Exam Review Vocab/Questions

Regarding office policies in Illinois: A » each office must have a written office policy manual B » offices must have written OR oral policies C » office policy manuals are standard and dictated by state law D » no office policy manuals are required

(A) All real estate companies in Illinois are required to have a written office policy manual, unless they are a sole-proprietorship with no additional sponsored agents.

The main difference between a cooperative and condominium is that: A » a cooperative owner obtains fee simple title to the unit B » a cooperative owner pays their own taxes and mortgage on the unit C » a condominium owner owns and finances their own unit D » a condominium owner receives a proprietary lease

(C) A condominium owner does own and finance their own space. (A) A condominium owner receives fee simple title to a unit, not a cooperative owner. (B) A condominium owner pays their own taxes and mortgage, not a cooperative owner. (D) A cooperative owner receives a proprietary lease, not a condominium owner.

A buyer was moving to a city. The buyer wanted to wait a little while and look around the city before purchasing a home. In the meantime, the buyer wanted to just rent. The best thing for this buyer would be a: A » lease option B » lease purchase C » month-to-month lease D » tenancy at sufferance

(C) A month-to-month lease would give the buyer the most flexibility with a short term lease while looking for a house to buy. (A) A lease option would require the buyer to select a property immediately that the buyer might want to buy later. However, this minimizes the buyer as far as looking around the city for the best buy. (B) A lease purchase would immediately bind the buyer. (D) A tenancy at sufferance is where the tenant stays over on a lease without permission.

LEASE OPTION

A possibility contract where one party is bound to perform but the other party is not

OPTION

A possibility contract where one party is bound to perform but the other party is not

OPTION AGREEMENT

A possibility contract where one party is bound to perform but the other party is not

WRIT OF EXECUTION

A procedure where a sheriff seizes property and sells to satisfy a judgment

ACTUAL NOTICE

A situation where a person has actual or personal knowledge of a transaction, etc.

LAND

A spot on the earth that goes down to the center of the earth and up to infinity

OFFER AND ACCEPTANCE AGREEEMENT

An essential element of a contract; the parties must agree on the exact same terms

A deed restriction would apply to the: A » current owner only B » present and future owners C » original developer D » homes association

B) A deed restriction is recorded on the public record and is binding on all current and future owners. (A) The restriction would not be for the present owner only. (C) The original developer normally establishes the deed restrictions. (D) The homes association normally can bring an action asking for enforcement of the deed restrictions.

RIGHT OF FIRST REFUSAL

A contract where one is given the first opportunity to buy if a property is put up for sale

APPRAISAL

A document that gives an estimate of fair market value; for lenders, owners, etc.

An industrial building sold for $535,000. The listing broker charged a 4.5% commission agreeing to cooperate with other brokers and split the commission 50/50. If a cooperating broker sold the property, how much would each of the brokers receive? A » $10,535.50 B » $12,037.50 C » $24,075.00 D » $28,975.00

(B) $535,000 x 4.5% = $24,075 divided by 2 = $12,037.50 for each broker.

Condominium ownership would NOT be used on which of the following? A » An apartment building B » A cooperative apartment C » Townhouses D » An office park

(B) A cooperative and a condominium are two different things. In a cooperative, the tenants in the apartment own stock in the property and have a proprietary lease. (A) An apartment building could be converted to condominium ownership. (C) Townhouses and (D) an office park could also be condominiums. Owning your own space and sharing common areas is a typical idea of a condominium.

VENDEE

Buyer of property; in a contract for deed, buyer is one who gets possession of property and pays "installments" to the seller until the contract is paid off

LAND CONTRACT

Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as a contract for deed or installment contract.

OPTIONEE

Receiver of option (possible buyer)

DEVELOPER

Improves the lots

A land contract is also referred to as a(n): A » right of first refusal B » installment contract C » option contract D » listing contract

(B) A land contract is also called an installment contract as well as a contract for deed. (A) A right of first refusal gives a person the first opportunity to buy if a property is put up for sale. (C) An option contract gives a person the right to buy at a set price for a definite time period in the future. (D) A listing contract is between a seller and broker allowing the broker to try and sell the property.

The best way to estimate value for a residential property is with: A » the owner's opinion B » an appraisal C » what the owner originally paid factoring in a multiplier D » an estoppel certificate

(B) An appraisal is used to estimate the value of property. (A) The owner`s opinion is typically inflated. (C) What the owner originally paid does not have any bearing on the current market value. (D) An estoppel certificate is used to state the current loan balance.

A buyer's agent presents an offer to a seller. The buyer's agent is not acting as a dual agent. In relation to the buyer's agent, the seller would be a(n): A » client B » customer C » principal D » prospect

(B) Since the buyer`s agent represents the buyer only and not the seller, the buyer would be the client and the seller would be the customer (one an agent works with but does NOT represent). (A) A client and (C) principal mean the same thing. Here, the buyer would be the client as the agent represents the buyer. (D) The word prospect is a general term and does not really apply.

A seller and buyer enter into a sales contract on a property. The seller breaches the agreement causing the buyer to sue for specific performance. If the buyer wins this lawsuit, the seller will have to: A » pay damages B » follow through with the original contract C » return the earnest money to the buyer D » rescind the contract

(B) Specific performance is court action to force completion. If the court orders this, the seller must complete the original agreement. (A) Damage awards are different than specific performance. (C) Returning the earnest money to the buyer would be normal given the fact that the seller breached the contract. (D) Rescinding the contract is returning the parties to the status quo, or the way they were before the contract was signed.

A property that contains asbestos insulation wrapped around pipes would be best remedied by: A » removing the insulation B » encapsulation C » replacing the pipes D » installing a water filtering system

(B) The best way to solve pipes wrapped with asbestos (which may be a health hazard) is to encapsulate, i.e., seal or enclose the insulation. (A) Removing the insulation might make things worse as the asbestos particles could become friable or airborne. (C) Replacing the pipes would once again disturb the asbestos. (D) A water filtering system would not deal with the issue at hand.

A seller and buyer have agreed to a sales contract. The buyer backs out of the agreement. Which of the following could the seller NOT do? A » Sue for specific performance B » Rescind the agreement C » File for a writ of execution D » Sue for compensatory damages

(C) A writ of execution is typically where the court orders a sheriff to seize property and sell it to satisfy a judgment. The seller could (A) sue for specific performance (court action to force completion), (B) rescind the agreement (return the parties to the status quo - the way they were before), or (D) sue for damages.

Mr. Smith sells his Illinois home for $151,050. He will be required to pay how much in Illinois transfer taxes? A » $ 227.25 B » $ 226.58 C » $ 454.50 D » $ 453.16

(A) Illinois transfer tax is $.75 per $500 of sales price, or portion thereof and is paid by the seller. $.50 goes to the state and $.25 is retained by the county where the property is located. $151,050 divided by $500 = 302.10. In this case, the .10 indicates we have a portion of the next $500 of sales price in addition to the 302 number. As the tax is $.75 per $500 of price, 303 times $.75 = $227.25 for transfer taxes.

What is the main difference between a freehold estate and a non-freehold estate? A » A freehold estate always involves ownership B » A freehold estate ends when a life estate terminates C » A freehold estate is always inheritable D » A freehold estate is for a fixed period of time

(A) The word freehold means ownership of some kind. A non-freehold estate is a leasing situation. (B) A life estate is a type of freehold estate. The freehold estate, however, doesn`t end with the termination of the life estate. (C) A freehold estate is not always inheritable, such as a life estate is a freehold estate but is non-inheritable. (D) A freehold estate is not for a fixed period of time - a leasehold estate is, however.

A violation of the federal fair housing laws: A » may be a criminal act B » must involve actual damages C » is permissible under certain circumstances D » must be filed with HUD within three years of the act

(A) Violation of the federal fair housing laws may be a criminal act if a person engages in threats or intimidation. (B) A violation may occur even if actual damages are not an issue. (C) A violation of federal fair housing laws is never permissible. (D) A complaint filed with HUD must be within one year of the act.

A person sold a property for $125,000 which represented an increase of 25% over the original cost. What was the original cost? A » $93,750 B » $100,000 C » $105,500 D » $112.000

(B) $125,000 divided by 125% = $100,000 for original cost.

In a land contract or contract for deed, the seller who retains the fee simple title is referred to as the: A » optionor B » optionee C » vendee D » vendor Glossary Terms

(D) A seller is always called a vendor. (A) The optionor is a giver of an option contract (seller). (B) The optionee is the receiver of an option contract (possible buyer). (C) The vendee is always a buyer.

An agency agreement between a seller and broker is normally created with an: A » implied agreement B » offer and acceptance agreement C » expressed agreement D » option agreement

(C) An expressed contract is where both parties clearly state their intentions. A seller and broker normally agree in writing on a listing contract where all obligations by both parties are understood. (A) An implied contract is created by one`s actions. (B) An offer and acceptance agreement is normally between a seller and a buyer for the purchase of a property. (D) An option agreement gives a possible buyer the right to purchase at a later date for a set price.

Private land uses are normally dictated by: A » title insurance B » appraisers C » private deed covenants D » judges

(C) Deed restrictions or covenants are placed by private parties (normally developers) dictating uses of the property, e.g., certain types of roofs and fences. (A) Title insurance insures a person`s title rights in a property. (B) Appraisers are used to estimate the value of a property. (D) Judges don't dictate private land uses.

With the exception of real estate taxes, liens generally are repaid at a foreclosure sale based on the: A » dollar amount of the lien B » actual need of the creditors involved C » recording date of the lien D » original date of the agreement that led to the lien being filed

(C) Liens are paid off in order of recording date with the exception of real taxes (taxes always take priority). (A) The dollar amount, (B) creditors need or (D) original date of agreement have nothing to do with the order of repayment.

Which of the following would NOT be a protected class under the federal fair housing laws? A » A person with children under 18 B » A person with a mental handicap C » A person with a different national origin D » A person currently using illegal substances

(D) A person currently addicted to illegal substances is NOT a protected class under the federal fair housing laws. (A) A person with children, (B) a mental handicap, or (C) from a different national origin are all protected classes.

What is the purpose of an appraisal? A » This is a scientific inexact way of determining value B » To give an average value derived from various sources C » To give a determination of value D » To give an estimate of value

(D) An appraisal is used to estimate value only. (A) An appraisal is not an inexact science and does not determine value, only estimates. (B) An appraiser does not usually average items together to come up with a value; an appraiser normally does analysis of comparable properties lending more weight to some than others. (C) Buyers determine value - appraisers estimate value.

A judgment against a seller has been recorded on the public record. A buyer is interested in purchasing the seller's property but does not know about the judgment. The buyer is said to have: A » actual notice B » preventive notice C » corrective notice D » constructive notice

(D) Any item recorded on the public record provides constructive notice to the public; in other words, any member of the public has access to the information. (A) Actual notice is where a person personally is aware of an item. (B) Preventive notice and (C) corrective notice are nonsense terms.

An item in a house that is usually easy and inexpensive to remedy is: A » a structural foundation issue B » a roof replacement C » major water leaks in a basement D » radon gas

(D) Radon gas mitigation is fairly easy and inexpensive to remedy. What is not easy and inexpensive to remedy is (A) a structural foundation problem, (B) a roof replacement or (C) major water leaks in a basement.

OPTIONOR

Giver of option (seller)

EARNEST MONEY

Good faith money

RESCIND

In a contract, this returns the parties to status quo; way they were before contract signed

OFFER

In a real estate transaction, the buyer makes the first offer

TITLE INSURANCE

Insures the title to a particular piece of property

CONSTRUCTIVE NOTICE

Occurs when a document is recorded on the public record at the county courthouse; a person is responsible for knowing facts because of recording on the public record

INSTALLMENT CONTRACT

Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as a contract for deed or land contract.

IMPLIED AGREEMENT

Refers to a contractual obligation that is created by one`s actions

EXPRESSED AGREEMENT

Refers to a contractual obligation where all parties have clearly stated their intentions

VENDOR

Seller of property; in a contract for deed, seller is one who retains legal title

ESTOPPEL CERTIFICATE

States the current loan balance on a note; used especially when notes are sold to others

ESTATE

The degree, quantity, nature and extent of ownership interest in real property.

MORTGAGE

A document where property is used as security for the debt

TENANCY AT SUFFERANCE

A lease where the tenant stays over without permission; landlord suffers

LIENS

A money encumbrance against a property

CONDOMINIUM

A multi-unit building where the occupants each own their individual units and receive a deed granting ownership of the property

COOPERATIVE

A multi-unit building where the people who occupy the units own stock in a corporation, thereby receiving a right to lease the unit from the cooperative itself

HANDICAP

A physical or mental impairment; a protected class under the 1988 Amendments to the Fair Housing Act

FEE SIMPLE

The maximum rights one can have in owning real estate; also called fee simple absolute.