ILLINOIS BROKER PRELICENSE Unit 1-12 REVIEW QUESTIONS

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 12: REAL ESTATE MATH UNIT QUIZ 1. A seller has agreed to sell his home for $215,300. The buyer will make a $27,000 down payment and assume an $85,000 mortgage. What is the Illinois transfer tax owed by the seller? A. $127.50 B. $155.25 C. $195.75 D. $323.25 2. Calculate the number of acres in the parcels described as the N 1/2, NW 1/4 of Section 30 and the N 1/2, NE 1/4, NE 1/4 of Section 31. A. 40 B. 80 C. 100 D. 160 3. When Frank bought his small office rental property for $120,000, the land was valued at $20,000. What is the approximate total amount of depreciation he has been able to claim for income tax purposes on that property over the last six years? A. $15,385 B. $18,462 C. $21,818 D. $26,181 4. A 60' x 87' lot sells for $465 per front foot. What is the selling price? A. $27,900 B. $40,455 C. $68,355 D. $2,427,300 5. A local nature preserve takes up 42 acres of land. How many square feet is that? A. 640 square feet B. 1,037.14 square feet C. 609,840 square feet D. 1,829,520 square feet 6. Mark wants to enclose his entire backyard with a fence for his dogs. The back yard is 70' x 50'. How many linear feet of fencing will he require? A. 240 B. 350 C. 2,400 D. 3,500 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 2 of 11 Revised 02/09/12 7. A parcel of land is 500 feet wide and 135 yards long. What's the square footage of the property? A. 22,500 B. 67,500 C. 202,500 D. 607,500 8. There's a lot that measures 580 feet in the front, 400 feet in the back, and is 200 feet deep. Find the square footage. A. 490 square feet B. 980 square feet C. 98,000 square feet D. 196,000 square feet 9. Terry and Jane Apple have been informed that the monthly payment for PITI on the property they have selected is $1,458.70. If local lenders are qualifying prospective buyers at 28/36, what must the required monthly income be for the Apples, assuming they have no other long-term debt? Round your answer to the nearest dollar. A. $5,210 B. $5,200 C. $4,520 D. $4,052 10. Marcus decides to make an offer on the house, since he thinks the sellers will agree to fill in the 25' x 12' x 6' pool at a cost of $7.50 per cubic yard, delivered and dumped. Marcus also wants them to lay sod over the bare dirt, which will cost $1 per square foot. What's the total amount Marcus is asking the sellers to incur to fill the pool and lay sod? A. $300 B. $800 C. $1,800 D. $2,300 11. Ike bought two adjacent lots. Lot A is 50' x 100' and Lot B is 100' x 100'. He divided the two lots into three lots and is selling them for $2,800 per front foot. If he sells all three for his asking price, how much will Ike get? A. $280,000 B. $332,500 C. $420,000 D. $560,000 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 3 of 11 Revised 02/09/12 12. An owner decides to ask $2,000 per front foot for that a 150' x 600' lot. What is his asking price? A. $252,000 B. $300,000 C. $720,000 D. $900,000 13. Lois is looking for a commercial property of approximately 8,000 square feet that will give her the most access to the road possible. She's looking at these four properties (frontage price indicated), each selling for $6.40 / square foot. She can't spend more than $50,000. Which property is she most likely to buy? A. 70' x 120' / $400 B. 80' x 100' / $600 C. 90' x 90' / $550 D. 120' x 65' / $460 14. Rachel's lot is 150' x 300' and she wants to put up a 3-foot high picket fence around the entire perimeter. The fence costs $4 per square yard. How much will the fence for Rachel's lot cost? A. $800 B. $1,200 C. $3,600 D. $6,000 15. Jim buys a triangular-shaped lot with 60 front feet. Each side of the lot is 100 yards deep. What is the square footage of Jim's lot? A. 3,000 square feet B. 6,000 square feet C. 9,000 square feet D. 18,000 square feet 16. Gretchen won't invest for less than an 11.5% return on her investment. The property she's evaluating showed an NOI of $32,000 last year. How much would Gretchen be willing to spend on this property? A. $278,261 B. $306,666 C. $359,375 D. $368,000 17. You purchase an investment property for $340,500. You later sell it for $290,000. What is your percent of loss? A. 8.5% B. 15% C. 17% D. 17.5% Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 4 of 11 Revised 02/09/12 18. A commercial property has a first year gross operating income of $64,000 and expenses of $12,000. If Joe wants to get at least an 8% return on his investment, what would he be willing to pay for the property? A. $416,000 B. $533,333 C. $650,000 D. $768,000 19. If Frank wants a 10% return on his investment, how much should he be willing to pay for a property with an NOI of $40,000? A. $200,000 B. $250,000 C. $400,000 D. $440,000 20. While investor Irving's accountant prepares a pro forma on a duplex he's considering, he hires appraiser Allen to give him an estimate of value. Allen finds that the duplex should rent for $1,100 each month, and he determines that the GRM in that neighborhood should be about 135. What is Allen's estimate of value? A. $97,778 B. $135,000 C. $147,273 D. $148,500 21. Trevor sold an apartment building for $2,000,000. The graduated percentage commission for the property was broken down: 5% on the first million, 3% on the next $500,000, 1.5% on everything above $1.5 million. What was Trevor's commission on the sale? A. $55,000 B. $70,000 C. $72,500 D. $140,000 22. Gary has a stable monthly income of $4,000 and recurring debts of $600. If he's getting a conventional loan, what's the maximum monthly payment for which he would qualify? A. $840 B. $960 C. $1,120 D. $1,440 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 5 of 11 Revised 02/09/12 23. The loan amount (principal) is $100,000 and the interest rate is 8%. What is the annual interest paid? A. $880 B. $800 C. $8,000 D. $8,800 24. Ben bought two adjacent lots 150 feet (W) x 200 feet (L) and 90 feet (W) x 100 feet (L), for a total of $12,500. They were later divided up into three lots of equal frontage and sold for $6,000 each. What is the percent of return on the original investment? A. 44% B. 45% C. 48% D. 96% 25. What is the required down payment if the purchase price is $68,000 and the loan-to-value ratio is 80%? A. $54,400 B. $13,600 C. $8,000 D. $5,440 26. A buyer of a house with a sales price of $150,000 is paying a $30,000 down payment and three discount points on the $120,000 loan. What is the total cost of the discount points? A. $3,600 B. $4,500 C. $10,800 D. $13,500 27. If Bob pays $695.20 for principal and interest every month for 30 years on his $110,000 loan, how much interest will he pay over the life of the loan? A. $20,856 B. $110,000 C. $140,272 D. $250,272 28. What is the required down payment if the purchase price is $85,000 and the loan-to-value ratio is 80%? A. $5,000 B. $6,800 C. $8,500 D. $17,000 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 6 of 11 Revised 02/09/12 29. Jessie is looking at a house with a sale price of $180,000 and an appraised value of $175,000. What is the most the lender will finance on a conventional 80% loan for this property? A. $180,000 B. $144,000 C. $140,000 D. $115,200 30. A section of land legally described as the north one-half of the northwest quarter of the southeast quarter of a section of land, contains A. 10 acres. B. 20 acres. C. 40 acres. D. 80 acres. 31. Broker Jeff earns $18,785 commission on a $289,000 sale. What was the commission rate? A. 5.75% B. 6% C. 6.5% D. 7% 32. Annual property taxes are $1,776. The previous year's taxes are paid. If the closing is on May 1, what is the seller's portion on the settlement, using a 360- day year? A. $588.76 B. $596.94 C. $628.60 D. $1,484.07 33. Broker Kendra sold a house for $70,000. The seller paid $4,900 in commission. What was Kendra's commission rate? A. 6% B. 7% C. 14% D. 28% 34. Broker David sold a house for $186,000 and was paid a commission of 6.5%. How much did he earn? A. $7,558 B. $11,160 C. $12,090 D. $28,615 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 7 of 11 Revised 02/09/12 35. Broker Charles receives a $16,000 commission on a listed property. Of that, 5% comes off the top to pay his franchise fee. He keeps 25% of the balance, pays the listing broker 45% and the selling broker 30%. Lucy, the listing agent, was a dual agent on this transaction. How much is Lucy's commission? A. $6,840 B. $7,200 C. $11,400 D. $12,000 36. How much will broker Bill earn on a $310,000 sale if he charges 8% on the first $100,000, 7% on the next $50,000, and 5% on anything above $150,000? A. $15,500 B. $19,500 C. $21,700 D. $24,800 37. How much will broker Ted earn on a $465,000 sale if he charges a flat fee of $20,000 for the first $300,000 and 8% for anything above that? A. $28,800 B. $33,200 C. $37,200 D. $44,000 38. A property is appraised at $150,000 and assessed for tax purposes at 50% of value. What are the quarterly taxes if the tax rate is $8 per $100? A. $600 B. $1,500 C. $6,000 D. $12,000 39. A 120' x 150' lot was assessed for property tax purposes at $200 per front foot, and the house was assessed at $44,000. What is the total yearly tax if the rate is $5.00 per $100? A. $1,200 B. $2,200 C. $2,400 D. $3,400 40. A property with the appraised value of $80,000 is assessed at 40%. The annual taxes are $1,120. How many mills were charged? A. 28 mills B. 35 mills C. 37 mills D. 42 mills Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 8 of 11 Revised 02/09/12 41. The sale of a property closes on May 10. Taxes are $3,600 per year and paid through the last half of the previous year. What is the seller's share of taxes, based on a calendar year (assuming it's not a leap year)? A. $1,200 B. $1,282.19 C. $1,300 D. $1,374.16 42. Bonnie sold her condo for $105,050. She paid off the $58,000 owed on her mortgage, 7% commission, attorney fees of $200, and prorated interest of $345. What was the net to seller? A. $39,151.50 B. $39,189.65 C. $43,211.50 D. $43,249.65 43. A property is assessed at 50% with 11 mills and 7 mills. The annual taxes are $720. What is the market value of the property? A. $40,000 B. $80,000 C. $90,000 D. $130,909 44. A property is appraised at $175,000 and assessed for tax purposes at 50% of value. What are the semi-annual taxes if the mills total 65? A. $1,137.50 B. $2,843.75 C. $5,687.50 D. $11,375.00 45. The market value of a property is $90,000 and is assessed at 35%. The annual taxes are $1,260. How many mills were charged? A. 28 mills B. 35 mills C. 40 mills D. 42 mills 46. Evelyn sold her condo for $110,000. Her broker received a 7% commission. Assuming Evelyn was responsible for no other expenses, what was her net share? A. $101,200 B. $102,000 C. $102,300 D. $103,400 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 9 of 11 Revised 02/09/12 47. The premium for a two-year insurance policy on a home is $460. The policy was purchased and paid for August 1, 2009. The house sells and the closing takes place June 2, 2011. Using a 365-day year, what is the seller's credit? A. $37.17 B. $37.69 C. $37.81 D. $74.36 48. Broker Carol negotiates a 7% commission for selling Rob's house. When the house sells for $389,000, how much will Carol earn if she pays the first 10% of her commission to her national realty company as a franchise fee? A. $24,507 B. $27,230 C. $29,953 D. $37,733 49. An office building was purchased 10 years ago and is now worth $564,000. It has appreciated 3% per year during this time. What was the original value? Round your answer to the nearest dollar. A. $545,200 B. $507,600 C. $433,846 D. $376,000 50. In the MLS, it states that the seller will pay 7% commission and the listing agent will pay 3% to a buyer's agent. Buyer's agent David earns a total of $5,340 commission. What was sale price of the property? A. $76,286 B. $112,140 C. $178,000 D. $186,900 51. Mr. and Mrs. Price have agreed to pay 10% down on a home selling for $86,500. A mortgage has been arranged for the balance of the purchase price. The Prices have agreed to pay 1% of the loan amount at closing for prepaid PMI. How much money must they bring to the closing if they have already paid $2,200 in earnest money? A. $7,228.50 B. $8,970.50 C. $9,428.50 D. $16,435.00 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 10 of 11 Revised 02/09/12 52. Mary sold her house for $145,000. Her broker received a 7% commission. Closing costs, points, and the remaining balance on her prior mortgage totaled $52,000. What was her net share? A. $81,250 B. $82,850 C. $93,000 D. $134,850 53. Dave wishes to sell a piece of land at a 15% net profit. He purchased the land for $95,500. Rounding your answer to the nearest dollar, what will he have to sell the land for to receive a 15% profit after paying the selling broker a 7% commission on the sale price? A. $96,344 B. $108,926 C. $115,149 D. $118,091 54. Max sold his house in Illinois for $144,800. His broker received a 7% commission. Closing costs, points, and the remaining balance on his prior mortgage totaled $52,000. How much was Max's transfer tax liability? A. $201.99 B. $202.50 C. $217.20 D. $217.50 55. A property is 100 ft. long by 100 ft. wide. The property has a deed restriction that requires 10-ft. setbacks on each side, a 25-ft. setback on the front of the property, and a 30-ft. rear setback. How much of the property is available for building use? A. 10,000 sq. ft. B. 3,600 sq. ft. C. 360 sq. ft. D. 260 sq. ft. 56. A mortgagor had a $67,000 loan at 5.5%. What would the new principal be after the third payment, if the monthly payment was $325? A. $65,950 B. $66,469 C. $66,900 D. $66,946 Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math © Hondros Learning www.hondroslearning.com Page 11 of 11 Revised 02/09/12 57. A parcel described as the NW 1/4 of the NW 1/4 sells for $3,600 per acre. If the commission rate is 6.5%, calculate the commission. A. $4,680 B. $6,390 C. $8,460 D. $9,360 58. The listing price of a house is $139,900. You bought if for the listing price plus 10% and sold it for the listing price. What percent of loss did you have? A. 9% B. 10% C. 11% D. 90% 59. A developer purchased a 4-acre parcel. He wants to divide the parcel into smaller lots. Before dividing the parcel, the developer must build a road 25 feet wide and 310 feet long. How many lots will the developer be able to create with the remaining land if each lot measures 60 feet by 135 feet? A. 18 B. 19 C. 20 D. 21 60. Jeffrey purchased a piece of land eight years ago for $35,000. He was recently offered $145,500. What would the annual appreciation rate be if Jeffrey accepts this offer? A. 39.5% B. 31% C. 30% D. 24%

ILLINOIS BROKER PRELICENSE TOPICS UNIT 12: REAL ESTATE MATH UNIT QUIZ ANSWER KEY 1. C. This is a three-part calculation. Because the $85,000 mortgage the buyer assumed is exempt from taxes, subtract this amount from the total sale of the house: $215,300 - $85,000 = $130,300. This is the amount subject to transfer tax. Remember, the down payment of $27,000 is not needed to calculate the transfer tax. Now, calculate the taxable parts by dividing the sale price by 500 to find 260.6. Since the tax is based on each $500 of the sale price or portion of 500, round up to fine 261 "unit." Next, multiply that by the Illinois state/county transfer tax of 75 cents: 261 x .75 = $195.75 2. C. Remember, there are 640 acres in a section. So, 640 ÷ 2 ÷ 4 = 80 acres in Section 30; AND 640 ÷ 2 ÷ 4 ÷ 4 = 20 acres in Section 31. Add the acres in both parcels to get 100 acres total. 3. A. To figure depreciation on commercial property for income tax purposes, divide the value of the improvements ($100,000) by the recovery period (39 years for nonresidential) to get $2,565. Frank deducted that for six years, so $15,385 is the approximate total depreciation ($2,565 x 6 = $15,384.615). 4. A. Only the front footage figures into the selling price (60 x 465 = 27,900). 5. D. An acre is 43,560 square feet, so multiply that by 42 and you get just over 1.8 million square feet. 6. A. You would add all lengths together to get the linear length: 70 + 70 + 50 + 50 = 240. 7. C. First, you need to convert the length of 135 yards to feet (135 x 3 = 405). Then, multiply the length by the width to find the square footage (405 x 500 = 202,500). 8. C. This is what you should have done: 580 + 400 = 980 / 2 = 490 and then 490 x 200 = 98,000 9. A. Use the Loan Amount formula; Whole (income) = Part (allowable payment amount) ÷ Percent (ratio) and plug in the known values; $1,458.70 ÷ 0.28 = $5,209.64. (Rounded to nearest dollar = $5,210.) 10. B. The pool is 1,800 cubic feet. To find cubic yards, divide by 27 (1,800 / 27 = 66.67). Multiply the cubic yards by $7.50 (66.67 x 7.5 = 500). The fill dirt costs $500, and at $1 per square foot, the sod will cost $300 (25 x 12 = 300) for a total of $800. 11. C. Regardless of how much he subdivides, Ike has 150' of frontage to sell. At $2,800 per front foot, he would get $420,000. 12. B. The front footage is the first number listed, 150 feet. At $2,000 per front foot, the asking price is $300,000. 13. C. Property C has 8,100 square feet and its price is $49,500. It would give her the most frontage for under $50,000. 14. B. The lot is 900 linear feet (150+150+300+300). The fence price is per yard, so divide the linear feet by 3, for a linear yardage of 300. The 3-foot fence is 1 yard tall, so the square yardage and the linear yardage are the same. The fence costs $1,200 (300 x $4). 15. C. First, convert the depth from yards to feet (100 x 3 = 300). Then, to find the square footage of a triangular lot, divide the base of the triangle by 2 (60 / 2 = 30), then multiply by the depth (30 x 300 = 9,000). Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 5 Revised 02/09/12 16. A. The formula for determining value using these figures is this: Income ($32,000) / Rate (11.5%) = Value ($278,261). 17. B. This is a two-part calculation. First, determine how much was lost; $340,500 - $290,000 = $50,500. Now, apply the formula; Percent of Loss = Loss ÷ Paid (What you LOST divided by what it COST equals percent of loss). So, $50,500 ÷ $340,500 = 0.1483. The percent of loss was 15%. 18. C. The formula for determining value using these figures is this: Net Operating Income ($64,000 - $12,000 = $52,000) / Rate (8%) = Value ($650,000). Remember IRV. 19. C. Take the NOI and divide it by the 10% cap rate to get $400,000. 20. D. Multiply the anticipated monthly rent by the GRM. 21. C. 5% of 1 million is 50,000, 3% of 500,000 is 15,000, 1.5% of 500,000 is 7,500; then add these figures together to get $72,500. 22. A. Using the payment-to-income ratio, we get $1,120. But using the total debt service ratio, we find: $4,000 (income) multiplied by 0.36, which equals $1,440. From that, you subtract monthly debts of $600, leaving $840. 23. C. To calculate the annual interest, you take $100,000 (P) and multiply by .08 (interest rate). 24. A. First, determine the total sale of the three lots; 3 x $6,000 = $18,000. Now, calculate what was made on the original investment; $18,000 - $12,500 = $5,500. Now, simply, divide what was made by what was paid to determine the percent of profit; $5,500 ÷ $12,500 = 0.44. The percent of return on the original investment is 44%. 25. B. If the loan-to-value (LTV) ratio is 80%, then the down payment is 20% of the purchase price (68,000 x .20 = $13,600). 26. A. The discount points are figured as 1% of the total loan amount ($120,000) not the sales price. Each discount point costs the borrower $1,200. Three discounts points costs the borrower $1,200 x 3 equals for a total of $3,600. 27. C. Bob will pay $140,272 in interest for that 30-year loan (695.20 x 12 months x 30 years = $250,272 total payment - $110,000 principal = $140,272 interest). 28. D. If the loan-to-value (LTV) ratio is 80%, then the down payment is 20% of the purchase price (85,000 x .20 = $17,000). 29. C. You remembered that the loan-to-value ratio is based on the lower of the appraised value or the sale price: 80% of $175,000 is $140,000. 30. B. The section contains 640 acres. Divide 640 by 2, divide that by 4 and divide that by 4 to obtain the total area of land. 31. C. Divide the commission earned (part) by the sales price (whole) to find the rate: $18,785 / $289,000 = .065 or 6.5%. 32. B. The calculation is this: 1776 / 360 = 4.933 (per day) x 121 days = $596.94. 33. B. $4,900 / $70,000 = 7%. 34. C. Multiply the sale price of $186,000 by 6.5% (.065) to get a commission of $12,090. 35. C. The listing agent commission is 45% of $15,200 ($16,000 - 5% for the franchise fee), which is $6,840. But as a dual agent, Lucy also earned commission as the selling agent, which is 30% of $15,200, or $4,560. Her total commission, then, is $11,400. Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 5 Revised 02/09/12 36. B. Bill's commission schedule would earn him $19,500 on a $310,000 sale. $8,000 = (.08 x $100,000) + $3,500 = (.07 x $50,000) + $8,000 = (.05 x $160,000) 37. B. Ted made 8% commission on $165,000 ($465,000 - $300,000), which is $13,200. Add that to the $20,000 flat fee and Ted earned $33,200. 38. B. First, determine the assessed value is $75,000, then divide by 100. Multiply that by 8 to get $6,000, which is the annual tax. To find the quarterly tax, divide by 4: $1,500. 39. D. This is a three-part calculation. First, determine the assessed value of the lot. Remember, front feet is always the first number expressed in a measurement. So, 120 x $200 = $24,000. Now, add the assessed value of the lot to the assessed value of the house to get the total assessed value; $24,000 + $44,000 = $68,000. Now, calculate the total yearly tax; ($68,000 ÷ $100) x $5.00 = $3,400. The total yearly tax is $3,400. 40. B. First, determine the assessed value is $32,000 by multiplying $80,000 by .40. Then divide the annual taxes $1,120 by $32,000 to get .035 or 35 mills. 41. B. To find the daily rate: $3,600 / 365 = 9.8630. There are 130 days between January 1 and May 10. To find the seller's share: 130 x 9.8630 = $1282.19. 42. A. Bonnie starts with 93% of the sales price, which is $97,696.50. Then subtract the other expenses to find a net to seller of $39,151.50. 43. B. First you determine the assessed value is $40,000 by dividing the taxes ($720) by the combined mills (.018). Then divide the assessed value by the tax ratio (.50) to get $80,000. 44. B. First, determine that the assessed value is $87,500, then multiple by mills .065 to get $5,687.50. Then divide by 2, since the question is asking for semi-annual taxes: $5,687.50 / 2 = $2,843.75. 45. C. First, determine the assessed value is $31,500 by multiplying $90,000 by .35. Then, divide the annual taxes $1,260 by $31,500 to get .040 or 40 mills. 46. C. Evelyn would receive 93% of the sale price. 47. A. Since it is a two year policy, you should have divided $460/730 (the number days in two calendar years) to arrive at a daily rate of .6301. There were 59 days remaining on the policy (June 2, 2009, to August 1, 2011). Multiply 59 x .6301 to find the seller's credit of $37.17. 48. A. Multiply the sales price by 7% to find the total commission, then subtract 10% of that to find what Carol keeps: $389,000 / .07 = $27,230 - $2,723 = $24,507. 49. C. This is a two-step process. First, multiply the annual appreciation rate by the number of years, so 3% x 10 years = 30%. Now, using the appreciation formula: Original Value = Current Value ÷ (100% + Rate of Appreciation), plug in the known variables; Original Value = $564,000 ÷ (100 + 30). 100 + 30 = 130, so 564,000 ÷ 1.30 = 433,846.15. The original value of the office building was $433,846. 50. C. Divide his earned commission by the commission rate for the buyer's agent to find the sale price: $5,340 / .03 = $178,000. 51. A. Finding the answer requires a few steps. First, calculate the 10% down payment on $86,500 ($86,500 x 0.10 = $8,650). Now, determine the loan amount by subtracting the down payment from the sale price of the home ($86,500 - $8,650 = $77,850). Now, calculate what is owed for PMI by multiplying the loan amount by 0.01 ($77,850 x 0.01 = $778.50). Now, add all of the costs required for closing and Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 4 of 5 Revised 02/09/12 subtract the $2,200 already paid in earnest money ($8,650 + $778.50 - $2,200 = $7,228.50) The Prices must bring an additional $7,228.50 to the closing. 52. B. First, calculate the net share by figuring that Mary would receive 93% of the sale price. Then, multiply .93 x $145,000= $134,850. Finally, subtract the $52,000. $134,850 - 52,000= $82,850. 53. D. This is a two-part calculation. First, determine the 15% profit on $95,500 ($95,500 x 0.15 = $14,325; $14,325 + $95,500 = $109,825, or $95,500 x 1.15 = $109,825). Next, factor in the commission fee of 7%: 100% - 7% = 93% net to owner. Now, use the percent formula: Whole (Total/Gross Sale price) = Part (Net amount + Expenses) ÷ Percent (100% minus deductions) and plug in the known variables. $109,825 ÷ 0.93 = $118,091.39. Rounded, Scott should sell his piece of land for $118,091 to make a 15% profit. 54. D. Find the number of $500 units in the sale price: $144,800 / $500 = 289.6. units. Since transfer tax is per $500 or portion, you multiply 290 units by 75 cents to find $217.50. 55. B. This question involves a building site of 100 ft. x 100 ft., which would be 10,000 total sq. ft. However, setback lines, side yards, etc., limit buildable area to a square of 80' x 45': (100' - 10' - 10' = setbacks) x (100' - 30' - 25' = rear and front setbacks). 80' x 45' = 3,600 sq. ft. which can actually be used for building. Note that two of the answers are much too low to be right. 56. D. First, find out how much interest is to be applied to the loan over a year: $67,000 x 5.5% (0.055) = $3,685; $3,685 ÷ 12 (months) = $307.0833 interest for the first month. Take the monthly payment, and subtract that month's interest to find out how much goes toward the actual principal: $325 - $307.0833 = $17.9167. For the second monthly payment, subtract the paid principal from the total loan amount: $67,000 - $17.9167 = $66,982.084. Next, determine yearly interest based on this new principal amount: $66,982.084 x 5.5% (0.055) = $3,684.0146. Divide by 12 to get $307.0012 as the interest paid on the second month. Subtract this interest from the monthly payment to determine how much of it went toward the principal: $325 - $307.0012 = $17.9988. For the third monthly payment, subtract the paid principal from the total previous loan amount: $66,982.084 - $17.9988= $66,964.086. Again, determine yearly interest: $66,964.086 x 5.5% (0.055) = $3,683.0247. Divide by 12 to get $306.9187 as the third month's interest. Subtract this from the monthly payment: $325 - $306.9187 = $18.0813 as the third month's amount going towards the principal. Subtract this third month's principal payment from the new total principal amount to determine what the total principal amount is after the third month's payment: $66,964.086 - $18.0813 = $66,946.005. Rounded to the nearest dollar, the new principal is $66,946. HINT: You could check the accuracy of your answer and double check it using a "short cut" method. Find the first month's principal payment and multiply it by the number of payments asked in the question: $17.9167 x 3 = $53.7501. Subtract that from the original loan amount: $67,000 - $53.7501 = $66,946.25—close enough? 57. D. This is a three-step problem. First, calculate the number of acres in the section of land described. There really isn't a formula for this problem —it is straight division. You do need to know there are 640 acres in a section. So, 640 ÷ 4 ÷ 4 = 40 acres. Next, multiply the number of acres by the price per acre: 40 x $3,600 = $144,000. Illinois Real Estate Broker Prelicense Topics - Unit 12: Real Estate Math - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 5 of 5 Revised 02/09/12 Finally, calculate the 6.5% commission on $144,000: $144,000 x 0.065 = $9,360. The commission earned is $9,360. 58. A. First, determine what you originally paid for the house: $139,900 x 1.10 (100% + 10% = 110% or 1.10) = $153,890. Now, calculate how much you lost: $153,890 - $139,900 = $13,990. Now you have the numbers to plug into the loss formula; Percent of Loss = Loss ÷ Cost or $13,990 ÷ $153,890 = 0.0909. You had a 9% loss. 59. C. This is a four-part calculation. Because measurements are provided in both acres and square feet, you will want to convert all measurements to the same unit. We will convert to square feet since the question asks how many 25' x 130' square foot lots can be created. Therefore, we need to convert the 4 acres to square feet, 43,560 x 4 = 174,240 square feet. Next, calculate the square footage of the road, 25 x 310 = 7,750 square feet. Next, subtract the area of the road from the total lot area, 174,240 - 7,750 = 166,490. This is the amount of land available to divide into lots. If each lot measures 8,100 square feet (60 x 135 = 8,100) how many lots can be created? Next, 166,490 ÷ 8,100 = 20.554. Because you can't have "part of a lot," you must round down so, 20 lots can be created. 60. A. Since Jeffrey originally paid $35,000 and was offered $145,500 eight years later, you need to find out how appreciation to apply for each year. So, $145,500 - $35,000 = 110,500 ÷ 8 years = $13,812.50 each year. Now, take this sum of money and divide by his purchase price of $35,000; $13,812.50 ÷ $35,000 = 0.3946. Rounded, the annual appreciation rate would be 39.5%.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 1: REAL ESTATE LAW UNIT QUIZ 1. Which of the following describes the Supreme Court decision in Plessy v. Ferguson (1896)? A. A court may not constitutionally enforce a "restrictive covenant" which prevents people of certain race from owning or occupying property. B. Arabs, Greeks, and other ethnic groups are protected. C. Racial discrimination is prohibited by any party in the sale or rental of real estate. D. The court ruled in favor of a "separate but equal" doctrine of legalized racial segregation. 2. To be eligible to take the state exam for a real estate broker license, an applicant must complete a minimum of ___________ hours of education. A. 75 B. 90 C. 100 D. 120 3. Who would NOT be considered a disability as defined by the federal Fair Housing Act? A. a amputee who must use a wheelchair B. a child with AIDS C. a man with mental illness who takes anti-psychotic drugs D. a woman addicted to methamphetamine 4. Antitrust laws are in place to ensure that A. all monies in financial transactions are accounted for. B. competition in the marketplace is fair and unrestrained. C. licensees have a minimum level of education and training to protect the public. D. no one is discriminated against because of race, sex, or national origin. 5. What is the name of the fund that can provide compensation for people who have been harmed by a licensee's negligence? A. Real Estate Audit Fund B. Real Estate License and Administration Fund C. Real Estate Recovery Fund D. Real Estate Research and Education Fund 6. According to the Fair Housing Act, which owner, if any, could refuse to rent to someone on the basis of race? A. Kate, who rents out the spare bedroom in her house B. Lisa, who owns and leases a four-unit apartment building C. Paul, who rents out several houses that he owns D. No one is exempt. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 2 of 14 7. Jane works as a clerical assistant for a brokerage company. Under the Illinois Real Estate Act, Jane is required to be licensed if she A. arranges for keys to be picked up for an open house. B. explains the terms of a sales agreement to a client. C. follows up on completing paperwork for a client after the contract has been signed. D. responds to phone inquiries from customers about prices by quoting directly from published information. 8. Donna, a licensed real estate broker, receives a fee for every client she refers to a mortgage company that results in loan. Is this permitted? A. No, this would be considered an illegal kickback under RESPA. B. Yes, it's permitted if she discloses the fee arrangement to the client when she makes the referral. C. Yes, it's permitted if she discloses the fee arrangement to the client before the sale is finalized. D. Yes, it's permitted as long as she does not require the client to use that mortgage company. 9. What is NOT a requirement to apply for an initial real estate managing broker license in Illinois? A. 21 years old B. certificate licensure for at least one year as a real estate broker or salesperson C. completion of prelicensing education or admittance to the Illinois Bar D. never have had a license revoked in any jurisdiction 10. Marge is a broker at Bob's Brokerage. Which of these phrases is LEAST LIKELY to be evidence of her conspiracy to commit an antitrust violation? A. "Let's do something about Top's discount fee policy." B. "No one will show your house for less than 6 percent." C. "Our brokerage charges 7%, but I can talk to Bob about lowering that." D. "This is my neighborhood. Tell him to go sell somewhere else." 11. Brokers Rob and Bonnie are having dinner when Bonnie mentions she's having trouble getting listings in a particular part of town. Rob says he's happy to handle all the listings in that neighborhood if she agrees to quit trying to land clients there. In exchange, he'll send prospective clients her way if they live closer to her business. This is an example of A. boycotting. B. price-fixing. C. territory allocation. D. tying in. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 3 of 14 12. Seller Stu refused to sign a sales contract unless buyer Beth agreed to use Stu & Associates Title Company. Beth really wanted that house and so agreed. The fee for the title insurance was $400. If she later chooses to sue Stu for violating RESPA, how much can she ask for? A. She cannot sue under RESPA since she agreed to the terms. B. She can only sue for the amount she paid, $400. C. She can sue for up to two times what she paid, $800. D. She can sue for up to three times what she paid, $1,200. 13. At a local convention of real estate licensees, broker Dan mentioned that he was going to have to raise his commission rates or close his office. Dan could be found guilty of A. allocation. B. price-fixing. C. securities violations. D. nothing; he did not violate any rules or laws. 14. Which act defined familial status as a protected class? A. Civil Rights Act of 1866 B. Title VIII of the Civil Rights Act of 1968 C. The Housing and Community Development Act of 1974 D. The Fair Housing Amendments Act of 1988 15. To be eligible for a broker license in Illinois, a new applicant must A. be at least 18 years old. B. be of good moral character. C. have completed a minimum of 80 hours of prelicensing education. D. have two years of experience working as a personal assistant in the real estate industry. 16. Which ruling by the Supreme Court of the United States upheld the Civil Rights Act of 1866, confirming that one can NEVER discriminate on the basis of race or color? A. Brown v. Board of Education B. Buchanan v. Wharley C. Jones v. Alfred H. Mayer Co. D. Plessy v. Ferguson 17. All are types of disciplines that can apply to real estate licenses EXCEPT A. probation. B. reprimand. C. termination. D. transfer. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 4 of 14 18. Steve is one of three brokers accused of boycotting. What did Steve and his fellow co-conspirators do? A. They agreed to charge the same commission for specific services. B. They decided to avoid showing clients homes listed by Easy Realty. C. They divided up their town into four quadrants so that each could focus on their specific area. D. They included a clause in their listing contracts requiring clients to use Thomas Title Co. 19. Of these, which would NOT be considered an action that the Department could take when disciplining a licensee? A. impose a jail term not to exceed 10 days B. petition the court for an injunction C. require a broker to have a medical examination D. restrict a broker's access to an escrow account 20. Property managers in Illinois must be licensed real estate brokers if they A. answer the phone at the property. B. collect and deliver keys for the property. C. collect rent for the property. D. perform improvements or repairs on the property. 21. Which sentence can be used as a memory device to recall each of the protected classes under the federal Fair Housing Act? A. Anyone Can Buy a Sweet House From a Realtor. B. Fast Sales Can Really Make Houses Affordable. C. Realtors Can Really Sell Houses Fast Now. D. Smart Real Estate Professionals Know How to Sell. 22. A disabled individual, confined to a wheelchair, would like to rent an apartment. The disabled individual states that the property would need to be made handicapped accessible. Which of the following options would not be lawful in this situation? A. The landlord makes the renovations, but requires the tenant to pay the actual cost of the materials. B. The landlord makes the renovations to the property at the landlord's expense. C. The landlord refuses to allow the individual to make the renovations to the apartment. D. The landlord requires the tenant to make the renovations at the tenants own expense and requires the tenant also return the property to its original condition at the end of tenancy. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 5 of 14 23. Michelle has been accused of breach of her agency obligations and has been notified of an upcoming hearing. How long does she have to file a written response to the charges levied against her? A. 10 days B. 20 days C. 30 days D. 45 days 24. Sponsoring broker Valerie's license was revoked for an ongoing issue related to failure to secure client escrow funds. The licenses of her affiliated brokers are A. automatically inoperative. B. revoked if they do not find a new sponsoring broker within 15 business days. C. temporarily suspended. D. not affected. 25. A broker is taking a listing and the seller states that he wishes to sell only to members of a particular race. Of these options, what do you think would be the broker's best response? A. comply with the seller's wishes B. refuse to take the listing C. say he must consult with his broker before making a decision D. take the listing but ignore the seller's request 26. As specified in Article 25 of the Illinois Real Estate License Act, who serves as Chair of the Real Estate Administration and Disciplinary Board? A. The board member who is elected by the voters chairs the Board. B. The board member who the Governor appoints chairs the Board. C. The Governor who is elected by the voters of Illinois chairs the Board. D. The Real Estate Coordinator who is appointed by the Secretary chairs the Board. 27. Violet, who is six months pregnant, tries to rent an apartment in a six-unit building with access to a shared swimming pool. The property manager rejects her application citing insurance liability concerns of having small children in the building. Does his refusal violate the federal Fair Housing Act? A. no, because safety is a legitimate reason for rejecting a rental applicant B. no, because residential buildings with six units or less are exempt from the federal Fair Housing Act C. no, because the federal Fair Housing Act doesn't apply to discrimination by real estate brokers D. yes, because discrimination based on familial status was a factor in the manager's decision Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 6 of 14 28. What is the maximum amount a claimant with a valid judgment may be able to recover from the Real Estate Recovery Fund? A. up to $15,000 plus court costs and reasonable attorney's fees B. up to $25,000 plus court costs and reasonable attorney's fees C. up to $50,000 plus court costs and reasonable attorney's fees D. up to $100,000 plus court costs and reasonable attorney's fees 29. A minority applicant applies to a mortgage company for a home loan and is refused based on the reputation of the neighborhood for a high number of foreclosures. This is an example of what illegal practice? A. blockbusting B. puffing C. redlining D. steering 30. Licensee Al wants to appeal a decision by the Real Estate Administration and Disciplinary Board. The first step he must step he must take to initiate a review is to petition the A. Circuit Court of the county in which he lives. B. Illinois Department of Financial and Professional Regulation. C. Illinois State Appellate Court. D. Real Estate Coordinator. 31. Which topic would NOT be acceptable for continuing education? A. appraisal B. escrow requirements C. property management D. sales techniques 32. What is steering? A. leading prospective homeowners to or away from certain homes B. refusing to make loans to certain areas because of their ethnic makeup C. refusing to help prospective buyers locate housing because of their race, color, religion, national origin, handicap, or familial status D. suggesting an owner should sell now because property values are expected to decline as more and more minorities infiltrate the area Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 7 of 14 33. All of the following would be considered examples of prohibited acts of misrepresentation or fraud under the Real Estate Licensing Act EXCEPT A. acting as an attorney for either the buyer or the seller in the same transaction in which the licensee has acted as a broker. B. acting as a broker for more than one party in a transaction without providing written notice to all parties. C. acting as a broker or salesperson in a retail sales establishment from an office that is not separate and distinct from the main retail area. D. acting as a designated agent of a sponsoring broker for a buyer when the seller is represented by a designated agent who is employed by the same sponsoring broker. 34. Which situation describes blockbusting? A. A bank refused to lend to residents of certain neighborhoods because of their racial makeup. B. A broker moves a minority person into a neighborhood with the intent of buying other houses in the neighborhood at a greatly reduced price. C. A salesperson shows a minority client only properties in areas mostly populated by the same minority. D. Despite the all-Caucasian character of a neighborhood and the implication the seller would like to see it remain that way, the broker insists on showing the property to minority buyers who've expressed an interest in the area. 35. If a managing broker's license is revoked, the sponsoring broker has ___________ days to designate a new managing broker. A. 7 B. 10 C. 15 D. 21 36. When does an Illinois real estate broker license expire? A. April 30 of each even-numbered year B. April 30 of each odd-numbered year C. December 31 of each even-numbered year D. December 31 of each odd-numbered year 37. Which act defined gender/sex as a protected class? A. Civil Rights Act of 1866 B. Title VIII of the Civil Rights Act of 1968 C. The Housing and Community Development Act of 1974 D. The Fair Housing Amendments Act of 1988 Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 8 of 14 38. What is the maximum amount of money that can be awarded in a civil violation of the American with Disabilities Act for a first offense? A. $25,000 B. $50,000 C. $100,000 D. unlimited 39. When a judgment amount is paid from the Illinois Real Estate Recovery Fund on behalf of a licensee, the licensee's license is A. automatically terminated until the money is repaid to the Fund. B. immediately placed in probationary status for the remainder of the two-year license period. C. permanently revoked without possibility of reinstatement. D. temporarily transferred to the sponsoring broker's name until the money is repaid to the Fund. 40. As amended in 1988, the federal Fair Housing Act allows for a fine up to what amount for a single first offense to be imposed by an administrative law judge? A. $10,000 B. $25,000 C. $50,000 D. $75,000 41. A disabled individual applies to rent an apartment and states that the property would need to be made handicapped accessible. Which action would not be lawful in this situation? A. The landlord makes the renovations, but requires the tenant to pay the actual cost of the materials. B. The landlord makes the renovations to the property at the landlords' expense. C. The landlord refuses to allow the individual to make the renovations to the apartment. D. The landlord requires the tenant to make the renovations at the tenants own expense and requires the tenant also return the property to its original condition at the end of tenancy. 42. Which of the following is NOT included as a protected class by the federal Fair Housing Act? A. handicap B. national origin C. religion D. sexual orientation Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 9 of 14 43. When considering the Real Estate Recovery Fund, the maximum liability arising out of multiple acts by any one licensee is ___________________________ and by any one unlicensed employee of a licensee is ___________________________. A. $50,000 / $25,000 B. $50,000 / $50,000 C. $100,000 / $50,000 D. $100,000 / $100,000 44. How many hours of prelicensing education are required to apply for a leasing agent license? A. 15 B. 45 C. 60 D. 75 45. A landlord is exempt from the policies of the federal Fair Housing Act A. at all times; federal Fair Housing laws apply only to sales of property, not to leasing of property. B. never; a landlord is not exempt from the laws governing fair housing. C. when leasing to families with children. D. when the lease is for less than 18 months. 46. Which appointee must hold a currently valid real estate broker license which must be surrendered to the Department during their appointment? A. any Advisory Council member B. any Real Estate Administration and Disciplinary Board member C. the Real Estate Coordinator D. the Secretary of the Real Estate Administration and Disciplinary Board 47. Which building is NOT EXEMPT under Title III of the American with Disabilities Act? A. Elks Club B. historical buildings at Colonial Williamsburg C. Presbyterian church D. state capitol building 48. Any licensee whose license has expired for more than _________________ is not eligible for renewal of that license. A. 180 days B. 2 years C. 3 years D. 4 years Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 10 of 14 49. An owner of an apartment complex may deny housing to children if A. 80% of residents are over 62 years of age. B. 80% of the residents are over 65 years of age. C. 100% of the residents are over 62 years of age. D. 100% of the residents are over 65 years of age. 50. Which group is composed of five members appointed by the Governor? A. Advisory Council B. Bureau of Real Estate Professions C. Division of Professional Regulations D. Real Estate Administration and Disciplinary Board 51. Sally was interested in renting the other half of an owner-occupied duplex. She called a broker about it who told her that the owner, his client, does not allow children. Who, if anyone, is violating fair housing laws in this situation? A. the broker B. the owner C. both the broker and the owner D. neither the broker nor the owner 52. Which household does NOT qualify as a protected class under the familial status clause? A. grandparents raising their grandchildren B. pregnant woman C. retired couple over 65 D. single mother with three toddlers 53. Any person who commits a first offense of acting as a leasing agent without being licensed under the Illinois Real Estate License Act can A. apply for a probationary license while waiting for a hearing. B. be charged with a Class A misdemeanor. C. be charged with a Class 4 felony. D. seek the immediate endorsement of a sponsoring broker. 54. Bob owns a single-family home that he rents out. In order to be exempt from federal fair housing laws, all of these requirements must be met EXCEPT that he A. does not use a real estate professional. B. owns no more than two one- to four-family homes. C. owns no more than three single-family homes. D. uses no discriminatory advertising. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 11 of 14 55. Who is NOT required to be licensed? A. Andrew who negotiates a real estate transaction via email correspondence. B. Helen, who sets an appointment with a client to view a property. C. Mark, who shows a client through a property being sold by an owner. D. Paula, who hosts a public open house on behalf of a sponsoring broker. 56. Which applicant's personal situation would LIKELY result in denial of licensure as a broker under the Illinois Real Estate License Act? A. Erin, who is only 21 years old and still a college student B. Frank, who had a felony conviction for assault 10 years ago C. George, who is currently in arrears for delinquent state income taxes D. Hannah, who is currently making payments against on a delinquent unpaid hospital bill 57. Alice believes that she is the victim of housing discrimination. Which of the following would NOT be an appropriate action to pursue? A. Alice should file a complaint with HUD by going to the closest HUD office. B. Alice should file a complaint with a state or local fair housing agency. C. Alice should file a complaint with the local sheriff. D. Alice should file a written complaint with HUD by writing a letter directly to HUD. 58. Under the Illinois Real Estate License Act, an employee of a brokerage is required to be licensed if he A. hosts a home show fair booth on behalf of the brokerage. B. places yard signs on properties on behalf of the brokerage. C. records and deposits earnest money on behalf of the brokerage. D. submits listings to a Multiple Listing Service on behalf of the brokerage. 59. Employers are obligated to comply with the Americans with Disabilities Act in places of employment where there are _________ or more employees. A. 5 B. 10 C. 15 D. 20 60. Upon termination of employment, A. the licensee sends their original license to the Department. B. the sponsoring broker sends the original license to the Department. C. the sponsoring broker signs the license and issues a new sponsor card to the licensee. D. the sponsoring broker signs the license, keeps a copy, and gives the original license to the licensee. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 12 of 14 61. In order to be eligible for a pay out from the Real Estate Recovery Funds, a wronged individual should notify the IDFPR in writing within ____ days of the intention to commence an action for a judgment. A. 2 B. 5 C. 7 D. 10 62. Which is NOT a cause for disciplinary action? A. allowing a real estate license to expire for more than five years B. attempting to cheat on the licensing exam or assist someone else in doing so C. being convicted of a felony in federal court D. making a false or fraudulent representation in attempting to obtain a license 63. What is the maximum fine that may be imposed by the IDFPR? A. $5,000 B. $10,000 C. $25,000 D. $50,000 64. Broker Ben owns several timeshare properties at a lakeside resort. He would like Fred, the maintenance man who lives nearby and takes care of Ben's properties for him, to help show available properties to prospective timeshare owners and provide them information about rates and terms. Under Illinois law, to perform this function for Ben, A. Fred must be licensed as a broker. B. Fred must be licensed as a leasing agent. C. Fred must be licensed as a managing broker. D. Fred must reside in one of the properties to perform this function. 65. Who must be licensed as a broker under Illinois law? A. Amy, who has keys made for a sponsoring broker's company listing B. Bruce, who holds open houses to market real estate to the public for a sponsoring broker C. Cassie, who sits at a sponsoring broker's property for a broker tour not open to the public D. Doug, who places signs on properties for a sponsoring broker 66. Broker Dan talks with his friend Jane, a financial analyst, and Jane suggests that she will refer her clients who need real estate related services to Dan. Dan is glad to have the extra business. In appreciation, Dan may A. direct a fee is paid out of closing to Jane. B. give Jane a flat screen TV. C. pay a referral fee to Jane. D. tell Jane, "Thank You." Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 13 of 14 67. All are potential expressions of steering EXCEPT A. "I think you'd be more comfortable in another more familiar neighborhood." B. "I think you'll be right at home here, this building is filled with elderly people." C. "I hope you'll like this house." D. "Don't you think this neighborhood is a little low-rent for you?" 68. All are exempt from licensing requirements under the Illinois Real Estate Act EXCEPT A. Garth, an attorney, who negotiates terms of a real estate transaction for a client as a secondary matter in representing his client. B. Laura, the owner of a timeshare unit, who receives compensation from the timeshare development company for her referral of between five (5) and ten (10) purchasers a year. C. Tam, who is selling an immediate family member's home as part of his duties as executor of a will. D. Vivian, a closing agent, who receives referral fees from a sponsoring broker for providing leads that result in sale of real estate by licensees of his company. 69. Broker James is considered to have an affiliated business relationship with a title company to whom he refers business if he has an ownership interest of more than A. 1%. B. 5%. C. 10%. D. 25%. 70. Of these, which would be grounds for discipline under the Illinois Real Estate License Act? A. acting as a dual agent B. agreeing to a reduced commission to close a sale C. participating in panic selling D. using the logo of an organization of which the licensee is a member in an advertisement 71. Which is NOT a protected class under the Illinois Human Rights Act? A. grandparents raising their grandchildren B. order of protection status C. sexual orientation or gender identity D. source of income 72. When does an Illinois real estate managing broker license expire? A. April 30 of each even-numbered year B. April 30 of each odd-numbered year C. December 31 of each even-numbered year D. December 31 of each year Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law © Hondros Learning www.hondroslearning.com Page 14 of 14 73. Which was the first federal law to prohibit business practices considered to be harmful to consumers? A. Clayton Antitrust Act B. Federal Trade Commission Act C. Sherman Antitrust Act D. Unfair or Deceptive Acts or Practices Law 74. Broker Bryn has been accused of conflict of interest by working with buyer client Jack to purchase a house owned by her sister without disclosing her relationship. What action could lead to an investigation by the Real Estate Administration and Disciplinary Board? A. Client Jack files a complaint against Bryn. B. The broker who is listing Jack's current house for sale files a complaint against Bryn. C. The IDFPR makes a motion for an investigation. D. All of the above 75. Jason, a real estate broker, also owns the mortgage company his buyer chooses. Which of the following is true under RESPA? A. Jason must advise his buyer to select a different mortgage company. B. Jason may refer the buyer to his mortgage company as long as he discloses his interest in the company to the buyer. C. Jason may not refer buyers to his mortgage company, but if the buyer chooses the company independently, this is permitted, as long as Jason discloses his interest in the company. D. Jason may not refer buyers to his mortgage company, but if the buyer chooses the company independently, Jason has no obligation to disclose his interest in the company.

ILLINOIS BROKER PRELICENSE TOPICS UNIT 1: REAL ESTATE LAW UNIT QUIZ ANSWER KEY 1. D. Thirty years after the Civil Rights Act was enacted, in Plessy v. Ferguson (1896), the Supreme Court ruled in favor of a "separate but equal" doctrine of legalized racial segregation. 2. B. An applicant for licensure must have completed a minimum of 90 hours of prelicensing education. 3. D. Someone illegally addicted to a controlled substance is not considered disabled and is not a member of that protected class. 4. B. Antitrust laws were enacted to ensure that there are no restraints on trade. 5. C. The function of the Real Estate Recovery Fund is to provide a means of compensating people who have been harmed by a licensee's negligence. 6. D. You can never discriminate on the basis of race or color. 7. B. Jane is required to be licensed in order to interpret or explain the terms of a sales agreement. Jane may perform the other activities described as an unlicensed employee of a brokerage. 8. A. RESPA prohibits a real estate broker or agent from receiving anything of value, such as a fee or commission, for referring business to a settlement service provider. 9. B. An applicant for licensure must have certification of licensure for at least two (2) of the preceding three (3) years as a real estate broker or salesperson. 10. C. All of these phrases could get a real estate licensee into severe trouble. Antitrust laws must be taken very seriously. 11. C. When two brokers agree to divide territory or customers, they are engaging in the illegal practice of allocation of territory. 12. D. Section 9 of RESPA prohibits a seller from requiring the homebuyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance. 13. B. Even the appearance of discussing fees could be considered an example of illegal price-fixing. 14. D. Familial status was added as a protected class in 1988 with the passage of the Fair Housing Amendments. 15. B. An applicant for licensure must provide evidence of good moral character. The other statements are not correct. 16. C. The Jones v. Alfred H. Mayer Co. ruling in 1968 prohibits any racially based discrimination in housing. 17. D. Transfer of sponsorship is not a type of discipline. The types of discipline include reprimand, probation for a period with various possible conditions, suspension for a period, indefinite suspension for a period, revocation, termination, refusal to renew a license, and/or refusal to issue a license. 18. B. When two companies conspire to deny business to a competitor, they could be accused of illegal boycotting. 19. A. The Department has no authority to impose a criminal penalty such as imprisonment. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 5 20. C. A property manager who collects rent must be licensed as a broker. Performing the other functions listed would not require the property manager to be licensed. 21. C. Realtors (Race) Can (Color) Really (Religion) Sell (Sex) Houses (Handicap/Disability) Fast (Familial Status) Now (National Origin). 22. C. The federal Fair Housing Act requires landlords and owners to make provisions for handicap accessibility, but it does not require the landlord to bear the expense of the renovations. The landlord is also allowed to require the property be returned to its original condition upon termination of occupancy. 23. B. The accused then has 20 days to file a written response to the charges. 24. A. The licensees of all sponsored licensees are automatically inoperative and sponsored licensees must secure a properly completed 45-day sponsor card from another qualified sponsoring broker in order to resume practice. 25. B. Racial discrimination is prohibited by the federal Fair Housing Act and the Civil Rights Act of 1866. Failure to comply constitutes an unlawful act. 26. D. One of the duties of the Real Estate Coordinator who is appointed by Secretary of the Real Estate Administration and Disciplinary Board is to act as Chairperson of the Board, without vote. 27. D. A woman who is pregnant is considered part of the familial status protected class. Unless the exemption criteria are met, it is unlawful to discriminate based on the fact that Violet will soon have a child living with her. 28. B. A claimant with a valid judgment from the court may be able to recover up to $25,000, plus court costs and reasonable attorney's fees. 29. C. Redlining is a refusal to make loans or issue insurance policies on property located in a particular neighborhood for discriminatory reasons (effectively, drawing a red line around an area). 30. A. Proceedings for judicial review are commenced in the Circuit Court of the county in which the party applying for review resides. 31. D. Offerings in office and business skills, such as advertising or sales techniques, would not be appropriate for continuing education. 32. A. Steering relates to buyers or renters and is defined as channeling prospective buyers or renters to or away from specific neighborhoods based on their race (or religion, national origin, or other protected class), to maintain or change the character of a neighborhood. 33. D. Two licensees who work for the same sponsoring broker may be assigned to represent a buyer and a seller in a real estate transaction. As designated agents, each licensee owes statutory duties to his or her respective client. The other situations all constitute prohibited practices. 34. B. It is defined as "Inducing or attempting to induce, for profit, any person to sell or rent property based on representations made regarding entry into the neighborhood of persons of a particular race, color, religion, sex, or national origin." Blockbusting is also referred to as panic selling or panic peddling. 35. C. The sponsoring broker has 15 days to replace the managing broker without consequence. 36. A. Brokers must complete and pass all continuing education requirements then renew their licenses before April 30 of each even-numbered year. 37. C. Gender was added as a protected class in 1974 with the passage of the Housing Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 5 and Community Development Act. 38. B. The Department of Justice may assess a civil penalty not to exceed $50,000 for a first violation. 39. A. When a judgment amount is paid from the Fund on behalf of a licensee, the licensee's license is automatically terminated, until such time as the money is repaid to the Fund, plus interest. Bankruptcy of the licensee does not discharge liability to the Fund. 40. A. An administrative law judge is limited to imposing a fine up to $10,000 for a single first offense. A federal court judge may impose a fine of up to $25,000 for the same offense. 41. C. The federal Fair Housing Act requires landlords/owners to make provisions for handicap accessibility, but it does not require the landlord to bear the expense of the renovations. The landlord is also allowed to require the property be returned to its original condition upon termination of occupancy. 42. D. As of today, the federal Fair Housing Act prohibits discrimination in housing based on "race, color, religion, sex, national origin, disability, or familial status in the sale or lease of residential property." 43. D. The maximum liability arising out of multiple acts by any one licensee or one unlicensed employee of a licensee is $100,000. 44. A. For prelicensing education, a leasing agent is required to complete 15 hours of instruction in an approved course of study related to the leasing of residential real property. 45. B. A landlord is not exempt from the laws governing fair housing. Anyone who is selling or leasing residential property must abide by these rules. 46. C. Article 25 of the Illinois Real Estate License Act establishes the creation of a Real Estate Coordinator. The Real Estate Coordinator is appointed by Secretary of the Real Estate Administration and Disciplinary Board. The Real Estate Coordinator must hold a currently valid broker license which must be surrendered to the Department during the appointment. 47. D. Places of worship, private clubs, and historical buildings are exempt; however, historical buildings must still comply with the "maximum extent feasible." Although civil penalties may not be assessed in cases against state or local government, there is no exemption for these facilities. 48. B. Any licensee whose license has expired for more than two years is not eligible for renewal of that license. 49. C. Exempt senior housing facilities and communities can lawfully refuse to sell or rent dwellings to families with minor children if the facility is intended for and solely occupied by persons 62 years or older. 50. A. Article 30 of the Illinois Real Estate License Act establishes the creation of The Advisory Council. The Council is composed of five members appointed by the Governor. 51. C. Both are in violation. Once the owner chose to use a real estate licensee, the exemption to familial status was no longer available to him. 52. C. Familial status refers to households that include individuals under the age of 18 who either live with parents or legal custodians. This protection also extends to pregnant women or any person in the process of obtaining legal custody of a child Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 4 of 5 under the age of 18. 53. B. Any person who practices, offers to practice, attempts to practice, or holds oneself out to practice as a real estate broker, managing broker, or leasing agent without being licensed under the Illinois Real Estate License Act has committed a Class A misdemeanor (first offense). 54. B. Single-family housing is exempt from federal fair housing laws if the owner owns no more than three such homes at one time, no discriminatory advertising is used, and no real estate professional is used. This is also known as the Mrs. Murphy Exemption. 55. B. Setting an appointment with a client does not require being licensed. 56. C. Of these personal situations, the fact that George has not paid his property taxes would likely result in a denial because it is evidence of financial irresponsibility and does not demonstrate evidence of good moral character. 57. C. Alice should either work with a national, state, or local fair housing agency when pursuing a fair housing complaint. 58. A. Hosting an open house, a home show kiosk, or fair booth on behalf of a brokerage would require an employee to be licensed under the Illinois Real Estate License Act. 59. C. Employers are expected to comply with the Americans with Disabilities Act when there are 15 or more employees in place of employment. 60. D. The sponsoring broker signs the license, keeps a copy, and then gives the original license to the licensee to facilitate the transfer of sponsorship. 61. C. Failure to notify the IDFPR in writing within 7 days of the commencement of an action may preclude any recovery from the fund. 62. A. Allowing a license to expire is not a cause for disciplinary action unless the person continues to practice real estate without a valid license. 63. C. The IDFPR may assess a fine not to exceed $25,000 per licensee as a result of a formal hearing. 64. A. According to the Illinois Real Estate License Act, to perform this function, Fred must be licensed as a broker. 65. B. Bruce is performing an activity that requires a license. The others are performing activities that an unlicensed personal assistant can perform. 66. D. Broker Dan can give Jane his thanks. All of the other choices would constitute illegal kickbacks or referral fees which violate RESPA. 67. C. This hopeful statement is perfectly acceptable. The other choices are all examples of steering. 68. D. Vivian's activities would require her to be licensed under Illinois law. 69. A. According to RESPA, an affiliated business arrangement is a situation where a person in a position to refer settlement services has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1% in a provider of settlement services and who then refers business to that provider. 70. C. It is unlawful to participate in panic selling or blockbusting. Acting as a dual agent so long as all parties involved are properly informed and have consented, agreeing to a reduced commission or using a membership logo in an advertisement are all acceptable practices. 71. D. Source of income is protected under the Equal Credit Opportunity Act, but not under the Illinois Human Rights Act. Illinois Real Estate Broker Prelicense Topics - Unit 1: Real Estate Law - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 5 of 5 72. B. Managing broker licensees must complete and pass all continuing education requirements then renew their licenses before April 30 of each odd-numbered year. 73. C. The Sherman Antitrust Act of 1890 was the first federal law outlawing practices considered harmful to consumers, such as monopolies. 74. D. Anyone can file a complaint that could lead to an investigation, as well as a motion from the IDFPR. The Board could also investigate on its own initiative. 75. B. Real estate brokers and mortgage companies may have an interest in each company so long as the real estate broker discloses its relationship with the joint venture company when it refers a customer to the mortgage broker or title company.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 2: AGENCY UNIT QUIZ 1. An agent is one who A. acts, or has the power to act, for another. B. is owed a fiduciary duty. C. is represented by another. D. represents the agent of another. 2. A sales agent has a duty to treat all parties to a transaction honestly and fairly A. in all transactions. B. only when acting as a dual agent. C. only when representing a buyer in a transaction. D. only when representing a seller in a transaction. 3. A broker takes a listing from a seller. In the third month of the listing the seller had a fatal heart attack. Regarding the listing agreement, which statement is TRUE? A. The broker must disclose if the seller had the heart attack at the listing. B. The broker must now reduce the price. C. The broker must remove the sign and the lockbox. D. The heirs must work with the broker to get the estate sold. 4. A broker has a policy that agents will not be dual agents when the agents sell their own listings. Which would a potential buyer be to the listing agent if the buyer wants to buy the agent's listing? A. agent B. client C. customer D. designated client 5. Joan has power of attorney to care for all aspects of her sister's life while her sister is serving in the military overseas. She handles her bills, signs legal papers, and even took on the task of selling her sister's house. Which type of agency does this represent? A. general agency B. limited agency C. special agency D. universal agency 6. An attorney-in-fact is best described as a(n) A. attorney at law. B. fiduciary to a principal. C. power of attorney. D. principal. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 2 of 9 7. Ken is a sponsoring broker. He contracts with licensee Barb to work for him as a broker. Barb is Ken's A. general agent. B. limited agent. C. special agent. D. universal agent. 8. Which is the best example of a general agent? A. a power of attorney given in order to transfer an automobile B. a power of attorney given to handle all dealings of a disabled person C. a property manager D. a real estate agent 9. Joel and Andy work for Blue Roof Realty. Joel has listed 1776 Constitution Blvd. and Andy has an interested buyer. If Joel and Andy put this deal together, then it will A. allow Joel and Andy to take advantage of what each other knows about seller and buyer. B. be an in-house deal where each client is represented individually. C. be illegal because in-house transactions are prohibited in Illinois. D. create a dual agency situation that requires written consent from buyer and seller. 10. What is the most common way to create an agency relationship between a home seller and a broker? A. buyer-broker agreement B. by implication C. listing agreement D. oral contract 11. The Multiple Listing Service (MLS) was created so that A. all brokers could have a secure place to record a client's confidential information. B. all brokers could share listings with a blanket offer of cooperation and compensation. C. dual agency agreements and disclosures would not be necessary. D. subagency could be established through membership in the service. 12. How long must an agent keep confidential information obtained from the client? A. Agents have no duty to keep information confidential. B. Agents must maintain confidentiality for three years after the transaction closes. C. Agents must maintain confidentiality only until the relationship ends. D. This duty never ends, even when the relationship does. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 3 of 9 13. A listing agent listed a property for a term of six months from the beginning of the listing. Six months have now passed. How did the listing terminate? A. accomplishment of purpose B. expiration C. mutual release D. operation of law 14. Identify the activity that is NOT considered a ministerial act. A. Broker Amy attends an open house and responds to buyer Bob's questions about a property. B. Broker Carrie advises her client Davis to have a property inspection. C. Broker Ethan makes an appointment to show a house to buyer Fritz. D. Broker Gwyneth goes along with Hannah, the home inspector, on her visit to seller Ivan's property. 15. An agency relationship can be terminated legally without recourse under what circumstance? A. the agent becomes mentally incompetent B. the buyer dies C. the listing broker dies D. the listing agent dies 16. Which type of agent has the greatest authority? A. general agent B. special agent C. universal agent D. All have equal authority. 17. Pam, a broker at Rob Realty, is the listing broker for Brian's house. Mary sees the house on Rob's website and calls Greg, another broker for Rob, to see if he'll show her the house. At this point, who does Greg have an agency relationship with? A. Brian, Pam's client B. Mary, his customer C. Pam, the listing broker D. Rob, his broker 18. What acronym can be helpful for remembering the basic fiduciary obligations? A. BAD CAT B. NEW CAB C. OLD CAR D. RED DOG Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 4 of 9 19. Which is NOT a potential consequence of undisclosed dual agency? A. criminal prosecution B. liability for damages due to a rescinded transaction C. loss of license D. loss of a commission associated with the transaction 20. Listing broker Dan includes an offer of cooperation to be a broker's agent in the MLS, and broker Sylvia accepts. When Fred, one of Sylvia's agents, refuses to show the house to a minority, who could NOT be held liable? A. Dan, the listing broker B. Fred, Sylvia's agent C. Steve, the seller D. Sylvia, the broker's agent 21. What does an agent owe to a client that he does not owe to a customer? A. fairness B. honesty C. integrity D. obedience 22. Joe's real estate brokerage practices designated agency. One of his agents brings Joe a listing agreement with a seller. Another of his agents brings Joe a brokerbuyer contract with a potential buyer for that property. As sponsoring broker, what type of relationship does Joe have with the seller? A. designated agent B. dual agent C. seller's agent D. selling agent 23. Lori is buying a house. She talks to broker Ralph of Star Agency who explains the different agency relationships to her. Lori says she only wants buyer's agency and will not accept dual agency under any circumstances. If that's the case, which statement is TRUE? A. Ralph cannot show Lori any of his listings. B. Ralph cannot show Lori any of Star's listings. C. Ralph's sponsoring broker must be a dual agent. D. Ralph must refuse Lori as a client. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 5 of 9 24. A property is listed with broker Barry for $200,000. He receives an offer from Gina for $150,000 cash with a closing in 90 days; an offer from Tim at $155,000, subject to the buyer obtaining a first mortgage for $130,000; an offer from Shari at $190,000 subject to the owner taking back a purchase money mortgage with closing in 30 days. Barry should disclose which offer(s)? A. all of the offers B. none of the offers, as they are all below the asking price C. only the first offer presented until the seller makes a decision to accept or reject; then the broker can reveal the next offer presented D. whichever offer is the highest and has the most favorable terms for the seller 25. Margaret of XYZ Realty discloses the fair housing laws to her client; however, the client refuses to show the property to a Native American couple. Which action do you think Margaret should take? A. Margaret has fulfilled her duty by disclosing the laws to her client; no other action is necessary. B. Margaret should contact the Native American couple and inform them of her client's violation of the fair housing laws. C. Margaret should ignore her client's wishes and show the house to any potential buyer without regard to race, religion, etc. D. Margaret should inform her broker so that the broker may determine the method in which to proceed or terminate the listing. 26. Which event that would LEAST LIKELY trigger the requirement to disclose an agency relationship and/or present the agency disclosure form to a prospective buyer? A. discussing an offer to buy property B. providing the price of a property in response to a phone inquiry C. requesting specific financial information from the buyer D. showing a property to a buyer (except at an open house) 27. What information would probably NOT be considered confidential? A. the city in which a buyer wants to look B. the price range that a buyer is interested in C. the reason a seller is selling a home D. the timeframe in which a seller must sell a home 28. Which agency relationship requires the written consent of both parties to the transaction? A. buyer's agent B. designated agent C. dual agent D. seller's agent Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 6 of 9 29. Broker Maeve met with buyer Sean and presented him with the required designated agency disclosure at the same time he signed a buyer-broker contract. The contract expired before Sean found a house. How long does Maeve's agency have to keep these records? A. It does not have to keep them since no transaction resulted. B. 5 years C. 2 years D. 1 year 30. Kevin is looking for a house and calls agent Guy about a listing he saw on a yard sign. At this point, Kevin just wants to learn a little bit about the house. Which question would most likely trigger the need to present agency disclosure? A. How big is the lot? B. How many bedrooms are in the house? C. How quickly might the owner want to close? D. What's the asking price? 31. What duty is an agent breaching when she appears to be advocating for the customer? A. accountability B. disclosure C. loyalty D. obedience 32. During a 90-day listing agreement, the seller dies. What statement is true? A. The agent can continue to show the property to any interested buyer. B. The agent's death is the only thing that would terminate the listing. C. The listing agreement can be enforced against the seller's heirs. D. The listing agreement is terminated. 33. What duty would require an agent to limit showings to a one-hour block on Sunday mornings if the seller insists? A. accountability B. loyalty C. obedience D. The agent would actually be in breach of the duty of reasonable care if he did not make every appropriate effort to market the property. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 7 of 9 34. Agent DeeDee has a 60-day buyer broker agreement with Melanie. The agreement states that DeeDee will vigorously pursue finding a house for Melanie. A month into the agreement, DeeDee goes on a two-week cruise. It's clear to Melanie that DeeDee has neglected and abandoned her. This could be an example of termination of agency by A. expiration. B. mutual agreement. C. renunciation. D. revocation. 35. What is another word for client? A. agent B. customer C. fiduciary D. principal 36. Felicia is a buyer's agent for Kevin. She sees a "For Sale By Owner" sign in front of Ron's house that indicates a 3% commission would be paid to any broker who procures a buyer. If Kevin makes an offer on that house through Felicia, what is seller Ron's relationship to Felicia? A. agent B. client C. customer D. principal 37. Sponsoring broker Greg practices designated agency at the outset of every agency agreement. Kim and Jeff are both brokers working for Greg. Kim has a buyer client interested in Jeff's listing. Who is a dual agent in this scenario? A. Greg only B. Greg, Kim, and Jeff only C. Greg and every one of his other affiliated licensees D. no one 38. In Illinois, a real estate agent who works for the seller must provide an agency disclosure form to a prospective buyer A. after first receiving confidential information. B. after the first property showing. C. at the first substantive contact. D. once the buyer wishes to make an offer on the property. 39. Which situation does NOT represent a conflict of interest? A. Alex is a disclosed dual agent, representing both buyer and seller. B. Kaye is a buyer's agent whose commission is based on the sale price of the home. C. Paul is showing his buyer client a house on which he had a prior listing. D. Susan is negotiating the purchase of a home for her client, who is also her sister. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 8 of 9 40. Tom employs broker Lester to sell his house, promising a specified sum as commission. Without informing Tom, Lester also acts for the buyer, who also promises a commission. When Tom discovers that Lester is acting for both parties, he goes through with the deal but refuses to pay any commission. If Lester sues, is he likely to recover commission from Tom? A. No, dual agency transactions are illegal. B. No, he breached his fiduciary responsibility. C. Yes, by going through with the deal, Tom forfeits his right to object. D. Yes, Lester has properly acted as a dual agent. 41. Rick was the buyer's agent for Tina, whose offer for Jane's house was countered with an amount $10,000 below list price. This was still more than Tina wanted to pay. She found another house and bought that instead. Now Rick is buyer's agent for Herman, who wants to put in an offer on Jane's house. Can Rick tell Herman that Jane would accept $10,000 below list? Why or why not? A. No, Tina's negotiations with the seller are confidential. B. Yes, Rick has no fiduciary obligation to seller Jane. C. Yes, Rick must act in Herman's best interest. D. Yes, Rick's relationship with Tina was over when she found another house. 42. The fiduciary duty of loyalty requires that the agent A. arrange financing for the buyer. B. hold the principal's interest above all other interests. C. look out for his own interest first. D. obey each and every request of the principal. 43. An agency relationship can be terminated by the A. agent discarding the agency disclosure forms. B. agent revoking the agency relationship. C. principal renouncing the agency relationship. D. principal revoking the agency relationship. 44. Which is the best example of a special agent? A. attorney-in-fact B. landlord C. property manager D. real estate licensee 45. If your buyer client wants to submit an offer on one of your own listings, you are a(n) A. buyer's agent. B. designated agent. C. dual agent. D. open agent. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency © Hondros Learning www.hondroslearning.com Page 9 of 9 46. What duty does an agent NOT owe a customer? A. fair dealing B. honesty C. integrity D. loyalty 47. Who could NOT be a selling agent? A. buyer's agent B. dual agent C. listing agent D. All of these could be a selling agent. 48. The listing agreement provides that the listing broker may make an offer of compensation to other brokers to assist in finding prospects willing to purchase the seller's property. A buyer-broker accepts this offer on behalf of the buyer. In this case, the cooperating buyer-broker represents the A. buyer. B. buyer and the seller. C. listing broker. D. seller. 49. Which information obtained from the client CANNOT be kept confidential? A. The boundary line of the property subject of the transaction is in dispute. B. The current resident of the property was diagnosed with HIV/AIDS. C. A murder of a previous resident occurred on the property three years ago. D. The neighboring property is a group home for developmentally disabled adults. 50. Of these, which termination of agency would be due to accomplishment of purpose? A. The listing broker abandons the seller before the listing period ends. B. The listing broker does not find a buyer before the listing period ends. C. The listing broker sells the house. D. The seller fires his agent before the listing period ends.

ILLINOIS BROKER PRELICENSE TOPICS UNIT 2: AGENCY UNIT QUIZ ANSWER KEY 1. A. An agent works for a principal. The person for whom the agent works is owed a fiduciary duty. A customer is not owed any fiduciary duty. A person who acts on behalf of another agent is known as a subagent. 2. A. Even with a customer, an agent has to be fair and honest. With a client, the agent has even more duties. 3. C. By operation of law, once the client or broker in an agency relationship dies the agency ends. 4. C. A dual agent is a broker who represents both buyer and seller. The customer is the party in the transaction that is not represented. 5. D. Joan is a universal agent. She is authorized to do anything and everything that can be lawfully delegated to a representative. 6. B. An attorney-in-fact receives authority under a power of attorney, and need not be an attorney at law. An attorney in fact is an agent for the principal and owes the principal all fiduciary duties. 7. A. Barb is a general agent in terms of her relationship to her sponsoring broker. 8. C. A general agent may do anything in a specific area, such as a property manager who has the authority to handle most, if not all, tasks associated with taking care of an owner's property. 9. B. It will be a perfectly legal in-house deal. 10. C. A listing agreement is an employment contract that creates an agency relationship between a seller and a broker. 11. B. The Multiple Listing Service was created so that all brokers could have a common place to share property listings. Subagency cannot be established through membership in a multiple listing real estate board. The other statements are FALSE. 12. D. Even if the relationship ends, the duty to keep information to yourself does not end. 13. B. Expiration is when the end of the listing term arrives. 14. B. Broker Carrie is advising her client, which is not considered a ministerial act. The other circumstances are examples of ministerial acts. 15. C. The listing broker is the agent of record in a listing. A listing is an employment agreement; therefore, when an employee dies, the agreement is void. This is not the salesperson's listing; the listing belongs to the broker of record in every transaction, not to the agent. 16. C. A universal agent has the authority to do everything that a principal could do by himself. Real estate agents are rarely universal agents. 17. D. In this situation, Greg is an agent of his employing broker, Rob. He has no fiduciary obligation with anyone else in this scenario at this point. 18. C. Basic fiduciary obligations include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care: OLD CAR. 19. A. The risks a sponsoring broker and affiliated agent face for acting as undisclosed dual agents does not include criminal prosecution, but other disciplinary action is possible. Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 3 20. C. In this situation, the seller does not have liability for the actions of a broker's agent or her affiliated licensees. 21. D. Obedience is a fiduciary duty owed only to clients. 22. C. The sponsoring broker is the one with whom the seller creates an agency agreement. He also appoints licensees as designated agents for his clients. 23. A. If Lori insists that she will not accept dual agency, Ralph cannot show her any homes he has listed for seller clients. He could show her listings from other Star Agency brokers, however, since he is her designated agent. 24. A. The broker must disclose and present the seller with all offers to purchase the said home. It is a breach of the broker's fiduciary duties to withhold pertinent information such as multiple offers. 25. D. A licensee must follow the laws governing the federal Fair Housing Act, even if the seller is in violation. If the listing is active, the licensee should consult with her broker so that the broker may determine the method in which to proceed or terminate the listing. 26. B. When working with a prospective buyer of real estate, the agency relationship must be disclosed at the first substantive contact but no later than certain trigger events. A phone call from someone making an inquiry about a property is not necessarily a trigger event. 27. A. The city in which a buyer chooses to house hunt is not likely to be confidential. The other information, on the other hand, could have an impact on the bargaining position of a buyer or seller and would, therefore, be considered confidential. 28. C. According to Illinois law, a licensee may act as a dual agent only with the written consent of both parties to the transaction. 29. B. Records of agency disclosure must be maintained by the sponsoring broker either electronically or in hard copy format for five years. 30. C. Of these questions, discussing the timeframe for settlement or the seller's motivations is most likely to lead to a discussion of Kevin's particular needs. The other questions simply require a factual answer. 31. C. Agents must be loyal to clients, not customers. 32. D. By law, if either the seller or the broker dies, the listings are terminated. The listing is between the broker and the seller, not the agent, so the agent's death would have no effect upon the listing. 33. C. Agents must obey their clients' lawful instructions. 34. C. Terminating agency through renunciation means that someone who was granted something later rejects it. In this case, DeeDee was granted to right be Melanie's agent, and you could say that her neglect and abandonment was a rejection of that right. 35. D. The client in any fiduciary relationship is the principal. 36. C. In this scenario, agent Felicia exclusively represents the buyer, Kevin. Ron, the seller, is representing himself and is therefore Felicia's customer. 37. D. If Kim was immediately designated as the buyer's agent, and Jeff was immediately designated as the seller's agent, no one would be considered a dual agent. 38. C. The agent working for the seller has the duty to disclose agency relationship in order to eliminate confusion or mistake. The disclosure of agency relationship should Illinois Real Estate Broker Prelicense Topics - Unit 2: Agency Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 3 be provided at the first substantive contact (i.e., before any property showings or receiving confidential information). 39. A. Dual agency is not a conflict of interest if it is disclosed. Alex is obligated to remain completely neutral in this transaction. 40. B. A broker cannot represent both parties in the same transaction without being a dual agent. To attempt to represent each party independently without disclosure to do so to each party is a breach of the broker's fiduciary responsibility and a violation of the Illinois Real Estate License Act. 41. A. The details of client Tina's negotiations with the seller are confidential information. That fiduciary obligation never ends unless Rick is given written permission to divulge that. 42. B. The broker putting self interest above the client's may be held liable for selfdealing, and is breaching the obligation of loyalty. 43. D. A principal revokes an agency relationship, while an agent is the party that would renounce the agency relationship. 44. D. By definition, a special agent is one who has very limited authority and may do only one thing for the principal (e.g., find a ready, willing, and able buyer). 45. C. If you represent both buyer and seller, you are a dual agent. Remember that dual agency requires written permission from both parties. 46. D. Agents must be fair and honest in their dealings with customers, and should behave with integrity at all times. Loyalty is a duty that an agent owes only to a client. 47. D. The selling agent is the one who procured a buyer. Any of these could be a selling agent. 48. A. The payment of fees from one broker to another does not establish any agency relationship between them or the clients that they represent. In this instance, the buyer-broker is the representative of the buyer and is accepting a fee on behalf of the client. 49. A. A boundary line dispute is a physical condition of the property that must be disclosed by law. 50. C. The most common way agency is terminated is by accomplishment of purpose, as when a listing broker sells the house.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 3: BROKERAGE OFFICE ISSUES UNIT QUIZ 1. Broker Sam places an advertisement for a property he co-owns with his brother on his sponsoring broker's web site. The ad indicates the location of the property, his name, and the name of his sponsoring broker. What else must be included in the ad? A. any deed restrictions or other encumbrances on the property B. a clear disclosure of any material defects C. a clear disclosure that the broker has ownership interest in the property D. the commission rate that the sponsoring broker will charge. 2. Which federal law requires companies to take measures to protect the financial information of consumers? A. ECOA B. FACTA C. RESPA D. TILA 3. Which statement about broker licensing is TRUE? A. In an advertisement, the sponsoring broker's business name must be in a font size no smaller than the licensee's name. B. A licensee may list his name in the phone book under real estate without including his sponsoring broker's business name. C. A licensee designated as a managing broker must identify herself as such in any advertisement. D. The sponsoring broker's business name is not required to be included on a business card. 4. A licensee who wishes to form a corporation for the purpose of receiving earned compensation from his sponsoring broker must A. get written permission from his sponsoring broker. B. get written permission from the IDFPR. C. license the corporation. D. be the sole shareholder of the corporation. 5. Licensee Lucinda is selling her house and has listed it with her sponsoring broker, who is well-known in her town. Lucinda A. is exempt from advertising rules and regulations since she is selling her own house. B. must include her sponsoring broker's phone number on the yard sign. C. must disclose her licensee status on the yard sign. D. must disclose her licensee status on the property data form. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues © Hondros Learning www.hondroslearning.com Page 2 of 6 6. A licensee's Internet home page for brokerage services is NOT required to include the A. city and state where the licensee's office is located. B. licensee's name. C. licensee's phone number. D. name of the licensee's sponsoring brokerage. 7. Which situation represents a blind ad placed by a licensee? A. Calvin includes a national franchise logo in an ad, but his brokerage is not affiliated with that company. B. Lauren indicates that she's a REALTOR® in ad for brokerage services, but she's not a member of the NAR. C. Phil puts a "for sale by owner" sign in a client's yard with nothing but his phone number. D. Wesley is selling his own property through his brokerage but does not include "broker-owned" on the sign he places. 8. An individual who wishes to work for a brokerage firm under independent contractor status A. does not require the employer to withhold state and federal employment taxes. B. is not responsible to any expenses incurred in the course of performing his or her duties. C. is not a preferred candidate for employment by most managing brokers. D. must be compensated for hours worked as well as production. 9. Which statement about a brokerage's company policy manual is TRUE? A. Every company policy manual must be approved by IDFPR. B. Every company policy manual must follow the template found in the Administrative Rules. C. Every licensee must sign a statement acknowledging receipt and compliance with the company policy manual. D. Every sponsoring broker is responsible for establishing a written company policy manual. 10. Which statement about an employment agreement is FALSE? A. It is required for brokers but not licensed personal assistants. B. It must address employment or independent contractor terms. C. It must be in writing. D. It must be signed by the licensee and the sponsoring broker. 11. The Illinois Telephone Solicitations Act prohibits sales calls between the hours of _________ and _________. A. 8 p.m. and 8 a.m. B. 8 p.m. and 9 a.m. C. 9 p.m. and 8 a.m. D. 9 p.m. and 9 a.m. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues © Hondros Learning www.hondroslearning.com Page 3 of 6 12. According to Illinois license law, when a licensee advertises property as being for sale by owner, property that would qualify as being "solely-owned" by a licensee would NOT include property in which the licensee A. has a 100% ownership interest alone. B. has 100% right to possession as a tenant in common. C. holds ownership as a tenant by the entirety. D. is the beneficiary of a 100% interest in a land trust. 13. Ace Realty has three brokerage offices in Illinois. Ace is required to have A. an employment agreement with each unlicensed assistant. B. an errors & omission insurance policy. C. a separate designated managing broker for each office. D. a written company policy. 14. An unlicensed assistant may NOT A. deposit earnest money in an escrow account. B. host a booth a local home show event. C. gather the documentation required for closing. D. submit listings to the MLS. 15. Which situation describes the practice of scraping? A. Broker Ben purchases a list of consumer names and phone numbers from an Internet search service so that he can cold call them. B. Broker Lois posts listings she pulled from another licensee's website on her public website without permission. C. Broker Mike includes links to HUD, FHA, and the VA from his home page as a service to consumers. D. Sponsoring broker Ned posts listings from the MLS on the company intranet for his affiliated licensees to reference. 16. A broker who is paid for non-production work, such as required meetings or training, receives a _________________ at the end of the year detailing the income. A. 1040 IND B. 1099 MISC C. W-2 D. W-4 17. Which statement about the CAN-SPAM Act is FALSE? A. It applies only to business-to-consumer communication. B. It applies to both computers and wireless devices. C. It gives recipients the right to opt-out at any time. D. It includes fines of up to $16,000 per violation. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues © Hondros Learning www.hondroslearning.com Page 4 of 6 18. Sponsoring broker John decides it's time to open a second brokerage office on the other side of town. He must A. appoint a separate managing broker. B. hire at least one broker to work at the branch office. C. inform IDFPR of the branch address within 24 hours of opening. D. obtain a branch office license from the state. 19. Broker Hannah has 100 licensees working in her office. She is required to have all licenses A. held by the individual licensees. B. in some readily-accessible form of storage, like a binder, which can be viewed by members of the public upon request. C. on display in a public area. D. on display in her private office. 20. Which statement about real estate brokerage advertising in Illinois is FALSE? A. Advertising in any media must be under the direct supervision of the sponsoring or managing broker. B. Only designated managing brokers may hold themselves out to the public to be managing brokers. C. A sponsored broker cannot advertise to the general public under his or her own name. D. A sponsoring broker must include the name of the designated sponsored licensee on a yard sign. 21. Any changes in managing brokers must be reported to the IDFPR in writing within ________________ days of the change. A. 7 B. 15 C. 30 D. 90 22. When licensees sell their property "by owner" without using brokerage services. they must A. disclose the name of their sponsoring broker in the multiple listing service entry. B. indicate their franchise affiliation on any signs. C. indicate "broker-owned" or "agent-owned" on any signs. D. use their sponsoring broker's name in any advertisements or signs. 23. Identify the statement about brokerage office requirements that is FALSE. A. A brokerage office does not have to be distinct when located in a retail establishment. B. Each sponsoring broker must maintain a definite place of business. C. Every branch office must have its own license. D. Every brokerage office must have an identifying sign conspicuously displayed outside. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues © Hondros Learning www.hondroslearning.com Page 5 of 6 24. Someone who violates Do Not Call provisions is subject to a fine of up to _______________ per incident. A. $11,000 B. $12,000 C. $15,000 D. $16,000 25. Which statement about the Illinois Telephone Solicitations Act is FALSE? A. A solicitor may not impede the function of any caller ID. B. Operators are not required to give their own names when calling. C. Operators must ask if the person consents to the sales call. D. Operators must state the name of the company and the purpose of the call. 26. When the Division of Professional Regulations requests written documentation about a transaction, a licensee has __________ days to comply. A. 7 B. 15 C. 30 D. 60 27. Leasing agent Lucy places an ad indicating downtown apartments available for $500 a month. Applicant Rick comes to her office and asks to see an apartment and she talks him into a place that rents for $900, which results in a higher fee for her. If the ad was simply intended to get prospects in the door, this might be an example of what sort of tactic? A. bait and switch B. extortion C. loan flipping D. ponzi scheme 28. A managing broker should encourage an agent to A. advertise a property as vacant to let people know there are no valuables inside. B. have a pre-established method or code phrase such as "pick up my kids" if she has no children for relating an emergency situation to the office. C. leave her cellular phone near the closest exit when showing a property to a client. D. let the client drive when going to look at a property to avoid liability. 29. An unlicensed assistant may be A. compensated for referring buyers to a broker. B. directly engaged in showing property. C. employed only by a sponsoring broker. D. under the supervision of a broker. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues © Hondros Learning www.hondroslearning.com Page 6 of 6 30. Which statement about escrow audits is FALSE? A. An audit may be conducted at any time with the consent of the sponsoring broker. B. A sponsoring broker may postpone an audit for up to 30 days in order to have an attorney present. C. A sponsoring broker must have at least 24 hours notice of the audit when consent is not granted. D. Licensed and unlicensed employees of the sponsoring broker may be interviewed as part of the audit.

ILLINOIS BROKER PRELICENSE TOPICS UNIT 3: BROKERAGE OFFICE ISSUES UNIT QUIZ ANSWER KEY 1. C. Any ownership interest the licensee has must be disclosed in writing in all advertising. 2. B. The Fair and Accurate Credit Transaction Act (FACTA) requires businesses to take measures to responsibly secure and dispose of sensitive personal information. 3. C. Those individuals licensed as a managing broker and designated with the Department as a managing broker by their sponsoring broker must identify themselves to the public in advertising as a managing broker. No other individuals holding a managing broker's license may hold themselves out to the public or other licensees as a managing broker. 4. D. Such a corporation is not required to be licensed as long as the person who formed it is a licensee and is the sole shareholder of the corporation. 5. D. Since she is listing her property with a brokerage, disclosure of ownership is not necessary on yard signs or in advertisements. However, ownership must be indicated on any property data form and disclosed to persons responding to any advertisement or any sign. 6. C. A phone number is not a required element on a licensee's home page. 7. C. A blind ad is defined as any real estate advertisement that does not include the sponsoring broker's business name. 8. A. The employer is not required to withhold state and federal employment taxes for an individual who wishes to work under independent contractor status. This is the only true statement. The other choices are false. 9. D. The sponsoring broker must establish written company policies although there is no mandated template that a sponsoring broker must follow. 10. A. Employee agreements must be in writing and signed by the parties to the contract, the sponsoring broker and the licensee. Each must retain copies for their files. Sponsoring brokers must also have a similar written employment agreement with each licensed personal assistant. 11. C. No person may solicit the sale of goods or services via a telephone call between the hours of 9 p.m. and 8 a.m. 12. B. All of these situations would be considered as being under sole ownership of a licensee except for property owned as a tenant in common. 13. D. It is not necessary to have separate managing brokers. And while it makes good business sense to do so, a sponsoring broker is not required to have an E&O policy. Nor does Ace need an employment agreement with unlicensed assistants. A company policy manual, however, is mandated. 14. B. A license would be required to host a booth at a fair or home show. 15. B. The term scraping refers to using or altering existing listing information or keywords that are copied from one Internet site and posted or displayed for the benefit of the general public in front of a firewall at another site without written or electronic authorization and disclosure of ownership. 16. C. A licensee receives a W-2 for any non-production income. Illinois Real Estate Broker Prelicense Topics - Unit 3: Brokerage Office Issues - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 2 17. A. The law makes no exception for business-to-business e-mail or wireless communication. 18. D. Each office needs a license, but it does not need a unique managing broker or any specific number of brokers. 19. B. All licensees must be available to the public for review. There is no longer a requirement that they be posted on a wall. 20. D. Nothing requires a sponsoring broker to include the name of one of its sponsored licensees on signs or other general advertising. All other statements are true. 21. B. Failure to report changes in managing brokers to the IDFPR within 15 days will subject the sponsoring broker to discipline. 22. C. When selling property "by owner" without using brokerages services, a licensee may not use the name of his or her sponsoring broker or affiliated franchise so as not to cause confusion in the minds of consumers. 23. A. A real estate office may be located in a financial business establishment as long as it is in a separate and distinct area. 24. D. Violators could be fined up to $16,000 per incident. 25. B. In addition to the name of the business or organization being represented and the purpose of the call, operators must immediately state their names. The other statements are true. 26. C. Upon any written or oral request by Division personnel for written documentation, a licensee must produce the requested documentation within 30 days after the request. 27. A. If Lucy teased the consumer with the rate in the ad to get him in the door and then convince him to go with something else that costs more, she could be accused of using an illegal bait and switch tactic. 28. B. One method of relating an emergency situation to the office is to establish with your managing broker and the office staff an emergency code phrase that alerts someone the agent is in an unsafe situation or needs assistance. A good code phrase may be a simple statement that makes no sense if the statement doesn't fit with that person's situation. For example, a person uttering the statement asking for help picking up kids when the agent has no children, could be a good code phrase. 29. D. Any licensee may employ, compensate, and supervise an unlicensed assistant. 30. B. The Division of Professional Regulations will not postpone an

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 4: REAL PROPERTY UNIT QUIZ 1. When you bequeath property to someone else in a will, which right from the bundle of rights are you taking advantage of? A. control B. disposition C. exclusion D. possession 2. Henry buys a retirement home in the mountains. He never really got along with his son, Mario, but really likes Mario's wife, Joan. After Mario gets a divorce, Henry changes his will so that Joan inherits the house when he dies. What type of estate does Henry have? A. conventional life estate B. estate for years C. fee simple absolute D. life estate pur autre vie 3. Which transaction does NOT represent an example of an appurtenance? A. selling the fructus industriales grown on your land B. selling the natural gas under your house to utility company C. selling the space above your farm to a billboard advertiser D. selling water from your underground spring to a bottling company 4. Which of these unities is required for there to be tenancy in common? A. possession B. interest C. time D. title 5. Lenny and Eileen just got married, and she moves into the house Lenny owned prior to the wedding. Which of these unities is present with respect to the ownership of the house? A. interest B. time C. title D. person Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 2 of 14 6. Ron and Deb are getting divorced and decide to sell the house. Before the house sells, however, the divorce is finalized, and the judge awards the house to Deb as part of the divorce settlement. What is her interest in the house? A. joint tenant B. tenant in common C. tenant by the entirety D. tenant in severalty 7. Which unity is NOT required for joint tenancy? A. interest B. time C. title D. person 8. Ann and Bob each own a one-third interest in a property as joint tenants. Dave owns a one-third interest in the property as tenants in common with Ann and Bob. When Bob dies, what happens to his interest in the property? A. It is split equally, so Ann and Dave each have a 50% interest. B. It goes to Ann, who now has a two-thirds interest. C. It goes to his heirs, leaving Ann and Dave with their one-third interest. D. It must go to probate court for a determination. 9. When Dave and Lucy get married, they decide to sell each of their homes and buy one house together. Lucy's house sells for $700,000; Dave's house sells for $300,000; and they're going to buy a $1 million house. If Lucy wants a 70% interest in the new house, what form of ownership must they take? A. joint tenancy B. tenancy in common C. tenancy by the entirety D. tenancy in severalty 10. Rita, Al, and Paul co-own a family restaurant as joint tenants. If Paul dies, his interest will pass to A. the corporation. B. his named heirs. C. the surviving co-owners. D. the state under escheat. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 3 of 14 11. Craig is the sole proprietor of a construction business. Business is slow and he does not pay his suppliers, who take him to court. He is ordered to pay one of the suppliers $150,000, but the company's assets total only $25,000. How would Craig and his wife need to own their house to keep it safe from the liability of a sole proprietorship? A. joint tenancy B. tenancy by the entirety C. tenancy in common D. tenancy in severalty 12. Betty died and left real property to her daughters, Bonnie and Beatrice. When Bonnie died, her husband did not get the property even though her will said that all her worldly possessions go to him. Instead, the property went to her sister, Beatrice. How did Bonnie and Beatrice own the property? A. joint tenancy B. tenancy in common C. tenancy by the entireties D. undivided interest tenancy 13. Jim and his friend Lisa buy a house together. The deed indicates that Jim owns a 75% interest, and Lisa owns a 25% interest. Jim sells a third of his 75% interest to Luke. Luke now has the right to live in how much of the house? A. 25% B. 33% C. 50% D. 100% 14. Albert conveys a life estate to daughter Charlotte for as long as she lives, and then to son David Who is David and what does he own? A. remainderman, present estate B. remainderman, future estate C. reversioner, present estate D. reversioner, future estate 15. Mike conveys a life estate to youngest son Ned for as long as his wife Olive shall live, and then to son Paul. Ned dies before Olive dies. Now who has the present interest in the estate? A. Mike B. Ned's heirs C. Olive D. Paul Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 4 of 14 16. Ed conveys a life estate to youngest son Frank for as long as his wife Gladys shall live, and then to son Hank. Hank dies before Frank dies. When Gladys dies, who has the present interest in the estate? A. Ed B. Frank C. Gladys's heirs D. Hank's heirs 17. Matilda wants to know that her granddaughter, Rose, will inherit her house when she dies. So, she deeds her house to her granddaughter but creates a situation where Matilda can still live in the house until she dies. When Matilda dies, Rose now owns the house. What kind of estate is this? A. conventional life estate B. fee simple absolute C. fee simple defeasible D. life estate pur autre vie 18. Mark bought a house for his just-divorced sister, Kim, to live in. When Kim dies, Mark wants to retain possession of the property. Who will own the property when Kim dies and what is that person called? A. The owner of the property will be Kim's heir, who is the life tenant. B. The owner of the property will be Kim's heir, who is the remainderman. C. The owner of the property will be Mark and he is the remainderman. D. The owner of the property will be Mark and he is the reversioner. 19. Lisa owns a condo, which means she owns in severalty the A. interior of her unit only. B. interior and exterior of her unit. C. interior and exterior of her unit as well as the land it sits on. D. interior of her unit and a percentage of the common elements. 20. Which is NOT an example of common area in a condominium community? A. balcony B. gym C. sidewalk D. swimming pool 21. Phil owns shares in a corporation that gives him the right to live in a unit of a building that is owned by the corporation. Phil lives in a A. condominium. B. cooperative. C. leasehold estate. D. timeshare. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 5 of 14 22. What is a legal device used by a person to give another person title to their property to hold for the benefit of a third party? A. cooperative B. leasehold estate C. limited partnership D. trust 23. ABC Remodeling Corporation buys a new warehouse for their trucks and excess building materials. How will they take title? A. joint tenancy B. tenancy by the entireties C. tenancy in common D. tenancy in severalty 24. Rufus is the silent partner in a consulting firm, giving his friends, general partners Mel and Joe, $200,000 to start the business. Four years later, the firm is $900,000 in debt. How much is Rufus liable for when the creditors come knocking at his door? A. $200,000 B. $300,000 C. $750,000 D. whatever the court decides 25. Ned is a co-owner of a property in Orlando. He is permitted to stay there only the first week of December and the third week of June every year. This type of ownership is called a A. cooperative. B. condominium. C. leasehold estate. D. timeshare. 26. Broker Steve is working with buyer client Marilyn, who enters into a contract to purchase a time-share interest in real estate. Steve should inform Marilyn that A. once she signs the contract, she will not have the option of canceling the contract B. she has the right to cancel the contract within five days from the date she signs it. C. she has the right to cancel the contract within three days from the date the transaction closes. D. she may cancel any time prior to five days before settlement without penalty. 27. Which type of business entity pays a share of the profits to it beneficiaries? A. corporation B. joint venture C. REIT D. syndicate Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 6 of 14 28. Trustor Harold makes daughter Jan the trustee of some rental property for the benefit of grandson Mike. Who actually holds title to the property? A. Harold B. Jan C. Mike D. not enough information to determine 29. You own 20 acres of land in the mountains. You decide to deed the land to your niece. However, you want to make sure that the pristine beauty of the property is not marred by development, so you indicate that at least 10 acres must remain undeveloped. This is an example of A. fee simple absolute. B. fee simple defeasible. C. fee tail estate. D. life estate . 30. Which is an example of an involuntary, general lien? A. IRS tax lien B. mechanic's lien C. mortgage lien D. special assessment lien 31. Helen has lived in her home for 30 years and has one daughter, Erin. She is widowed and lives there with her sister-in-law, Amy, who is also widowed. If Helen dies before Amy, Helen wants to make sure that Amy is still allowed to live there, so she grants Amy a life estate. Helen dies. After ten years, Amy also dies. Which statement is true? A. Amy's life estate will exist as long as Helen lives. Once Helen dies the life estate ends and Erin will take possession of the property. Erin has a future interest in the life estate. B. Helen is the grantor of the life estate; Amy is the life tenant and the measuring life for the estate and Erin has a reversionary interest in the property. C. Helen is the measuring life of the life estate; Amy is the life tenant and Erin is the remainderman. D. Helen's daughter can terminate Amy's life estate 10 year's after Helen's death. 32. James goes on vacation. When he comes back, he finds that his neighbor put up a fence three feet over his property line. The fence is a/an A. appurtenance. B. encroachment. C. nuisance. D. trespass. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 7 of 14 33. Which of these would NOT be classified as real property? A. magnolia trees B. tulips planted in a backyard, which bloom every year C. wild blackberry bushes that grows on your property D. zucchini picked from a garden 34. A wood-burning stove is a leasehold improvement installed in the living room of a rented single-family home. The stove must have been installed by the __________ and would most likely be _________ property. A. landlord / personal B. landlord / real C. tenant / personal D. tenant / real 35. A pizza oven is attached to the floor of a rented pizza shop as a fixture. The oven was installed by the __________ and is _________ property. A. landlord / personal B. landlord / real C. tenant / personal D. tenant / real 36. Which is NOT an appurtenance? A. the right to hunt on the property B. the right to sell space on the roof for a satellite dish C. the right to tap an underground oil well D. the right to use the river behind your house river for boating 37. Which item is NOT a fixture? A. the built-in washer that's at the repair shop on the day of closing B. the curio cabinet in the living room that matches the room's decor C. the keys to the house D. the white picket fence around the house 38. Carl, the candy maker, has a five-year lease. He installs a marble counter to use for making fudge. When the lease is up, Carl A. can leave the marble counter and charge the landlord for the improvement. B. can remove the marble counter because it's a trade fixture. C. cannot remove the counter because it was permanently attached to the cabinet. D. must remove the marble counter since he didn't ask permission to install it. 39. Which item is NOT an attachment? A. an above ground children's pool B. an apple orchard C. an island in the middle of a kitchen D. a key to an attic Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 8 of 14 40. Chris is selling his farm to Carmen before the corn is harvested. What method of easement creation would most likely be used to allow Chris to enter the property after settlement for the specified purpose of harvesting that crop? A. easement by express reservation B. easement by implication C. easement by necessity D. easement by prescription 41. Terry has a property right on the road where she's built a house. She's lived there for 10 years. Ebony owns the vacant land behind Terry's property. When Ebony decides to build a house, she realizes she does not have any way to get from the road to her property. Ebony asks Terry for permission to cross her property, and Terry refuses. What is Ebony's best option to get to her property? A. easement by express reservation B. easement by implication C. easement by necessity D. easement by prescription 42. You live next to a bend in the river. Over the last several years, the river has been depositing silt at the bend, making the river channel straighter, and adding land to your property. This is an example of A. accretion. B. avulsion. C. erosion. D. reliction. 43. Jack has lived in a house on a property with no access to the road for 30 years. He's been driving across Rob's vacant front property all 30 years to get to the road without an easement. When Rob decides to build, he puts a fence all around his property, blocking Jack from the road. Other than an easement by necessity, what option does Jack have to travel from his property to the road? A. easement by condemnation B. easement by implication C. easement by prescription D. She has no other option. 44. A sidewalk is an example of A. a covenant. B. an appurtenant easement. C. an easement in gross. D. an encroachment. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 9 of 14 45. Jill's house is sold for $120,000 to satisfy several liens. Priority 1 lienholder, Abe, is owed $60,000; Priority 2 lienholder, Ben, is owed $90,000, and Priority 3 lienholder, Carla, is owed $30,000. How will the proceeds from the sale be divided? A. Abe=$60,000; Ben=$60,000; Carla=$0 B. Abe=$60,000; Ben=$40,000; Carla=$20,000 C. Abe=$40,000; Ben=$60,000; Carla=$20,000 D. Abe=$45,000; Ben=$45,000; Carla=$30,000 46. Darrell has a written agreement to drive across Lin's property to get to his own. This is an example of a/an A. appurtenant easement, where Darrell's property is the dominant tenement and Lin's property is the servient tenement. B. defeasible easement, which puts a condition on Darrell to follow the rules established by Lin. C. easement in gross, where the easement is attached to Darrell and he can't transfer the easement if he sells the land. D. encroachment, since Darrell is allowed to encroach on the rights of Lin. 47. Harold and Joanne have been neighbors for years. Up until recently, Harold has been using Joanne's drive to get to his garage. Harold decides to buy the lot behind his house. Since Harold has more room, he tears down his garage and builds a new garage with its own driveway from the street behind his house. How is this easement being terminated? A. destruction B. failure of purpose C. merger D. prescription 48. What do a lumber company, a property tax collector, a painter, and a mortgage bank have in common? A. By law, they all have easements in gross that burden your property. B. They can all put specific, financial encumbrances on your property. C. They can attach general, involuntary liens on your property. D. They can only force a foreclosure on your property if they are the first lien holder. 49. Lucy is getting ready to split the family farm up into 20 individual lots. Which would NOT be an acceptable deed restriction? A. Houses must be painted white or grey. B. Houses must be at least 50 feet from the road. C. Owners may not sell the property for at least two years. D. Owners may not install swimming pools. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 10 of 14 50. Klaus inherited 50 acres of land near Carlyle, IL. He's never been there, so he didn't realize that neighbor Glenda has fenced in two acres of his land to grow vegetables for the last 22 years. She even has a stand from which she sells her produce. What would allow Glenda to petition the courts for ownership of the two acres? A. adverse possession B. appurtenant easement C. easement by prescription D. easement in gross 51. Ad valorem taxes are assessed A. based on a person's income. B. based on the property's value. C. on a decedent's estate. D. to cover the costs of specific improvements to a neighborhood. 52. The constitutional basis that gives governments the right to regulate the use of private property for the benefit of the general public is A. eminent domain. B. environmental laws. C. nonconforming use. D. police power. 53. The city wants Julie's property to build a municipal park. An appraiser values her property at $150,000. She's willing to sell for $200,000. How much is Julie most likely to get for her property? A. She does not have to sell her property. B. $150,000 C. $175,000 D. $200,000 54. Which of these are items could LEAST LIKELY be regulated by zoning? A. building size for parcel of land B. landscaping C. setbacks D. sulfur emissions from an industrial site 55. Fiona bought a lot to build a home. The zoning for that town said that the lot had to be 100 feet wide, but to Fiona's surprise, she learned that the lot was only 98 feet wide when she applied for a building permit. The land is worthless to Fiona if she cannot build the house for lack of two feet. What does Fiona need from the zoning board? A. buffer zone B. conditional use C. nonconforming use D. variance Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 11 of 14 56. You are driving through a suburb of a city and notice that all of the fast food signs are close to the ground. This is a result of A. building codes. B. subdivision regulations. C. variances. D. zoning ordinances. 57. Anna has always dreamed of owning a pottery shop. She buys a piece of property on the edge of a suburb where several new subdivisions are being built and begins to save money for the building. When she finally saves enough money to build the shop, she finds out that the area is zoned residential. What can she do? A. request a use variance B. request a special exception C. request spot zoning D. request to be grandfathered in 58. Ten years ago, Daniel bought a 20-acre farm and orchard. He put up a small building from which to sell produce, jams, pies, etc. Now the area is zoned residential and many exclusive homes are built. Daniel's farm stop is very popular and brings a lot of traffic to the area at certain times of the year. The neighbors sue to have the farm stand removed. The court rules in favor of Daniel. What is the most likely reason? A. Daniel has a special exception since his food benefits the general public. B. Daniel has followed the building codes for agricultural buildings. C. Daniel has followed the zoning laws for farms. D. Daniel's farm stop is a nonconforming use and is grandfathered into the zoning. 59. Mary is working with an agent to buy a particular property. She tells the agent she owns a large RV for vacationing and wishes to park the large vehicle when it's not being used beside the detached garage in the backyard. What document should the agent be sure to check in order to advise Mary? A. appraisal B. deed C. mortgage D. survey Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 12 of 14 60. You buy a two-year old house in a development and receive a copy of the declaration of covenants, conditions, and restrictions (CC&Rs). Five months after you move in, you start to paint your house bright purple. You receive a notice to stop. You A. can get a variance from the zoning authority to allow you to paint your house purple. B. can ignore the notice, since the CC&Rs are a restriction on your basic bundle of rights, specifically the right of control. C. can ignore the notice, since you are the second owner of the house. D. must comply with the CC&Rs, since it specifies what colors are appropriate for homes in the development. 61. Parkway Crossing development has several deed restrictions related to flying flags in front of houses. A number of people have violated the restriction for years, but no one complained until someone flew the flag of the rival college football team on game day. What doctrine might prevent the neighborhood association from enforcing this deed restriction? A. appropriation B. escheat C. laches D. reversion 62. Which is NOT an example of a public land restriction? A. deed restriction B. plumbing code standard C. residential zoning D. water pollution law 63. Tom bought a piece of property. He goes to the local zoning officer before he builds to see what restrictions he might have to consider. Which is LEAST LIKELY to be addressed by a zoning ordinance? A. the grade of the land B. the number of outlets required for each room C. the position of the building on the lot D. whether or not Tom can operate a bar from the property 64. Dan moves into a quiet residential neighborhood with several open acres across the street. A church buys the property and puts up a large building that attracts 3,000 people every Sunday. When Dan contacts the zoning authority, he is told that this was allowed because of a A. conditional use. B. deed restriction. C. nonconforming use. D. variance. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 13 of 14 65. Which is NOT a reasonable deed restriction? A. activities that cannot be conducted at the site B. ethnicity of purchasers who would be acceptable residents C. minimum size of buildings to be constructed D. types of building that may be constructed 66. The illegal rezoning of a single parcel of land or a small area to benefit one ore more property owners rather than carry out objectives of the master plan is known as A. as of right zoning. B. cluster zoning. C. incentive zoning. D. spot zoning. 67. Which of these statements is NOT true regarding deed restrictions? A. Once established they run with the land and are limitations on the use of future grantees. B. They are also called restrictive covenants. C. They are frequently encountered in residential subdivisions. D. They terminate upon the death of the grantor. 68. The type of zoning that allows developers to provide a varied selection of lot sizes and housing choices within a single area is A. as of right zoning. B. cluster zoning. C. incentive zoning. D. spot zoning. 69. All of the homes in a Prairie Acres Subdivision appear to be built a uniform distance of 30 feet from the street. What is the probable reason? A. coincidence B. setback requirements in the subdivision regulations C. homeowner's association rules and regulations D. a zoning variance 70. Developer Lenny purchased 20 acres and had an engineer/land planner survey and draw up a plan, subdividing the land into 20 residential lots and two streets. The plan indicates the dimensions and number of each lot, the required setbacks, and the location of easements for utilities. What is this document commonly called? A. a deed B. a plat C. a PUD D. a topographic survey Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property © Hondros Learning www.hondroslearning.com Page 14 of 14 71. In the metes and bounds system the description always ends at the A. intersection of the range lines and base lines. B. permanent reference point. C. point of beginning. D. primary deviation. 72. In whose office would you find a plan book showing lots and blocks? A. broker B. county recorder C. state auditor D. the Department of Natural Resources 73. Which document would be least likely to require a legal description? A. deed B. listing agreement C. mortgage D. title insurance 74. In a topographic map, Hill A has contour lines that are closer together than the contour lines on Hill B. This indicates A. Hill A is higher than Hill B. B. Hill A is smaller than Hill B. C. Hill A is steeper than Hill B. D. Hill A is wider than Hill B. 75. Milo, who is buying a house, was looking through the purchase documents when he noticed the property description says: "Beginning at the old oak tree, then South 15 degrees East, thence North 90 degrees ..." What type of survey system is this? A. government survey B. lot and block C. metes and bounds D. plat map

ILLINOIS BROKER PRELICENSE TOPICS UNIT 4: REAL PROPERTY UNIT QUIZ ANSWER KEY 1. B. The right to sell, give away, or bequeath property is the right of disposition. 2. C. Fee simple absolute is the highest form of ownership. It allows you to will the property to anyone if you are the owner. Thus, in this situation, Henry can will the house to Joan, even though she legally is no longer married to Mario. 3. A. Fructus industriales is personal property. An appurtenance is a right that related to real property, such as air, subsurface, and surface rights. 4. A. The only unity required for tenancy in common is possession. 5. D. The deed is in Lenny's name, so there is no unity of interest, time, or title. He could sign a new deed that has both him and Eileen as owners, making them tenants by the entirety. They do have unity person, since they are married. They also have unity of possession, since they both live in the house. 6. D. Ownership in severalty is ownership held by one person. 7. D. To have joint tenancy, the unities of possession, interest, time, and title must be present. 8. B. Ann and Bob are joint tenants, which includes the right of survivorship. Bob's share goes to Ann. 9. B. Tenancy in common is the only form of co-ownership that does not require the unity of interest. 10. C. Joint tenancy allows co-owners to take ownership shares of a deceased co-owner without going through the court. 11. B. If Craig and his wife owned the house as tenants by the entirety, it would be safe. 12. A. Each joint tenant has an equal undivided interest in the land and the right of survivorship. When a joint tenant dies, her share of the property is split between the remaining co-owners. In this case, Beatrice was the only remaining survivor so she became owner in severalty. 13. D. They are all tenants in common. As co-owners, they have an undivided interest by the entire property, so Luke, Jim, and Lisa legally own the entire house. 14. B. The estate will belong to David when the measuring life/life tenant Charlotte is dead. David is the remainderman, and he has a future interest in the estate. 15. B. A life estate is inheritable. Therefore, if life tenant Ned dies before the measuring life, Olive, dies, the life estate goes to Ned's heirs. 16. D. A remainder interest is also inheritable. Therefore, when the measuring life dies, the remainder interest goes to the heirs of the original remainderman, Hank. 17. A. Matilda is creating a life estate for herself. Life estates last only as long as the measuring life lives. Rose is the remainderman. 18. D. Ownership of the property will revert to Mark when life tenant Kim dies. 19. A. If Lisa is the sole owner of her condo, she owns only the interior of her unit in severalty. Her interest in the common elements is as tenants in common. 20. A. Owned by all but used by one owner only is known as limited common area. A laundromat, swimming pool, and the sidewalk are owned and used by all owners. The balcony is limited to only one person's use. 21. B. Cooperatives are owned by corporations with the residents as shareholders. 22. D. The trustor transfers ownership of their property to the trustee, who will hold or manage it for the beneficiary. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 4 23. D. A corporation is considered to be a single entity, and so will take title in severalty. 24. A. A silent partner, or limited partner, is only liable for his or her investment, $200,000. 25. D. Ned owns the property with several other people who share the property, and each has a designated time period in which they can occupy the property. 26. B. Under the Illinois Real Estate Time-Share Act of 1999, a timeshare purchaser has the right to void the contract within five calendar days of receiving the public offering statement or signing the contract, whichever comes last, for a full refund, 27. C. The key word is beneficiaries, who are paid profit from a REIT, or real estate investment trust. 28. B. Jan, as trustee, holds the title to the property, although her power is limited by the terms outlined in the trust. 29. B. Since you put a condition on the property, you limited what could be done with the property. This type of freehold estate is also called qualified fee. 30. A. There are a few liens that are involuntary general liens: Some judgment liens and some tax liens, such as lien for unpaid income tax. 31. B. The property goes to the grantor's heir when the life estate ends; Erin has a reversionary interest and is not the remainderman. The life estate continues as long as the life tenant, Amy, lives and cannot be terminated except by death or Amy's choice. Amy is the measuring life for the estate. 32. B. An encroachment, the fence, is an object that intrudes on a property. An appurtenance is a right that goes along with ownership of real property and usually transferred with the property. Coming back from a vacation to find a fence on your property might be annoying but legally, it's not a nuisance. Finally, an object cannot trespass. 33. D. Trees and tulips are natural attachments; the blackberry bush is naturally occurring. These are real property. The zucchini has been harvested and is personal property. 34. B. A leasehold improvement is installed by the landlord for the use of the tenant. Since the stove is attached to the house, it would most likely be considered real property of the landlord. 35. C. A fixture is installed by a commercial tenant and is considered to be personal property. 36. A. An appurtenance is a right that goes with real property, including air, water, and mineral rights. The right to hunt is not an appurtenance but a license. 37. B. The curio cabinet might look nice in the room but it is not a fixture. The dishwasher is still part of the real property even though it is not in the house. Keys are considered to be fixtures; you cannot use a property without one. The fence is an attached to the land; it is a fixture. 38. B. The counter is considered a trade fixture since it is necessary for candy making and was installed by the tenant for that purpose. Carl should remove the marble counter when the lease is up and restore the property to its original condition. 39. A. Since the pool is not actually attached to the property, it is still considered to be personal property. The key to the attic is an example of constructive annexation, which is necessary to access the attic. The island in the kitchen is a man-made attachment and the orchard is a natural attachment. 40. A. An easement by reservation in the deed could be used to create an easement that allows Chris to go back and harvest that corn after settlement. 41. C. The law says that if you own real estate, you have an absolute right to be able to get to it so that you enjoy the benefits of ownership. Since Ebony cannot get to this real estate at this point, she would go to the courts and ask for an easement by necessity. Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 4 42. A. This is an example of accretion, which is a gradual addition to dry land by the forces of nature. 43. C. Jack has been using that land for well over 20 years; the court could award him an easement by prescription to continue to go across Rob's property. 44. C. An easement in gross involves just one property and benefits a person, not another property. 45. A. Abe, with first priority, gets his full amount. Ben gets the remainder, which is less than he is owed. There's nothing left from the proceeds for Carla. 46. A. An appurtenant easement burdens one property, the servient tenement (Lin's property), for the benefit of another property, the dominant tenement (Darrell's property). Darrell is allowed to cross the property (nonencroachment). While the explanation with easement in gross is correct, here, the easement runs with the land and not a person. 47. B. Harold no longer needs the easement since he has a new garage and driveway, so it would be terminated by a failure of purpose. 48. B. All of these can put specific liens or financial encumbrances on your property. These can be voluntary (mortgage bank) or involuntary (lumber company, painter, tax collector). 49. C. A deed restriction cannot be so restrictive as to prevent the free and reasonable transfer of the property. 50. A. Adverse possession, also known title by prescription, requires open and notorious, hostile and adverse, exclusive and continuous use of another's land for a specific period of time, after which she can petition the courts of ownership. This is not an easement because she is using the land exclusively. 51. B. Ad valorem taxes are assessed based on the value of the property. A large portion of ad valorem taxes are usually used for local school districts. 52. D. Police power is the constitutional power of state, county, and local governments to enact and enforce laws that protect the public's health, safety, morals, and general welfare. 53. B. The city can exert its power of eminent domain and pay Julie just compensation for her property, which typically is its fair market value. 54. D. Zoning can regulate landscaping, building size for parcel of land, and setbacks. Environmental laws regulate sulfur emissions from an industrial site. 55. D. A variance would allow Fiona to build despite lacking two feet to be in compliance with the zoning requirements. The zoning board might decide to require her to include a firewall on the side of the house closest to the next lot, however. 56. D. Zoning ordinances set minimum standards such as lot sizes and building height limits, including sign heights. Building codes usually control how a building is actually constructed and includes what materials and methods are used. A variance is a type of zoning exception. Subdivision regulations determine how a subdivision is planned. 57. A. She can request a use variance which would allow her to build her shop in a residential area. She doesn't have a nonconforming use exception since she hasn't actually been using the land as a pottery shop. Spot zoning is generally illegal. 58. D. Since Daniel already had the farm stop before the area was zoned residential, he has a nonconforming use. 59. B. The agent should advise Mary to review the deed for the property and confirm there are no deed restrictions in place that prohibit parking her RV as she would like. 60. D. Regardless of whether or not you are the second or the 200th owner, as long as the CC&Rs are in place for the development, anyone who buys a house there needs to follow the Illinois Real Estate Broker Prelicense Topics - Unit 4: Real Property - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 4 of 4 established rules of the community. 61. C. Laches is the loss of a right due to a failure or a delay in asserting that right, in this case, the right to enforce the deed restriction. 62. A. Deed restrictions are private land restrictions. Common public restrictions are zoning, building codes, subdivision regulations, and environmental laws. 63. B. Zoning ordinances usually regulate permitted uses of land, lot size, building size, and location, etc. The number of outlets in a room is more likely to be a building code requirement. 64. A. A conditional use or special exception is made for land usage that doesn't conform to zoning rules for the benefit of the general public. Churches, schools, and hospitals often are allowed because of a conditional use. 65. B. Deed restrictions in violation of fair housing laws, such as restrictions on the sale of the property to a particular race or creed, are void. 66. D. Spot zoning is an example of isolated zoning changes or rezoning that can be illegal because the law is not applied the same way to all landowners. 67. D. These restrictions are "appurtenant" to the real property and thus "run with the land." 68. B. Cluster zoning may take the form of a planned unit development which is a special type of subdivision in which developers do not have to comply with all standard zoning and subdivision regulations. 69. B. Setback requirements are usually dictated by subdivision regulations and restrictions put on the property by the original developer. It would be up to the neighbors to enforce these. 70. B. A plat is a detailed survey map of a subdivision showing boundaries of lots, streets, easements, etc., which, upon approval, is recorded and becomes the basis for transfer of title of the individual lots. 71. C. Metes and bounds descriptions always start and end at the point of origin or point of beginning. 72. B. The plan book containing plat maps is recorded in the office of the county recorder. 73. B. Of these documents, only a listing agreement does not require a legal description of the property. 74. C. Contour lines show how steep the land is. The closer the lines, the steeper the hill. 75. C. Metes and bounds uses distance (metes) and direction (bounds) to describe the boundaries of a parcel of land.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 5: CONTRACTS UNIT QUIZ 1. Greg signs a piece of paper promising to paint Kim's house. This is A. an express bilateral contract. B. an express unilateral contract. C. an implied bilateral contract. D. not a contract. 2. In a face-to-face meeting, a farmer offers to pay a roofer $1,500 to install a roof on his barn and the roofer says, "I'll do it tomorrow." What type of contract do they have? A. express bilateral contract B. express unilateral contract C. implied bilateral contract D. implied unilateral contract 3. Shirley was under psychiatric care and declared incompetent in March. She signed a purchase contract to buy Joe's house two months later. What was the status of the contract when she signed? A. unenforceable B. valid C. void D. voidable 4. Lisa has a contract to buy Bill's house for $150,000. She made a $6,000 earnest money deposit, which was specified to be used as liquidated damages if necessary. Lisa does not show up at settlement. It takes Bill six months to find another buyer, who offers him only $134,000. How much can Bill most likely sue Lisa for in compensatory damages? A. $6,000 B. $10,000 C. $16,000 D. however much he wants for his pain and suffering 5. The Statute of Frauds is a statutory law that requires contracts regarding real estate to A. be in writing to be enforceable. B. have a definite expiration date. C. have adequate consideration. D. include a non-discrimination clause. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 2 of 13 6. Walton decides to sell his cabin on the lake and offers it in a letter to his regular postman, Bill, at a price of $5,000. The next day, Walton receives a note from a neighbor, a close friend of the postman, who says, "I accept your offer." Is Walton obligated to sell to the neighbor? A. no, because no licensed agent was involved B. no, because only the offeree can accept an offer C. yes, because both the offer and the acceptance were in writing D. yes, because the acceptance was within three days 7. Carrie, age 17, is selling the house that she inherited from her grandparents. George has agreed to buy the property, and both have signed a purchase agreement. What is the status of this contract? A. valid B. void C. voidable by Carrie D. voidable by George 8. A subdivision developer employs agent Sue to sell lots. John offers to buy lot B-3 for $20,000, and the sales contract is executed. However, through a typographical error, which no one noticed, the contract identified the lot as D-3 (which was listed at $25,000.) What is the contract status? A. enforceable B. unenforceable C. void D. voidable 9. Melissa went to the dry cleaners and dropped off her good wool coat to be cleaned. When the clerk accepted the coat, Melissa and the dry cleaning operation had just entered into what type of contract? A. complete B. express C. implied D. unilateral 10. Adam and Jenny enter into an agreement wherein Adam will buy Jenny's house at the asking price if Jenny will install a new roof and if Adam can qualify for a loan sufficient to cover the purchase. Until the roof is installed and the financing obtained, the contract is said to be A. executed. B. executory. C. rescinded. D. voidable. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 3 of 13 11. Jill tells Rick that she will walk his dog for $40 a week and they shake on the deal. This oral contract is A. express and valid. B. implied and valid. C. unenforceable. D. void. 12. Mary signs a one-year lease for landlord Sue's house. After six months of paying rent, this lease could be best described as A. bilateral, executory. B. express, executed. C. implied, bilateral. D. unilateral, executed. 13. Martin promises to pay Fred $10,000 to set fire to Martin's house so he can collect the insurance. Fred agrees and they shake on the deal. This oral contact could be described as A. invalid. B. valid. C. void. D. voidable. 14. Ruth is disappointed when her 21-year-old daughter Beth drops out of college. She and Beth sign a contract that states Beth promises to go back to school and graduate, and in exchange, Ruth will give her a new SUV on the day she gets her diploma. This contract is best described as A. bilateral and valid. B. bilateral and voidable. C. unilateral and valid. D. unilateral and void. 15. A contract is entered into on fraudulent terms introduced by the seller. Upon discovery of the fraud by the buyer, the contract would be A. valid. B. void. C. voidable by the buyer. D. voidable by the seller. 16. Lora offers to buy Chip's house for $150,000. Chip counteroffers. Lora is the A. counterofferee. B. counterofferor. C. offeree. D. offeror. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 4 of 13 17. The rule that prevents the admission into court of any prior or simultaneous oral or written agreements that contradict the terms of the written contract is referred to as the A. doctrine of part performance. B. parol evidence rule. C. rule of genuine assent. D. statute of frauds. 18. Clark is being transferred. Using the ABC Realty website to look at photos of listed houses, he makes an offer on one. The seller accepts and settlement is handled with a long distance conference call. When Clark arrives at the house, nothing looks familiar. ABC determines that their website was linking to a different house. This contract can be nullified because of A. duress. B. fraud. C. misrepresentation. D. undue influence. 19. Something of value given to another to compensate them for entering into a contract is termed A. chattel. B. commingling. C. consideration. D. cooperation. 20. Paula is selling her house. She changes the terms proposed by the buyer in the sales contract, creating a/an A. counteroffer. B. modification agreement. C. notification of acceptance. D. offer and acceptance. 21. Gary and Tom have a contract. Gary gives consideration that is comparable in value to Tom's consideration. This is considered A. adequate consideration. B. good consideration. C. lawful consideration. D. valuable consideration. 22. Jess has a one-year lease on office space. Her husband is transferred, and she has to move six months into the lease. She assigns the lease to Owen. When Owen does not pay the rent, who can the landlord go after? A. Jess only B. Owen only C. Owen first, then Jess D. both Owen and Jess equally Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 5 of 13 23. Kara signs a one-year lease with landlord Lenny and moves into a new apartment. Which is NOT an example of novation? A. A balcony unit opens up, so Lenny substitutes a new lease for that unit and Kara moves. B. Kara and Lenny substitute her sister's name on the rental agreement. C. Kara and Lenny tear up her one-year lease and replace it with a two-year lease. D. Kara's lease is up and Lenny lets her remain in the apartment month-to-month. 24. A seller and buyer agree on terms of a purchase and sale agreement and are now waiting for closing to occur. Unfortunately, before closing occurs, the detached garage on the property is struck by lightning, catches fire, and is totally destroyed. What is LEAST LIKELY to be the buyer's remedy? A. accept the property as is B. accept the property and claim the insurance proceeds C. require the seller to rebuild the garage D. terminate the contract 25. Julia contracts with Joe to create the lace wedding dress she designed. Joe shows up at the first fitting with a pink satin dress, although the design is similar. Joe demands the full $8,200 indicated in the contract. Julia refuses to pay. He sues, and the court rules that Julia owes him nothing because this was A. a material breach. B. partial performance. C. specific performance. D. substantial performance. 26. Calvin had a contract with Liz to build her a house for $200,000. Before he even breaks ground, Calvin skips town. Liz contracts with Oscar to build the house using the same plans, but he charges $225,000. Liz sues Calvin for breach of contract and is awarded damages. How much is the court most likely to award Liz? A. $25,000 compensatory damages B. $25,000 liquidated damages C. $225,000 punitive damages D. whatever Liz asked for 27. Lori and Luke have a valid contract for Lori to buy Luke's house. The settlement date is Nov. 12. On Nov. 1, Luke tells Lori that he does not intend to sell the house. This is an example of A. a tender offer. B. anticipatory repudiation. C. novation. D. substantial performance. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 6 of 13 28. Harvey agrees to sell his house to Stuart. They sign a contract. Harvey changes his mind. Which option is NOT possible for Stuart to pursue? A. filing suit to force Harvey to sell the house B. recovering the earnest money as liquidated damages C. requiring that Harvey find him a comparable property D. suing Harvey for compensatory damages 29. Betty signs a listing agreement with Lots-O-Wealth Real Estate Company. They sell her house and she pays them the promised commission. Therefore, all terms of the contract have been met. This contract is now A. discharged. B. liquidated. C. mitigated. D. rescinded. 30. Larry signed a contract to buy Bob's house. However, the deadline in the contract has passed and Larry has not finalized the loan with his mortgage company. There is NOT a "time is of the essence" clause in their contract. The contract is considered A. discharged. B. rescinded. C. void. D. voidable. 31. Carter tells Terry that he would like to buy his house some day. He pays him $5,000 to have a right of first refusal to buy the house whenever Terry decides to sell it. When will Carter get the opportunity to purchase Terry's house? A. as soon as Terry decides to put it up for sale B. when Terry dies C. when Terry gets an acceptable offer from another prospective buyer D. within the timeframe established in the agreement 32. Jim made an earnest money deposit of $8,000 when entering into a contract to buy Allen's house. The contract indicated that the injured party would get the earnest money in the event of a breach. Before closing, Jim backs out of the contract, citing health issues, and Allen gets a check for $8,000. This is an example of A. compensatory damages. B. consideration. C. liquidated damages. D. novation. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 7 of 13 33. Carol and Leslie enter into a contract stating that Carol will pay Leslie $650 per month for the next 20 years. Carol will live in the house and pay all expenses including property taxes, insurance, and maintenance costs. Leslie will continue to hold the title until the property is paid off. What kind of contract do they have? A. land contract B. land lease C. lease purchase agreement D. option agreement 34. What is the name of the document that sets forth all details of the agreement between a buyer and a seller and establishes their legal rights and obligations? A. counteroffer B. deed C. escrow agreement D. sales contract 35. Which of these does NOT involve the sale or possible sale of real property? A. condominium sales contract B. cooperatives sales contract C. land contract D. right of first refusal 36. When a buyer has a right of first refusal, he or she has these rights EXCEPT the right to A. buy property at a specified price within a limited time. B. have the first chance to buy or lease property. C. match any other offer the seller/lessor is willing to accept. D. refuse to purchase or lease property if offered. 37. Lyle leases his property to Shawn. Lyle is the _________ and Shawn is the __________. A. landlord / lessor. B. lessee / lessor. C. lessor / lessee. D. tenant / landlord. 38. Daphne, a victim of identity theft, can't currently qualify for a loan but wants to buy her friend's condo for $90,000. She could give him $1,000 now, if he promised not to sell to anyone else in the next six months and give her the opportunity to purchase the property within that time period. This is A. a lease purchase agreement. B. an option agreement. C. a purchase contract. D. a right of preemption. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 8 of 13 39. Larry bought a house on a land contract. Under this contract, he A. has equitable interest in the property. B. will not have to pay any interest charges. C. will not live at the property until it is paid for. D. will receive the title to the property immediately. 40. The covenant of __________ is a guarantee that the grantor has the right to convey the property. A. chattel B. hypothecation C. rescission D. seizen 41. Mike bought property at a foreclosure sale. Which deed was he LEAST LIKELY to have received in the transfer? A. bargain and sale deed B. judicial deed C. limited warranty deed D. sheriff's deed 42. Which deed guarantees title against all encumbrances occurring during any previous ownership? A. general warranty deed B. grant deed C. limited warranty deed D. special warranty deed 43. Elisa names Jim to be the executor of her will. Jim dies before Elisa, but she never updated her will. The court appoints David to carry out the sale of her estate. David will use what kind of deed to transfer Elisa's property to a new owner? A. administrator's deed B. deed of confirmation C. executor's deed D. judicial deed 44. Which is NOT a type of judicial deed? A. executor's deed B. guardian's deed C. quitclaim deed D. sheriff's deed Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 9 of 13 45. A statement that follows the words of conveyance in a deed that includes "to have and to hold" is called the A. accord and satisfaction. B. granting clause. C. habendum clause. D. recital. 46. Which element is NOT required in order for a deed to be valid? A. acknowledgment B. consideration C. execution D. granting clause 47. When a person dies with a will, it's considered __________. When a person dies without a will it's called __________. A. descent / devise B. intestate / devise C. intestate / testate D. testate / intestate 48. Jared granted a deed to the local school district for 10 feet of land for a walkway easement beside his house to the elementary school. This property was transferred by A. adverse possession. B. condemnation. C. dedication. D. eminent domain. 49. Lou learns that the signature on his recorded deed was forged, and he gets his money back from Douglas. In order to correct the public record, A. the forged deed must be destroyed. B. Lou must sign a quitclaim deed. C. the real owner must bring charges against Douglas. D. the real owners must sign a deed of correction. 50. Larry bought a house at a foreclosure sale. What type of deed was he given? A. deed of trust B. deed in lieu of foreclosure C. grant deed D. sheriff's deed Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 10 of 13 51. Once a person has gone to the courthouse and reviewed all documents pertaining to the property he intends to buy, he is said to have A. actual notice. B. constructive notice. C. inquiry notice. D. legitimate notice. 52. Lucy lives in a townhouse that she rents from Joey. Joey's deed is NOT recorded in county records. Bob, a prospective buyer, has A. actual notice that Joey owns the property. B. constructive notice that Joey owns the property. C. inquiry notice that Joey has an interest in the property. D. inquiry notice that Lucy has an interest in the property. 53. What is the most common way to transfer title? A. adverse possession B. eminent domain C. involuntary alienation D. voluntary alienation 54. Margaret Jones buys a house. She gets married and is now Margaret Smith. When she sells the house, the grantor name on the deed is Margaret Smith. To clear the cloud on the title caused by having a different name on the deed used to convey her property to someone else, Margaret can file a A. bargain and sale deed. B. general warranty deed. C. grant deed. D. quitclaim deed. 55. The public records would be LEAST LIKELY to reveal what about a specific parcel of land? A. a discharged mortgage B. an easement in gross C. an encroachment D. a pending lawsuit 56. Transfer tax in Illinois is based on the A. mortgage amount. B. property's appraised value. C. property's purchase price. D. seller's capital gain. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 11 of 13 57. A standard form of title insurance policy does not protect against loss resulting from A. encroachment on the property. B. forgery in the chain of title. C. lack of capacity of the grantor. D. liens and encumbrances of record. 58. A lender typically requires title insurance to cover the A. buyer. B. mortgagee. C. mortgagor. D. seller. 59. A title examiner tries to establish the present owner of a certain property by reviewing all the previous deeds of the previous owners he can find. The title examiner is trying to establish A. abstract of title. B. certificate of sale. C. chain of title. D. opinion of title. 60. A valid deed requires the signature of the A. grantee. B. grantor. C. grantor and grantee. D. notary of public. 61. Which action transfers title? A. Doug decides to give his property to his son, Alex. B. Doug signs a deed that conveys title to Alex. C. Doug hands the signed deed to Alex, who accepts it. D. Alex takes the deed to the county recorder's office to be recorded. 62. A deed contains a guarantee that the buyer will not be bothered by others claiming title to the property. This is example of which covenant? A. against encumbrances B. further assurance C. quiet enjoyment D. seizen 63. A written instrument transferring the grantor's ownership of or interest in real property is known as a/an A. deed. B. easement. C. mortgage. D. title. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 12 of 13 64. During a person's lifetime, title to real estate may be transferred by which method? A. descent B. devise C. escheat D. involuntary alienation 65. Which of the following is NOT an example of the involuntary transfer of real estate? A. adverse possession B. eminent domain C. gift D. mortgage foreclosure 66. What is the document that transfers title of personal property from one person to the other? A. bill of sale B. deed C. settlement statement D. title report 67. Each of these costs is typically paid by the buyer EXCEPT A. discount points. B. escrow reserves. C. existing lien payoff. D. mortgage insurance premiums. 68. Jim bought a house in Illinois for $100,000. How much state realty transfer tax will he be assessed? A. $150 B. $750 C. The amount varies from county to county, and from town to town. D. None, the seller pays the transfer tax. 69. Title insurance protects policyholders from all of the following defects EXCEPT A. a forged deed. B. an unrecorded lien that the buyer knew about. C. improper deeds. D. mistakes in the public records. 70. Sally died testate. She has no spouse, no children, and no surviving siblings. Who would inherit Sally's estate? A. her cat Socks, to whom she left everything in her will B. her Grandma Sadie C. her Uncle Joe D. the county where she lived Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts © Hondros Learning www.hondroslearning.com Page 13 of 13 71. Larry has a will that leaves his house to his grandson, Sean. When Larry dies, Sean is ________ and his interest was created by ________. A. co-owner / deed B. co-owner / devise C. sole owner / deed D. sole owner / devise 72. Walter was living in Champaign when he died intestate. He is survived by his wife, his son from his current marriage, his ex-wife, and his daughter from that previous marriage. According to Illinois laws for intestate succession, who would NOT be entitled to some of Walter's estate? A. his daughter B. his father C. his son D. his wife 73. Rob agrees to rent an apartment from Kristy for three months for $500 a month. He moves in January 1 and moves out March 31. What type of leasehold estate is this? A. estate for years B. periodic estate C. tenancy at sufferance D. tenancy at will 74. Your roommate from college moves to your town. You let her move in with you while she is looking for a job. What type of leasehold estate is this? A. estate from year to year B. periodic estate C. tenancy at sufferance D. tenancy at will 75. Martha signs a lease for one year and agrees to pay $1,200 a month. She moves in April, 2007. After eight months, Martha stops paying rent but doesn't move out. What is this? A. estate for years B. estate from year to year C. tenancy at sufferance D. tenancy at will

ILLINOIS BROKER PRELICENSE TOPICS UNIT 5: CONTRACTS UNIT QUIZ 1. D. If Kim does not offer something in return for Greg's promise to paint the house, this is not a contract. 2. A. An express contract is an agreement that has been expressed in words, either spoken or written. They each made a promise for a promise, so it's also bilateral. 3. C. The contract is void because Shirley did not have capacity at the time she signed. 4. B. Bill can sue for compensatory damages, which is the amount he's lost ($16,000) minus the liquidated damages he should have already recovered ($6,000). 5. A. Statute of Frauds requires all real estate contracts to be in writing to be enforceable. 6. B. No one but the offeree can accept an offer. The acceptance by the neighbor is not valid, no matter how or when it was communicated. It is, in fact, a new offer, which Walton now may or may not accept, as he chooses. 7. C. Because Carrie is not of legal age, she can back out of the deal; however, George can't. 8. D. A mistake that is mutual, material, unintentional, and free from negligence may cause the contract to be voidable, in this case by the developer, though he may decide to honor the deal. 9. C. An implied contract is one that has not been put into words, but the terms of which are implied by the actions of the parties. Melissa expects her coat to be professionally cleaned in a timely manner and the drycleaners expect to be paid for their services. 10. B. An executory contract is one in which the parties have agreed to the terms but some conditions still remain to be fulfilled. Once all of the conditions are met and all that remains is the closing, the contract is said to be complete, or executed. 11. A. An oral contract such as this is valid, and since Jill and Rick explicitly described the terms, it is an express contract. 12. A. Sue agrees to give up occupancy to Mary, who agrees to pay rent; this is a bilateral contract. Since the one-year term of the lease is not yet up, the contract is executory. 13. C. This contract is for an illegal action, therefore, it is void. 14. C. There's nothing to suggest that the contract would not be valid. It's unilateral because it's simply an inducement to get Beth back in school. The contract does not require Beth to graduate, but she would have to graduate before Ruth's promise is binding. 15. C. In cases of fraud against the buyer of real estate, the buyer may affirm or disaffirm the contract within a reasonable time after the truth is discovered. The contract would be voidable by the buyer until he or she disaffirmed it; then the contract would be void. If the buyer affirmed the contract, then it would be valid. 16. A. Buyer Lora, originally the offeror, is now the counterofferee. Chip is the counterofferor. 17. B. Evidence concerning negotiations or oral agreements that wasn't included in a contract, parol evidence, is not admitted when a contract dispute ends up in court. 18. C. This is an example of misrepresentation, which is an accidental or negligent misstatement of fact. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 4 19. C. The essential elements of a contract include consideration. Commingling refers to the mixing of funds held in trust with other funds. Chattel is tangible personal property other than real property. 20. A. A counteroffer is a rejection of the original offer, substituting a change in terms. 21. A. Adequate consideration is when both parties give something of similar value. It could be either valuable or good consideration. 22. C. The assignor, Jess, remains secondarily liable in addition to the assignee, Owen. She can be sued if Owen doesn't perform by paying the rent. 23. D. Novation is substitution of one contract for another or one party to the contract for another. Kara staying on after her lease is up is an example of periodic tenancy. 24. C. The buyer may terminate the contract due to impossibility of the seller to perform or accept the property as is. The buyer has equitable title and may claim any insurance proceeds for real property damage (but not the seller's personal property, unless that was included in the contract). 25. A. A breach of contract significant enough to excuse the non-breaching party from performing the contractual obligations is considered a material breach. 26. A. Calvin will likely have to pay her only $25,000 in compensatory damages, the extra amount Liz had to pay. 27. B. Luke repudiated this contract. 28. C. The buyer may choose to file a court suit for specific performance and/or sue the seller for damages, but cannot simply require that the seller perform a service such as this. 29. A. One way in which a contract is discharged or terminated is when all of the terms have been met. 30. D. The contract is voidable by Bob because Larry did not perform by the stated deadline. Bob could choose to wait for the loan to clear and go forth with the contract. Had there been a "time is of the essence" clause, the contract would automatically be void when the deadline passes. 31. C. Carter cannot exercise the right of first refusal until Terry gets a bona fide offer from a third party. 32. C. In purchase contracts, there's often a clause calling for forfeiture of the earnest money deposit to the seller if the buyer breaches. This is an example of a liquidated damages provision. 33. A. A land contract, or contract for deed, allows the buyer to make payments over time to the owner, while the owner holds the property title until it's paid in full. 34. D. This is a sales contract, also known as an agreement of sale, among other names. 35. B. Cooperatives involve the sale of shares in the corporation, which technically is personal property. 36. A. The right to buy property at a specified price within a limited time describes an option, not a right of preemption; also called a right of first refusal. 37. C. One who leases his property is called the lessor or the landlord. A lessee or tenant is the person who rents the property. 38. B. Consideration is given with an option so she can purchase the property anytime with the six-month period. 39. A. Under a land contract, the buyer will not receive title to the property until it is paid off. The buyer holds equitable interest in the property until then. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 4 40. D. Seizen is the ownership of a freehold estate. The covenant of seizen is a guarantee that the grantor has the right to convey that estate. 41. C. A sheriff's deed, a type of judicial deed, or a bargain and sale deed, which has no warranty at all, are typically used. Of these options, a limited warranty deed would be the least likely to be used in a foreclosure sale. 42. A. That's a general warranty deed. Each of the other choices refers to a deed in which the grantor's warranty extends only to the time of the grantor's ownership. 43. A. David was appointed by the court as an administrator to dispose of Elisa's estate in the absence of a named executor. David would use an administrator's deed to convey the property. Note that while an administrator's deed is a type of judicial deed, you should always select the more specific response. 44. C. A judicial deed is one in which a court orders an official to execute a deed. Examples include administrator's or executor's deeds, guardian's deeds, and sheriff's deeds. A quitclaim deed is not a judicial deed. 45. C. The habendum clause describes the type of estate granted, and follows the granting clause, or words of conveyance. 46. A. A valid deed must have the names of the parties, consideration, granting clause, legal description, and execution. The acknowledgment is required only to record the deed. 47. D. With a will is testate; without a will is intestate. 48. C. Jared voluntarily transferred private property for public use, so this is alienation by dedication. 49. B. If Lou grants a quitclaim deed to the real owner, the public record will be corrected and current. 50. D. A sheriff's deed, sometimes called a referee's deed, would be used to convey title to a property sold due to foreclosure. 51. A. The law says everyone has constructive notice, or presumed knowledge, of recorded documents. Once you actually have seen the documents that pertain to property ownership, you have "actual" notice. 52. D. Joey's deed may not be recorded, but Lucy is in possession of the land, even though she doesn't own it. As a buyer, Bob would reasonably be expected to make further inquiry. 53. D. Voluntary alienation is the voluntary transfer of an interest in real property usually done by sale or gift. 54. D. A quitclaim deed can be used to correct this break in the chain of title. A correction deed or a deed of confirmation might also be used. 55. C. Encroachments are generally discovered through a survey of the property, while the other information would likely be available in the public records. 56. C. Transfer taxi is based on the sales price. 57. A. The title insurance company is insuring that all previous documents in the public record are valid, which includes looking for forgeries and incapacity. An encroachment is the intrusion of a physical object onto the property, and would be disclosed by a survey, not a title search. 58. B. The lender requires insurance only to protect itself, the mortgagee. It may be advisable, or even customary, for insurance to be purchased for the borrower (the mortgagor), but usually it is not required. Illinois Real Estate Broker Prelicense Topics - Unit 5: Contracts - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 4 of 4 59. C. A string of successive conveyances from one owner to the next owner arranged consecutively from the first recorded owner of the property to the current owner is called a chain of title. 60. B. The grantor must sign a deed for it to be valid. The grantee never signs the deed. Acknowledgement is only required for the deed to be recorded, the deed is valid without it. 61. C. The title is transferred once there has been delivery and acceptance of the deed. 62. C. Quiet enjoyment does guarantee that the buyer won't be bothered by others claiming title. 63. A. The deed is the instrument that transfers title. 64. D. Descent, devise, and escheat are all related to someone's estate after death. 65. C. Gift and sale of property are the most common ways title is transferred by voluntary alienation. 66. A. A bill of sale transfers title of personal property. 67. C. The seller is responsible for ensuring that any existing liens are discharged. 68. D. In Illinois, the seller - not the buyer - would pay the $150 transfer tax on the purchase price of $100,000. 69. B. Title insurance does not cover known defects. 70. A. Sally left a will; she died testate. If her will left her estate to her cat, Grandma and Uncle Joe are out of luck. 71. D. The property was transferred to new sole owner Sean through devise, which is Larry's will. 72. B. The father is not included in the succession laws for someone who dies intestate when there is a current spouse and children. 73. A. This leasehold has a specific time frame, three months, along with a set payment per month. 74. D. Since there is no specific time frame for the end of the lease, nor is there money exchanged, this is a tenancy at will. If the old roommate agrees to pay you some money once a month, then you would have a periodic tenancy. 75. C. Martha rented the house, an estate for years, since there is a specific termination date to the lease. However, when Martha stopped paying rent, it became a tenancy at sufferance since she was no longer fulfilling her end of the contract - to continue paying rent for a year at the specified amount.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 11: BUYER RELATIONSHIPS AND COUNSELING UNIT QUIZ 1. Your buyer client, Sheila, makes a $400,000 offer on Russell's house, which you give to the listing agent. Later that day, another buyer client, Kent, wants to make a $408,000 offer on the same house. Should you give the listing agent Kent's offer? A. No, unless the listing agent has not yet presented Sheila's offer to Russell. B. No, you breached your duty to Sheila by showing Russell's house to another buyer. C. Yes, but only if Russell rejects Sheila's offer. D. Yes, provided that Sheila and Kent give you written consent to do so. 2. You're the agent for the buyer. On the fact sheet, it indicated that the washer and dryer would be included in the sale. Further conversations with the seller confirmed this. The washer and dryer are examples of _____________ property and ______________ need to be in the agreement of sale. A. personal / do B. personal / do not C. real / do D. real / do not 3. A real estate broker has actual knowledge of structural damage to the floor boards of a home due to termite infestation. He informs the buyer that there are no termites or termite damages in the home. The buyer signs a contract to purchase the property. Is the broker susceptible to claims of fraud? A. No because he is protected by the "as is" clause in the purchase agreement. B. No, because the termite damage would be deemed a latent defect. C. Yes, because his untrue statements could be seen as an inducement to buy. D. Yes, because the termite damage is considered a patent defect. 4. Broker Lisa is representing Jane in a real estate transaction to buy a property in which she has an exclusive agency agreement. Jane asks Lisa for a business card for her sister, Sally, who is interested in moving into the area in the near future. While meeting with Jane, Lisa receives a phone call from Diane, a caller, who wants to know the price of the same property Jane is interested in. In this scenario, who is a client of Broker Lisa? A. Jane only B. Jane and Diane C. Jane and Sally D. Jane, Sally, and Diane Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 2 of 7 5. After showing houses to a buyer, designated agent Mariann returns to the office and complains to a fellow licensee at the brokerage that her buyer is low-balling every offer even though she just inherited a fortune from her grandmother. The agent has breached A. no duty, since her fellow agent would also represent the buyer. B. no duty, as long as she did not mention the buyer's name. C. the client duty of loyalty. D. the customer duty of honesty. 6. Which of these is NOT a duty that a licensee acting as a dual agent owes to his buyer client? A. assist in comparing financing alternatives B. explain closing costs and procedures C. help arrange for property inspections D. suggest an appropriate price to offer 7. Louise, a potential home buyer, is chatting with a broker. Of the information Louise shares with the broker, which is LEAST LIKELY to be considered confidential information? A. her current address B. her reason for house hunting C. the price range she's looking at D. the terms of her divorce 8. Patrick's home is listed for sale on the MLS by listing broker Abe. There is no mention to compensate the buyer's broker. Buyer-broker Jane has a client who is interested in the Patrick's home and presents an offer which Patrick accepts. Patrick is paying 7% commission. How much of the commission must Patrick pay Jane? A. 7% B. 3.5% C. nothing D. impossible to tell 9. Who are the parties to an agreement of sale? A. buyer and listing broker B. buyer and seller C. buyer, seller, and both brokers D. seller and listing broker Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 3 of 7 10. A house is listed at $180,000 and your buyer client wants to offer $125,000. Which fiduciary duty are you following by presenting the offer to the seller or the seller's agent? A. accountability B. confidentiality C. disclosure D. obedience 11. You are a buyer's agent for Doris, who is getting ready to make an offer on Clyde's house. A friend of yours tells you that Clyde and his wife are getting divorced. Do you think you should you share this information with Doris? A. Yes, as long as the listing agent gives you permission to share it. B. Yes, this information could affect Doris's negotiating position. C. No, this is gossip and it's none of your business. D. No, you have a duty to keep confidential information confidential. 12. Broker Sally executes a buyer-broker agreement with buyer Brad. Sally reads an ad placed by an FSBO seller, offering 3.5% commission to the broker who brings the buyer. What is the seller considered to be to Sally if Brad makes an offer on the house? A. agent B. client C. customer D. principal 13. What should be the first thing an agent discusses with a potential buyer client? A. agency disclosure B. amount of money the buyer has to spend C. neighborhoods the buyer is interested in D. number of bedrooms the buyer needs 14. Buddy makes an offer to buy Wally's home. The offer contained a provision limiting the time for acceptance to 48 hours. Wally immediately rejected the offer as inadequate. After thinking about it overnight, Wally called his agent and said, "I've changed my mind. I'll take the offer." What is the status of Buddy's offer? A. It is a binding contract now that Wally has accepted it B. It is still open because Buddy hasn't formally withdrawn it. C. It is still open because it still had 24 hours to run. D. It was terminated when Wally first rejected it. Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 4 of 7 15. A buyer submits an offer to his agent, who gives it to the listing agent for delivery to the sellers. The sellers like the offer and sign their acceptance. They then hand the accepted offer to their agent with instructions to deliver the accepted contract back to the buyer. Has a contract been created? A. No, because the sellers have not relinquished control of the acceptance. B. Yes, because the listing agent now has possession of the accepted offer. C. Yes, because the offer has been delivered to the buyer. D. Yes, because the offer was accepted. 16. If, upon receipt of an offer to purchase under certain terms, the seller makes a counteroffer, the prospective buyer is A. bound by his original offer. B. bound by the agent's decision. C. bound to accept the counteroffer. D. released from his original offer. 17. You have a listing for Marilyn's house. She also engages you to represent her in her search to find a new house. This makes you a A. designated buyer's agent only B. designated seller's agent only C. designated seller's agent and designated buyer's agent D. dual agent 18. Broker Sue has just completed a pre-printed purchase agreement with her client buyer Bob. The agreement includes a good faith deposit of $5,000 in the form of a check, which Bob has given to Sue. Absent any specific instructions, what should Sue do with Bob's check? A. turn it over to her sponsoring broker immediately B. keep it until the offer is accepted C. give it to the seller to hold until closing D. deposit the check in her personal savings account 19. Paul has a buyer-broker agreement with Mary, who agreed to pay him 2.5% commission for finding her a house. He showed her 16 different houses, but when she settled on the one she wanted, she submitted her offer directly to the listing agent, bypassing Paul to avoid paying his commission. What is Paul's best recourse? A. record a lien against Mary's property B. submit to an arbitration hearing with the local board of Realtors® C. sue the listing agent for his 2.5% of the sales price D. sue Mary for breach of contract Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 5 of 7 20. Which statement about a "letter of intent" is FALSE? A. It is a legal contract. B. It is more often used for commercial real estate transactions than residential real estate transactions. C. It is not binding on the parties. D. It is a statement of facts used to create a formal contract. 21. If you use this calculation while evaluating income, "PITI divided by Gross Monthly Income," you have just determined what? A. combined loan-to-value ratio B. housing expense ratio C. loan-to-value ratio D. total debt service ratio 22. Which would NOT be included in determining a buyer's housing allowance? A. homeowners association fees B. mortgage principal and interest C. property tax D. utility bills 23. If Josh Walsh has an annual gross income of $66,000 and monthly debts of $460, how much monthly PITI payment can he qualify for if the lender uses 28/36 qualifying ratios? A. $1,520 B. $1,540 C. $1,848 D. $1,980 24. Which statement regarding tax deductions is FALSE? A. Interest on home equity debt is deductible up to $100,000. B. Interest on a home mortgage is deductible up to $1,000,000. C. Points paid to refinance a mortgage are fully tax deductible in most cases. D. A principal residential property can be depreciated over 27.5 years for tax purposes. 25. Bob is an attorney in Illinois. He is also a licensed real estate broker. Bob may A. not serve in both capacities on the same transaction. B. serve in both capacities on the same transaction. C. serve in both capacities on the same transaction but only if he is paid separately. D. serve in both capacities on the same transaction only with the written consent of both parties. Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 6 of 7 26. Which is an example of liquidated damages? A. A broker reimburses a former client who sued for breach of agency obligations. B. A court orders a reluctant seller to pay the commission due a broker. C. A court orders a seller to return the earnest money deposit when he backs out of the sale. D. A seller keeps the earnest money deposit when the buyer backs out. 27. An open buyer agency agreement means that broker Susan is paid A. if any broker introduces her buyer client to the property he ultimately buys. B. only if her buyer client purchases a property that she has listed. C. only if she introduces her buyer client to the property he ultimately buys. D. no matter who introduces her buyer client to the property he ultimately buys. 28. A home inspection generally would not include an assessment of A. the foundation of the property. B. heating and air-conditioning units. C. plumbing. D. radon levels in the basement. 29. Which is NOT considered a purpose of the purchase contract? A. buyer's offer B. contract between the buyer and the seller C. contract between the seller and the broker D. receipt for the earnest money deposit 30. Buyer Jim's broker, Bruce, submits to seller Tom an offer to purchase signed by Jim, stipulating a price of $250,000, a commission of 6%, and closing within 90 days. Tom accepts the price and closing, changes the commission to 5%, initials the changes, then signs and returns the contract to Bruce, who gives it to Jim. Is the contract valid? A. No, because the broker's commission is non-negotiable. B. No, because there was no meeting of the minds. C. Yes, because it is in writing and signed by both parties. D. Yes, because Tom initialed his changes. 31. Which of these do you think would LEAST LIKELY be considered a material fact? A. current owner believes the house is haunted B. nearby factory C. previous termite infestation D. warped window frames Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 7 of 7 32. A home has a large, ugly stain on the carpeting, visible as soon as one walks in the door. What is the general rule regarding disclosure of such defects? A. Disclosure of defects is the responsibility of the seller and not the seller's agent; most agents require the seller to sign a waiver attesting to this. B. Regardless of whether a defect is patent or latent, having an "as is" clause in the purchase agreement will protect the seller. C. The stain is considered to be a latent defect and must be disclosed in the disclosure statement to avoid liability. D. Patent defects such as this are typically considered the responsibility of the buyer. 33. What is the loan-to-value ratio if the loan amount is $100,000, the appraised value is $125,000 and the sales price is $127,000? A. 75% B. 78% C. 80% D. 100% 34. Which statement about loan pre-approval is FALSE? A. It can be completed by a mortgage broker or a real estate broker. B. It can be given prior to having a signed sales contract. C. It can improve a buyer's negotiating position. D. It is binding on the lender. 35. What is the name of the 1996 federal law that requires states to develop a procedure to notify community residents of sexual offenders living in their area? A. Adam's Law B. Amber's Law C. Casey's Law D. Megan's Law

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 11: BUYER RELATIONSHIPS AND COUNSELING UNIT QUIZ 1. Your buyer client, Sheila, makes a $400,000 offer on Russell's house, which you give to the listing agent. Later that day, another buyer client, Kent, wants to make a $408,000 offer on the same house. Should you give the listing agent Kent's offer? A. No, unless the listing agent has not yet presented Sheila's offer to Russell. B. No, you breached your duty to Sheila by showing Russell's house to another buyer. C. Yes, but only if Russell rejects Sheila's offer. D. Yes, provided that Sheila and Kent give you written consent to do so. 2. You're the agent for the buyer. On the fact sheet, it indicated that the washer and dryer would be included in the sale. Further conversations with the seller confirmed this. The washer and dryer are examples of _____________ property and ______________ need to be in the agreement of sale. A. personal / do B. personal / do not C. real / do D. real / do not 3. A real estate broker has actual knowledge of structural damage to the floor boards of a home due to termite infestation. He informs the buyer that there are no termites or termite damages in the home. The buyer signs a contract to purchase the property. Is the broker susceptible to claims of fraud? A. No because he is protected by the "as is" clause in the purchase agreement. B. No, because the termite damage would be deemed a latent defect. C. Yes, because his untrue statements could be seen as an inducement to buy. D. Yes, because the termite damage is considered a patent defect. 4. Broker Lisa is representing Jane in a real estate transaction to buy a property in which she has an exclusive agency agreement. Jane asks Lisa for a business card for her sister, Sally, who is interested in moving into the area in the near future. While meeting with Jane, Lisa receives a phone call from Diane, a caller, who wants to know the price of the same property Jane is interested in. In this scenario, who is a client of Broker Lisa? A. Jane only B. Jane and Diane C. Jane and Sally D. Jane, Sally, and Diane Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 2 of 7 5. After showing houses to a buyer, designated agent Mariann returns to the office and complains to a fellow licensee at the brokerage that her buyer is low-balling every offer even though she just inherited a fortune from her grandmother. The agent has breached A. no duty, since her fellow agent would also represent the buyer. B. no duty, as long as she did not mention the buyer's name. C. the client duty of loyalty. D. the customer duty of honesty. 6. Which of these is NOT a duty that a licensee acting as a dual agent owes to his buyer client? A. assist in comparing financing alternatives B. explain closing costs and procedures C. help arrange for property inspections D. suggest an appropriate price to offer 7. Louise, a potential home buyer, is chatting with a broker. Of the information Louise shares with the broker, which is LEAST LIKELY to be considered confidential information? A. her current address B. her reason for house hunting C. the price range she's looking at D. the terms of her divorce 8. Patrick's home is listed for sale on the MLS by listing broker Abe. There is no mention to compensate the buyer's broker. Buyer-broker Jane has a client who is interested in the Patrick's home and presents an offer which Patrick accepts. Patrick is paying 7% commission. How much of the commission must Patrick pay Jane? A. 7% B. 3.5% C. nothing D. impossible to tell 9. Who are the parties to an agreement of sale? A. buyer and listing broker B. buyer and seller C. buyer, seller, and both brokers D. seller and listing broker Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 3 of 7 10. A house is listed at $180,000 and your buyer client wants to offer $125,000. Which fiduciary duty are you following by presenting the offer to the seller or the seller's agent? A. accountability B. confidentiality C. disclosure D. obedience 11. You are a buyer's agent for Doris, who is getting ready to make an offer on Clyde's house. A friend of yours tells you that Clyde and his wife are getting divorced. Do you think you should you share this information with Doris? A. Yes, as long as the listing agent gives you permission to share it. B. Yes, this information could affect Doris's negotiating position. C. No, this is gossip and it's none of your business. D. No, you have a duty to keep confidential information confidential. 12. Broker Sally executes a buyer-broker agreement with buyer Brad. Sally reads an ad placed by an FSBO seller, offering 3.5% commission to the broker who brings the buyer. What is the seller considered to be to Sally if Brad makes an offer on the house? A. agent B. client C. customer D. principal 13. What should be the first thing an agent discusses with a potential buyer client? A. agency disclosure B. amount of money the buyer has to spend C. neighborhoods the buyer is interested in D. number of bedrooms the buyer needs 14. Buddy makes an offer to buy Wally's home. The offer contained a provision limiting the time for acceptance to 48 hours. Wally immediately rejected the offer as inadequate. After thinking about it overnight, Wally called his agent and said, "I've changed my mind. I'll take the offer." What is the status of Buddy's offer? A. It is a binding contract now that Wally has accepted it B. It is still open because Buddy hasn't formally withdrawn it. C. It is still open because it still had 24 hours to run. D. It was terminated when Wally first rejected it. Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 4 of 7 15. A buyer submits an offer to his agent, who gives it to the listing agent for delivery to the sellers. The sellers like the offer and sign their acceptance. They then hand the accepted offer to their agent with instructions to deliver the accepted contract back to the buyer. Has a contract been created? A. No, because the sellers have not relinquished control of the acceptance. B. Yes, because the listing agent now has possession of the accepted offer. C. Yes, because the offer has been delivered to the buyer. D. Yes, because the offer was accepted. 16. If, upon receipt of an offer to purchase under certain terms, the seller makes a counteroffer, the prospective buyer is A. bound by his original offer. B. bound by the agent's decision. C. bound to accept the counteroffer. D. released from his original offer. 17. You have a listing for Marilyn's house. She also engages you to represent her in her search to find a new house. This makes you a A. designated buyer's agent only B. designated seller's agent only C. designated seller's agent and designated buyer's agent D. dual agent 18. Broker Sue has just completed a pre-printed purchase agreement with her client buyer Bob. The agreement includes a good faith deposit of $5,000 in the form of a check, which Bob has given to Sue. Absent any specific instructions, what should Sue do with Bob's check? A. turn it over to her sponsoring broker immediately B. keep it until the offer is accepted C. give it to the seller to hold until closing D. deposit the check in her personal savings account 19. Paul has a buyer-broker agreement with Mary, who agreed to pay him 2.5% commission for finding her a house. He showed her 16 different houses, but when she settled on the one she wanted, she submitted her offer directly to the listing agent, bypassing Paul to avoid paying his commission. What is Paul's best recourse? A. record a lien against Mary's property B. submit to an arbitration hearing with the local board of Realtors® C. sue the listing agent for his 2.5% of the sales price D. sue Mary for breach of contract Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 5 of 7 20. Which statement about a "letter of intent" is FALSE? A. It is a legal contract. B. It is more often used for commercial real estate transactions than residential real estate transactions. C. It is not binding on the parties. D. It is a statement of facts used to create a formal contract. 21. If you use this calculation while evaluating income, "PITI divided by Gross Monthly Income," you have just determined what? A. combined loan-to-value ratio B. housing expense ratio C. loan-to-value ratio D. total debt service ratio 22. Which would NOT be included in determining a buyer's housing allowance? A. homeowners association fees B. mortgage principal and interest C. property tax D. utility bills 23. If Josh Walsh has an annual gross income of $66,000 and monthly debts of $460, how much monthly PITI payment can he qualify for if the lender uses 28/36 qualifying ratios? A. $1,520 B. $1,540 C. $1,848 D. $1,980 24. Which statement regarding tax deductions is FALSE? A. Interest on home equity debt is deductible up to $100,000. B. Interest on a home mortgage is deductible up to $1,000,000. C. Points paid to refinance a mortgage are fully tax deductible in most cases. D. A principal residential property can be depreciated over 27.5 years for tax purposes. 25. Bob is an attorney in Illinois. He is also a licensed real estate broker. Bob may A. not serve in both capacities on the same transaction. B. serve in both capacities on the same transaction. C. serve in both capacities on the same transaction but only if he is paid separately. D. serve in both capacities on the same transaction only with the written consent of both parties. Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 6 of 7 26. Which is an example of liquidated damages? A. A broker reimburses a former client who sued for breach of agency obligations. B. A court orders a reluctant seller to pay the commission due a broker. C. A court orders a seller to return the earnest money deposit when he backs out of the sale. D. A seller keeps the earnest money deposit when the buyer backs out. 27. An open buyer agency agreement means that broker Susan is paid A. if any broker introduces her buyer client to the property he ultimately buys. B. only if her buyer client purchases a property that she has listed. C. only if she introduces her buyer client to the property he ultimately buys. D. no matter who introduces her buyer client to the property he ultimately buys. 28. A home inspection generally would not include an assessment of A. the foundation of the property. B. heating and air-conditioning units. C. plumbing. D. radon levels in the basement. 29. Which is NOT considered a purpose of the purchase contract? A. buyer's offer B. contract between the buyer and the seller C. contract between the seller and the broker D. receipt for the earnest money deposit 30. Buyer Jim's broker, Bruce, submits to seller Tom an offer to purchase signed by Jim, stipulating a price of $250,000, a commission of 6%, and closing within 90 days. Tom accepts the price and closing, changes the commission to 5%, initials the changes, then signs and returns the contract to Bruce, who gives it to Jim. Is the contract valid? A. No, because the broker's commission is non-negotiable. B. No, because there was no meeting of the minds. C. Yes, because it is in writing and signed by both parties. D. Yes, because Tom initialed his changes. 31. Which of these do you think would LEAST LIKELY be considered a material fact? A. current owner believes the house is haunted B. nearby factory C. previous termite infestation D. warped window frames Illinois Real Estate Broker Prelicense Topics - Unit 11: Buyer Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 7 of 7 32. A home has a large, ugly stain on the carpeting, visible as soon as one walks in the door. What is the general rule regarding disclosure of such defects? A. Disclosure of defects is the responsibility of the seller and not the seller's agent; most agents require the seller to sign a waiver attesting to this. B. Regardless of whether a defect is patent or latent, having an "as is" clause in the purchase agreement will protect the seller. C. The stain is considered to be a latent defect and must be disclosed in the disclosure statement to avoid liability. D. Patent defects such as this are typically considered the responsibility of the buyer. 33. What is the loan-to-value ratio if the loan amount is $100,000, the appraised value is $125,000 and the sales price is $127,000? A. 75% B. 78% C. 80% D. 100% 34. Which statement about loan pre-approval is FALSE? A. It can be completed by a mortgage broker or a real estate broker. B. It can be given prior to having a signed sales contract. C. It can improve a buyer's negotiating position. D. It is binding on the lender. 35. What is the name of the 1996 federal law that requires states to develop a procedure to notify community residents of sexual offenders living in their area? A. Adam's Law B. Amber's Law C. Casey's Law D. Megan's Law

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 6: PROPERTY VALUATION UNIT QUIZ 1. When looking at highest and best use, what is the primary consideration that the appraiser must take into account? A. What is the ideal building for the land if it were vacant? B. What is the most radical zoning change that the owner could try to get for the property? C. What is the best way to ensure value without tearing down the existing structures if at all possible? D. What is the best way to move the existing building to a new site? 2. The accepted standards of ethics and appraisal practice are known as A. AQB. B. CMA. C. URAL. D. USPAP. 3. Which statement best describes the nature of appraisals? A. An appraisal can always determine market price. B. An appraisal is completely subjective in defining market value. C. An appraisal is completely objective. D. An appraisal is only an opinion of value supported by objective data. 4. Which of the following would NOT be depreciated? A. an abandoned building B. a residential property used as a rental C. unimproved land D. a 2700 sq. ft. commercial building 5. A new company has just opened in an area. There are not too many properties for sale yet, and no new construction taking place. Many people are moving into the area to take these new jobs. What type of market has been created? A. balanced market B. buyer's market C. seller's market D. trader's market 6. What is assessment value? A. The value the property taxes are based on B. The price the property actually sold for C. The theoretical price a property can bring D. The replacement cost of the property Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 2 of 10 7. In which of the following cases would you expect market price to equal market value? A. The parties to the sale were related. B. The sale was a foreclosure. C. The sale was made with an anticipation of a change in zoning. D. The sale was an arm's-length transaction. 8. Harvey owns a large home in a nice neighborhood. His house, impeccably maintained, is at the upper limit of its value. After he retired, Harvey spent $28,000 building a new deck and greenhouse on the back of his property. Although he enjoyed the new features, they did not add anything to the value of his home. This is an example of the principle of A. conformity. B. contribution. C. regression. D. substitution. 9. Market price is A. equal to market value. B. the amount, in dollars, actually paid for the property. C. the amount, in dollars, asked for by the seller. D. the amount, in dollars, that a property should bring on the open market. 10. A run-down house in a good neighborhood A. benefits from the principle of regression. B. is hurt by the principle of regression. C. benefits from the principle of progression. D. is hurt by the principle of progression. 11. Gladys is a widow who has been working hard to maintain her home as well as she can, but there's only so much she's able to do. It's just too much house for her and she's ready to move to a condo. As she prepares her home to sell, all of these could be considered curable physical deterioration except the A. basement wall starting to cave in B. carpet is stained and ripped. C. driveway pavement is cracked. D. paint on the siding is peeling. 12. The principle of substitution says that an informed buyer would pay ________ for the property than what the buyer would pay to obtain a similar one with the same benefits and utility. A. less B. no more C. more D. considerably less Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 3 of 10 13. A nice, well-kept house located in the heart of an all residential area, surrounded by other well-kept houses of similar style and value is an example of A. conformity. B. contribution. C. regression. D. substitution. 14. When performing the sales comparison approach, comparable sales should be A. competitive listings. B. on the same street. C. special sale properties. D. very similar in most respects. 15. Comp #2 has a deck; the subject property does not have a deck. Through matched pair analysis, the appraiser has determined that a deck in that neighborhood is worth $3,000. What is the appropriate way to apply this information when performing the sales comparison approach to valuation? A. add $3,000 to Comp #2 value B. subtract $3,000 from Comp #2 value C. add $3,000 to the subject base D. subtract $3,000 from the subject base 16. The severe structural damage to a home's basement and foundation would cost $80,000 to repair, but would add only $20,000 to the value of the property. This would most likely be considered A. curable physical deterioration. B. incurable physical deterioration. C. curable functional obsolescence. D. incurable external obsolescence. 17. Which of these would be considered functional obsolescence? A. a bedroom through bedroom floor plan B. a home fronting on a busy four-lane highway C. a home with broken furnace D. a home with severe structural damage to the foundation 18. Which is NOT an accepted appraisal approach? A. cost approach B. income approach C. highest and best use approach D. sales comparison approach Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 4 of 10 19. An appraiser used various cost manuals and regional multipliers, as well as her own experience, to determine that it would cost $72 per square foot to replace the subject property. At 1,775 square feet, she determines it would cost $127,800 to rebuild the house. To find the value of the subject property, she must also factor in A. depreciation and land value. B. depreciation and inflation. C. inflation and labor costs. D. labor costs and land value. 20. For which property would you expect the cost approach method to be least useful? A. a new home in a relatively new subdivision B. an older home in a neighborhood with high turnover C. a school building D. a home with many unique features 21. Which element should be considered part of the gross living area? A. a bedroom's walk-in closet B. a finished basement C. a garage D. an unheated sun porch 22. An appraiser used the cost approach to determine a value of the subject property. Using his notes, determine the final estimate of value: Replacement Cost: $245,500; Deterioration: $9,750, Site value: $34,250 A. $201,500 B. $270,000 C. $288,700 D. $289,500 23. If an industrial building needs a sprinkler system at a cost of $30,000, and if this will result in an increase in value $40,000, the depreciation is referred to as A. incurable external obsolescence. B. incurable physical deterioration. C. incurable functional obsolescence. D. curable functional obsolescence. 24. Adjusting properties involves A. changing the base to make it more like the comps. B. changing the comps to make them more like the base. C. always using comps that are exactly like the base. D. finding comps that sold for the same price. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 5 of 10 25. A strip mall has a net operating income of $84,000. The capitalization rate in the area for similar properties is 12%. What is the value of the property? A. $184,800 B. $700,000 C. $940,800 D. $1,008,000 26. Appraiser Anna determines that the 3-unit rental property she's appraising should take in $600 each month in rent per unit. She estimates a vacancy loss of $1,800 per year. She also determines that the GRM should be about 121. What is Anna's estimate of value? A. $72,600 B. $145,200 C. $199,650 D. $217,800 27. Which would most likely NOT be considered functional obsolescence? A. home with crumbling roof B. home with low ceilings C. home with steep, narrow stairs D. geodesic dome home in neighborhood of ranches 28. A duplex recently sold for $200,000. It brings in monthly rental income of $900 per unit. The expenses for this property run $8,000 per year. What is the GRM for this duplex? A. 88.89 B. 106.67 C. 111.11 D. 222.22 29. Appraiser Julia is estimating the value of a small office building. Which method of income approach would she be most likely to use? A. capitalization rate B. gross rent multiplier C. Either would appropriate. D. Neither would be appropriate. 30. Marcie is considering two nearly identical properties on neighboring streets, each with the same benefits and utilities. However, Property A is selling for $198,000 and Property B is selling for $190,000. Which principle indicates that Marcie, as an informed buyer, would likely be willing to pay no more for Property A than for Property B? A. anticipation B. conformity C. contribution D. substitution Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 6 of 10 31. Which would be considered external obsolescence? A. a bedroom through bedroom floor plan B. a home fronting on a busy four-lane highway C. a home with broken furnace D. a home with severe structural damage to the foundation 32. Which of these properties do you think is the best example of a piece of real estate being put to its highest and best use? A. a gas station near the off ramp of a busy highway B. an farm house in the middle of an industrial park C. a strip mall on a retail corridor with multiple vacancies D. a triple-decker parking garage in an area with plenty of free on-street parking 33. Market value can best be defined as a property's A. appraised value for property tax purposes. B. listing price. C. most probable selling price. D. most recent selling price. 34. An "arm's-length transaction" means that the transaction occurred A. between a buyer and a seller who have a close family relationship. B. under typical conditions where each of the parties were acting in their own best interests. C. when the buyer purchased the property sight-unseen. D. only after the seller made concessions for closing costs. 35. Steve and Jana bought an empty lot on a quiet street of small, 40-year-old ranch homes. On the lot, they built a luxurious two-story, 3,500 square foot home. A year later when they put their home on the market, its value will likely be held down by the other homes in the neighborhood. This is an example of the principle of A. anticipation. B. balance. C. progression. D. regression. 36. The value of an improvement is equal to A. the amount the owner adds to the selling price of the home when the improvement is made. B. what it actually contributes in value to that piece of real estate. C. only what the owner spent on the materials necessary to make the improvement. D. what it actually cost to make the improvement in both materials and labor. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 7 of 10 37. The theory of progression indicates that the value of the "worst" property in a given area is A. equal to the other properties in the area. B. lowered by the other properties in the area. C. raised by the other properties in the area. D. unaffected by the other properties in the area. 38. The house has a storm cellar accessible only from a door and steps in the back yard. This might best be considered an example of A. an amenity. B. eminent domain. C. functional obsolescence. D. physical depreciation. 39. An example of external obsolescence would be A. peeling paint on a home's exterior. B. an outdated floor plan. C. a basement that leaks. D. location in a declining neighborhood. 40. Adding or subtracting to a comparable to develop an opinion of value is called A. an adjustment. B. capitalization. C. ranking. D. reconciliation. 41. Which home suffers from external obsolescence? A. Home A allows access to the basement only from outside of the home. B. Home B has only a detached one-car garage. C. Home C has a crumbling foundation. D. Home D is less than 500 yards from the county dump. 42. Comp #2 has four bedrooms; the subject property has five bedrooms. Through matched pair analysis, the appraiser has determined that a bedroom in that neighborhood is worth $6,000. What is the appropriate way to apply this information when performing the sales comparison approach to valuation? A. add $6,000 to Comp #2 value. B. subtract $6,000 from Comp #2 value. C. add $6,000 to the subject base. D. subtract $6,000 from the subject base. 43. Which appraisal approach is LEAST useful for a special purpose property? A. cost approach B. income approach C. sales comparison approach D. All are equally reliable. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 8 of 10 44. For which situation would the sales comparison approach be best? A. a commercial building in a residential neighborhood B. a condo in a complex with high turnover C. a recently constructed building with custom features D. a unique, octagon-shaped home in neighborhood of split levels 45. Which homes should an appraiser consider when finding comps? A. homes currently listed for sale in the market B. homes where the listing agreements have expired C. homes that have sold recently in the subject's area D. homes that were taken off the market 46. Using appraiser Jason's notations, determine the final estimate of value using the cost approach: Replacement Cost=$527,000; Deterioration=$116,000; Site value=$72,000 A. $411,000 B. $483,000 C. $571,000 D. 715,000 47. Lori is tasked with deriving the value for a unique geodesic dome home in a resort community of A-frame cabins. Which approach could be considered the most reliable for valuation? A. cost approach B. income approach C. sales comparison approach D. All are equally reliable. 48. For which property would the gross rent multiplier method be appropriate? A. a single family home that is owner occupied B. a duplex C. a retail complex with three units D. an apartment building with five units 49. Appraiser Jack has been contracted to determine the value of a large apartment building for a potential investor. Which appraisal method is probably the most useful for this situation? A. competitive market analysis B. cost approach C. income approach D. sales comparison approach Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 9 of 10 50. Amy is appraising a four-unit apartment building for a potential buyer. She determines that the building's four units should bring in $38,400 in annual rent. She also determined, based on evaluating similar properties in the area, that the GRM for the building should be about 108. What is Amy's estimate of value? A. $288,000 B. $345,600 C. $376,700 D. $460,800 51. Lot A is 350' x 200' and Lot B is 200' x 350'. Commercial lots on this street are selling for $500 per front foot. Which lot will sell for more? A. Lot A B. Lot B C. They'll sell for the same amount. D. Need more information. 52. The "subject property" best describes A. the property compared to the base B. the property for which the value is sought C. the property surrounding the base D. the property currently on the market 53. A commercial property has a first year gross operating income of $64,000 and expenses of $12,000. If the capitalization rate for similar properties in the same area is 8%, what is the estimate of value? A. $416,000 B. $533,333 C. $650,000 D. $768,000 54. Something is guaranteed to have value if A. effective demand, utility, scarcity, and transferability exist for the item. B. a huge advertising budget is created to market it. C. it is necessary to sustain life. D. physical, economic, social, and governmental factors influence it. 55. The life cycle of a neighborhood occurs in four stages. What is the order of the four stages? A. decline, stability, growth, and revitalization B. growth, decline, revitalization, and stability C. growth, stability, decline, and revitalization D. revitalization, stability, decline, and growth Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 10 of 10 56. An appraisal is valid only on its effective date because of the A. cost savings for the client—a higher price could buy an effective date range. B. principle of Appraiser Income Maximization. C. principle of change. D. simplicity report model being used by the appraiser. 57. The term "amenities," in reference to real property valuation, refers to the A. features, both tangible and intangible, that enhance the desirability of real estate. B. increase in the value of property, either due to a positive improvement of the area or elimination of negative factors. C. valuation placed on real property that is the basis for the amount of tax levied. D. value of real property, established for purposes of computing taxes. 58. It would be unethical for an appraiser to A. appraise a property in which she has a disclosed interest. B. ask for payment in advance. C. base her payment on a percentage of the appraised value. D. refuse to make a commercial appraisal because she has only residential experience. 59. An increase in the value of property, either due to positive improvements in the area or elimination of negative factors, is called A. appraisal. B. appreciation. C. appurtenance. D. assignment. 60. Which term is the process of joining several parcels of land into one larger parcel? A. assemblage B. plottage C. site D. situs

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 6: PROPERTY VALUATION UNIT QUIZ 1. When looking at highest and best use, what is the primary consideration that the appraiser must take into account? A. What is the ideal building for the land if it were vacant? B. What is the most radical zoning change that the owner could try to get for the property? C. What is the best way to ensure value without tearing down the existing structures if at all possible? D. What is the best way to move the existing building to a new site? 2. The accepted standards of ethics and appraisal practice are known as A. AQB. B. CMA. C. URAL. D. USPAP. 3. Which statement best describes the nature of appraisals? A. An appraisal can always determine market price. B. An appraisal is completely subjective in defining market value. C. An appraisal is completely objective. D. An appraisal is only an opinion of value supported by objective data. 4. Which of the following would NOT be depreciated? A. an abandoned building B. a residential property used as a rental C. unimproved land D. a 2700 sq. ft. commercial building 5. A new company has just opened in an area. There are not too many properties for sale yet, and no new construction taking place. Many people are moving into the area to take these new jobs. What type of market has been created? A. balanced market B. buyer's market C. seller's market D. trader's market 6. What is assessment value? A. The value the property taxes are based on B. The price the property actually sold for C. The theoretical price a property can bring D. The replacement cost of the property Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 2 of 10 7. In which of the following cases would you expect market price to equal market value? A. The parties to the sale were related. B. The sale was a foreclosure. C. The sale was made with an anticipation of a change in zoning. D. The sale was an arm's-length transaction. 8. Harvey owns a large home in a nice neighborhood. His house, impeccably maintained, is at the upper limit of its value. After he retired, Harvey spent $28,000 building a new deck and greenhouse on the back of his property. Although he enjoyed the new features, they did not add anything to the value of his home. This is an example of the principle of A. conformity. B. contribution. C. regression. D. substitution. 9. Market price is A. equal to market value. B. the amount, in dollars, actually paid for the property. C. the amount, in dollars, asked for by the seller. D. the amount, in dollars, that a property should bring on the open market. 10. A run-down house in a good neighborhood A. benefits from the principle of regression. B. is hurt by the principle of regression. C. benefits from the principle of progression. D. is hurt by the principle of progression. 11. Gladys is a widow who has been working hard to maintain her home as well as she can, but there's only so much she's able to do. It's just too much house for her and she's ready to move to a condo. As she prepares her home to sell, all of these could be considered curable physical deterioration except the A. basement wall starting to cave in B. carpet is stained and ripped. C. driveway pavement is cracked. D. paint on the siding is peeling. 12. The principle of substitution says that an informed buyer would pay ________ for the property than what the buyer would pay to obtain a similar one with the same benefits and utility. A. less B. no more C. more D. considerably less Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 3 of 10 13. A nice, well-kept house located in the heart of an all residential area, surrounded by other well-kept houses of similar style and value is an example of A. conformity. B. contribution. C. regression. D. substitution. 14. When performing the sales comparison approach, comparable sales should be A. competitive listings. B. on the same street. C. special sale properties. D. very similar in most respects. 15. Comp #2 has a deck; the subject property does not have a deck. Through matched pair analysis, the appraiser has determined that a deck in that neighborhood is worth $3,000. What is the appropriate way to apply this information when performing the sales comparison approach to valuation? A. add $3,000 to Comp #2 value B. subtract $3,000 from Comp #2 value C. add $3,000 to the subject base D. subtract $3,000 from the subject base 16. The severe structural damage to a home's basement and foundation would cost $80,000 to repair, but would add only $20,000 to the value of the property. This would most likely be considered A. curable physical deterioration. B. incurable physical deterioration. C. curable functional obsolescence. D. incurable external obsolescence. 17. Which of these would be considered functional obsolescence? A. a bedroom through bedroom floor plan B. a home fronting on a busy four-lane highway C. a home with broken furnace D. a home with severe structural damage to the foundation 18. Which is NOT an accepted appraisal approach? A. cost approach B. income approach C. highest and best use approach D. sales comparison approach Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 4 of 10 19. An appraiser used various cost manuals and regional multipliers, as well as her own experience, to determine that it would cost $72 per square foot to replace the subject property. At 1,775 square feet, she determines it would cost $127,800 to rebuild the house. To find the value of the subject property, she must also factor in A. depreciation and land value. B. depreciation and inflation. C. inflation and labor costs. D. labor costs and land value. 20. For which property would you expect the cost approach method to be least useful? A. a new home in a relatively new subdivision B. an older home in a neighborhood with high turnover C. a school building D. a home with many unique features 21. Which element should be considered part of the gross living area? A. a bedroom's walk-in closet B. a finished basement C. a garage D. an unheated sun porch 22. An appraiser used the cost approach to determine a value of the subject property. Using his notes, determine the final estimate of value: Replacement Cost: $245,500; Deterioration: $9,750, Site value: $34,250 A. $201,500 B. $270,000 C. $288,700 D. $289,500 23. If an industrial building needs a sprinkler system at a cost of $30,000, and if this will result in an increase in value $40,000, the depreciation is referred to as A. incurable external obsolescence. B. incurable physical deterioration. C. incurable functional obsolescence. D. curable functional obsolescence. 24. Adjusting properties involves A. changing the base to make it more like the comps. B. changing the comps to make them more like the base. C. always using comps that are exactly like the base. D. finding comps that sold for the same price. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 5 of 10 25. A strip mall has a net operating income of $84,000. The capitalization rate in the area for similar properties is 12%. What is the value of the property? A. $184,800 B. $700,000 C. $940,800 D. $1,008,000 26. Appraiser Anna determines that the 3-unit rental property she's appraising should take in $600 each month in rent per unit. She estimates a vacancy loss of $1,800 per year. She also determines that the GRM should be about 121. What is Anna's estimate of value? A. $72,600 B. $145,200 C. $199,650 D. $217,800 27. Which would most likely NOT be considered functional obsolescence? A. home with crumbling roof B. home with low ceilings C. home with steep, narrow stairs D. geodesic dome home in neighborhood of ranches 28. A duplex recently sold for $200,000. It brings in monthly rental income of $900 per unit. The expenses for this property run $8,000 per year. What is the GRM for this duplex? A. 88.89 B. 106.67 C. 111.11 D. 222.22 29. Appraiser Julia is estimating the value of a small office building. Which method of income approach would she be most likely to use? A. capitalization rate B. gross rent multiplier C. Either would appropriate. D. Neither would be appropriate. 30. Marcie is considering two nearly identical properties on neighboring streets, each with the same benefits and utilities. However, Property A is selling for $198,000 and Property B is selling for $190,000. Which principle indicates that Marcie, as an informed buyer, would likely be willing to pay no more for Property A than for Property B? A. anticipation B. conformity C. contribution D. substitution Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 6 of 10 31. Which would be considered external obsolescence? A. a bedroom through bedroom floor plan B. a home fronting on a busy four-lane highway C. a home with broken furnace D. a home with severe structural damage to the foundation 32. Which of these properties do you think is the best example of a piece of real estate being put to its highest and best use? A. a gas station near the off ramp of a busy highway B. an farm house in the middle of an industrial park C. a strip mall on a retail corridor with multiple vacancies D. a triple-decker parking garage in an area with plenty of free on-street parking 33. Market value can best be defined as a property's A. appraised value for property tax purposes. B. listing price. C. most probable selling price. D. most recent selling price. 34. An "arm's-length transaction" means that the transaction occurred A. between a buyer and a seller who have a close family relationship. B. under typical conditions where each of the parties were acting in their own best interests. C. when the buyer purchased the property sight-unseen. D. only after the seller made concessions for closing costs. 35. Steve and Jana bought an empty lot on a quiet street of small, 40-year-old ranch homes. On the lot, they built a luxurious two-story, 3,500 square foot home. A year later when they put their home on the market, its value will likely be held down by the other homes in the neighborhood. This is an example of the principle of A. anticipation. B. balance. C. progression. D. regression. 36. The value of an improvement is equal to A. the amount the owner adds to the selling price of the home when the improvement is made. B. what it actually contributes in value to that piece of real estate. C. only what the owner spent on the materials necessary to make the improvement. D. what it actually cost to make the improvement in both materials and labor. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 7 of 10 37. The theory of progression indicates that the value of the "worst" property in a given area is A. equal to the other properties in the area. B. lowered by the other properties in the area. C. raised by the other properties in the area. D. unaffected by the other properties in the area. 38. The house has a storm cellar accessible only from a door and steps in the back yard. This might best be considered an example of A. an amenity. B. eminent domain. C. functional obsolescence. D. physical depreciation. 39. An example of external obsolescence would be A. peeling paint on a home's exterior. B. an outdated floor plan. C. a basement that leaks. D. location in a declining neighborhood. 40. Adding or subtracting to a comparable to develop an opinion of value is called A. an adjustment. B. capitalization. C. ranking. D. reconciliation. 41. Which home suffers from external obsolescence? A. Home A allows access to the basement only from outside of the home. B. Home B has only a detached one-car garage. C. Home C has a crumbling foundation. D. Home D is less than 500 yards from the county dump. 42. Comp #2 has four bedrooms; the subject property has five bedrooms. Through matched pair analysis, the appraiser has determined that a bedroom in that neighborhood is worth $6,000. What is the appropriate way to apply this information when performing the sales comparison approach to valuation? A. add $6,000 to Comp #2 value. B. subtract $6,000 from Comp #2 value. C. add $6,000 to the subject base. D. subtract $6,000 from the subject base. 43. Which appraisal approach is LEAST useful for a special purpose property? A. cost approach B. income approach C. sales comparison approach D. All are equally reliable. Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 8 of 10 44. For which situation would the sales comparison approach be best? A. a commercial building in a residential neighborhood B. a condo in a complex with high turnover C. a recently constructed building with custom features D. a unique, octagon-shaped home in neighborhood of split levels 45. Which homes should an appraiser consider when finding comps? A. homes currently listed for sale in the market B. homes where the listing agreements have expired C. homes that have sold recently in the subject's area D. homes that were taken off the market 46. Using appraiser Jason's notations, determine the final estimate of value using the cost approach: Replacement Cost=$527,000; Deterioration=$116,000; Site value=$72,000 A. $411,000 B. $483,000 C. $571,000 D. 715,000 47. Lori is tasked with deriving the value for a unique geodesic dome home in a resort community of A-frame cabins. Which approach could be considered the most reliable for valuation? A. cost approach B. income approach C. sales comparison approach D. All are equally reliable. 48. For which property would the gross rent multiplier method be appropriate? A. a single family home that is owner occupied B. a duplex C. a retail complex with three units D. an apartment building with five units 49. Appraiser Jack has been contracted to determine the value of a large apartment building for a potential investor. Which appraisal method is probably the most useful for this situation? A. competitive market analysis B. cost approach C. income approach D. sales comparison approach Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 9 of 10 50. Amy is appraising a four-unit apartment building for a potential buyer. She determines that the building's four units should bring in $38,400 in annual rent. She also determined, based on evaluating similar properties in the area, that the GRM for the building should be about 108. What is Amy's estimate of value? A. $288,000 B. $345,600 C. $376,700 D. $460,800 51. Lot A is 350' x 200' and Lot B is 200' x 350'. Commercial lots on this street are selling for $500 per front foot. Which lot will sell for more? A. Lot A B. Lot B C. They'll sell for the same amount. D. Need more information. 52. The "subject property" best describes A. the property compared to the base B. the property for which the value is sought C. the property surrounding the base D. the property currently on the market 53. A commercial property has a first year gross operating income of $64,000 and expenses of $12,000. If the capitalization rate for similar properties in the same area is 8%, what is the estimate of value? A. $416,000 B. $533,333 C. $650,000 D. $768,000 54. Something is guaranteed to have value if A. effective demand, utility, scarcity, and transferability exist for the item. B. a huge advertising budget is created to market it. C. it is necessary to sustain life. D. physical, economic, social, and governmental factors influence it. 55. The life cycle of a neighborhood occurs in four stages. What is the order of the four stages? A. decline, stability, growth, and revitalization B. growth, decline, revitalization, and stability C. growth, stability, decline, and revitalization D. revitalization, stability, decline, and growth Illinois Real Estate Broker Prelicense Topics - Unit 6: Property Valuation © Hondros Learning www.hondroslearning.com Page 10 of 10 56. An appraisal is valid only on its effective date because of the A. cost savings for the client—a higher price could buy an effective date range. B. principle of Appraiser Income Maximization. C. principle of change. D. simplicity report model being used by the appraiser. 57. The term "amenities," in reference to real property valuation, refers to the A. features, both tangible and intangible, that enhance the desirability of real estate. B. increase in the value of property, either due to a positive improvement of the area or elimination of negative factors. C. valuation placed on real property that is the basis for the amount of tax levied. D. value of real property, established for purposes of computing taxes. 58. It would be unethical for an appraiser to A. appraise a property in which she has a disclosed interest. B. ask for payment in advance. C. base her payment on a percentage of the appraised value. D. refuse to make a commercial appraisal because she has only residential experience. 59. An increase in the value of property, either due to positive improvements in the area or elimination of negative factors, is called A. appraisal. B. appreciation. C. appurtenance. D. assignment. 60. Which term is the process of joining several parcels of land into one larger parcel? A. assemblage B. plottage C. site D. situs

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 10: SELLER RELATIONSHIPS AND COUNSELING UNIT QUIZ 1. When is the Residential Real Property Disclosure Report usually completed? A. when an appraiser provides an estimate of the property's value B. when a buyer submits an offer to purchase C. when a mortgage lender evaluates the property to secure a loan D. when the property is listed for sale 2. When working an open house as a designated seller's agent, a prospective buyer tells you that she would like you to represent her. You must get written consent from both buyer and seller before you can act as a A. designated buyer's agent. B. dual agent. C. implied agent. D. designated seller's agent. 3. A listing agent is showing a buyer a home. The buyer sees a large crack in a basement wall that is seeping water. The buyer buys the property and later sues the agent for non-disclosure of a property defect. A. The agent is liable for damages because he did not tell the buyer about the crack. B. The agent is not liable under the doctrine of "caveat emptor." C. The agent should have fixed the crack prior to showing the property. D. The agent should have instructed the sellers to hide the defect behind paneling or boxes. 4. Which fact is NOT required to be disclosed in a real estate transaction? A. The broker represents both the buyer and the seller in the transaction. B. The county landfill is less than 1,000 yards from the property. C. The former owner was murdered in the kitchen of the home. D. The home's chimney was damaged by lightening and has not yet been repaired. 5. Seller Sam calls a real estate agent to list his home. Sam tells the agent that he wants $156,000 in his pocket at closing and the agent can have the rest for the commission. What type of listing would this be? A. exclusive agency B. exclusive right to sell C. net listing D. open listing Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 2 of 8 6. A real estate broker acting as a seller's agent may A. advise the seller of the best manner of taking title to the new property they are purchasing. B. attempt to create or encourage an offer from any buyer. C. disclose to a buyer that the client will accept an offer at the listed price and terms. D. modify the listing contract on behalf of the seller if it is in the seller's best interest. 7. The seller lists her house with New Age Realty. The next day, the seller goes to work and mentions listing her house. A co-worker expresses interest in the listing. What kind of listing would make the broker entitled to a commission if the co-worker makes an offer acceptable to the seller? A. exclusive agency B. exclusive right to sell C. open listing D. net listing 8. A seller who lives in a small town has posters made up advertising his house for sale. He posts them on many telephone poles around the neighborhood. As part of the poster, he advertises that he will pay 3% to any broker who brings him a buyer. What type of "listing" might this be considered? A. exclusive agency B. exclusive right to sell C. open listing D. net listing 9. Kent is single and sold his primary residence for $325,000. His adjusted basis (original cost) in the home is $150,000. He had selling expenses of $15,000. Kent meets all the conditions for the Section 121 exclusion. What is Kent's recognized gain? A. - $90,000 (loss) B. $0 C. $160,000 D. $175,000 10. Karen is selling her house and contracts with Yvonne to be her broker. What fact is Yvonne prohibited by law from disclosing to a potential buyer or buyer's representative, even if asked directly? A. Karen's husband died of AIDS. B. Mold was discovered in the walls and floor of the basement. C. Someone in the house next door is a registered sex offender. D. There's an old chemical dump upstream that is now closed. Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 3 of 8 11. James is selling his home. He needs to pay off a $96,000 first mortgage, a $12,000 second mortgage, and wants $10,000 cash for himself. If his closing costs are $1,900 and he needs to pay a 7% commission, how much must he sell the property for? A. $102,207.21 B. $119,900.54 C. $128,924.73 D. $129,900.32 12. The lead paint disclosure deals with homes built prior to A. 1978. B. 1982. C. 1992. D. 2001. 13. A latent defect can be best described as a defect that A. has been present for some time. B. is not plainly observable. C. is unknown to the seller. D. the seller doesn't disclose. 14. Who is obligated to complete a Residential Real Property Disclosure Report? A. Builder Bob, who is selling a newly built home B. Bob, who is selling a property he owns to his son C. Cathy, who is selling her condo D. Evan, who is selling his 10-unit apartment building 15. Peter is selling his house and his agent gives him the Property Condition Disclosure Statement to complete. Which statement is true? A. The agent may assist Peter in completing the form. B. The agent must sign the form after walking through the property with Peter. C. Peter must hire a home inspector to help him complete the form. D. Peter should complete the form to the best of his knowledge. 16. Which of the following circumstances is NOT an exception to the two-year provision of Section 121 of the Taxpayer Relief Act of 1997? A. change in place of employment B. divorce C. health considerations D. marriage Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 4 of 8 17. Henry is buying Bob's farm. On the back of the property is an underground water culvert which was not apparent from a normal inspection of the land. What type of defect would this be considered, and is Bob required to disclose it? A. latent defect; must disclose B. latent defect; not required to disclose C. patent defect; must disclose D. patent defect; not required to disclose 18. A broker should inform a prospective seller client that A. all listing contracts are written for one year. B. all properties are automatically included in the Multiple Listing Service. C. any advertising is negotiable. D. commission rates are set by the local board of REALTORS®. 19. An agency agreement that allows the sellers to procure the buyer themselves best describes a(n) A. exclusive agency. B. FSBO. C. net listing. D. non-exclusive right to sell. 20. What is NOT negotiable in a listing agreement? A. the broker's cooperation with other brokers B. the commissions C. whether there is an end date D. the scope of activities permitted 21. Broker Stan, who represents a seller under an exclusive listing agreement, receives two offers for the seller's property at the same time: One from an agent in his office, and one from the salesperson of a cooperating broker. What should Stan do? A. submit the higher offer first; if it is not acceptable, look at the other one B. submit the offer from his agent first, and let the seller decide on it before looking at the other offer C. submit the offer from the cooperating agent first, and let the seller decide on it before looking at the other offer D. submit both offers at the same time, allowing the seller to make a decision after looking at all the facts 22. Who is legally responsible for completing a form disclosing material facts about a property that's for sale? A. the seller only B. the seller's broker only C. both the seller and the seller's broker D. no one; the buyer must perform due diligence Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 5 of 8 23. If interest rates are high and a seller wants to make a property more marketable, what is one strategy that the seller could use to make a property more attractive to a buyer? A. The seller could agree to pay the discount points to reduce the buyer's interest rate. B. The seller could give the buyer a certificate of eligibility for a VA-guaranteed loan. C. The seller could offer to refinance the existing mortgage. D. The seller could try to help the borrower get wraparound financing. 24. Buffy wants to buy Xander's house. She really likes the patio with the built-in grill. She puts in the contract that the built-in grill is included in the purchase of the property. Xander agrees to the contract. When Buffy moves in after the closing, she finds the grill gone. She sues Xander. The court rules in her favor. What would be the most compelling evidence used to determine the ruling? A. Removing the grill caused damage to the patio. B. The patio was less useful and appealing without the grill. C. There was a written agreement. D. Xander used concrete to attach the grill to the patio. 25. Jill buys a house from Jack. She assumed that the curtains would be included in the price, even though they were not listed in the agreement of sale. What is the best argument Jill could make to persuade a judge if this goes to court? A. "Jack mentioned that they went with the house." B. "My agent assured me they were included." C. "The curtains were custom-made for the odd-shaped window." D. "The curtains were in the ad that appeared in the paper." 26. When is a broker generally entitled to commission? A. at the closing table B. when the listing agreement is signed C. when a ready, willing, and able buyer is found on terms acceptable to the seller D. when a sales contract is signed 27. Broker Brittney is using competitive market analysis to set her seller client Justin's expectations about the sale of his property. Her research shows that there are 20 current listings and only four listings have sold in the past 60 days. Based on this, Justin could expect that his house might be on the market for at least A. 180 days. B. 6 months. C. 10 months. D. 12 months. Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 6 of 8 28. Will and Gwen are getting a divorce and need to sell their house. Ursula is considering purchasing the home. Seller's agent Betty just finished a competitive market analysis on the home. Who is the most likely audience for her value estimation? A. Gwen's accountant B. Ursula C. Ursula's lender D. Will and Gwen 29. What feature of a comp is considered in a sales comparison appraisal that is NOT generally considered in a competitive market analysis? A. age B. financing concessions C. lot size D. number of rooms 30. Complete the following statement. A competitive market analysis is ___________ the equivalent of an appraisal. A. never B. sometimes C. usually D. always 31. A large mirror that a buyer wants to remain with the property should A. be agreed upon verbally, with its price stated in the contract. B. be disregarded as having no consequence. C. be identified as a fixture in the sales contract. D. never be included in the sales contract. 32. You're working at an open house as designated agent for the seller. At a minimum, what should you obtain from prospective buyers? A. buyer-brokerage agreement B. dual agency agreement C. implied agency agreement D. notice of ministerial acts 33. A CMA most resembles which formal appraisal approach? A. cost approach B. income approach C. sales comparison approach D. It has elements of all three. Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 7 of 8 34. During a listing interview, a seller demands that the listing agent reduce the proposed commission by 1%. What is the best course of action for the agent? A. call the broker and discuss the matter B. explain that commissions are generally fixed in each locality C. go ahead and reduce the commission D. refuse the listing as commissions are not negotiable 35. The amount of commission that a licensed salesperson is paid A. is determined by each state's real estate commission. B. is determined by negotiation between the licensed salesperson and the employing broker. C. is negotiated by the salesperson at the time of listing the property. D. may not exceed the standard rate set by the local board. 36. Carla is a seller's agent for Lane, whose home is listed for $450,000. After Carla submits an offer to Lane, she must A. allow him time to review it before submitting any other offers. B. evaluate the new offer to see if it's more favorable than the first before presenting it. C. present him with any additional offers immediately. D. tell other prospective buyers that the house is under contract. 37. An owner lists her home with Mike of MNK Realty, a member of the local MLS. Mike knows of several potential buyers, so he holds the listing out of MLS until after the first open house, which is a week away. At the open house, one of his buyers makes an offer near full price; it is accepted and the transaction closes with no problems. Did Mike do the right thing? A. No, an open house cannot be held until the listing is submitted to MLS. B. No, he did what was in his best interest, not the client's. C. Yes, he did what was in the client's best interest. D. Yes, he obtained an acceptable offer and the transaction went smoothly. 38. You think a house should list for $225,000 but your clients insist that they need $249,000 to pay off their mortgage and get their next house. If you decide to take the listing anyway, which of these fiduciary duties requires you to list at $249,000? A. accountability B. disclosure C. obedience D. reasonable care Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships and Counseling © Hondros Learning www.hondroslearning.com Page 8 of 8 39. Matt wants to sell his home. He must pay off his existing $96,200 mortgage and pay $3,100 in closing costs. If he pays a 6% commission, what is the minimum offer he can accept? Round your answer to the nearest dollar. A. $99,216 B. $100,208 C. $102,802 D. $105,638 40. Which property transfer is NOT EXEMPT from the requirements of the Illinois Radon Awareness Act? A. condominium units three stories or higher above ground B. foreclosed property C. new construction D. transfers between spouses

ILLINOIS BROKER PRELICENSE TOPICS UNIT 10: SELLER RELATIONSHIPS AND COUNSELING UNIT QUIZ ANSWER KEY 1. D. This form is customarily completed at the time of listing the property for sale, and is referenced in the agreement of sale. 2. B. Dual agency is only allowed with the informed written consent of all the parties to the transaction. 3. B. The agent is under no duty to disclose a patent defect. A latent or hidden defect must be disclosed. The term "caveat emptor" refers to "let the buyer beware," and the buyers should be aware of things that they can readily see. 4. C. A previous crime in the home is not material and is not necessary to disclose. The other information should be disclosed. 5. C. Net listings create a breeding ground for fraud and unhappy clients and agents. 6. B. A broker acting as an agent of the seller is required to use his/her best effort to market the property and locate a ready, willing, and able purchaser that will meet the seller's terms and conditions. 7. B. Only the exclusive right to sell listing agreement entitles a broker to a commission, no matter who brings the buyer. 8. C. When a seller offers a commission to any broker who finds a buyer, this is known as an open listing. The seller does not sign exclusively with any one agency. 9. B. Since the amount of the Section 121 exclusion ($250,000) is greater than the realized gain of $160,000, there is no recognized gain. However, the excess amount is lost and cannot be rolled over into future transactions. 10. A. It is against the law to tell a potential buyer anything that would constitute unlawful discrimination as defined by fair housing laws. AIDS would be covered by this ultimatum. 11. C. There are two steps to this problem. First, add all of the expenses: $96,000 + $12,000 + $10,000 + $1,900 = $119,900. This is the base cost. Now, factor in the broker's commission fee. Sale price = 100%; Commission = 7%, thus net to James equals 93% (100% - 7% = 93%). Using the seller pricing/net to owner formula; Whole (Total/Gross Sale price) = Part (Net amount + Expenses) ÷ Percent (100% minus deductions), plug in the known variables. Whole = $119,900 ÷ 93% or 119,900 ÷ 0.93 = 138,924.73. The minimum offer James should accept is $128,924.73. 12. A. Federal law requires a disclosure concerning lead-paint in connection with the sale of residential properties built before 1978. A seller covered by this act must complete a series of steps before a buyer executes a binding purchase contract. 13. B. An example of a latent defect would be a crack in a basement wall that is hidden behind paneling. Sellers have a duty to disclose latent defects to potential buyers as the buyers would not otherwise have any way of discovering them. 14. C. The disclosure is required for real property improved with not less than one nor more than four residential dwelling units, units in residential cooperatives or, condominium units. Exceptions include transfers to spouses or children, sales to or from government agencies, transfers of newly constructed homes that have never been lived in, and transfers through court order, as with an estate. Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 3 15. D. If Peter doesn't have all the information needed to complete all parts of the form, he must indicate that his statements may be based on incomplete facts, but he must still complete and sign the form. The agent simply provides the form, but should not assist Peter or sign it. 16. D. Marriage is the only item listed that is not exempted. Divorce, as well as disaster, qualify as unforeseen circumstances. 17. C. All of these items are actually negotiable. The broker is obligated to tell the client that. 18. A. This is a latent, or hidden, defect. If Bob knew about it but does not disclose it, he could be held liable and Henry might be able to recover damages. Either way, Henry would most likely be able to rescind the contract. 19. A. When the seller has the ability to bring the buyer, yet hires one broker to market the property, the listing agreement is an exclusive agency agreement. 20. C. Each one of these items is negotiable, and a licensee must inform the consumer of that fact. 21. D. There is no written rule about the order to present offers, but the broker is obligated to submit all offers. The seller has the right to know all the facts and look at all the offers before reaching a decision. 22. A. Legally, the seller must disclose all material facts about the property in a seller disclosure form. The seller's broker would be acting ethically if he or she disclosed material facts about the property that did not appear on the seller disclosure form. And the broker would not be subject to discipline for having disclosed those material facts. 23. A. In most cases the seller pays points to reduce the interest rate to be paid by the buyer making the property more marketable. It's far easier to sell a property if the interest rate is affordable. 24. C. Written agreements are the most compelling evidence when a dispute arises about property. If there is no written agreement, then the purpose and intent of the annexer, the manner of the annexation, and the relationship between the two parties is considered. 25. C. Jill's best argument is that curtains were custom-made. 26. C. A broker is entitled to commission only after fulfilling the duty of finding a ready, willing, and able buyer on the seller's terms. 27. C. Given the current market in Justin's area - four houses every two months - it would not be unreasonable to think that his house could be on the market for 10 months. 28. D. Seller's agent Betty's value estimation is really only for her clients, Will and Gwen. Other parties to this transaction might need a formal appraisal performed by a licensed appraiser. 29. B. A CMA is primarily concerned with the observable differences between houses that would draw a buyer to one house over another. 30. A. Although a CMA is similar to an appraisal, it is never equal to an appraisal. 31. C. A fixture is defined as a piece of personal property that stays with the real property. Even though the large mirror might be removable, if it is identified as a fixture and made part of the real estate contract, it will remain after the sale. Illinois Real Estate Broker Prelicense Topics - Unit 10: Seller Relationships - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 3 32. D. To protect yourself and to avoid misinterpretation, it is wise to at least obtain a signed notice of ministerial acts, also called a non-agency disclosure, from prospective buyers. If they want representation, you can discuss a buyer-brokerage agreement. 33. C. The tasks and analysis that a real estate licensee performs to do a CMA are very similar to those an appraiser performs when doing an appraisal using the sales comparison approach. 34. A. An agent should not adjust commissions without the consent of the broker. Commissions may be fixed by company policy, but are not dictated by law or even local custom; they are negotiable between the company and the client. 35. B. The amount that a broker will pay a salesperson is generally negotiated between the broker and the salesperson at the time the salesperson is hired. There is no standard fee set by any board or licensing authority. 36. C. Carla is obligated to submit all offers. 37. B. Most MLS systems require that all listings must be submitted within a day or two. Regardless, Mike was looking out for his own best interests in an attempt to secure both sides of the commission. The home may have brought a higher offer if exposed to all buyers through the MLS. 38. C. You can offer your advice, but you owe your client obedience to all legal instructions. You should list at $249,000. 39. D. Two steps are required to solve this problem. First, add the expenses $96,200 + $3,100 = $99,300. This is the whole/base cost. Now, factor in the broker's commission fee. Sale price = 100%; Commission = 6%, thus net to Matt equals 94% (100% - 6% = 94%). Now use the net to owner/seller pricing formula, Whole (Total/Gross Sale price) = Part (Net amount + Expenses) ÷ Percent (100% minus deductions) and plug in the known values; $99,300 ÷ 0.94 = $105,638.29. Rounded, Matt should sell his home for a minimum of $105,638. 40. C. Sellers of newly constructed homes must comply with the provisions of the Act.

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 7: REAL ESTATE FINANCE UNIT QUIZ 1. When the lender loans money to a borrower and the borrower gives the lender a mortgage, this is referred to as a A. buyer's market. B. primary mortgage market. C. secondary mortgage market. D. seller's market. 2. A conforming loan is a loan that A. exceeds the maximum loan amount established by Fannie Mae/Freddie Mac. B. follows the secondary market criteria set by Fannie Mae/Freddie Mac. C. is for more than $417,000 on a single family home and also called a jumbo loan. D. is offered to borrowers who do not meet qualifications for Fannie Mae/Freddie Mac. 3. The amount of money borrowed compared to the appraised value or the sale price of a property, whichever is less, is called the A. down payment. B. interest rate. C. loan-to-value ratio. D. principal amount. 4. A partially amortized note that reduces part of the principal by the time the final payment is due may be referred to as a A. balloon loan. B. conventional loan. C. negative amortization loan. D. wraparound loan. 5. With a trust deed, who is considered the beneficiary? A. the borrower B. the independent third party C. the lender D. the witness 6. The sale price of the home a buyer wants to buy is $161,500. The appraisal on the property comes in at $163,000. If the lender wants an LTV of 80%, how much is the lender willing to lend? A. $129,200 B. $130,400 C. $145,350 D. $146,700 Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 2 of 13 7. James has an adjustable rate mortgage (ARM). It has an initial interest rate of 5%. The interest rate is adjusted annually with a 2/5 interest rate cap. If interest rates go up to 8%, what is the most that James's interest rate can increase to in the second year? A. 6% B. 7% C. 8% D. 10% 8. The type of note that has an interest rate that varies up or down depending on the cost of money as determined by an index is called A. an adjustable rate note. B. a fully amortized installment note. C. an installment note. D. a straight note. 9. The document that creates a lien against real property as security for promise to repay a loan is called a A. deed. B. mortgage. C. negotiable instrument. D. promissory note. 10. Escrow refers to A. the amount of cash that a borrower pays up front toward the price of the property. B. the difference between the value of the property and the value of the loan against the property. C. the holding of funds in a reserve account in order to pay for taxes and insurance premiums when they come due. D. a payment in advance from the borrower to the lender for the purpose of reducing the interest rate. 11. Once the initial rate has been set for an adjustable rate mortgage (ARM), future interest rate adjustments are based on the upward and downward movements of A. income tax rates. B. the price of houses. C. a standard index. D. the stock market. 12. Loan assumption refers to the circumstance when A. a new buyer takes over the seller's existing mortgage loan. B. a lender sells a mortgage loan to the secondary mortgage market. C. a borrower makes a payment in advance to reduce their interest rate. D. a borrower makes a balloon payment at the end of the loan term. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 3 of 13 13. The simple process of asking prospective clients general questions about income, expenses, and debts is known as A. appraisal. B. credit report. C. pre-approval. D. pre-qualification. 14. An intermediary who earns a commission for bringing together borrowers and lenders is called a A. mortgage banker. B. mortgage broker. C. mortgage company. D. mortgage insurer. 15. Dave and Sara are both young lawyers with the same firm who are buying a home. They have a new baby. Dave will be working full time at the law firm for the next five years but Sara will not be working until the baby is in kindergarten, so in six years, both plan to be full time at the law firm. Which type of mortgage would offer them the best monthly payment plan and tax advantages? A. equity participation mortgage B. graduated payment mortgage C. reverse equity mortgage D. shared appreciation mortgage 16. A wraparound mortgage A. allows homeowners to finance expensive purchases or pay off credit card debt. B. allows the borrower to redo or expand a loan on an existing property. C. occurs between the termination of one mortgage and the beginning of the next. D. occurs when a new mortgage plus an existing mortgage are structured as a single obligation. 17. What may a mortgage broker NOT do? A. negotiate a loan B. originate a loan C. process a loan D. solicit a loan 18. On a closing statement, a new mortgage loan is usually a A. credit to the buyer. B. credit to the seller. C. debit to the buyer. D. debit to the seller. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 4 of 13 19. A borrower is buying a house for $90,000. He provides a down payment of $10,000. If he pays three discount points, what is the total cost of the points? A. $3,000 B. $2,700 C. $2,400 D. $2,000 20. The lender who provides money to a borrower is referred to as the A. mortgage broker. B. mortgagee. C. mortgagor. D. vendor. 21. When lenders sell mortgages to investors in order to receive funds in order to make additional mortgage loans to others, this is known as A. first lien. B. second lien. C. primary mortgage market. D. secondary mortgage market. 22. The term PITI refers to the components of a budget mortgage. What does the "P" stand for? A. payment B. percentage rate C. primary D. principal 23. Which best describes the process of judicial foreclosure? A. Advertising runs for consecutive weeks, then a public auction of the property is held, and then a confirmation of sale. B. Debtors legally deal with a personal financial situation that has become unmanageable. C. Debtors lose the property by mutual agreement and return it voluntarily before final court action. D. Lenders forfeit all interest charged past, present, and future to the borrower. 24. The interest rate of a fixed rate loan A. fluctuates according to a standard index. B. is usually lower than the rate for an adjustable rate loan. C. remains constant for the duration of the loan. D. starts lower in early years of the loan and increases in later years. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 5 of 13 25. A lender has the right to enforce the acceleration clause in a mortgage when a borrower is behind by A. one payment. B. two payments. C. three payments. D. more than three payments. 26. A purchase money mortgage is a type of mortgage where A. the lender collects the cost of insurance and taxes as part of the borrower's monthly payment. B. the lender participates in earnings, income, or profits generated by the mortgaged property. C. the seller finances all or part of the sale price of a piece of property for a buyer. D. the seller keeps the existing loan and continues to pay on it while giving the buyer another mortgage. 27. A mortgage that includes more than one parcel of land is called a A. blanket mortgage. B. package mortgage. C. purchase money mortgage. D. wraparound mortgage. 28. Cathy has a mortgage with an alienation clause. She sells her property to John who assumes her loan. The alienation clause gives the lender the right to A. call for the entire loan balance to be paid off at the transfer. B. cancel the lender's interest in the property. C. charge a higher rate of interest. D. release part of the property from the lien. 29. The main advantage of a 15-year loan versus a 30-year loan is A. down payment required is higher. B. less tax deductions for overall interest paid. C. monthly payments are usually lower. D. the total paid back to the lender is less. 30. What clause cancels the lender's interest in the property when the loan is repaid? A. acceleration B. assumption C. defeasance D. partial release Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 6 of 13 31. What type of clause allows the lender to sell the property to pay the debt the borrower owes without going through the courts? A. an alienation clause B. a defeasance clause C. a power of sale clause D. a subordination clause 32. A debtor who is required to pay an extra 3% of the total loan amount if more than 20% of the principal is repaid during the first five years of the term is bound to these terms under a A. late payment clause. B. partial release clause. C. power of sale clause. D. prepayment clause. 33. Lisa applied for the loan on May 1. XYZ rejected Lisa's loan application on May 5. XYZ must send Lisa a written explanation of their decision by A. May 10. B. May 15. C. May 30. D. June 4. 34. A home developer has an existing mortgage for the purchase of land. If the new lender of a second construction mortgage wants to ensure that the second construction mortgage takes priority over the existing first mortgage, what type of clause must be contained in the construction mortgage? A. acceleration clause B. defeasance clause C. power of sale clause D. subordination clause 35. Credit scoring refers to A. the dollar amount of the loan a lender is willing to make to the borrower. B. the lender's decision to approve the loan application. C. numerical values the lender assigns to qualify the borrower. D. the review of a loan application by the underwriting department. 36. ABC Bank tells Joe they will loan him $100,000 at 6.75% interest for an adjustable rate mortgage. What should Joe most likely expect regarding the APR? It will be A. higher than 6.75%. B. lower than 6.75%. C. the same. D. impossible to know, as it fluctuates. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 7 of 13 37. Charging interest rates in excess of the state maximum allowed is known as A. escrow. B. defeasance. C. hypothecation. D. usury. 38. What law requires that borrowers be shown how much they are going to pay for credit terms of the annual percentage rate? A. Community Reinvestment Act B. Equal Credit Opportunity Act C. Fair Credit Reporting Act D. Truth in Lending Act 39. A potential home buyer may receive pre-approval for a loan of a certain amount without providing A. complete income information. B. an employment history. C. a purchase or sales agreement. D. a residence history. 40. A credit report shows the borrower's A. current purchase or sale agreement. B. history of making payments on past debts and obligations. C. loan-to-value ratio (LTV). D. tax returns for the previous two years. 41. As the lender's underwriters evaluate the borrower's loan application to decide whether or not to make the loan, they may not consider the borrower's A. employment history. B. field of employment and its economic viability. C. history of making payments on past obligations. D. receipt of public assistance. 42. At the initial meeting with the lender, a potential borrower should be prepared to A. make a down payment. B. review a credit bureau report. C. show proof of age. D. supply personal and financial information. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 8 of 13 43. Equitable title is the A. difference between the value of the property and the value of the loan against the property. B. instrument that creates a lien against real property as security for the payment of a note. C. interest in real property created upon the execution of a valid land contract. D. title held by the trustee for the benefit of the borrower and/or the lender under a trust deed. 44. Abe's stable monthly income is $3,500. Every month he pays: $250 car payment, $100 student loan payment, and $50 gym membership. What is the maximum monthly mortgage payment he would qualify on a conventional loan? A. $1,260 B. $980 C. $910 D. $860 45. A state in which title is conveyed to the mortgagor is referred to as A. an equitable theory state. B. an intermediary theory state. C. a lien theory state. D. a title theory state. 46. In the event of a default, which debt is normally paid first from the proceeds of the foreclosure sale? A. first recorded lien B. second recorded lien C. third recorded lien D. real estate taxes and associated costs of sale 47. The purpose of using PITI to structure payments in a mortgage is to A. allow the borrower to obtain actual cash from the equity built up in the property. B. allow the lender to participate in any earnings, income, or profits generated. C. ensure that enough funds are collected to cover taxes and insurance premiums. D. include the financing of personal property, such as appliances or furnishings. 48. A Illinois homeowner whose property is in foreclosure has A. equitable right of redemption before the sale takes place. B. equitable right of redemption for 2 days after the sale takes place. C. statutory right of redemption for 10 days after the sale takes place. D. no right of redemption. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 9 of 13 49. The defeasance clause ensures that A. a mortgage recorded at a later date takes priority over an earlier recorded mortgage. B. at default, the borrower must assign any rental income over to the lender. C. upon final payment, the mortgage is satisfied, cancelled, or void, and the title is re-vested from mortgagee to mortgagor. D. upon sale of the property, the lender may accelerate the debt, change the interest rate, or charge an assumption fee. 50. The Equal Credit Opportunity Act (ECOA) is a law that ensures A. borrowers are shown how much they will pay for credit in dollars and percentages. B. financial institutions provide funding for low-income and moderate income housing. C. lenders make credit available with fairness and without discrimination. D. settlement procedures are regulated so buyers can compare the cost of services. 51. The annual percentage rate (APR) is also referred to as A. effective rate of interest. B. equity. C. escrow account. D. nominal rate of interest. 52. The act of redlining may be defined as A. channeling buyers to certain neighborhoods based on their race or ethnic background. B. charging a greater rate of interest on a mortgage loan than the law allows. C. refusing to make loans on property in certain neighborhoods for discriminatory reasons. D. using voluntary reconveyance or friendly forfeiture to avoid judicial foreclosure. 53. What does a borrower applying for a VA loan need to complete the loan application? A. certificate of eligibility and discharge papers B. credit bureau report C. purchase sale agreement D. RESPA guidelines 54. What is an important distinction between pre-qualification and pre-approval? A. Pre-qualification of a buyer is more costly than pre-approval. B. Pre-qualification of a buyer is not binding on the lender. C. Pre-qualification of a buyer is not useful to the real estate agent. D. Pre-qualification takes longer to complete than pre-approval. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 10 of 13 55. The lender usually does not allow the source of a borrower's down payment to be A. borrowed funds. B. a gift from a relative. C. proceeds from the sale of a house. D. savings. 56. The difference between the index value and the interest rate charged to the borrower on an adjustable rate mortgage (ARM) is called a A. cap. B. discount. C. margin. D. return. 57. The legislation that sets out specific procedures and guidelines for closing and settlement procedures is A. ECOA. B. Regulation Z. C. RESPA. D. TILA. 58. Secondary mortgage markets can make local real estate markets more stable by A. moderating the effect of local real estate cycles. B. raising interest rates charged to borrowers. C. reducing reserve requirements for lenders. D. serving as intermediaries between borrowers and lenders. 59. An example of a servicing activity for which a servicing fee may be charged is A. collecting monthly mortgage payments. B. increasing interest rates charged to borrowers. C. purchasing mortgages on the secondary market. D. setting reserve requirements and discount rates. 60. A loan in which total payments over the life of the loan pay off the entire balance of principal and interest due at the end of the term is referred to as A. annualized. B. compounding. C. diminishing. D. fully amortizing. 61. Which act requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application? A. Equal Credit Opportunity Act (ECOA) B. Fair and Accurate Credit Transactions Act (FACT Act) C. Fair Credit Reporting Act (FCRA) D. Real Estate Settlement Procedures Act (RESPA) Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 11 of 13 62. Debts that are considered as part of a borrower's obligations when qualifying for a loan include A. car payments. B. insurance premiums. C. membership fees. D. utility payments. 63. William has an adjustable rate mortgage (ARM). It has an initial interest rate of 6% adjusted annually with a 2/5 interest rate cap. If interest rates go up, what is the most that William's interest rate can increase to over the life of the loan? A. 8% B. 11% C. 12% D. 17% 64. A buyer has a $32,300 cash down payment. The sale price of the property is $161,500, so the buyer is looking for a mortgage of $129,200. The property was appraised at $159,500, and the lender requires an 80% loan-to-value ratio. What is the loan-to value ratio (LTV) for this transaction? A. 78% B. 80% C. 81% D. 90% 65. Private mortgage insurance (PMI) is not required when A. a buyer makes less than a 20% down payment on a loan. B. interest rates are high. C. interest rates are low. D. the loan has been paid down to less than 78% of the property's current value. 66. A disadvantage of a 15-year loan versus a 30-year loan is A. a greater tax deduction for overall interest paid. B. monthly payments are usually higher. C. the down payment required is usually lower. D. total of repayments made over the life of the loan are lower. 67. Under the protections offered by Equal Credit Opportunity Act (ECOA), when qualifying a potential borrower, a lender may NOT consider A. credit rating. B. job stability. C. marital status. D. net worth. Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 12 of 13 68. A borrower's stable monthly income is $3,000. He has three monthly debts: $350 car payment, $50 personal loan payment, and $50 credit card payment. What is the maximum monthly mortgage payment he would qualify for using the total debt service ratio of 36% for a conventional loan? A. $390 B. $630 C. $840 D. $1,080 69. When a loan balance for an adjustable rate mortgage grows because of deferred interest when payments are not covering the interest portion of the loan this is known as A. full amortization. B. margin. C. mortgage payment cap. D. negative amortization. 70. Which statement concerning a settlement or closing statement is TRUE? A. A closing statement is a simultaneous listing of debits and credits to the respective buyer and seller. B. There is a corresponding credit for a buyer and debit for a seller on all charges on a closing statement. C. There is a corresponding debit for a seller and credit for a buyer for all charges on a closing statement. D. The real estate agent's commission is a credit to the buyer's side of a closing statement. 71. To establish the value of a property for a VA loan, the required documentation is A. an broker price opinion. B. a certificate of eligibility. C. a certificate of reasonable value. D. a competitive market analysis. 72. Kelly's gross stable monthly income is $3,500. What is the maximum monthly mortgage payment (PITI) she would qualify for using the payment-to-income ratio for a conventional loan? A. $875 B. $980 C. $1,020 D. $1,750 Illinois Real Estate Broker Prelicense Topics - Unit 7: Real Estate Finance © Hondros Learning www.hondroslearning.com Page 13 of 13 73. With a fixed-rate mortgage, what happens to a borrower's payments if interest rates increase? A. Payments go down. B. Payments go up. C. Payments remain the same. D. Payments are made more frequently. 74. The sale of a property will close on April 30. Taxes are $3,390 per year and are paid through the last half of the previous year. Calculate the seller's share of taxes using a calendar year (365 days). A. $1,113.60 B. $1,114.51 C. $1,130.51 D. $2,276.05 75. A bank notifies a homeowner that she is delinquent on her mortgage and threatens foreclosure. The homeowner offers to give the property to the bank if the bank will NOT file the foreclosure suit against her. This process is known as A. deed in lieu of foreclosure. B. deed of trust. C. deficiency judgment. D. quitclaim deed.

ILLINOIS BROKER PRELICENSE TOPICS UNIT 7: FINANCE UNIT QUIZ ANSWER KEY 1. B. When the lender loans money to a borrower and the borrower gives the lender a mortgage, this is called the primary mortgage market. 2. B. A conforming loan follows the Fannie Mae and Freddie Mac criteria in order to be eligible for sale in the secondary mortgage market. 3. C. The loan-to-value ratio or LTV is the amount of money borrowed compared to the appraised value or the sale price of a property, whichever is less. 4. A. A balloon loan is partly amortized with a lump sum payment of the principal due at the end of a loan. 5. C. With a trust deed, the lender is called the beneficiary, the borrower is called the trustor, and there is also an independent third party called the trustee. 6. A. The lender will use the sale price of $161,500 to consider the loan because it is less than the appraised value, and 80% of $161,500 is $129,200. 7. B. With a 2/5 interest rate cap, even if the interest increase according to the standard index plus margin is greater (8%), the interest rate adjustment for the second year is capped at 2%. The highest increase possible would be 7% (5% + 2% = 7%). 8. A. An adjustable rate note has an interest rate that varies up or down depending on the cost of money as determined by an index. 9. B. A mortgage creates a lien against real property as security for the payment of a note. The mortgage is a type of security instrument where the borrower (mortgagor) pledges property to the lender (mortgagee) as collateral for the debt. 10. C. Escrow refers to a reserve account used to pay for taxes and insurance premiums when they come due. A budget mortgage creates an escrow account by collecting one-twelfth of the taxes and insurance premiums as part of the monthly mortgage payment. 11. C. Interest rate adjustments are based on the upward and downward movements of the selected index. 12. A. Assumption of a loan occurs when a new buyer takes over the seller's existing mortgage loan. 13. D. Pre-qualification is simple process of asking prospective clients general questions about income, expenses, and debts. 14. B. A mortgage broker is similar to a real estate broker who earns a commission for connecting buyers and sellers. 15. B. A graduated payment mortgage is for a young professional such as a doctor or lawyer whose income may be lower now but is expected to greatly increase in the future. 16. D. This is when a new mortgage wraps around an existing mortgage. The total debt (a new loan plus an existing loan) is treated as a single obligation by the buyer, with one payment made on the entire debt. 17. B. A mortgage broker may not originate, service, or underwrite a loan, but he can perform these other tasks. 18. A. A new mortgage loan is a credit to the buyer, as it reduces the amount of money the buyer has to bring to the closing table. A new mortgage loan is neither a debit nor Illinois Real Estate Broker Prelicense Topics - Unit 7: Finance - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 5 a credit to the seller. A credit is something you get (e.g., a buyer getting the security deposit from the seller for a tenant). A debit is something you pay (e.g., a real estate commission). 19. C. He would pay $2,400. $80,000 x 0.03 = $2,400. Discount points are paid on the mortgage amount. The down payment is separate. 20. B. The borrower who pledges property as collateral is called the mortgagor. The lender is called the mortgagee. 21. D. The secondary mortgage market refers to lenders selling off mortgages to investors to receive funds in order to make additional mortgage loans to others. This is an example of loan assignment or assignment of loans. 22. D. PITI stands for principal, interest, taxes, and insurance. 23. A. Judicial foreclosure under a mortgage requires advertising in a newspaper of a court-ordered sheriff's sale of the property to repay the debts owed. 24. C. The interest rate of a fixed-rate loan remains constant. 25. A. When an acceleration clause is present, the lender has the right to call the entire loan balance due once a borrower is behind by just one payment, because the borrower has violated the terms. However, it is more likely the lender will want to work with the borrower to continue the mortgage. 26. C. A purchase money mortgage (PMM) is where the seller finances all or part of the sale price of a piece of property. 27. A. A blanket mortgage covers more than one parcel of land. 28. A. Upon sale of, or even a transfer of significant interest in the property, the lender will often have the right to accelerate the debt, change the interest rate, or charge a hefty assumption fee. 29. D. The main advantage to a 15-year loan is that the total of the repayments or the total paid back to the lender is less. 30. C. Also known as a release, the defeasance clause cancels the lender's interest when the debt is repaid. 31. C. A power of sale clause allows the lender to sell the property to pay the debt the borrower owes without going through the courts. This is referred to as non-judicial foreclosure. 32. D. A prepayment clause allows to lender to charge borrower a penalty for paying off the loan early. 33. C. A lender is required to provide the borrower a reason for rejection of credit in writing, within 30 days of loan application. 34. D. A subordination clause in a contract gives a mortgage recorded at a later date the right to take priority over an earlier recorded mortgage. 35. C. Credit scoring involves the lender assigning specified numerical values to different aspects of the borrower. These numbers may be adjusted up and down based on the strength or weakness of a particular borrower's qualification. 36. A. The annual percentage rate will likely be more than the stated interest rate because it will include the cost of financing the loan. A loan has only one APR even if the interest rate itself is adjustable. 37. D. Charging more than the interest rate set by state law is called usury and is subject to lender penalties. Illinois Real Estate Broker Prelicense Topics - Unit 7: Finance - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 5 38. D. The Truth in Lending Act, Regulation Z, requires that borrowers be shown how much they are going to pay for credit in dollars and percentages and that lenders use an APR (annual percentage rate). 39. C. If being considered for pre-approval, the potential homebuyer may not have a purchase agreement in place yet. This document should be given to the lender for review when the buyer finds a house. 40. B. A credit report will show the borrower's history of making payments on past debts and obligations. 41. D. Considering that factor, if the applicant adequately met all other criteria, would be a violation of the Equal Credit Opportunity Act (ECOA). All people must be considered for credit equally on the basis of income adequacy, sufficient net worth, job stability, and satisfactory credit rating. 42. D. Gathering the necessary personal financial documents and providing this information early will help speed up the application and approval process. 43. C. Equitable title is an interest in real property created upon the execution of a valid land contract or being "in contract," such as with a purchase contract. Actual title will be transferred by deed at a future date. 44. C. Using the payment-to-income ratio, we get $980. But using the total debt service ratio, we find: $3,500 (income) multiplied by 0.36, which equals $1,260. From that, you subtract monthly debts ($250 + $100) which total $350 (the gym membership is not considered a debt). So, this leaves $910. 45. C. States in which title is conveyed to the mortgagor or borrower are called lien theory states. 46. D. Real estate taxes and the associated costs of the sale are paid first. Then, the liens are paid in priority order (first lien, second lien, and so on) until the money is exhausted. 47. C. The lender (mortgagee) provides this service to a mortgagor by adding one-twelfth of the insurance premiums and taxes to the monthly mortgage payment amount. 48. A. In Illinois, the owner of property being foreclosed has equitable right of redemption before the sale. After the sale, the property owner has no rights. 49. C. A defeasance clause is a clause used to defeat or cancel a certain right upon the occurrence of a specific event. For example, upon final payment, the mortgage is thereby satisfied or cancelled or void, and the title is re-vested to mortgagor. 50. C. The Equal Credit Opportunity Act (ECOA ensures all lenders must make credit available with fairness and without discrimination. 51. A. The APR or effective rate of interest is the total cost of the loan as an annual percentage of the loan amount and includes the loan fees, discount points, and other charges that must be paid by the borrower. 52. C. Redlining is the refusal to make loans on property in certain neighborhoods for discriminatory reasons and is an illegal discriminatory act under federal, state, and local fair housing laws. 53. A. A potential borrower who is applying for a VA loan will need a certificate of eligibility and discharge papers to complete the loan application. 54. B. Pre-qualification of a buyer is not binding on the lender and but it is a useful tool to help agents and prospects get started so agents do not waste time showing prospects homes they cannot afford. Illinois Real Estate Broker Prelicense Topics - Unit 7: Finance - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 4 of 5 55. A. Savings, the previous sale of a home, or gifts are all acceptable sources of down payment, but the buyer is usually not allowed to use borrowed funds. 56. C. The margin is the difference between the index value and the interest rate charged to the borrower. 57. C. The Real Estate Settlement Procedures Act (RESPA) sets forth specific procedures and guidelines related to real estate closing and settlement. 58. A. Effects of local real estate cycles can be moderated by the banks having stable investments from other regional areas that may be going through different phases of a real estate cycle. 59. A. Servicing activities include collecting and processing payments including taxes and insurance, accounting, recordkeeping and bookkeeping, and other follow-up services. 60. D. A loan that is fully amortized means the total payments over the life of the loan will pay off the entire balance of principal and interest due at the end of the term. 61. A. The Equal Credit Opportunity Act or ECOA requires the lender to provide the borrower a reason for rejection of credit in writing within 30 days of loan application. 62. A. Car payments are a recurring monetary obligation that cannot be cancelled. The others may be monthly expenses but are not considered as debts because they can be cancelled. 63. B. With a 2/5 interest rate cap, even if the increase in interest according to the standard index is greater than 5%, the interest rate adjustment for the life of the loan is capped at 5%. The highest increase possible would be 11% (6% + 5% = 11%). 64. C. The LTV is calculated as $129,000 (mortgage loan amount) divided by $159,500 (appraised value) =.81 or 81%. You remembered that the LTV is calculated on the lower of the sale price or the appraised value. The lender would not make this loan. 65. D. PMI is no longer required and will be cancelled when the loan has been paid down to less than 78% of the property's current value. 66. B. A disadvantage to a 15-year loan is that monthly payments are usually higher. 67. C. A lender will consider income adequacy, sufficient net worth, job stability, and credit rating. Age, marital status, and receipt of public assistance are protected classes under the ECOA law. 68. B. Total debt service ratio is calculated as: $3,000 (income) multiplied by (x) 0.36, which equals $1,080. From the $1,080, you must subtract his monthly debts ($350 +$50+ $50), which totals $630. 69. D. Negative amortization means a loan balance grows because of deferred interest when payments are not covering the interest portion of the loan. 70. B. A closing statement does not include corresponding debits and credits to either buyer or seller. A closing statement presents a final, detailed accounting of a real estate transaction, listing each party's debits and credits and the amount each will receive or be required to pay at closing. This is not an accountant's balance sheet, on which each debit has a corresponding credit and vice versa. 71. C. For VA loans, a Certificate of Reasonable Value is required to establish value for the property. 72. B. The monthly PITI cannot exceed 28% of the borrower's gross stable monthly income: $3,500 (income) multiplied by 0.28 equals $980. Illinois Real Estate Broker Prelicense Topics - Unit 7: Finance - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 5 of 5 73. C. With a fixed-rate mortgage, if interest rates go up, the borrower's payments remain the same over the life of the loan. 74. B. The first thing to do is calculate the cost per day ($3,390 ÷ 365 = $9.2876). Next, determine the number of days for which taxes haven't been paid (January 31 + February 28 + March 31 + April 30 = 120). Finally, multiply the number of days for which taxes haven't been paid by the daily tax rate (120 x $9.2876 = $1,114.512). The seller owes $1,114.51 in taxes. 75. A. In a deed in lieu of foreclosure, the correct answer, the deed to property is given by a borrower to the lender to satisfy the debt and avoid foreclosure (also called voluntary conveyance).

ILLINOIS REAL ESTATE BROKER PRELICENSE TOPICS UNIT 8: COMMERCIAL REAL ESTATE UNIT QUIZ 1. Which statement does NOT apply to commercial real estate? A. It requires special commercial education and licensing to sell. B. It requires special knowledge and expertise. C. Negotiations are more time consuming and sophisticated than for residential properties. D. Transactions are more risky and more complicated than typical residential transactions. 2. What line item appears at the top of an operating statement? A. depreciation B. initial investment amount C. potential gross income D. purchase price 3. Mike bought investment property. Like most investors, the yardstick he'll use to evaluate his property's performance is called the A. cash flow model. B. expense allocation method. C. gross effective income theory. D. investment recovery strategy. 4. Carol's Candies rents retail space from JKM Enterprises. Carol pays JKM a set fee of $200 each month in rent in addition to 18% of her candy shop's gross sales. What kind of lease is this? A. gross lease B. index lease C. net lease D. percentage lease 5. Smallville builds a new sewage treatment plant and raises water rates to pay for it. Clark's rent is raised as a result. His lease most likely A. contains an escalation clause. B. is a graduated lease. C. is an index lease. D. is a percentage lease Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 2 of 9 6. The rent for each unit of a ten-unit strip mall is $1,000 per month. The annual vacancy rate averages 5%. The expenses for the property come to $30,000 per year with depreciation of $15,000. What is the net operating income? A. $49,000 B. $54,500 C. $84,000 D. $96,000 7. Robert owns a building he leases to a software company, collecting monthly rent of $7,500. His expenses are $45,000 per year, and the building's depreciation is $10,000 per year. Robert wants to sell the building, and Hannah is interested in buying it if she can make a 12% return on her investment. Using the capitalization rate method, estimate the value that Hannah can expect. A. $291,666 B. $375,000 C. $540,000 D. $750,000 8. Which is NOT a requirement to get a license to sell commercial real estate in Illinois? A. complete 90 hours of approved prelicensing education B. have at least two years of experience in real estate sales C. have a sponsoring broker D. pass a state licensing examination 9. Which statement about commercial real estate is FALSE? A. Commercial transactions are usually more complicated than typical residential transactions. B. Commissions on commercial real estate transactions tend to be higher than those on residential. C. More than half of all commercial specialists work for a company that works exclusively in commercial properties. D. The Civil Rights Act of 1866 does not apply to commercial real estate. 10. In a sale and leaseback arrangement, the A. buyer gets possession of the property. B. buyer receives equitable title only. C. seller retains possession of the property. D. seller retains title to the property. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 3 of 9 11. Investor Betty borrows money from a bank to purchase a small office building. She is able to make the mortgage payments from the rent generated by the leases and still realize a profit. This is an example of what financing concept? A. debt service B. leverage C. piggy-backing D. tailgating 12. Margaret rents an apartment from Marty. Margaret pays rent and some of her utilities. Marty pays insurance on the building, property taxes, and maintenance. What kind of lease is this? A. gross lease B. index lease C. net lease D. percentage lease 13. Frank rents warehouse space. In addition to the rent he pays the landlord, Frank also pays the property taxes and insurance. He is also responsible for maintenance on the building. What type of lease does Frank have? A. graduated lease B. gross lease C. ground lease D. net lease 14. What would help ensure that two tenants in the same strip mall aren't competing against each other with the same merchandise? A. attornment clause B. certificate of estoppel C. escalation clause D. use clause 15. A triple net lease is typically used for A. industrial property. B. rural property. C. single family property. D. small business property. 16. A clause in the lease the gives a tenant the opportunity to buy the building if it is put up for sale and they can match a bona fide accepted offer is called A. assumption. B. escalation. C. escape. D. right of first refusal. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 4 of 9 17. Of these assets, which is the most illiquid? A. certificates of deposit B. gold C. real estate D. savings bonds 18. Tim owns a property that has an effective gross income of $60,000, expenses of $20,000 and an annual debt service of $23,950. What is his cash flow? A. $16,050 B. $36,050 C. $40,000 D. $60,000 19. Net square footage refers to A. common space. B. rentable space. C. shared space. D. useable space. 20. Last year, a new manufacturing plant was built in a rural area, which brought many workers. The area had very few retail storefronts to provide services to the influx of people, and lease rates were very high. In time, developers began constructing much needed retail space. As the supply of retail space in the area rises, what would you expect to happen to lease rates in the area in the short term? A. Lease rates should fall slightly from their high points. B. Lease rates should not be affected. C. Lease rates will continue to rise. D. It's not possible to predict. 21. Hugh has a percentage lease where he pays an annual base rent of $42,000 plus a 6% overage percentage. What is the natural breakpoint on this lease? A. $252,000 B. $534,240 C. $583,333 D. $700,000 22. Hugh has a percentage lease where he pays an annual base rent of $42,000 plus a 6% overage percentage. This year, Oliver had $720,000 in gross sales. What is his total rent? A. $42,000 B. $42,210 C. $43,200 D. $44,520 Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 5 of 9 23. Otis got a mortgage with a 6% interest rate to buy a car wash. The first year, his return on investment was 5.25%. This is an example of A. capital gains. B. market loss. C. negative leverage. D. positive leverage. 24. Which statement about square footage is FALSE? A. Net square feet is typically used to calculate base rent. B. Rentable square feet is the same thing as gross square feet. C. Space shared among tenants in a building is rentable square feet. D. Useable square feet is the actual space inside the walls of leased premises. 25. An example of a typical Class A tenant would be A. check processing operation. B. distribution center. C. law firm. D. software call center. 26. Listing agent Ben procured a lease for 12,000 square feet of warehouse space. The rental rate is $3 per square foot and the lease term is for six years. The property owner agreed to pay a 6% lump sum commission. What is his commission? A. $7,200 B. $12,960 C. $21,600 D. $25,920 27. Ben's listing agreement indicated a 4% commission will be paid on any renewal as well. If the lease is renewed twice at two-year intervals, what is Ben's total commission? (Remember, Ben already earned a 6% lump sum commission based on $3 per square foot for a 12,000 square foot warehouse space over six years.) A. $5,760 B. $15,840 C. $18,720 D. $21,600 28. A graduated lease typically bases rent increases on A. actual operating expenses. B. indexing methods which vary according to the rate of inflation. C. a pre-determined negotiated percentage. D. property tax increases. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 6 of 9 29. An income statement where certain units such as rental income are hypothetical is known as a A. closing documentation. B. financial review. C. loan application. D. pro forma. 30. The type of property that would have the greatest risk of being 100% vacant is A. mixed-use property. B. multi-family residential property. C. office property. D. single-family residential property. 31. A commercial investor who values a property based on its ability to fulfill specific business needs is called a/an A. amenity purchaser. B. developer. C. occupant purchaser. D. special investor. 32. Lydia wants to move her clothing boutique to the east side. She has licensee, Renee, working for her to help her find the perfect location to relocate the boutique and she has agreed to pay Renee a fixed fee. This fee is best described as a A. finder's fee. B. fixed percentage. C. lump sum. D. procurement fee. 33. Heather agreed to accept a flat fee of $2,000 from the landlord for finding a suitable tenant on his retail space. The space is 800 square feet and monthly rent is $25 per square foot for a minimum term of one year. What is Heather's commission? A. $2,000 B. $12,000 C. $14,000 D. $20,000 34. The age requirement to sell commercial property in Illinois is A. 18. B. 21. C. 25. D. There is no age requirement. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 7 of 9 35. Gross square footage refers to A. common area space. B. land. C. rentable space. D. useable space. 36. Which type of lease separates ownership of the land from ownership of improvements? A. fee simple B. freehold C. ground D. sale and leaseback 37. Ray rents warehouse space for his internet outdoor pursuits store. Recently an investor purchased the property and asked Ray to sign an instrument that acknowledged his obligation to continue paying rent based on his existing lease as well as confirm other specific conditions. What is this called? A. attornment B. escalation C. estoppel D. sublease 38. Many beginning investors may start out their investment careers by investing in a A. large multi-family complex. B. multi-use property with residential and office space. C. single family residence to rent out to tenants. D. vacant lot. 39. Listing agent Sarah procured a lease for 10,000 square feet of warehouse space. The rental rate is $4 per square foot and the lease term is for five years. The property owner agreed to pay a 5% lump sum commission. What is her commission? A. $2,500 B. $10,000 C. $20,000 D. $40,000 40. When a landlord allocates money to build out a new tenant's space, it is called A. building renovation fund. B. common area maintenance amount. C. escalation percentage amount. D. tenant improvement allowance. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 8 of 9 41. If Taylor buys the strip mall for $480,000, financing $400,000, and his estimated NOI, based on the current owner's operating statement, is $36,000, what would be his expected capitalization rate? A. 7.5% B. 9% C. 13.3% D. 17.3% 42. An investor concerned with the demographics surrounding the location is most likely considering an investment in A. industrial property. B. multi-family residential property. C. retail property. D. single-family residential property. 43. Which would be the most reasonable example of a Class C tenant? A. architectural design firm B. bank processing center C. insurance headquarters D. law firm 44. A lease escalation clause is a way for the landlord to A. evict a tenant with cause. B. evict a tenant without cause. C. decrease rent. D. increase rent. 45. A tenant would like to rent 3,000 square feet of office space. Rent is quoted at $25 a square foot, triple net. Insurance usually runs $2,400 annually, and property taxes are $6,000 each quarter. The monthly base rent for this property is A. $6,250. B. $7,450. C. $8,250. D. $8,450. 46. Doris owns a four-unit apartment building. The rent on each unit is $500 a month. She averages 10% vacancy and collects $500 a year from the coinoperated washer and dryer in the building's basement. What is the potential gross income for Doris's building? A. $21,600 B. $22,100 C. $24,000 D. $24,500 Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial Real Estate © Hondros Learning www.hondroslearning.com Page 9 of 9 47. Which action would NOT help a property owner increase the NOI? A. cutting expenses B. increasing the occupancy C. raising the rent D. refinancing to a lower interest rate 48. Jenny paid $245,000 for a small office building. Her net operating income is $35,750 and her cash flow is $18,650. What is her cash-on-cash return? A. 7.0% B. 7.6% C. 8.9% D. 14.6% 49. You buy an industrial property for $500,000 and allocate 20% of that value to the land. How much may be deducted as depreciation every year? A. $10,256 B. $12,820 C. $14,545 D. $18,181 50. Denise would be happy with an 8% return on her investment. How much would she be willing to pay for a property with a stabilized NOI of $40,000? A. $250,000 B. $400,000 C. $440,000 D. $500,000

ILLINOIS BROKER PRELICENSE TOPICS UNIT 8: COMMERCIAL REAL ESTATE UNIT QUIZ 1. A. In Illinois, a real estate broker's license is all that is required to sell commercial real estate. 2. C. The cash flow model starts with the gross income, sometimes called potential gross income. 3. A. To be able to judge the performance of a real estate investment, most investors use the cash flow model. 4. D. Carol is paying JKM a set percentage of her gross sales in addition to a fixed amount monthly. 5. A. A lease with an escalation clause requires the tenant to pay more rent to offset rising expenses. 6. C. Remember the formula: NOI = Annual gross income - vacancy - expenses (excluding depreciation). 7. B. First you need to determine net income: ($7,500 x 12 months) - $45,000 = $45,000 (you don't count depreciation). Then you can use that in the IRV formula: Income ($45,000) / Rate (12%) = Value ($375,000). 8. B. There is only one real estate sales license and someone who has one can sell residential or commercial real estate. 9. D. You correctly identified the untrue statement. The Civil Rights Act of 1866 applies to all property transactions, no exceptions. 10. C. A sale and leaseback arrangement is a method for financing commercial or industrial properties. In this situation, a company will construct a building that suits its needs, and then sell the building to an investor, who becomes the landlord. 11. B. Leverage is the use other people's money to make money. 12. A. This is an example of a gross lease, as are most residential leases. 13. D. With a net lease, the tenant pays all or part of the cost of ownership in addition to rent. We'll look at net leases in more detail in a few moments. 14. D. Landlords may insert a use clause to restrict the use of the leased space. 15. A. A triple net lease would be typically used for industrial property. 16. D. The right of first refusal is a clause in the lease that provides the tenant the opportunity to match a bona fide accepted offer for the sale of the building. 17. C. The full value of a real estate investment property is usually not immediately convertible to cash without some loss of total value. 18. A. Cash flow is equal to NOI minus debt service. 19. D. Net square footage refers to the space between the walls, the useable space. 20. A. The law of supply and demand tells us that lease rates should fall slightly from their high points as the supply of retail space in the area rises. 21. D. To find the natural breakpoint, you divide the annual base rent by the agreed upon overage percentage (42,000 / .06 = 700,000). 22. C. He had to pay a 6% overage percentage on the $20,000 he earned over the breakpoint (20,000 x .06 = 1,200). Adding that $1,200 to the $42,000 base rent equals $43,200 total. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 3 23. C. Negative leverage occurs when borrowed funds are invested at a rate of return lower than the cost of those funds to the borrower. 24. A. Rentable square feet, also called gross square feet, is the number typically used for calculating base rent. 25. C. A law firm would be an example of a typical Class A tenant. 26. B. It breaks down this way: 12,000 x $3 = $36,000 x 6 years = $216,000 x .06 = $12,960. 27. C. He already earned $12,960. He earned another 4% for four more years: $3 x 12,000 sq. ft. x 4 years x .04 = $5,760, which totals $18,720 over 10 years. 28. C. Also called a step up lease, a graduated lease includes specified rent increases in the contract. This gives the tenant the benefit of knowing exactly how much his rent will be in the future. 29. D. In a commercial real estate transaction the pivotal parties to the transaction are the salesperson, accountant, and lawyer. 30. D. The single-family residential property is either 100% occupied or 100% vacant, which is a greater risk than with other types of multi-unit properties, where one of the rentable units may be vacant while another remains occupied. 31. A. Most investors are primarily interested in a property's rate of return, while an amenity purchaser is looking to fulfill a specific business need. 32. D. Procurement fees paid by a tenant to an agent are often fixed fees but can also be percentage based. 33. A. Because Heather agreed to a flat fee of $2,000 her commission is set. The amount of rent received or the size of the space is irrelevant. 34. B. There are no special requirements or licensing to sell commercial real estate in Illinois. A real estate broker license is all that is required, and it can be obtained at age 21. 35. C. Gross square footage refers to the rentable space; it is the total space that the tenant pays for. 36. C. With a ground lease, or land lease, the tenant can lease only the land and usually owns the improvements on it. 37. A. An attornment clause confirms a tenant's obligations. 38. C. Investors in commercial real estate often begin by purchasing a single family residence not to live in, but to rent out to tenants. 39. B. It breaks down this way: $10,000 x $4 = $40,000 x 5 years = $200,000 x .05 = $10,000. 40. D. The tenant improvement allowance is usually found in the work letter. 41. A. The cap rate can be used to estimate the annual return when you divide the income by the value (36,000 / 480,000 = .075). 42. C. Demographics is a typical concern of investors considering an investment in retail property. 43. B. A bank processing center would be an example of a typical Class C tenant. 44. D. A lease escalation clause allows the landlord to increase rent; the escalation may be fixed, variable or based on an index. 45. A. The base rent for this property is $75,000 a year (3,000 x 25 = 75,000), which would be $6,250 each month. Insurance and taxes are included in a triple net lease. Illinois Real Estate Broker Prelicense Topics - Unit 8: Commercial - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 3 of 3 46. C. The potential gross income is simply the total of the rent that could be collected before losses are subtracted and miscellaneous income is added (500 x 4 x 12 = 24,000). 47. D. Financing does not figure into the NOI equation. The other actions, however, could affect net operating income positively. 48. B. You know to divide the cash flow by the purchase cost: $18,650 / $245,000 = .076 or 7.6% 49. A. You can only depreciate the value of improvements. Depreciation for industrial property is over 39 years, so $400,000 / 39 = $10,256 per year for the next 39 years. 50. D. Denise would be paying more for a $40,000 NOI if she's willing to accept less of a return on her investment (40,000 / .08 = 500,000).

ILLINOIS REAL ESTATE PRELICENSE TOPICS UNIT 9: PROPERTY MANAGEMENT UNIT QUIZ 1. In the property owner/property manager relationship, who is the principal? A. manager B. owner C. tenant D. tenant and owner 2. What is the name of the lawsuit that a landlord files in order to evict a tenant? A. forcible entry and detainer action B. lis pendens action C. writ of eviction action D. statutory right of re-entry action 3. The policy that establishes the maximum number of people allowed in a given rental dwelling is called a(n) A. dwelling quota. B. occupant maximum. C. occupancy standard. D. tenant quota. 4. The Illinois Security Return Act applies to residential properties containing __________ or more units. A. 2 B. 5 C. 7 D. 10 5. A(n) ______________ helps a landlord ensure compliance with a lease. A. occupancy standard B. periodic tenancy C. rent strike D. security deposit 6. Which type of leasehold estate would probably be most affected by the death of either party? A. estate for years B. periodic tenancy C. tenancy at will D. All are equally affected. Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 2 of 8 7. Landlord Gary manages a 14-unit apartment building in Joliet. When Natasha moves out, he has ___________ days to return her security deposit, assuming he finds no damage beyond normal wear and tear. A. 15 B. 20 C. 30 D. 45 8. Wilma agrees to rent a house for $1,000 a month for as long as she wants to stay. She moves in and every month, her landlord sends someone around once a month to collect rent. What type of leasehold estate is this? A. estate for years B. estate from year to year C. tenancy at sufferance D. tenancy at will 9. Under the Illinois Residential Tenant's Right to Repair Act, a landlord must address a written request for repair within _______________ days or the tenant can have the repair made at the landlord's expense. A. 7 B. 14 C. 20 D. 30 10. Appraiser Jack analyzes several four-unit rental properties in one neighborhood. One recently sold for $495,700. The building brings in an annual gross rent of $60,000 with expenses of $22,000. What would be the gross rent multiplier for that building? A. 8.26 B. 33.05 C. 94.74 D. 99.14 11. Chicago landlord Stu wants to encourage tenants to refer potential residents to the building. Under Illinois law, he can pay a referral fee for up to _____________ referrals in a 12-month period. A. 3 B. 4 C. 5 D. 7 Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 3 of 8 12. Rich rents a house from Allison for a year. At the end of the year, Allison does not renew the lease and Rich refuses to move out. This is A. adverse possession. B. estate for years. C. tenancy at sufferance. D. tenancy at will. 13. David's parents let him move back in for a while to help him get back on his feet. Unfortunately, David acts like he is back in high school by not paying rent, asking his mom to cook, clean, and wash his clothes, without paying his parents any money. This is A. adverse possession. B. estate for years. C. tenancy at sufferance. D. tenancy at will. 14. Sally asks her parents if she can move back home for a little while after going through a messy divorce. Her parents agree that she can move back home for a year, as long as she pays them $700 a month in rent. This is an example of A. estate for years. B. periodic tenancy. C. tenancy at sufferance. D. tenancy at will. 15. Which is NOT a legitimate reason to turn down the application of a prospective tenant? A. He has a criminal record. B. He is currently in bankruptcy due to unpaid bills. C. He has AIDS. D. His income not enough to cover other living expenses. 16. Tenant Sue is tired of fighting with landlord Joe about fixing the boiler. It's almost winter and she's concerned about keeping her kids warm. Sue files a complaint with the city. When Joe is informed of the complaint, he counters by serving Sue with an eviction notice. This is an example of A. actual eviction. B. constructive eviction. C. retaliatory eviction. D. self-help eviction. 17. The most typical lease to be used in a residential rental is a A. graduated lease. B. gross lease. C. net lease. D. percentage lease. Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 4 of 8 18. Otis owns two duplexes. When he dies, his four tenants must vacate the premises. What kind of leases do they have? A. estate for years B. periodic tenancy C. tenancy at will D. tenancy at sufferance 19. Zach is going to college. His parents sign a four-year lease for an apartment on campus. The first year, the rent is $450 per month. Each year, the rent will increase by $50 per month. What kind of lease is this? A. graduated lease B. index lease C. net lease D. percentage lease 20. When determining the value of an apartment building, an appraiser is likely to place the most emphasis on the ____________________ approach. A. cost B. highest and best use C. income D. sales comparison 21. Bonnie is renting a house from Clyde. She pays Clyde $1,100 each month and is responsible for paying all utilities at the house. Clyde is responsible for repairs and property taxes. Her lease is mostly likely a A. gross lease. B. ground lease. C. net lease. D. percentage lease. 22. Which type of agent is a property management usually considered to be? A. general agent B. principal agent C. special agent D. universal agent 23. Which of these circumstances is NOT cause for eviction? A. causing physical damage to the property B. complaining to the local housing authority about the plumbing C. failure to pay rent D. violating a provision in the lease Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 5 of 8 24. Landlord Howie is leasing a three-bedroom townhouse. Based on local fire codes and the size of the rooms, the occupancy limit is established at two people per bedroom. Which applicant could Howie legitimately refuse? A. Boris and Natasha, their two children, and Boris's mother and grandmother B. Douglas, his three sons and daughter, and his uncle Charlie C. Frank and Pat, Frank's mother and grandfather, and Pat's father and brother D. Kate and Allie, Allie's three sons, and Kate's two daughters 25. Tenant Tom has often complained to his landlord about the terrible conditions of his apartment. There are holes in the windows, leaks in the ceiling, and an infestation of roaches. When things become unbearable, Tom moves out and quits paying rent, even though he has five months left on his lease. This is an example of A. actual eviction. B. constructive eviction. C. retaliatory eviction. D. self-help eviction. 26. A person hired by a real property owner to administer, market, merchandise, and maintain property, especially rental property is a(n) A. investor. B. lessee. C. property manager. D. sponsor. 27. Brenda manages a building with 450 units. She has a vacancy rate of 30% and tenants. She knows that nearby properties with similar amenities have significantly lower vacancy rates. What should Brenda, as property manager, recommend to the owner to entice new residents? A. add more amenities B. raise the rent C. reduce the rent D. make no changes 28. Which of the following is LEAST LIKELY to be a primary obligation of a property manager? A. create income for the owners B. fulfill the goals and objectives of the owners C. maintain or increase the property's value D. securing financing for capital improvements Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 6 of 8 29. Which is a contract between a property owner and a property manager that includes details about the duties, responsibilities, and compensation of a property manager? A. agency contractor agreement B. listing agreement C. management agreement D. owner brokerage agreement 30. Property manager Chuck changes the filters in the furnaces of each unit in the building in manages every month. This is an example of what type of maintenance? A. corrective B. cosmetic C. preventive D. routine 31. Patti has had enough with her tenant Dan. His rent check has bounced twice in the past six months. His neighbors have complained that he parks in their designated spots, and he leaves trash in the common hallway. Patti shuts off his electricity and water and posts an eviction notice on his door. This is an example of A. actual eviction. B. constructive eviction. C. retaliatory eviction. D. self-help eviction. 32. In an operating budget, maintenance needed to replace the early-blooming pansies with heat and drought-tolerant flowers in the community's flower beds is classified as what? A. corrective B. cosmetic C. emergency D. preventive 33. Charlene's rent is $1,300 a month in Gold Coast Apartments. When her cousin moves to town, she refers him to her property manager Vic to see if there are any vacancies. What is the maximum Vic can pay Charlene as a referral fee, assuming it is the only referral she makes in a 12-month period? A. $650, half a month's rent B. $1,300, a month's rent C. $1,500, the maximum allowed D. $1,950, one and a half times her rent Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 7 of 8 34. Which is NOT an organization for professional property managers? A. BOMA B. IREM C. NARPM D. USPAP 35. As property manager Kim puts together her management proposal, she determines that similar properties are charging higher rent. In her operating budget, she considers the rent she could get on the open market, not what the units are actually renting for. Kim is looking at ______________ rent. A. contract B. market C. statutory D. vacancy 36. An individual comes into a leasing agent's looking to rent an apartment. The agent greets him at the front door. Because the individual seems to be of Asian descent, the agent restricts the buildings he selects to show the potential tenant to those that have a high Asian population. This could be construed as A. blockbusting. B. panic buying. C. redlining. D. steering. 37. Appraiser Marla analyzes several rental properties in her town, determining their respective GRMs using gross monthly rent. She determines that the gross rent multiplier for her subject property should be around 114. The property currently rents for $1,225 per month. What would be Marla's approximate estimate of value? A. $116,375 B. $128,950 C. $139,650 D. $154,750 38. The implied covenant of quiet enjoyment in a lease A. allows landlords to set limits on loud noises in the building. B. is a promise that tenants will call landlords after business hours only in event of an emergency. C. requires tenants to get permission from neighboring tenants to play music after 10 p.m. D. restricts the landlord's right of entry to the property. Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management © Hondros Learning www.hondroslearning.com Page 8 of 8 39. Property manager Jill is looking over a rental application from Jeremy, who is disabled. What law prohibits Jill from discriminating against Jeremy because the source of his income is primarily from Social Security? A. Americans with Disabilities Act B. Equal Credit Opportunity Act C. Fair Housing Act D. There is no such law. 40. Property manager Harvey is responsible for multiple properties. For which must he comply with the Residential Lead-Based Paint Hazard Reduction Act of 1992? A. a unit in a duplex built in 1944 that is being rented by a 45-year-old single man with no children B. a single-family home built in unit in 1984 that is being rented by a family with small children C. both units D. neither unit 41. When Kay moved out of her Evanston apartment, landlord Bill made careful notation of all the damage and wrote up an itemized statement that included the actual costs for repairs and replacement, as well as copies of the receipts. He must provide this statement to Kay within _______________ days of her vacating the premises. A. 15 B. 20 C. 30 D. 45 42. Which is NOT sufficient cause for an Illinois landlord to begin emergency eviction proceedings against a tenant? A. committing sexual abuse B. possessing of an unregistered illegal weapon C. refusing to pay rent for three months in a row D. selling marijuana

ILLINOIS BROKER PRELICENSE TOPICS UNIT 9: PROPERTY MANAGEMENT UNIT QUIZ ANSWER KEY 1. B. The property owner is the principal, the one to whom the property manager owes his or her fiduciary obligations. 2. A. A forcible entry and detainer action is a lawsuit filed by a landlord to evict a defaulting tenant and regain possession of the property. 3. C. The policy that establishes the maximum number of people allowed in a rental dwelling is the occupancy standard. 4. B. The Illinois Security Return Act defines the process that a lessor of residential real property containing five or more units must follow in order to retain a portion of the security deposit to cover property damage. 5. D. A security deposit helps a landlord ensure compliance with a lease. 6. C. A tenancy at will leasehold usually ends on the death of the landlord or tenant. 7. D. Gary has 45 days after Natasha vacates the premises to return her security deposit. 8. B. A lease that automatically renews like this is an estate from year to year, or periodic tenancy, even if it is a month-to-month lease. 9. B. If the landlord fails to make the repair within 14 days after being notified (or more promptly if an emergency), the tenant may have the repair made. 10. D. To find the gross rent multiplier, take the value (in this case, the recent sales price) and divide by the monthly gross income: $495,700 / $5,000. Expenses are not considered. 11. A. A landlord can pay a referral fee to resident tenants for no more than three prospective tenants in a 12-month period. 12. C. Tenancy at sufferance is where a tenant who once legally had the right to possess a property now possesses it illegally. This can happen by either remaining on the property after a lease is up or not paying rent. One way to remember is that the landlord suffers. 13. D. There is no specific end to his tenancy, and regular rent is not scheduled or expected. This is a tenancy at will. 14. A. With a deadline (one year) and rate ($700/month), we have an estate for years. If Sally's parents only indicated rent (no deadline), we have a periodic tenancy. With no rent or deadline, we'd have a tenancy at will. Although Sally's parents might be suffering, no illegal possession is occurring. 15. C. Persons with AIDS are protected under the Americans with Disabilities Act. 16. C. Unless he has a legitimate reason to evict, Joe is retaliating against Sue. 17. B. Most residential leases are gross leases. The other types mentioned are more common for commercial leases. 18. C. A tenancy at will is not an inheritable estate, and it does not survive the death of the property owner (or a lessee). The leases of these four tenants are terminated when Otis dies. 19. A. A graduated lease has rent increases or decreases at set intervals. 20. C. The income approach is most often used for rental property as it estimates the value of real estate by analyzing the revenue, or income, the property currently generates or could generate often comparing it to other similar properties. Illinois Real Estate Broker Prelicense Topics - Unit 9: Property Management - Quiz Answer Key © Hondros Learning www.hondroslearning.com Page 2 of 2 21. A. When the tenant is not responsible for the cost of ownership, i.e., property taxes, repairs, etc., it is a gross lease. 22. A. A general agent is authorized to represent the principal in a broad range of matters as specified, usually as part of a long-term relationship. Property management is a prime example of a general agency. 23. B. Each of these is a cause for possible eviction except for filing a complaint with a local housing authority. 24. D. The occupancy limit for that unit is six people. Kate and Allie and their five children exceed that limit. 25. B. This is an example of constructive eviction. 26. C. Property managers are hired by owners to administer, market, merchandise, and maintain property. 27. C. The rent for units in Brenda's building may not be competitive if no one is moving in, despite offering similar amenities to other nearby buildings. It might be a good idea to lower the rent. 28. D. It's more likely that the owner would be involved in securing financing on his or her property. A property manager could be expected to be responsible for the other choices, however. 29. C. The management agreement outlines the duties, responsibilities, and compensation of the property owner and the property manager. 30. D. This is most likely an example of routine maintenance. 31. D. Patti has illegally bypassed the formal eviction process with this self-help eviction. 32. B. This type of maintenance would be considered cosmetic. 33. B. A tenant can be paid a total referral fee of no more than $1,500 or the equivalent of one month's rent, whichever is less, in any 12‑month period. 34. D. USPAP is the Uniform Standards of Professional Appraisal Practice. The others are organizations for property managers: Building Owners and Managers Association International (BOMA), Institute of Real Estate Management (IREM), and National Association of Residential Property Managers (NARPM). 35. B. Market rents is what a unit could get on the open market. 36. D. Steering refers to channeling tenants to certain neighborhoods or buildings because of their race, religion, etc. 37. C. You need to multiply the annual rent ($14,700) by the GRM of 114 to find an estimate of $139,650. 38. D. Privacy and the right of entry are part of the implied covenant of quiet enjoyment. 39. B. The ECOA prohibits discrimination based on source of income. Jill would also have to comply with the ADA and the Fair Housing Act and not discriminate against Jeremy because of his disability. 40. A. Property managers must comply with this Act when leasing any residential units built before 1978 even if no children will be living there. 41. C. Such an itemized statement must be delivered in person or by mail within 30 days of the tenant vacating the premises. 42. C. In Illinois, a landlord may have the right to bring emergency eviction proceedings when there is direct evidence that unlawful activity is taking place on the property.