exam 11
The Schaefer's have been living in their condominium at the shore for the past 5 years and leasing their home in the city to a tenant. When they sell the home, how much capital gain will be taxable?
100 percent
How many people sit on the IDFPR Disciplinary Board?
15
What should be the first thing an agent discusses with a consumer who walks into the real estate office looking for housing information in the area?
Agency disclosure and representation
How long is a sponsoring broker required to keep records of sellers and buyers?
All records for 5 years
The brokerage company of Dewey, Cheatem, and Howe offers some agents a 50-50 commission split and other agents 60-40 splits. This policy is:
Allowable and provides motivation and activity
When determining whether an article of property is a fixture, a court will apply various legal tests. Which of the following is NOT one of the tests?
Cost of the article
Len owns a multi-unit apartment complex which he has for sale. Jason has made an offer on the property and is doing his due diligence to protect his potential investment. Jason would be wise to have all the tenants acknowledge their obligations under their leases by signing a(n):
Estoppel certificate
John Chance owns a real estate company and is the sponsoring broker with 50 agents, 4 staff members and several licensed and unlicensed personal assistants. Who is the sponsoring broker required to train?
Everyone
Bud wants to sell his retail center and purchase another larger center across town, but cannot do so without disposing of his current retail center. With the poor real estate market and sales being sluggish, he can't wait too long and risk losing the other property. His REALTOR suggested that he look closely at an opportunity to do business by:
Exchanging his property under The Internal Revenue Code 1031
Under the fiduciary duty of obedience, a licensee must:
Follow the legal instructions of the principal
A licensee who has contracted with a condo owner to manage a high-rise apartment building she owns as an investment is probably a:
General agent
The local real estate companies met for breakfast at a local restaurant and decided that they were disgusted with the current price increase by the local newspaper. They agreed to withdraw all their advertising from the paper until they lowered the price. This is an example of:
Group boycotting
Sales broker Pam has written an offer that was accepted by the seller and the buyer has $2,000 in cash that he wishes to use as earnest money. Pam advised the buyer that the company does not accept cash for deposits. Pam suggests that the buyer give her the cash and she will deposit it in her personal account and write a check on his behalf to be put on deposit by the sponsoring broker. Pam is:
Guilty of commingling funds
Judy was a lifelong tenant in the building owned by Don. When Don decided to sell the building, he received a bona fide offer from purchaser Wayne. Before Don could accept Wayne's offer he was required to make the property available to Judy for the same offering price because Judy:
Had a recorded first right of refusal clause in her lease
After the closing of a property, the buyer found out that agent was the beneficial interest in the trust that owned the building. The agent now:
Has put his license in jeopardy because it is a violation of the license act in Illinois to be a dual agent on a property in which a licensee has an ownership interest, and the interest must be disclosed
Which of the following statements about the relationship between the sponsoring broker and hislicensees is NOT true?
He cannot have agents representing buyers and sellers in the same office
Bennett has been licensed as a broker in Illinois since 1980. What type of continuing education must Bennett complete?
He must complete the required education every renewal period
A high vacancy rate may be due to:
Inept management
The Smiths own a retail store on a main street with accessibility to the store through revolving doors and handicap accessible automatic double doors. This type of easy access contributes to the store's:
Ingress/egress
In order to cut costs, a sponsoring broker cancels her errors and omissions insurance. If she still wants her agents covered, she should:
Insist that the agents maintain their own errors and omissions coverage
Under the Illinois license act, a written policy manual:
Is required if the office has more than one agent
A broker heads a team of licensed agents that work with her. Some work with buyers and others work exclusively with sellers. From a license law standpoint, a potential problem for the broker is how to:
Keep all individual client's records confidential
Patrick, a licensee, lists the McNulty's property where their outstanding debt exceeds market value. After several attempts, a short sale contract is negotiated and accepted through a broker who is a member of the MLS. The lender approves the short sale on the condition that the brokerage commission is reduced by 1%. The listing licensee, Patrick, accepts this condition. The listing licensee:
May be liable for the full cooperative commission to the co-broker
A licensee works with a broker who specializes in selling only commercial property and is explaining to the seller the disclosures he must provide to buyers. The licensee must have the seller complete:
No specific disclosure form
A wealthy business woman wishes to hire someone full-time to buy and sell all her Illinois properties. Will this person need an Illinois real estate license?
No, as long as the person just buys and sells for the owner
Julia, a real estate licensee, receives a fee from her favorite mortgage broker for every client she refers thatresults in a loan. Is this permitted?
No, this is not permitted under RESPA
Sally purchased her first home and wanted to be certain that the property was in good condition and would not need major repairs or work. Before proceeding any further, Sally should:
Order a property inspection through a licensed, certified property inspector
As a general rule, rent calculations on a retail space are based upon which type of lease?
Percentage lease
Zohan calls ABC Real Estate and talks to the agent on floor duty. He wants to know the price of the house and the lot size to which the agent responds with the information. During the conversation, Zohan asks how much money is needed to be put down, the type of financing that is available and when the property is available to be seen. The agent is:
Performing ministerial acts for Zohan
What is NOT considered confidential information?
Seller tells the agent that the roof was damaged by a windstorm and she cannot afford to repair it
In an initial interview with a potential buyer, agent Bond was told by the buyer that he did not want to look at any property that was north of South Street or west of East Street and that he wants 3 bedrooms with multiple baths and at least a 2-car garage. During the interview Bond knows of a perfect house that meets the buyer's requirement to the letter, but is not in the location mentioned. Bond should:
Should definitely mention the home in order to offer the buyer more options in more areas
Commercial real estate professionals should always be sure to:
Stay current and up to date on the local marketplace, available properties and the law
Li, an Asian American real estate licensee, was showing a young Asian couple homes in a predominately Asian neighborhood. Li told them they would be happier living among their own. Li could be guilty of;
Steering
During the listing presentation, agent Susan is filling out the listing contract and Residential Real Property Disclosure Report. In this situation:
Susan is not allowed to complete the Residential Real Property Disclosure Report
Which of the following is NOT a benefit of leasing vs buying?
Tax advantages for the depreciation of the property over time
Which of the following would a buyer's agent be required to disclose to his/her client?
That the property is located in a flood plain zone
Which of the following is NOT a basic step in Illinois to evict a tenant?
Verbal warnings to the tenant
Zeke, the listing agent, listed his neighbor's house after helping clean up the basement after heavy rains caused it to flood. The neighbor asked Zeke not to mention it because it has never happened before. Zeke agrees and never mentions it to anyone.
Zeke is committing fraud
Personal property is transferred by:
bill of sale
In a property management agreement, who is considered to be the principal?
the owner
When qualifying a buyer before showing homes to help establish the amount of a mortgage he/she can afford, a rule of thumb for a conventional mortgage prequalification is:
28% of gross monthly income or 36% of gross monthly income after monthly expenses, whichever is less
Bob and Bill bought a gas station as tenants in common. If Bob dies, which of the following statement is CORRECT about the ownership of the property?
50% is held by Bill and 50% goes to Bob's estate
Which of the following is exempt under the Federal Fair Housing Act?
A religious organization if it gives preference to its members in leasing church owned property as long as discrimination does not occur in becoming a member of the organization
During an interview, Zohan tells the agent that he has been looking for a home since he transferred into town a month ago and really likes the subdivision that the home is in. He tells that agent that he has seen 4 other homes in the neighborhood with broker A. He then tells the agent that he is qualified for a $200,000 mortgage and has $50,000 to put on deposit. What must the agent do?
Advise Zohan that they have now created an agency relationship and ask if he has signed a representation agreement with broker A
Under which of the following agreements are the owners of a property obligated to pay the commission even though they sell the property themselves:
An exclusive right to sell listing
An exclusive right to sell listing is BEST described as:
An executory bilateral contract
Which of the following will NOT terminate an offer?
An offer by a third party for more money
Brokers Smith and Weston are commercial retail Professionals and competitors. Lately, business has Been extremely slow and leasing space is difficult. Over lunch they decide that in order to increase profits in the retail leasing business, they need to increase their commission rates and agree to a fair commission rate to charge. Together Smith and Weston:
Are in violation of anti-trust issues by fixing prices
A licensee is holding an open house on a new listing. The open house is very busy and there are several interested buyers. One buyer wishes to make an offer on the spot. What should the licensee do?
Ask if the buyer has an exclusive buyer agency with any other agent
Sales broker Tom has listed his personal home for sale. In attempting to show this property, Tom:
Cannot be a dual agent on his own home
Agent Dan, gets a call from Dewey about the office building listed by Dan on Front Street. Dewey told Dan that he is sitting in front of the building and would like to see it "right now". Dan jumped in his car and drove over to the property where he met Dewey and proceeded to show him through the building. As they walked and talked, Dan learned about Dewey's business and his profitable investments as well as his desire to purchase the property at a price less than the offering price, but with a substantial down payment and pre-approved financing. Dan immediately took Dewey back to the office and wrote an offer to purchase on Dewey's terms. Dan:
Clearly has no idea of the law of agency and has become an undisclosed dual agent
AceyDeucy Brokers has a standard commission rate of 7%. One of their licensees is trying to list a house that the owner is currently selling "By Owner." The owner is insisting on paying a 4% commission. What is the licensee's best course of action?
Consult the office policy manual and discuss the situation with the managing broker
Agent Wendell met with Kelton, who is the administrator for the estate of Emily Thorn. Wendell learned that the property was the sight of a mass murder. The licensee should:
Determine whether the event affected the physical condition of the property
Jack is working exclusively with 2 buyers. Little did Jack know that both buyers attended an open house on Sunday and both want to make an offer on the home. Lisa, the agent sitting the open house, had no idea that the buyers were represented by Jack. In this case, when Jack submits offers from both buyers through the listing agent to the seller of the home, what kind of disclosure will be necessary from Jack?
Disclosure of contemporaneous offers
Which of the following is NOT part of the written evidences of dual agency disclosure?
Disclosure of the broker's cooperation and compensation policy
An Illinois licensee who is designing a web site will need to:
Display the company name on every page
Which of the following is NOT an unlawful act?
Displaying the Equal Housing Opportunity poster and providing all clients and customers with pertinent information in every transaction
James is building a new office complex containing 50,000 square feet. He is providing for a common lobby, elevators, restrooms and stairways of 8,000 sf, and a 2,000-sf atrium which will service the building tenants. The balance of the building will be divided in to quality office spaces of 10,000 square feet each. If Jordan leases one of the offices, her rent will include:
Her actual office space plus her 25% share of the common areas
The agency that regulates and oversees the real estate activities in the State of Illinois is:
Illinois Department of Financial and Professional Regulation
Broker Bob listed a home in an exclusive, high priced area of large impressive homes. After a strong marketing campaign and several months of diligent hard work, Bob was able to procure a buyer for the home and finalized the sale. Just prior to the closing, the buyer found out that the seller of the home has AIDS and has started an action to cancel the purchase. The seller has refused to cancel the sale and the buyer has filed a lawsuit against Bob for failing to disclose the seller's condition.
Illinois law provides that no action can be taken against Bob for not disclosing the seller's condition
A potential buyer walks into an open house hosted by the licensee who also owns the home. The licensee should tell the buyer:
Immediately of the licensee's ownership interest
From a property management point of view, apartment buildings that reach as high as 98% occupancy would tend to indicate that:
It is time to raise the rent
Broker Jack and buyer Ella enter into an exclusive agency buyer agency representation agreement. This means:
Jack is entitled to payment only if he, or any broker acting under his authority, locates the property Ella ultimately buys
Jeff and Jim are co-listers of a home along the banks of a river. Esther has been working with Jennifer for over a year looking for the perfect home. Upon viewing the home Jennifer decides to make an offer on the home. In this circumstance:
Jeff and Jim represent the seller and Esther represents the buyer
When in the market to purchase real estate, the ability to pay for it is the foremost consideration in the selection process. What is typically the second consideration?
Location
A tenant has negotiated a net lease with the property owner. Under the terms of the lease agreement, the tenant would probably be responsible for paying which of the following expenses?
Maintenance expense
A licensee with Prove It Realty has been found guilty of violating the Illinois Real Estate License Act. The sponsoring broker may also be disciplined if the:
Managing Broker had prior knowledge of the violation
Which of the following is NOT a penalty for a RESPA violation?
Mandatory payments of legal fees of the prevailing party
Landlord Dave has a policy that although he welcomes families with children into his apartment building, they cannot rent apartments above the first floor. Dave:
May be in violation of fair housing laws involving familial status
Mr. Blue has just purchased a downtown building for his personal investment portfolio. The 9-story building has 2 small retail stores on the first floor, a dance studio on the second floor and residential apartments on the remaining floors. The category of this type of building is considered a(n):
Mixed use building
Kevin listed a commercial property and the seller agreed to the placement of a sign. After the expiration of the listing the seller told Kevin that he did not wish to relist the property, but would allow Kevin to leave the sign up as long as he wanted. Kevin:
Must get the seller to agree in writing to leave the sign on the property
A real estate licensee selling a personal residence is offering a $1,000 gift card as a bonus paid upon acceptance of the offer to the "first agent to bring in an offer that is acceptable." Since this is the broker's personal residence this is:
Not legal since any bonus must be paid to the sponsoring broker, not to an individual agent
Broker A designated Nate as the broker representing Gus, the seller, on a new listing. Gus agrees that Nate may be a dual agent and signs the appropriate form. During a showing by Nate, Gus recognizes the buyer as a local investor who is considered quite shrewd. Gus no longer wants Nate to be a dual agent and represent him only. Nate must:
Notify his sponsoring broker to designate another agent to represent either the seller or buyer
Pathway Commercial Brokers listed a prime commercial building in downtown Chicago. After several months of aggressive marketing and working with a large number of interested prospects, Pathway was successful in procuring an acceptable offer for the building that was accepted by the seller. In order for the broker to protect their commission in the transaction, it should:
Place a commercial broker lien on the property for the amount of the commission
Which action will NOT violate Illinois license law?
Placing a for sale sign in the front of a house after asking and receiving the seller's written permission
The anticipated cost of home ownership is called a housing allowance and it is based on:
Principal, interest, taxes, insurance, association dues and PMI
Alex purchased a home for $205,000; put 5,000 in earnest money and $20,000 down. Since his total amount of money down is less than 20%, the lender will require Alex to pay:
Private mortgage insurance
Broker A has been notified by the IDFPR that they are going to conduct an audit on the escrow account. The designated broker must:
Provide all accounts and documents for inspection within 24 hours
Which of the following would not be an expectation of an investor to preserve their capital and realize a return on investment?
Purchase and flip the property
The type of lease arrangement designed to allow the lessee to receive the capital investment from the leased property is called a(n):
Sale and leaseback
At a listing presentation, a licensee tells the seller that "the going commission rate in the area is 7%". Which statement is true?
The agent could be charged with antitrust violations for price fixing
Broker Smith has placed an ad on his Web site for a property he has listed. License law will require that the ad contain at LEAST:
The agent's company name and the property location
The Real Estate Administration and Disciplinary Board shall be comprised of 15 individuals, 3 of which represent the interest of the public at large. Which of the following provisions shall be taken into consideration when appointing a member of the public to sit on the Disciplinary board?
The appointee cannot hold nor be have held a real estate license in Illinois or another jurisdiction
Which statement regarding open buyer agency is TRUE?
The buyer may enter into agreements with multiple brokers and is obligated to pay only the broker who locates the property that the buyer ultimately purchases
A sponsoring broker placed the following order with the telephone company. "List my name in the phone directory under the heading "Real Estate". The broker must also include:
The company name
Tommy is showing a young couple with small children several homes in a neighborhood with older homes, mature trees and established services. When the couple asked Tommy about the quality of the schools and the demographic make-up of the students, Tommy handed them a brochure published by the school district and a crime report published by the police. This practice is okay because:
The information was published by appropriate authorities and was available to anyone at anytime
After an exhaustive search for a suitable property, a buyer's agent finally submits a purchase offer that includes a hot tub and riding lawn mower in the initial offer. The seller accepts the price, but is not willing to include the lawn mower. The listing agent makes the change in the contract to exclude the lawn mower and the seller initials and signs the contract. The listing agent delivered the contract to the buyer's representative who verbally accepts the change on behalf of the buyer. Which of the following is true?
The original offer was rejected, and the seller's counteroffer must be accepted in writing
Catherine told her friend Ida that she wanted to be represented as a buyer when she started looking for a new lease space for her business and if Ida wanted to be her agent she would pay her $10,000. A week later Catherine leased a retail space through Betty. Ida sued Catherine for the $10,000 but lost, because:
The promise of compensation does not in itself create an agency relationship
In the business of real estate and the representation of consumers, customers, and clients, our job is finally done when:
The property is closed
Which of the following is NOT a right to control one's own property?.
The right to exclude the utilities meter reader
Broker Ricky listed and sold Martin's home. Martin told Ricky that the home was structurally sound. Ricky passed this information on to the buyers in the course of the transaction. If Ricky had no way of knowing that the information is false, who will likely be held liable if a latent defect is discovered?
The seller
Home inspections are vital components of today's housing market. A home inspection is intended to provide a buyer with some peace of mind about the condition of the property. Which of the following is NOT an item a home inspector would investigate?
The title
An unlicensed personal assistant is working for a team of real estate agents. The assistant's compensation is 10% of the team's gross commissions. Regarding this arrangement, which statement is TRUE?
This arrangement is illegal as unlicensed assistants cannot be paid commissions
Caroline owns a strip mall on the outer edge of town. She has several good tenants, but is searching for a major retail chain to occupy the major space available in the center. The advantage of finding a well know "anchor" tenant is:
To attract additional consumers to the center which is good for other smaller tenants
Which of the following is NOT a responsibility of an agent when the agent is representing the buyer in a real estate transaction?
To show properties that protect the broker's commissions and select the best time to show properties
Managing broker, A holds his monthly sales meeting in the office with all sales staff attending. During the meeting agents are able to promote their current properties for sale, or seek other properties that may be available for their current buyer prospects. Mike, a listing agent, stands and announces that his listing on Lime Road has been on the market for 97 days and has taken several offers that were not acceptable. He tells the group that the owner is now desperate because he has lost his job and cannot make the mortgage payments. Seller will now entertain any reasonable offer above the outstanding mortgage balance. Mike has:
Violated his responsibility of confidentiality unless he has written approval from the client
Which of the following is not a typical qualifying statement when interviewing a buyer?
What church the buyer will attend
Rick walked into a real estate office and talked with the sales agent about the purchase of a home in the Bric-A-Brac subdivision. Rick discussed his needs, his financial ability, and motivation with the agent. Unless otherwise agreed in writing, the sales agent:
Will be named the designated agent by the managing broker
Pam, a single mom with two young sons, just purchased a home in a quiet cul-de-sac. After the home closed and Pam moved in, she learned that the neighbor across the street was a convicted child molester. Pam sued the real estate agent for failing to disclose that information to her before she submitted an offer. The selling agent more than likely:
Will win the lawsuit because the information is public and available to everyone, so Pam could have found this out on her own
While showing a prospective buyer a home in a very exclusive area, the agent said to the buyer "this is the prettiest house in the neighborhood with the most beautiful landscaping I have ever seen". The agent is guiltyof:
puffing
