Illinois Real Estate License Test

Which of these factors tends to affect supply in the real estate market?

Government controls and financial policies

A major manufacturer of automobiles announces that it will relocate one of its factories, along with 2,000 employees, to a small town. What effect will this announcement MOST likely have on the small town's housing market?

Houses will become more expensive.

Escheat

Escheatment is a process by which the state may acquire privately owned real or personal property. State laws provide for ownership to transfer, or escheat, to the state when an owner dies and leaves no heirs and also leaves no will or living trust instrument that directs how the real estate is to be distributed. In Illinois, real property will escheat to the county in which it is located rather than to the state.

novation

If a seller wants to be completely free of the original mortgage loan, the seller(s), buyer(s), and lender must execute a novation agreement in writing. The novation makes the buyer solely responsible for any default on the loan. The original borrower (seller) is freed of any liability for the loan.

suit to quiet title

If ownership cannot be traced through an unbroken chain, a gap or cloud in the chain of title is said to exist. In these cases, the cloud on the title makes it necessary to establish ownership by a court action called a suit to quiet title. For example, a suit might be required when a grantor acquired title under one name and conveyed it under another name, or there may be a forged deed in the chain, after which no subsequent grantee acquired legal title. All possible claimants are allowed to present evidence during a court proceeding; then the court's judgment is filed. Often, the simple procedure of obtaining any relevant quitclaim deeds is used to clear title and establish ownership.

Easement by Prescription

If the claimant has made use of another's land for a certain period of time as defined by state law, an easement by prescription (also called prescriptive easement) may be created. The prescriptive period may vary from 10 years to 21 years, depending upon state law. To create a prescriptive easement, the claimant's use must have been continuous, exclusive, and without the owner's approval ("adverse"). The use must be visible, open, and notorious; that is, the owner must have been able to learn of it.

Annual Sale

If the taxes on a property have not been paid by the due date of the second installment, the county collector can enforce the tax lien and request that the circuit court order a tax sale.

Impact fees

Impact fees are charges made in advance to cover anticipated expenses involving offsite capital improvements such as water and sewer facilities expansion, additional roads, and school expansions.

quick-take

In certain situations, Illinois law permits a summary proceeding in which a plaintiff/condemnor may obtain immediate fee simple title to real property, including the rights of possession and use.

intestate

In contrast, when a person dies intestate (without a will), real estate and personal property pass to the decedent's heirs according to the state's statute of descent and distribution. Legally, when a person dies, ownership of real estate immediately passes either to the heirs by descent or to the persons named in the will. Before these individuals can take full title and possession of the property, however, the estate must go through the judicial process of probate, and any claims against the estate must be satisfied.

lien theory

In lien theory states, the mortgagor/borrower holds both legal and equitable title. The mortgagee/lender simply has a lien on the property as security for the mortgage debt. The mortgage is nothing more than collateral for the loan.

title theory

In title theory states, the mortgagor actually gives legal title to the mortgagee (or some other designated individual) and retains equitable title. Legal title is returned to the mortgagor when the debt is paid in full (or some other obligation is performed). In theory, the lender actually owns the property until the debt is paid.

Real Property

It includes both land and real estate. Real property is the interests, benefits, and rights that are automatically included in the ownership of land and real estate. Real property includes the surface, subsurface, airspace, any improvements, and the bundle of legal rights—the legal rights of ownership that attach to ownership of a parcel of real estate

The Duty of Disclosure

It is the agent's duty to keep the principal informed of all facts or information that could affect a transaction. Duty of disclosure includes disclosure of relevant information or material facts that the agent knows or should have known about. The agent is obligated to discover facts that a reasonable person would feel are important in choosing a course of action, regardless of whether those facts are favorable or unfavorable to the principal's position.

Liability Under CERCLA

Landowners are liable under CERCLA when a release (or a threat of release) of a hazardous substance has occurred on their property. Regardless of whether the contamination is the result of the landowner's actions or those of others, the owner can be held responsible for the cleanup. This liability includes the cleanup not only of the landowner's property but also of any neighboring property that has been contaminated. A landowner who is not responsible for the contamination can seek reimbursement for the cleanup cost from previous landowners, any other responsible party, or the Superfund. However, if other parties are not available, even a landowner who did not cause the problem could be solely responsible for the costs.

Lease assignment

Lease assignment occurs when a tenant transfers all of his leasehold interests to another person. The new tenant is legally obligated for all the promises the original tenant made in the lease.

Freddie Mac

Like Fannie Mae, the Federal Home Loan Mortgage Corporation, usually called Freddie Mac, is a government-sponsored enterprise that provides a secondary market primarily for conventional loans. Many lenders use the standardized forms and follow the guidelines issued by Fannie Mae and Freddie Mac. In fact, the use of such forms is mandatory for lenders wishing to sell mortgages in the agencies' secondary mortgage market. The standardized documents include loan applications, credit reports, and appraisal forms.

Megan's Law

Megan's Law is a general name for state and federal laws requiring law enforcement authorities to make information available to the general public regarding registered sex offenders.

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) prohibits lenders and others who grant or arrange credit to consumers from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant is of legal age), or dependence on public assistance.

Radon Act

The act does not require that all homes in a real estate transaction be tested or that the home be mitigated if the test results are elevated. It also does not apply to the transfer of any residential dwelling unit located three stories (or higher) above ground level in any structure

Amount of broker commission

The amount of a broker's commission is negotiable in every case. A sponsoring broker, however, may set the minimum commission rate acceptable for his own company. The important point is that the broker and the client agree on a rate before the agency relationship is established.

An owner decides to sell her house and takes the antique front door with her when she moves. In the absence of any provision in the contract, is the owner allowed to remove the door?

No, this act of severance is not allowed at time of selling because the door is a fixture.

Schools are considered part of which real estate classification?

Special-purpose

Agency is governed by two kinds of law:

Statutory Law, Common Law

Stigmatized Properties

Stigmatized properties are those properties that society has branded undesirable because of events that occurred there. Typically, the stigma is a criminal event such as homicide, gang-related activity, or a tragedy such as suicide.

Taking

The concept of taking is similar to eminent domain in that it comes from the takings clause of the Fifth Amendment to the U.S. Constitution. The clause reads, "Nor shall private property be taken for public use, without just compensation." This means that when land is taken for public use through the government's power of eminent domain or condemnation, the owner must be compensated. This payment is called just compensation—compensation that is just and fair. The compensation may be negotiated between the owner and the government, or the owner may seek a court judgment setting an amount based on appraisals. In general, no land is exempt from government seizure.

Highest and Best Use

The most profitable single use to which a property may be put, or the use that is most likely to be in demand in the near future, is the property's highest and best use.

Conformity

The principle of conformity means that maximum value is created when a property is in harmony with its surroundings. Maximum value is realized if the use of land conforms to existing neighborhood standards. In single-family residential neighborhoods, for example, buildings should be similar in design, construction, size, and age.

Supply and Demand

The principle of supply and demand holds that the value of a property depends on the number of properties available in the marketplace—the supply of the product. When supply increases, value decreases and when demand increases, value increases.

promissory note

The promissory note (also called a note or financing instrument) is the borrower's personal promise to repay a debt according to agreed terms. The note exposes all the borrower's assets to claims by secured creditors. The mortgagor executes one or more promissory notes to total the amount of the debt.

defeasance clause,

The qualified title held by the lender is subject to the defeasance clause, which stipulates that such title must be fully reconveyed, or released back, to the mortgagor at the time the debt is repaid in full

Title

Title is a way of referring to ownership; it is not an actual printed document. The document by which the owner transfers the title to another is the deed. The deed must be recorded to give public notice of new ownership.

procuring cause of sale

To be considered the procuring cause of a sale, the broker must have started or caused a chain of events that resulted in the sale. A broker who causes or completes such an action without a contract or without having been promised payment is a volunteer and may not legally claim compensation.

Signature of Grantor

To be valid, a deed must be signed by all grantors named in the deed. Some states also require witnesses to the grantor's signature.

density zoning (also called bulk zoning)

Zoning ordinances typically establish special density zoning (also called bulk zoning) ordinances for certain subdivisions, which restrict the average maximum number of houses per acre that may be built within a particular subdivision. For example, a typical zoning restriction may set the minimum lot area on which a subdivider can build a single-family housing unit at 10,000 square feet. This means that the subdivider can build four houses per acre. In such cases, the subdivider may choose to cluster building lots to achieve an open effect. Regardless of lot size or number of units, the subdivider will be consistent with the ordinance as long as the average number of units in the development remains at or below the maximum density. This average is called gross density.

If an annual charge of $560 is prorated in October using the statutory variation method, which of these will be the resulting daily charge? a $1.51 b $1.53 c $1.54 d $1.56

a $1.51

Which of these is available to a surviving husband in Illinois? a Homestead b Dower c Curtesy d A marital easement

a Homestead

The term REALTOR® refers to

a member of the National Association of REALTORS®.

When responsible for maintaining a client's property and maximizing the return on the client's investment, a real estate licensee is serving as

a property manager.

A REALTOR® is

a real estate licensee who is a member of the National Association of REALTORS®.

affidavit of title

a sworn statement in which the seller assures the title insurance company (and the buyer) that there have been no judgments, bankruptcies, or divorces involving the seller since the date of the title examination. The affidavit promises that no unrecorded deeds or contracts have been made, no repairs or improvements have gone unpaid, and no defects in the title have arisen that the seller knows of. The seller also affirms that he is in possession of the premises.

After an offer is accepted, the seller learns that the sponsoring broker was the undisclosed agent for the buyer as well as the agent for the seller. The seller may a withdraw without obligation to sponsoring broker or buyer. b withdraw but would be subject to liquidated damages. c withdraw but only with the concurrence of the buyer. d refuse to sell but would be subject to a suit for specific performance.

a withdraw without obligation to sponsoring broker or buyer.

If a property's annual net income is $24,000 and it is valued at $300,000, what is its capitalization rate? a. 8% b. 10.5% c. 12.5% d. 15%

a. 8%

Which action by a property manager is a breach of her fiduciary relationship to the owner? a. Checking the credit history of minority applicants only b. Generating a high net operating income by maintaining the property c. Maintaining good relations with the tenants d. Scrutinizing property expenses

a. Checking the credit history of minority applicants only

Which of these BEST describes the water table? a. Natural level at which the ground is saturated b. Level at which underground storage tanks may be safely buried c. Measuring device used by specialists to measure groundwater contamination d. Always underground

a. Natural level at which the ground is saturated

Amortized Loans

Unlike a straight loan payment, the payment in an amortized loan (also called a direct reduction loan) partially pays off both principal and interest. Most mortgage and deed of trust loans are amortized loans. Regular periodic payments are made over a term of years, generally 15 or 30 years, and at the end of the term, the full amount of the principal and all interest due is reduced to zero.

Equitable Title

When a buyer signs a contract to purchase real estate, the buyer does not receive legal title to the land. Legal title transfers only on delivery and acceptance of a deed. However, after both buyer and seller have executed a sales contract, the buyer acquires an interest in the land. This interest is called equitable title. Equitable title may give the buyer an insurable interest in the property.

Earnest Money and Purchaser Default

When any written listing includes a provision that the seller will not receive the earnest money deposit if the purchaser defaults, this fact must appear emphasized in letters larger than those otherwise used in the listing agreement.

Township Squares

When the horizontal township lines and the vertical range lines intersect, they form squares. These township squares are the basic units of the rectangular survey system (see Figure 9.3). Townships are six miles square and contain 36 square miles (23,040 acres).

Which clause is found in MOST homeowners insurance policies? a. Property improvement clause b. Coinsurance clause c. Co-ownership clause d. Property devaluation clause

b. Coinsurance clause

Two adjacent vacant lots are each worth $50,000. However, if they are sold as a single lot, the combined parcel is worth $120,000. What principle does this illustrate? a. Substitution b. Plottage c. Regression d. Progression

b. Plottage

Which of these liens would usually be given highest priority in disbursing funds from a foreclosure sale? a. Mortgage dated last year b. Real estate taxes due c. Mechanic's lien for work started before the mortgage was made d. Judgment rendered yesterday

b. Real estate taxes due

Which of these is the act of analyzing and effectively weighing the findings from the three approaches to appraisal? a. Reintegration b. Reconciliation c. Benefit analysis d. Appraisal analysis

b. Reconciliation

Which of these is a lien on real estate made to secure payment for a specific municipal improvement project? a. Mechanic's lien b. Special assessment c. Ad valorem d. Utility lien

b. Special assessment

Under Illinois agency law, which of these is TRUE? a. The law codifies the common-law concept of caveat emptor by eliminating any assumption of a buyer's right to representation or disclosure. b. Sponsoring brokers may designate which agent represents which party. c. Sellers are not legally obligated to make any disclosures regarding the known physical condition of the property. d. Dual agency is illegal.

b. Sponsoring brokers may designate which agent represents which party.

A couple paid $56,000 for their property 20 years ago. Today, the market value is $119,000, and they owe $5,000 on their mortgage. Regarding this situation, which of these is TRUE? a. The $63,000 difference between the original investment and the market value is their tax basis. b. The $114,000 difference between the market value and the amount owed on the mortgage is their equity. c. The $63,000 difference between the original investment and the market value will be used to compute the capital gains. d. The $114,000 difference between the market value and the mortgage is their replacement cost.

b. The $114,000 difference between the market value and the amount owed on the mortgage is their equity.

A buyer comes into a real estate broker's office and asks the broker to represent her while searching for a home in the $190,000-$200,000 price range. The broker recalls a house for sale by an owner listed at $198,000. The broker calls the owner of the house, asking for permission for his client to see the house. Based on these facts, which of these statements is TRUE? a. Both the buyer and for-sale-by-owner seller are customers of the broker. b. The for-sale-by-owner seller is the broker's customer; the buyer is a client. c. The buyer is the broker's customer; the for-sale-by-owner seller is the broker's client. d. The broker is now a dual agent.

b. The for-sale-by-owner seller is the broker's customer; the buyer is a client.

Which of these events will terminate an agency in a broker-seller relationship? a. The broker discovers that the market value of the property is such that she will not make an adequate commission. b. The owner declares personal bankruptcy. c. The owner abandons the property. d. The broker appoints other brokers to help sell the property.

b. The owner declares personal bankruptcy.

A sponsoring broker listed and sold a home. The seller had told the sponsoring broker that the home was structurally sound. This information was passed on to a prospective buyer by one of the licensee's sponsored by the broker. If the sponsoring broker has no way of knowing that this information is false, who will likely be held liable if a latent defect is later discovered? a. The sponsored licensee b. The seller c. The seller and the sponsored licensee d. The buyer will lose because a buyer must carefully inspect or bear the loss

b. The seller

Which of these statements applies to both joint tenancy and tenancy by the entirety? a. There is no right to file a partition suit. b. The survivor becomes a severalty owner. c. A deed signed by one owner will convey a fractional interest. d. A deed will not convey any interest unless signed by both spouses.

b. The survivor becomes a severalty owner.

Which of these statements is TRUE regarding the execution of a valid will in Illinois? a. The testator must be at least 21 years old and of sound mind. b. The will must be in writing, signed, and witnessed by two people. c. The will must be witnessed by three people. d. The will must be notarized.

b. The will must be in writing, signed, and witnessed by two people.

A buyer approaches a seller and says, "I'd like to buy your house." The seller says, "Sure," and they agree on a price. What kind of contract is this? a. Implied b. Unenforceable c. Void d. None of these

b. Unenforceable

Which type of insurance coverage insures an employer against MOST claims for job-related injuries? a. Consequential loss b. Workers' compensation c. Casualty d. Surety bond

b. Workers' compensation

A father conveys ownership of his residence to his daughter but reserves for himself a life estate in the residence. The interest the daughter owns during her father's lifetime is a. pur autre vie. b. a remainder. c. a reversion. d. a leasehold.

b. a remainder.

A woman bought acreage in a distant county, never went to see the acreage, and did not use the land. A man moved his mobile home onto the land, had a well drilled for water, and lived there for 22 years. The man may become the owner of the land if he has complied with the state law regarding a. requirements for a valid conveyance. b. adverse possession. c. avulsion. d. voluntary alienation.

b. adverse possession.

To allow for more intensive use of a subdivision land, a zoning variation is required to permit which of the following: a. a decrease in the number of outbuildings allowed per block b. an increase in the number of building sites per acre c. deed restrictions prohibiting the sale of any residential lot to a family of fewer than four persons d. deed restrictions prohibiting the shrinkage of the backyard area in any residential lot.

b. an increase in the number of building sites per acre

A broker has found a buyer for a seller's home. The buyer has indicated in writing his willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the broker. The seller is out of town for the weekend, and the broker has been unable to inform him of the signed document. At this point, the buyer has signed a. a voidable contract. b. an offer. c. an executory agreement. d. an implied contract.

b. an offer.

The names of the beneficiaries of a land trust must be revealed by the trustee to a. any member of the public who is interested in the beneficiary's identity. b. any Illinois agency when applying for a license or permit affecting the entrusted real estate. c. any unsecured creditor of the beneficiary. d. a licensed real estate broker if the broker is assisting in the sale or rental of the entrusted property

b. any Illinois agency when applying for a license or permit affecting the entrusted real estate.

At the closing of a real estate transaction, the person performing the settlement gave the buyer a credit for certain accrued items. These items were a. bills relating to the property that have already been paid by the seller. b. bills relating to the property that will have to be paid by the buyer. c. all the seller's real estate bills. d. all the buyer's real estate bills.

b. bills relating to the property that will have to be paid by the buyer.

The successful bidder at a foreclosure sale in Illinois immediately receives a a. sheriff's deed. b. certificate of sale. c. deed of foreclosure. d. certificate of foreclosure.

b. certificate of sale.

The segment of the population most likely to obtain lead poisoning from paint is a. the elderly. b. children. c. teenagers. d. all of these.

b. children.

Permitted land uses, housing projections, transportation issues, and objectives for implementing future controlled development would all be found in a community's a. zoning ordinance. b. comprehensive plan. c. enabling act. d. land-control law.

b. comprehensive plan.

In Illinois, the transfer tax is a. customarily paid by the buyer. b. computed on the sales price less the amount of any existing mortgage to which the property remains subject. c. not required if the actual total consideration is less than $500. d. assessed at the rate of $1 per $1,000 of sales price.

b. computed on the sales price less the amount of any existing mortgage to which the property remains subject.

The earnest money left on deposit with the seller's real estate broker is a a. credit to the seller. b. credit to the buyer. c. balancing factor. d. debit to the buyer.

b. credit to the buyer.

The principal amount of a purchaser's new mortgage loan is a a. credit to the seller. b. credit to the buyer. c. debit to the seller. d. debit to the buyer.

b. credit to the buyer.

Asbestos is MOST dangerous when it a. is used as insulation. b. crumbles and becomes airborne. c. gets wet. d. is wrapped around heating and water pipes.

b. crumbles and becomes airborne.

Capitalization is the process by which annual net operating income is used to a. determine cost. b. estimate value. c. establish depreciation. d. determine potential tax value.

b. estimate value.

During the period of time after a real estate sales contract is signed but before title actually passes, the status of the contract is a. voidable. b. executory. c. unilateral. d. implied.

b. executory.

After a broker takes a listing of a residence, the owners specify that they will not sell their home to any Asian family. The broker should a. advertise the property exclusively in Asian-language newspapers. b. explain to the owner that the instruction violates federal law and that the broker cannot comply with it. c. abide by the principal's directions despite the fact that they conflict with the fair housing laws. d. require that the owner sign a separate legal document stating the additional instruction as an amendment to the listing agreement.

b. explain to the owner that the instruction violates federal law and that the broker cannot comply with it.

In Illinois, mortgage foreclosures may be obtained only through a court proceeding. This means Illinois is characterized as a a. strict foreclosure state. b. judicial foreclosure state. c. foreclosure-by-lawsuit state. d. intermediate mortgage theory state.

b. judicial foreclosure state.

Discount points on a mortgage are computed as a percentage of the a. selling price. b. loan amount. c. closing costs. d. down payment.

b. loan amount.

The amount of money a property commands in the marketplace is its a. intrinsic value. b. market value. c. subjective value. d. book value.

b. market value.

Although the homeowners have located a buyer for their home, the buyer's offer is less than what the homeowners owe. In this situation, if the lender agrees to accept an amount less than owed, the lender has agreed to a a. friendly foreclosure. b. short sale. c. deed in lieu of foreclosure. d. waiver of redemption.

b. short sale.

In Illinois, how much written notice is a landlord required to give a tenant to pay overdue rent before terminating the lease, when the tenant is in default only for failing to pay rent on time? a 0 days b 3 days c 5 days d 10 days

c 5 days

The general datum plane referred to by surveyors throughout Illinois is the a Chicago City Datum. b New York Harbor Datum. c United States Geological Survey Datum. d Centralia Datum.

c United States Geological Survey Datum.

In 1971, a developer conveyed a motel and restaurant to an investor "on condition that no liquor is ever served on the property." The conveyance provided that if liquor were served on this property, ownership would revert to the developer. In 2014, the investor sold the motel and restaurant to his son. Based on these facts, which statement is TRUE? a The sale of the motel and restaurant in 2014 extinguished the developer's right of reverter. b Both the developer's right of reverter and the condition expired by operation of Illinois statute in 2000; the investor is free to sell the motel and restaurant without condition. c While the condition continues forever, the developer's right of reverter automatically expired in 2014. d Both the condition and the developer's right of reverter automatically expired in 2005.

c While the condition continues forever, the developer's right of reverter automatically expired in 2014.

The initial broker's license fee for a partnership, LLC, or corporation is a. $55. b. $100, so long as no more than 50% of the shares of the company are held by brokers. c. $125. d. $250.

c. $125

An appraiser who is asked to determine the value of an existing strip shopping center would probably give the MOST weight to which approach to value? a. Cost approach b. Sales comparison approach c. Income approach d. Index method

c. Income approach

In Illinois, a landlord must give a tenant at least 60 days' written notice to terminate which of these tenancies? a. Tenancy at will b. Tenancy for years c. Tenancy from year to year d. Tenancy at sufferance

c. Tenancy from year to year

Which of these statements is TRUE of a real estate broker acting as the agent of the seller? a. The broker is obligated to render faithful service to the seller. b. The broker can disclose personal information to a buyer if it increases the likelihood of a sale. c. The broker can agree to a change in price without the seller's approval. d. The broker can accept a commission from the buyer without the seller's approval.

a. The broker is obligated to render faithful service to the seller.

Which of these would a lender generally require at the time of closing? a. Title insurance b. Market value appraisal c. Application d. Credit report

a. Title insurance

A couple is married, and both are Illinois residents. If their co-owned home is sold to satisfy their unpaid credit card debts, what is the maximum the creditors will receive if the property sells for $165,000? a Nothing; by statute, an Illinois resident's home may not be sold except to satisfy a mortgage debt or real estate taxes b $135,000 c $157,500 d $163,600

b $135,000

Your monthly rent is $525. What is your rent as a percentage of an annual income of $21,000? a. 25% b. 30% c. 33% d. 40%

b 30% $525 monthly rent × 12 months = $6,300 annual rent $6,300 annual rent ÷ $21,000 annual income = 0.30 or 30%

How often is the assessed valuation of all real estate in Illinois adjusted by county authorities? a Quarterly b Annually c Biennially d Every three years

b Annually

When does a leasing agent's license expire? a On the date it was first acquired, every two years b On July 31 of each even-numbered year c On April 30 of each odd-numbered year d On January 1, every third year

b On July 31 of each even-numbered year

A lawyer represented the seller in a transaction. Her client informed her that he did not want to recite the actual consideration that was paid for the house. Based on these instructions, the lawyer a must inform her client that only the actual price of the real estate may appear on the deed. b may prepare a deed that shows only nominal consideration of $10. c should inform the seller that either the full price should be stated in the deed or all references to consideration should be removed from it. d may show a price on the deed other than the actual price, provided that the variance is not greater than 10% of the purchase price.

b may prepare a deed that shows only nominal consideration of $10.

Common zoning classifications include a. "P" for planned, "B" for buffer-zoned, and "C" for commercial. b. "C" for commercial, "R" for residential, and "A" for agricultural. c. "A" for agricultural, "C" for comprehensive, and "S" for subdivided. d. "R" for residential, "D" for density zoned, and "A" for agricultural.

b. "C" for commercial, "R" for residential, and "A" for agricultural.

A landlord had a property that produced a 12% rate of return. The net income on the property was $1,050 a month. Based on the income approach to value, what was the market value of the property? a. $87,500 b. $105,000 c. $151,200 d. $200,000

b. $105,000

A building was purchased five years ago for $240,000. It currently has an estimated remaining useful life of 60 years. What is the property's total depreciation to date? a. $14,364 b. $18,462 c. $20,000 d. $54,000

b. $18,462

A charge of three discount points on a $120,000 loan equals a. $450. b. $3,600. c. $4,500. d. $116,400.

b. $3,600.

Which of these types of deeds merely implies, but does not specifically warrant, that the grantor holds good title to the property? a. Special warranty b. Bargain and sale c. Quitclaim d. Trustee's

b. Bargain and sale

Which of the following is an example of functional obsolescence? a. the living room carpet is worn out b. the house is located near a factory c. a person must go through the kitchen to get to the only bathroom d. the house has a sloping wooden porch that is unattractive

c. a person must go through the kitchen to get to the only bathroom

A home equity line of credit is: a. for a 30 year term b. fully tax deductible c. a secured loan d. available on rental property

c. a secured loan.

A property manager hires a full-time maintenance person. While repairing a faucet in one of the apartments, the maintenance person steals a television set, and the tenant sues the owner. The property manager could protect the owner against this type of loss by purchasing a. liability insurance. b. workers' compensation insurance. c. a surety bond. d. casualty insurance.

c. a surety bond.

The purpose of a building permit is to a. assert a deed's restrictive covenant. b. maintain municipal control over inverse condemnation. c. ensure compliance with municipal regulations. d. show compliance with restrictive covenants.

c. ensure compliance with municipal regulations.

A ground lease is usually a. short term. b. for 100 years or longer. c. long term. d. a gross lease.

c. long term.

In the previous question, the mortgage company is the a. mortgagor. b. beneficiary. c. mortgagee. d. vendor.

c. mortgagee.

A Chicago resident purchases farmland in southern Illinois as an investment. The deed to the Chicago resident should be recorded in the a. county recorder's office of Cook County, where the individual's permanent residence is located. b. statewide land registry located in Springfield. c. recorder's office of the county in which the farmland is located. d. tax records of the city of Chicago.

c. recorder's office of the county in which the farmland is located.

A quitclaim is BEST used to a. convey a marketable title. b. release a substantial real estate interest. c. remove a cloud on title. d. warrant that a title is valid.

c. remove a cloud on title.

A purchaser went to the county building to check the recorder's records. She found that the seller was the grantee in the last recorded deed, and no mortgage was on record against the property. The purchaser may assume that a. all taxes are paid, and no judgments are outstanding. b. the seller has good title. c. the seller did not mortgage the property. d. no one else is occupying the property.

c. the seller did not mortgage the property.

The six common law fiduciary duties are

care, obedience, loyalty, disclosure, accounting and confidentiality.

covenants, conditions, and restrictions (CC&Rs)

covenants, conditions, and restrictions (CC&Rs) are private rules set up by the developer that set standards for all the parcels within the defined subdivision. The developer's restrictions may be imposed through a covenant in the deed or by a separate recorded declaration. CC&Rs typically govern the type, height, and size of buildings that individual owners can erect, as well as land use, architectural style, construction methods, setbacks, and square footage. CC&Rs are enforced by the homeowners association.

How many acres are there in the N½ of the SW¼ and the NE¼ of the SE¼ of a section? a 20 b 40 c 80 d 120

d 120

The National Do Not Call Registry provides that a licensees may never contact consumers without written authorization. b consumers with whom a licensee has had a business relationship can be contacted for up to 12 months after termination of that relationship. c licensees may not contact previous customers who are on the registry. d consumers who have made an inquiry to a licensee may be contacted up to three months later.

d consumers who have made an inquiry to a licensee may be contacted up to three months later.

A person who dies without having made a will is said to be a a testate. b a testator. c in probate. d intestate.

d intestate.

A buyer signed an exclusive-agency buyer agency agreement with a sponsoring broker. If the buyer finds a suitable property with no assistance from any licensee, the sponsoring broker is entitled to a full compensation from the buyer, regardless of who found the property. b full compensation from the seller. c partial compensation as generally required under this type of agreement. d no compensation under the terms of this type of agreement.

d no compensation under the terms of this type of agreement.

A veteran wishes to refinance his home with a VA-guaranteed loan. The lender is willing, but insists on 3½ discount points. In this situation, the veteran can a refinance with a VA loan, provided the lender charges no discount points. b refinance with a VA loan, provided the lender charges no more than two discount points. c be required to pay a maximum of 1% of the loan as an origination fee. d proceed with the refinance loan and pay the discount points.

d proceed with the refinance loan and pay the discount points.

In Illinois, the closing statement is customarily prepared by the a buyer's attorney. b buyer's broker. c seller's broker. d seller's attorney.

d seller's attorney.

An unmarried couple owns a parcel of real estate. Each owns an undivided interest, with the man owning one-third and the woman owning two-thirds. The form of ownership under which the couple owns their property is a severalty. b joint tenancy. c tenancy at will. d tenancy in common.

d tenancy in common.

A condominium community offers a swimming pool, tennis courts, and a biking trail. These facilities are MOST likely owned by the a condominium board. b corporation in which the unit owners hold stock. c unit owners in the form of proportional divided interests. d unit owners in the form of percentage undivided interests.

d unit owners in the form of percentage undivided interests.

Which factor is important in comparing properties under the sales comparison approach to value? a. Active listings b. Property rent roll c. Depreciation d. Date of sale

d. Date of sale

Which deed requires the Illinois transfer tax? a. A deed conveying a property owned by a charitable institution b. A deed conveying a property owned by a government body c. Deeds for property valued at less than $100 d. Deeds between relatives

d. Deeds between relatives

Which of these is NOT covered in either a basic form or a broad form homeowners insurance policy? a. Fire and lightening b. Explosion c. Windstorm and hail d. Flood

d. Flood

In Illinois, a real estate broker hired by an owner to sell a parcel of real estate must comply with the a. federal common law of compensation. b. concept of market value as codified in Illinois law. c. concept of caveat emptor as codified in Illinois law. d. Illinois statute called the Real Estate License Act of 2000.

d. Illinois statute called the Real Estate License Act of 2000.

The Real Estate Settlement Procedure Act (RESPA) applies to which of the following loans? a. a 30 acre farm b. a contract for deed c. an installment contract d. a first mortgage home loan

d. a first mortgage home loan

Which of these is considered personal property? a. Woodburning fireplace b. Awnings c. Bathtubs d. Patio furniture

d. Patio furniture

Homeowners may deduct which of the following expenses when preparing their income tax return? a. Interest paid on maintenance and repairs b. Insurance premiums c. Flood insurance premiums d. Real estate taxes

d. Real estate taxes

In real estate transactions, the term fiduciary typically refers to the a. sale of real property. b. person who gives someone else the legal power to act on her behalf. c. person who has legal power to act on behalf of another. d. agent's relationship to the principal.

d. agent's relationship to the principal.

In determining whether a prospective buyer can afford a certain home purchase, lenders will consider a. monthly income. b. debt. c. credit score. d. all of these.

d. all of these.

The federal Fair Housing Act prohibits discrimination in housing based on a. sex. b. disability or familial status. c. race, color, religion, or national origin. d. all of these.

d. all of these.

A mechanic's lien would be available to a a. seller's real estate agent. b. buyer's real estate agent. c. taxing authority. d. contractor.

d. contractor.

From a management point of view, apartment building occupancy that reaches as high as 98% would tend to indicate that a. the building is poorly managed. b. the building has reached its maximum potential. c. the building is a desirable place to live. d. rent could be raised.

d. rent could be raised.

Legal title passes from seller to buyer a. on the date of execution of the deed. b. when the closing statement has been signed. c. when the deed is placed in escrow. d. when the deed is delivered.

d. when the deed is delivered.

All of these are categories of the uses of real property EXCEPT

developmental.

The Federal Reserve Board

establishes a discount rate of interest for the money it lends to its member banks.

exclusive brokerage agreements

exclusive brokerage agreements must be in writing to be enforceable in court. Oral agreements are not illegal, but they are not recommended because they cannot be enforced in court.

agricultural

farms, timberland, ranches, and orchards; or

Priority of Liens

first to record, first in right

Monuments

fixed objects used to identify the POB, the ends of boundary segments, or the location of intersecting boundaries. A monument may be a natural object, such as a large tree, lake, or stream. It may also be a man-made object, such as a street, highway, fence, canal, or markers (iron pins or concrete posts) placed by surveyors.

reversionary interest

he creator of the life estate may choose not to name a remainderman. In that case, the creator will recapture ownership when the life estate ends. The ownership is said to "revert to the original owner"

acceleration clause

he mortgage or deed of trust typically includes an acceleration clause to assist the lender in foreclosure. If a borrower defaults, the lender has the right to "accelerate the maturity of the debt." This means the lender may declare the entire debt due and payable immediately. Without an acceleration clause, the lender would have to sue the borrower every time a payment was overdue.

survey

he process by which boundaries are measured by calculating the dimensions and area to determine the exact location of a piece of land.

Allocation of Customers or Markets

involves an agreement among real estate companies to divide their markets and refrain from competing for each other's business.

Price-fixing

is the practice of setting prices for products or services rather than letting competition in the open market establish those prices. In real estate, price-fixing occurs when competing real estate companies agree to set standard sales commissions, fees, or management rates or if they attempt illegal tying arrangements.

Chattels

items of personal property, including such tangibles as chairs, tables, clothing, money, bonds, and bank accounts. Trade fixtures are included in this category.

One defining difference between real estate (real property) and personal property is that real estate includes

land and all things permanently attached, while personal property includes property that is movable.

Real estate:

land with improvements

Real property:

land with improvements plus rights

Leasehold estates

last for a fixed period of time. They include estates for years and estates from period to period. Estates at will and estates at sufferance also are leaseholds, though by their operation, they are not generally viewed as being for fixed terms.

Gross Lease

lessee pays basic rent

Littoral Rights

littoral rights of owners whose land borders commercially navigable lakes, seas, and oceans. Owners with littoral rights enjoy unrestricted use of available waters but own the land adjacent to the water only up to the mean high-water mark (see Figure 7.7). All land below this point is owned by the public

A property manager

maintains the owner's investment and ensures that the property produces income.

The term appraisal is defined as the

method of estimating a property's market value based on established methods and the appraiser's professional judgment.

Land:

no improvements

disadvantages of REITs

nvestments are passive in nature and usually restricted to very large real estate transactions. Losses cannot be passed through to the investor to offset her income and usually the trust must be registered with the Securities and Exchange Commission.

implied contract

the agreement of the parties is demonstrated by their acts and conduct.

Demographics

the study and description of population.

Why was the managing broker license created?

to increase accountability and awareness of the statutory duties of supervision

back-end ratio

total housing and all long-term debt (43%)

Rectangular Survey System

was established by Congress in 1785 to standardize the description of land acquired by the newly formed federal government. This system is based on two sets of intersecting lines: principal meridians and base lines. The principal meridians run north and south, and the base lines run east and west. Both are located by reference to degrees of longitude and latitude.

subleased

when a tenant transfers less than all the leasehold interests by leasing them to a new tenant, the original tenant has subleased (or sublet) the property. The original tenant remains responsible for rent being paid by the new tenant and for any damage done to the rental during the lease term. The new tenant is responsible only to the original tenant to pay the rent due. Most leases prohibit a lessee from assignment or subleasing without the lessor's consent. This permits the lessor to retain control over the occupancy of the leased premises. As a rule, the lessor must not unreasonably withhold consent.

All of these would affect overall demand in the real estate market EXCEPT

zoning ordinances.

Covenant of seisin

The grantor warrants that she owns the property and has the right to convey title to it. (Seisin simply means "possession.") The grantee may recover damages up to the full purchase price if this covenant is broken.

advantages of the REIT

avoidance of corporate tax, centralized management, continuity of operation, transferability of interests, diversification of investment and the benefit of skilled real estate advice

Fee Simple Absolute

A fee simple absolute estate is the highest interest in real estate recognized by law. Fee simple ownership is absolute ownership; the holder is entitled to all rights to the property. It is limited only by certain public and private restrictions, such as zoning laws and restrictive covenants.

According to law, a trade fixture is usually treated as

personalty

Personal property

property that is movable and not affixed to or associated with the land. Basically, personal property includes all property except real property.

An owner has a fence on her property. By mistake, the fence extends one foot onto the property of a neighbor. The fence is an example of a. a license. b. an encroachment. c. an easement by necessity. d. an easement by prescription.

b. an encroachment.

A professional estimate of a property's market value, based on established methods and using trained, professional judgment, is performed by a

real estate appraiser.

In Illinois, what brokerage agreements must be in writing? a. Any brokerage agreement b. Only listing agreements c. Exclusive brokerage agreements d. Those listed with a REALTOR®

C. Exclusive brokerage agreements

Disclosure

Disclosures have to do with who has clear and full representation in a transaction and who does not. They may have to do with one's interest as a licensee in a property that one is selling. Matters of structure, surroundings, client representation, dual agency, previous agency, or agent interest in a property all may demand disclosure.

When an owner of real estate sells the property to someone else, which of the "sticks" in the bundle of legal rights is she using?

Disposition

Sections

Each township contains 36 sections. Each section is one square mile, or 640 acres. Sections are numbered 1 through 36

Correction Lines

Every fourth township line, both north and south of the base line, is designated a correction line. On each correction line, the range lines are measured to the full distance of six miles apart. Guide meridians run north and south at 24-mile intervals from the principal meridian. A government check is the irregular area created by these corrections; such an area is about 24 miles square.

Decreasing reserve requirements lowers rates:

Increases money for loans Stimulates market Increases inflation

What are the capital gains shelter requirements?

The exemption is available so long as the homeowners have both owned and occupied the property as their primary residence for at least two of the past five years.

market value

The market value of real estate is the most probable price that a property should bring in a fair sale.

Reality of Consent

Under the doctrine of reality of consent, a contract must be entered into as the free and voluntary act of each party. Each party must be able to make a prudent and knowledgeable decision without undue influence. A mistake, misrepresentation, fraud, undue influence, or duress deprives a person of that ability. If any of these circumstances is present, the contract is voidable by the injured party. If the other party were to sue for breach of contract, the injured party could argue as a defense that the agreement lacked reality of consent.

Which of these are traditionally covered by a standard title insurance policy? a. Unrecorded rights of persons in possession b. Improperly delivered deeds c. Changes in land use due to zoning ordinances d. Unrecorded liens not known of by the policyholder

b. Improperly delivered deeds

Two people are co-owners of a small office building with the right of survivorship. One of the co-owners dies intestate and leaves nothing to be distributed to his heirs. Which of these would explain why the second co-owner acquired the deceased's interest? a. Adverse possession b. Joint tenancy c. Law of escheat d. Reversionary interest

b. Joint tenancy

Three women were concurrent owners of a parcel of real estate. When one woman died, her interest, according to her will, became part of her estate. The deceased was a a. joint tenant. b. tenant in common. c. tenant by the entirety. d. severalty owner.

b. tenant in common.

When a manager develops an operating budget, which of these is considered a variable expense? a. Employee wages b. Utilities c. Building repairs d. Basic operating costs

c. Building repairs

A highrise apartment building burns to the ground. What type of insurance covers the landlord against the resulting loss of rent? a. Fire and hazard b. Liability c. Consequential loss, use, and occupancy d. Casualty

c. Consequential loss, use, and occupancy

A buyer signs a contract allowing her to purchase the property for $230,000 anytime in the next three months. The buyer pays the owner $5,000 at the time the contract is signed. Which of these BEST describes this contract? a. Contingency b. Option c. Installment d. Sales

b. Option

A property manager repairs a malfunctioning boiler in the building. This is classified as which type of maintenance? a. Preventive b. Corrective c. Routine d. Construction

b. Corrective

Subordination agreements

are written agreements between lienholders to change the priority of mortgage, judgment, and other liens. Under a subordination agreement, the holder of a superior or prior lien agrees to permit a junior lienholder's interest to move ahead of her lien.

In one city, developers are limited by law to constructing no more than an average of three houses per acre in any subdivision. What does this restriction regulate? a. Clustering b. Gross density c. Out-lots d. Covenants

b. Gross density

Another term for personal property is

chattels.

special purpose

churches, schools, cemeteries, and government-held lands.

contemporaneous offers

contracts to purchase or lease the same property. When buyer brokers are working with two or more clients who are seeking similar properties in the same price range, the buyer's broker is permitted to show alternative properties to prospective buyers or tenants.

All of these affect how quickly the forces of supply and demand work EXCEPT

degree of standardization of the product's price.

Factors that affect supply side of market

labor force, construction and material costs, government controls, and financial policies.

Brokerage

the business of bringing people together in a real estate transaction

Evidence of Ownership (3)

* A warranty deed, * title insurance policy, * or abstract of title with an attorney's opinion can be used for proof of title

Termination of Agency- An agency may be terminated for any of the following reasons: (7)

* Death or incapacity of either party * Destruction or condemnation of the property * Expiration of the term of the agency * Mutual agreement by all parties to the contract * Breach by one of the parties, in which case the breaching party might be liable for damages * By operation of law, as in bankruptcy of the principal (bankruptcy terminates the agency contract, and title to the property transfers to a court-appointed receiver) *Completion, performance, or fulfillment of the purpose for which the agency was created

LBPHRA applies to housing built before 1978 with the following six exceptions:

* Property sold at foreclosure, although the disclosure must be made at resale time * Rental property that is certified "lead-based paint free" by an inspector who is certified under a federal program or federally authorized state certification program * Property leased for 100 days or less, with no lease renewal or extension * Renewals of existing leases if disclosure was made at the time of the initial lease * Units with no bedrooms or with no separation between sleeping and living areas * Housing for the elderly or disabled if children under the age of six are not expected to live there

A purchaser of real estate learned that his ownership rights could continue forever and that no other person could claim to be the owner or exert any ownership control over the property. This person owns a a. fee simple absolute interest. b. life estate. c. determinable fee estate. d. fee simple on condition.

A. fee simple absolute interest.

The seller has listed his property under an exclusive-agency listing with the broker. If the seller sells the property himself during the term of the listing to someone introduced to the property by the seller, he will owe the broker a. no commission. b. the full commission. c. a partial commission. d. only reimbursement for the broker's costs.

A. no commission.

A listing taken by a real estate licensee is an agreement between the seller and the a. sponsoring broker. b. local multiple listing service. c. sponsored licensee associated with the firm. d. local association of REALTORS®.

A. sponsoring broker.

encroachment

An encroachment occurs when all or part of a structure (such as a building, fence, or driveway) illegally extends beyond the land of its owner. An encroachment usually is disclosed by either a physical inspection of the property or a spot survey.

The amount of commission paid to a sponsored licensee is determined by a. Illinois law. b. the local real estate board. c. mutual agreement with the sponsoring broker. d. mutual agreement with the client.

C. mutual agreement with the sponsoring broker.

Deed restrictions

Deed restrictions are private agreements that affect land use. Once placed in the deed by a previous owner, they "run with the land," limiting the use of the property and binding to all grantees. Deed restrictions are enforced by an owner of real estate and are included in the seller's deed to the buyer.

For the four characteristics of value, remember DUST:

Demand. The need or desire for possession or ownership backed by the financial means to satisfy that need Utility. The property's usefulness for its intended purposes Scarcity. A finite supply Transferability. The relative ease with which ownership rights are transferred from one person to another

A real estate company received a 6.5% commission on the sale of a property. The listing broker in the company received 40% of the commission, or $9,750. What was the selling price of the property? a. $55,000 b. $150,000 c. $250,000 d. $375,000

D. $375,000

Remember the four government powers as PETE:

* Police power * Eminent domain * Taxation * Escheatment

Who needs a written agreement with a sponsoring broker?

All salespersons, brokers, or leasing agents All licensed personal assistants in the firm

Seven Sources of Law

1. U.S. Constitution 2. Laws passed by Congress 3. Rules of the regulatory agencies 4. State constitutions 5. State statutes 6. Local ordinances 7. Common law

Bilateral contract:

Bi means two—must have two promises. both parties promise to do something; one promise is given in exchange for another. A real estate sales contract is a bilateral contract because the seller promises to sell a parcel of real estate and convey property title to the buyer, who in turn promises to pay a certain sum of money for the property.

A seller signs a listing agreement with a broker to sell his home. The agreement states that the broker will receive a 5.5% commission. The home sells for $387,000. What is the net amount that the seller will receive from the sale? a. $4,785 b. $21,285 c. $365,715 d. $369,585

C. $365,715

A broker received $2,520 as the firm's 50% share of a commission. If the property sold for $72,000, what was the commission rate? a. 6% b. 6.5% c. 7% d. 8%

C. 7%

Which of these is a similarity between an exclusive-agency listing and an exclusive right-to-sell listing? a. Under both, the seller retains the right to sell the real estate without the broker's help and without paying the broker a commission. b. Under both, the seller authorizes only one particular broker to show the property. c. Both types of listings give the responsibility of representing the seller to one broker only. d. Both types of listings are open listings.

C. Both types of listings give the responsibility of representing the seller to one broker only.

A broker enters into an agreement with a client. The agreement states, "In return for the compensation agreed upon, Broker will assist Client in locating and purchasing a suitable property. Broker will receive the agreed compensation regardless of whether Broker, Client, or some other party locates the property ultimately purchased by Client." What kind of agreement is this? a. Exclusive-agency listing b. Exclusive-agency buyer agency agreement c. Exclusive buyer agency agreement d. Open buyer agency agreement

C. Exclusive buyer agency agreement

Community Reinvestment Act (CRA)

Community reinvestment refers to the responsibility of financial institutions to help meet their communities' needs for low-income and moderate-income housing. Under the Community Reinvestment Act (CRA), financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms.

When moving into a newly purchased home, the buyer discovered that the seller had taken the electric lighting units that were installed over the vanity in the bathroom. The seller had not indicated in the sales contract that these would be removed. Which of these is TRUE?

Installed lighting units normally are considered real estate fixtures.

BASIC TYPES OF LEASES (3)

There are three basic types of leases: gross lease, net lease, and percentage lease. The type of lease that exists depends on the manner in which rent is determined.

An unmarried homeowner has $80,000 in equity in his primary residence of three years. The owner sells the residence for $135,000. The broker's commission was 5.5%, and other selling expenses amounted to $1,200. What is the owner's taxable gain on this transaction?

$0

A man incurs the following expenses: $9,500 in interest on a mortgage loan on his residence, $800 in real estate taxes plus a $450 late payment penalty, and a $1,000 loan origination fee paid in the course of purchasing his home. How much may be deducted from his gross income?

$11,300

What is the amount of profit excluded from capital gains for a principle residence by a married taxpayer who file jointly?

$500,000

licensees shall be considered to be representing the consumer they are working with as a designated agent for the consumer unless

(1) there is a written agreement between the sponsoring broker and the consumer providing that there is a different relationship or (2) the licensee is performing only ministerial acts on behalf of the consumer.

Open Listing (3)

* There are multiple brokers. * Only the selling broker is entitled to a commission. * Seller retains the right to sell independently without obligation.

A licensee using the internet cannot do the following 3 things:

* use a URL or domain name that is deceptive or misleading * deceptively or without authorization frame another real estate brokerage or MLS website * engage in the deceptive use of keywords or other devices to direct, drive, or divert internet traffic or mislead consumers

Terminating an Easement (6)

* when the need no longer exists, * when the owner of either the dominant or the servient tenement becomes the owner of both properties (or termination by merger), * by release of the right of easement to the owner of the servient tenement, * by abandonment of the easement (the intention of the parties is the determining factor), * by destruction of the servient tenement (e.g., the demolition of a party wall), or * by lawsuit ("action to quiet title") against someone claiming an easement.

Economic Characteristics of Real Estate (4)

1. Scarcity 2. Improvements 3. Permanence of investment 4. Location

Financial Benefits of home ownership

1. property's value increases 2. total mortgage debt is reduced through monthly payments, total ownership increases (equity) 3. accumulates a good credit rating by paying the rent on time, but a homeowner's mortgage payments build equity and, thus, increase net worth 4. tax deductions available to homeowners but not to renters

bundle of legal rights (5)

1. right of possession, 2. right to control the property (within the framework of the law), 3. right of enjoyment (that is, to use the property as the owner wishes, within the framework of the law), 4. right of exclusion (to keep others from entering or using the property), and 5. right of disposition (to sell, will, transfer, or otherwise dispose of or encumber the property).

Blanket Loans

A blanket loan covers more than one parcel or lot. It is usually used to finance subdivision developments. However, it can be used to finance the purchase of improved properties or to consolidate loans as well. A blanket loan usually includes a partial release clause, which permits the borrower to obtain the release of any one lot or parcel from the lien by repaying a certain amount of the loan. The lender issues a partial release for each parcel released from the mortgage lien. The release form includes a provision that the lien will continue to cover all other unreleased lots.

Construction Loans

A construction loan (also called interim financing) is made to finance the construction of improvements on real estate such as homes, apartments, and office buildings. The lender commits to the full amount of the loan but disburses the funds in payments called draws during construction. Draws are made to the developer or general contractor for that part of the construction work that has been completed since the previous payment. Before each payment, the lender has the right to inspect the work. The general contractor must provide the lender with adequate waivers that release all mechanic's lien rights for the work covered by the payment. Construction loans are generally short-term (interim) financing. The borrower pays interest only on the monies that have actually been disbursed. The borrower is expected to arrange for a permanent loan (also called an end loan or take-out loan), which will repay or take out the construction financing lender when the work is completed.

Creating Joint Tenancies

A joint tenancy can be created only by the intentional act of conveying a deed or giving the property by will. It cannot be implied or created by operation of law. The deed must specifically state the parties' intention to create a joint tenancy, and the parties must be explicitly identified as joint tenants.

Terminating Joint Tenancies

A joint tenancy is destroyed when any one of the four unities of joint tenancy is terminated. Joint tenants are free to convey their interest in the jointly held property, but doing so destroys the unities of time and title. The new owner cannot become a joint tenant and will hold interest as a tenant in common. Rights of other joint tenants, however, are unaffected.

license

A license is a personal privilege (not a right) to enter the land of another for a specific purpose. A license differs from an easement in that it can be terminated or canceled by the licensor (the person who granted the license) at any time.

Purchase-Money Mortgages

A purchase money mortgage (PMM) is a note and mortgage created at the time of purchase when the seller agrees to finance all or part of the purchase price and consists of a first or junior lien, depending on whether prior mortgage liens exist. Often called seller financing or owner financing, a PMM is often used when the buyer does not qualify for a typical lender loan. The buyer/borrower executes a note and mortgage at the time of purchase and the seller records the mortgage against the property. Payments are made to the seller, according to the terms of the note. If the buyer stops making payments, the seller has recourse to foreclose on the property.

real estate closing

A real estate closing is the culmination of many efforts—finding clients, negotiating offers, solving problems, coordinating inspections, and much more. At the closing, title to the real estate is transferred in exchange for payment of the purchase price. It's also a complicated time because until closing preparations begin, the licensee's relationship is primarily with the buyer or the seller. During the closing period, new players come on the scene: appraisers, inspectors, loan officers, insurance agents, and lawyers. Negotiations continue, sometimes right up until the property is finally transferred. A thorough knowledge of the process is the best defense against the risk of a transaction failing.

Trade Fixtures

A special category of fixture includes property used in the course of business. An article owned by a tenant and attached to a rented space or building or used in conducting a business is a trade fixture (or chattel fixture)

Survey

A survey provides information about the exact location and size of the property. The sales contract specifies who will pay for the survey. Typically, the survey indicates the location of all buildings, driveways, fences, and other improvements located on the premises. Any improvements located on adjoining property that may encroach on the premises being bought also will be noted. The survey should set out, in full, any existing easements and encroachments. Whether or not the sales contract calls for a survey, lenders frequently require one.

A broker sold a residence for $235,000 and received $12,925 as her commission in accordance with the terms of the listing. What was the broker's commission rate? a. 5.5% b. 5.7% c. 6.25% d. 6.5%

A. 5.5%

Which of these statements is TRUE of a listing contract? a. It is an employment contract for the professional services of the broker. b. It obligates the seller to convey the property if the broker procures a ready, willing, and able buyer. c. It obligates the broker to work diligently for both the seller and the buyer. d. It automatically binds the owner, broker, and MLS to the agreed provisions.

A. It is an employment contract for the professional services of the broker.

Which of these is a similarity between an open listing and an exclusive-agency listing? a. Under both, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. b. Both grant a commission to any broker who procures a buyer for the seller's property. c. Under both, the broker earns a commission regardless of who sells the property as long as it is sold within the listing period. d. Both grant an exclusive right to sell to whatever broker procures a buyer for the seller's property.

A. Under both, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure.

Illinois licensees may a. submit a listing to the local MLS. b. refuse to show a property to racial minorities if their sellers so instruct them. c. advertise in their own name as long as they hold independent contractor status. d. never take open listings.

A. submit a listing to the local MLS.

Adjustable-rate mortgages (ARMs)

Adjustable-rate mortgages (ARMs) generally originate at one rate of interest, then fluctuate up or down during the loan term, based on some objective economic indicator. Because the interest rate on ARMs may change, the mortgagor's loan repayments also may change.

Transfer by Adverse Possession

Adverse possession (also called squatter's rights) is another means of involuntary transfer. The law recognizes that the use of land is an important function of its ownership. As such, an individual who makes a claim to certain property, takes possession of it, and uses it may take title away from an owner who fails to use or inspect the property for a period of years. Usually, the possession by the claimant must be open, notorious, continuous and uninterrupted, hostile, and adverse to the true owner's possession. The period of uninterrupted possession required to claim title by adverse possession is 20 years. However, if the party whose property is being claimed has color of title (that is, if her apparently good title actually is invalidated by some flaw) and if the real estate taxes on the property are paid while satisfying the other statutory requirements, the possessory period may be shortened to seven years. Through the principle of tacking, successive periods of different adverse possession by different adverse possessors can be combined, enabling a person who is not in possession for the entire required time to establish a claim. For example, if a woman held a property in adverse possession for 5 years, then the woman's daughter held the same property for 10 years, then the woman's son held the property for 5 more years, the son would be able to claim the property by adverse possession even though she had not personally possessed the property for the full statutory 20 years.

Agricultural Lease

Agricultural landowners often lease their land to tenant farmers, who provide the labor to produce and bring in a crop. A landowner can be paid by a tenant in one of two ways: as an agreed-on rental amount in cash in advance (cash rent), or as a percentage of the profits or losses from the sale of the crop when it is sold (sharecropping).

Air lots

Air lots are composed of the airspace within specific boundaries located over a parcel of land.

Encumbrances

All liens must be paid by the seller or be assumed by the buyer at the closing. Identify as much information as possible about existing loans, such as the name and address of each lender, the type of loan, the loan number, the loan balance, the interest rate, the monthly payment, and if the loan can be prepaid without penalty. Determine whether the buyer can assume the present loan, and if so, under what circumstances and if there is any possibility of seller financing.

Advertising (Managing Broker)

All managing broker licensees who are named as managing brokers with the IDFPR must indicate this status on all advertising that includes their name (with the exception of property signs).

Strict Foreclosure

Although judicial foreclosure is the prevalent practice, it is still possible in some states for a lender to acquire mortgaged property through a strict foreclosure process. In this process, appropriate notice must first be given to the delinquent borrower. Then, once the proper papers have been prepared and recorded, the court establishes a deadline by which the balance of the defaulted debt must be paid in full. If the borrower does not pay off the loan by that date, the court simply awards full legal title to the lender. No sale takes place.

Multiple Listing Services

An MLS is a marketing organization whose members make their listings available for showing and sale through all the other member licensees. An MLS offers advantages to licensees, sellers, and buyers. Licensees develop a sizable inventory of properties to be sold and are assured a portion of the commission if they list property or participate in the sale of another licensee's listing. Sellers gain because the property is exposed to a much larger market. Buyers gain because of the variety of properties on the market.

Abstract and Attorney's Opinion of Title

An abstract and attorney's opinion of title are used in some areas, including Illinois, as evidence of title.

Acknowledgment/Notarization

An acknowledgment (also called notarization) is a formal declaration that the person who signs a written document does so voluntarily and that her signature is genuine. The declaration is made before a notary public or some other person as prescribed by state law. An acknowledgment usually states that the person signing the deed or other document is known to the officer or has produced sufficient identification to prevent a forgery. In Illinois, acknowledgment is not essential to the validity of the deed. However, unless the deed is acknowledged, it may not be introduced as evidence in a court of law without some further proof of its execution. As a result, it is customary that virtually all documents conveying title are acknowledged/notarized.

appurtenant easement

An appurtenant easement is attached to the ownership of one parcel and allows the owner the use of a neighbor's land. For an appurtenant easement to exist, two adjacent parcels of land must be owned by two different parties. The parcel over which the easement runs is called the servient tenement; the neighboring parcel that benefits is called the dominant tenement

estate from period to period

An estate from period to period (or periodic tenancy) is created when the landlord and the tenant enter into an agreement for an indefinite time—that is, the lease does not contain a specific expiration date. Such a tenancy is created for a specific payment period—for example, month to month, week to week, or year to year—but continues indefinitely until proper notice of termination is given.

executed contract

An executed contract is one in which all parties have fulfilled their promises: the contract has been performed.

Property Management Agency

An owner may employ a sponsoring broker to market, lease, maintain, or manage the owner's property. Such an arrangement is called property management. The sponsoring broker is made the agent of the property owner through a property management agreement. As in any other agency relationship, the sponsoring broker has a fiduciary responsibility to the client-owner.

emblements

Annually cultivated crops such as wheat, corn, vegetables, and fruit, called emblements, are generally considered personal property. As long as an annual crop is growing, it will stay with the real property unless other provisions are made in the sales contract.

Names of All Parties to the Contract

Anyone who has an ownership interest in the property must be identified and must sign the listing to validate it. If the property is owned under some form of co-ownership, that fact must be clearly established

Land Trusts

As in all trusts, the title to the property is conveyed to a trustee, and the beneficial interest belongs to the beneficiary. In the case of land trusts, however, the beneficiary usually is also the trustor. While the beneficial interest is personal property, the beneficiary retains management and control of the real property and has the right of possession and the right to any income or proceeds from its sale. Land trusts are frequently created for the conservation of farmland, forests, coastal land, and scenic vistas.

Assignment

Assignment is the substitution of parties. Assignment is a transfer of rights or duties under a contract. Rights may be assigned to a third party (called the assignee) unless the contract forbids it. FOR EXAMPLE An elderly widower wants to move closer to his children. His house has been on the market for some time. The widower is in the hospital at the time a buyer makes an offer to purchase, so he assigns his contract rights to his son. This allows the property to be sold in a real estate closing transaction without him being present or signing documents.

The statutory requirements for enforcement of tax liens are complex. When a property owner fails to pay taxes on real estate in Illinois, the property ultimately may be sold in one of three ways:

At an annual tax sale At a forfeiture sale At a scavenger sale

Avulsion

Avulsion is the sudden removal of soil by an act of nature. It is an event that causes the loss of land much less subtly than erosion. A major earthquake or a mudslide, for example, can cause an individual's land holdings to become much smaller very quickly.

A broker listed the seller's home for $300,000. Before the listing contract expired, the broker brought the seller a full-price offer on the seller's terms, containing no contingencies. The seller then decided not to sell. Which of these statements is TRUE? a. The broker has no reason to collect a commission in this case. b. The seller probably is liable for the commission. c. The broker must immediately file suit against the seller. d. The seller's only liability is to the buyer.

B. The seller probably is liable for the commission.

A licensee entered into a contract with her sponsoring broker, specifying that she is not an employee. In the past year, just less than half of the licensee's income from real estate activities came from sales commissions. The remainder was based on an hourly wage paid by the sponsoring broker for office administrative duties. The IRS would MOST likely classify the licensee as a. self-employed. b. an employee. c. an independent contractor. d. a part-time real estate licensee.

B. an employee.

A sponsored licensee wants to receive a lump-sum payment at the end of each transaction. The sponsored licensee must meet all these requirements EXCEPT a. receive all income from the brokerage based on production, not time worked. b. be free from supervision by the sponsoring broker and/or office manager. c. hold a current real estate license. d. have a written agreement with the sponsoring broker stating that the sponsored licensee will not be treated as an employee for federal tax purposes.

B. be free from supervision by the sponsoring broker and/or office manager.

BROKERAGE AGREEMENTS

Brokerage agreements are employment contracts for the personal professional services of the sponsoring broker, not for the transfer of real estate. Perhaps most important, brokerage agreements address the essential questions of exclusivity and compensation.

Brownfields

Brownfields are defunct, derelict, or abandoned commercial or industrial sites, many of which are suspected to contain toxic wastes. According to the U.S. General Accounting Office, several hundred thousand brownfields plague communities as eyesores and potentially dangerous and hazardous properties, often contributing to the decline of surrounding urban property values.

Improvements

Building an improvement on one parcel of land can affect the land's value and use, as well as that of neighboring tracts and whole communities. For example, constructing a new shopping center or selecting a nuclear power site or toxic waste dump can dramatically shift land values in a large area.

A person owned the fee simple title to a vacant lot adjacent to a hospital and was persuaded to make a gift of the lot. She wanted to have some control over its use, so her attorney prepared her deed to convey ownership of the lot to the hospital "so long as it is used for hospital purposes." After completion of the gift, the hospital will own a a. fee simple absolute estate. b. license. c. fee simple determinable. d. leasehold estate.

C. fee simple determinable.

Real estate licensees who are paid in a lump sum and who are personally responsible for paying their own taxes are probably a. nonexempt. b. buyer's broker. c. independent contractors. d. employees.

C. independent contractors.

One general rule of the National Do Not Call Registry is a. states must maintain separate do-not-call lists. b. the national registry must be updated once a year. c. it is illegal to make an unsolicited phone call to a number listed on the national registry. d. real estate offices are exempt from the laws because they are not considered telemarketers.

C. it is illegal to make an unsolicited phone call to a number listed on the national registry.

IRS Reporting Requirements

Certain real estate closings must be reported to the Internal Revenue Service (IRS) on Form 1099-S. The affected properties include sales or exchanges of * land (improved or unimproved), including air space; * an inherently permanent structure, including any residential, commercial, or industrial building; * a condominium unit and its appurtenant fixtures and common elements (including land); or * shares in a cooperative housing corporation.

Usury

Charging interest in excess of the maximum rate allowed by law is called usury. To protect consumers from unscrupulous lenders, many states have enacted laws limiting the interest rate that may be charged on loans.

The Duty of Confidentiality

Client information obtained during the term of the brokerage agreement must be kept confidential. For example, when the principal is the seller, the agent may not reveal such things as the principal's willingness to accept less than the listing price or urgency to sell, unless the principal has authorized the disclosure. If the principal is the buyer, the agent may not disclose that the buyer will pay a higher price, is under a tight moving schedule, or other facts that might harm the principal's bargaining position.

Commingling

Commingling such monies with the licensee's personal or general business funds is illegal. Conversion, the practice of using those escrow funds as the licensee's own money, is illegal as well. Licensees should be aware that records of escrow account transactions and reconciliations must be kept on file for at least five years.

Competition

Competition is the interaction of supply and demand. Excess profits tend to attract competition. For example, the success of a retail store may cause investors to open similar stores in the area. This tends to mean less profit for all the stores concerned unless the purchasing power in the area increases substantially.

Conventional Loans

Conventional loans are viewed as the most secure loans because their LTV ratios are often lowest. Usually, the ratio is 80% of the value of the property or less because the borrower makes a down payment of at least 20%. The security for the loan is provided solely by the mortgage; the payment of the debt rests on the ability of the borrower to pay.

Trustee's Deed

Conveyance from trustee to third party. A deed executed by a trustee is a trustee's deed. It is used when a trustee conveys real estate held in the trust to the beneficiary. The trustee's deed must state that the trustee is executing the instrument in accordance with the powers and authority granted by the trust instrument.

Deed in Trust

Conveyance from trustor to trustee. A deed in trust is the means by which a trustor conveys real estate to a trustee for the benefit of a beneficiary. The real estate is held by the trustee to fulfill the purpose of the trust.

Advantages of Cooperatives

Cooperative ownership, despite its risks, has become desirable in recent years for several reasons. Lending institutions view the shares of stock as acceptable collateral for financing. The availability of financing extends the possible transfer of shares to modest purchasers in many co-ops. As a tenant-owner, rather than a tenant who pays rent to a landlord, the shareholder has some control over the property. Tenants in cooperatives also enjoy certain income tax advantages. The IRS treats cooperatives as it does fee simple interest in single homes or condominiums in regard to deductibility of loan interest, property taxes, and homesellers' tax exclusions.

CE Core Requirements The core CE requirement, now the same for both managing brokers and brokers requires three hours in each of the following mandatory topic areas:

Core A, which addresses license law, agency, fair housing, and escrow Core B, which addresses legal issues

Equity =

Current market value - property debt

A sponsoring broker must have a written employment agreement with a. independent contractors. b. licensed personal assistants. c. sponsored brokers. d. all of these.

D. all of these.

Designated agency

Designated agency describes a business model where licensees in an office may represent both buyers and sellers. Under designated agency, the sponsoring broker designates one agent to represent the seller and one agent to represent the buyer. Designated agency is legal in Illinois and constitutes a business model that is commonly chosen and described in a real estate company's written policies. License law requires the licensee to disclose that a designated agency relationship exists and to put in writing the name of the designated agent. The purpose of this requirement is to ensure that a client knows to whom their secrets are told and to ensure that all other licensees sponsored within the same company do not obtain confidential information.

CONTINUING EDUCATION

Each broker and managing broker who applies for license renewal must successfully complete six hours per year (or its equivalent) of real estate continuing education (CE) courses approved by the Advisory Council. In addition, managing brokers seeking to renew their licenses must complete a 12-hour IDFPR-approved CE course on broker management during each pre-renewal period and, at the conclusion of the course, take and pass a test developed and administered according to IDFPR specifications. The course must be delivered in a classroom or by some other interactive means. Only schools approved by the Advisory Council may provide real estate CE courses. Instructors and course materials also must be approved for both the prelicensing schools and the CE schools. The license law includes strict criteria for obtaining and renewing approvals.

The portion of an owners' property value that exceeds the amount of their mortgage debt is called

Equity

capitalization rate

Estimate the price a typical investor would pay for the income produced by this particular type and class of property. This is done by estimating the rate of return (or yield) that an investor will demand for the investment of capital in this type of building. This rate of return is called the capitalization rate (or cap rate) and is determined by comparing the relationship of NOI to the sales prices of similar properties that have sold in the current market. For example, a comparable property that is producing an annual net income of $15,000 is sold for $187,500. The capitalization rate is $15,000 divided by $187,500, or 8%. If other comparable properties sold at prices that yielded substantially the same rate, it may be concluded that 8% is the rate that the appraiser should apply to the subject property.

Police Power

Every state has the power to enact legislation to preserve order, protect the public health and safety, and promote the general welfare of its citizens.

External obsolescence

External obsolescence. External obsolescence is caused by negative factors not on the subject property, such as zoning, environmental, social, or economic forces. In this case, the depreciation is always incurable; the loss in value cannot be reversed by spending money on the property. For example, proximity to a polluting factory or a deteriorating neighborhood is a factor that could not be cured by the owner of the subject property.

Fraud

Fraud is the intentional misrepresentation of a material fact so as to harm or take advantage of another person. That includes not only making false statements about a property but also intentionally concealing or failing to disclose important facts.

Plats

From the land development and subdivision plans, the subdivider draws plats. A plat map is a detailed map that illustrates the geographic boundaries of individual lots. It shows the blocks, sections, streets, public easements, and monuments in the prospective subdivision. A plat also may include engineering data and restrictive covenants. The plats must be approved by the municipality before they can be recorded. Once a plat is properly recorded, it may be used as an adequate legal description of real property.

Frontage

Frontage is the length of a property along a street or waterfront. If two unlabeled dimensions are given for a parcel of land, the first dimension is the frontage.

puffing.

Generalized, vague exaggeration of a property's benefits is called puffing. While puffing is not illegal, licensees must ensure that none of their statements can be interpreted as fraudulent.

Syndicates

Generally speaking, a syndicate is two or more people or firms joined together to make and operate a real estate investment. A syndicate is not in itself a legal entity; however, it may be organized into a number of ownership forms, including co-ownership (tenancy in common and joint tenancy), partnership, trust, or corporation.

Home Equity Loans

Home equity loans provide a source of funds using the equity built up in a home. The original mortgage loan remains in place, and the home equity loan is junior to the original lien.

Disciplinary Statute of Limitations

IDFPR may only take action against persons for violation of the terms of the Act within five years after the occurrence of the alleged violation.

Attorney's Fees

If either party's attorney will be paid from the closing proceeds, that party will be charged with the expense in the closing statement. This expense may include fees for the preparation or review of documents or for representing the parties at settlement.

Scavenger Sale

If the taxes have not been paid on a property for two years or more, the property may be sold at a scavenger sale. The county must go through the same court process as for a tax sale and receive an order of sale. The property is sold to the highest bidder. The buyer is not required to pay the tax lien but must pay current taxes.

Forfeiture Sale

If there are no bids on a property at the annual tax sale, the property is forfeited to the state, although title does not really change. The owner still may redeem the property after forfeiture by paying delinquencies, publication costs, and interest. On the other hand, anyone who wants to purchase the property for the outstanding taxes may make application to the county. If this happens and the owner does not claim the property within 30 days of notification, the applicant will be issued a certificate of purchase after paying the outstanding taxes, interest, and other fees. If redemption is later made by the original owner, the certificate holder must be compensated based on 12% interest for each six months the certificate was held.

Importance of Credit History

In addition to credit scores, underwriters consider from two to seven years of a potential borrower's repayment history, especially for rent and/or mortgage loans. A payment is considered late if it is more than 30 days past due. Underwriters especially look for bankruptcies, judgments, and foreclosures. Loan underwriters may make exceptions if the applicant can show specific reasons for the late payments (e.g., a death, divorce, or medical reasons). Applicants who are consistently more than 30 days late for rent or mortgage payments will most likely be ineligible for VA and FHA loans and other loans that are sold to Fannie Mae and Freddie Mac.

Exclusive-Agency Listing Agreement

In an exclusive-agency listing, one broker is authorized to act as the exclusive agent of the seller-principal. However, the seller retains the right to sell the property without obligation to the broker. The seller is obligated to pay a commission to the broker only if the listing broker or a cooperating broker has been the procuring cause of a sale. The seller retains the right to sell the property without financial obligation to the listing broker.

Regression and Progression

In general, the worth of a better-quality property is adversely affected by the presence of a lesser-quality property; this is called the principle of regression. Thus, in a neighborhood of modest homes, a structure that is larger, better maintained, or more luxurious would tend to be valued in the same range as the less-lavish homes. Conversely, under the principle of progression, the value of a modest home would be higher if it were located among larger, fancier properties.

Final Property Inspection

In the real estate contract, the buyer usually reserves the right to make a final inspection (also called a walk-through) shortly before the closing takes place. Accompanied by the licensee, the buyer verifies that necessary repairs have been made, that the property has been well maintained, that all fixtures are in place, and that no unauthorized removal or alteration of any part of the improvements has taken place. It is not an opportunity to reopen negotiations.

Inverse condemnation

Inverse condemnation is an action brought by a property owner seeking just compensation for land taken for a public use where it appears that the taker of the property does not intend to bring eminent domain proceedings. The property is condemned because its use and value have been diminished due to an adjacent property's public use. For example, property along a newly constructed highway may be inversely condemned. While the property itself was not used in constructing the highway, the property value may be significantly diminished due to the nearby construction of the highway. The property owner may bring an inverse condemnation action to be compensated for the loss.

involuntary alienation

Involuntary transfers are usually carried out by operation of law—such as by condemnation or a sale to satisfy delinquent tax or mortgage liens. When a person dies intestate and leaves no heirs, the title to the real estate passes to the county (in Illinois) by the state's power of escheatment.

annexation

It also is possible to change personal property into real property through a process called annexation. For example, a landowner buys cement, stones, and sand, mixes them into concrete, and constructs a sidewalk across her land. This landowner has effectively converted personal property (cement, stones, and sand) into real property (a sidewalk).

Earnest Money Deposits

It is customary (although not legally required) for a purchaser to provide a deposit when making an offer to purchase real estate. This deposit, usually in the form of a check, is called earnest money.

Immobility

It is true that some of the substances of land are removable and that topography may shift. Nevertheless, the geographic location of any given parcel of land can never be changed. It is fixed or immobile.

The methods of terminating a tenancy by the entirety may be remembered by the acronym JSDAD

Judgment Sale Death Agreement Divorce

Indestructibility

Land is also indestructible. This permanence of land, coupled with the long-term nature of most improvements, tends to stabilize investments in real estate.

Township Tiers

Lines running east and west, parallel to the base line and six miles apart, are called township lines (see Figure 9.3). They form strips of land called township tiers. These township tiers are designated by consecutive numbers north or south of the base line.

Which of these is considered the MOST important characteristic of land?

Location.

multiperil policies

Many insurance companies offer multiperil policies for apartment and commercial buildings. These policies offer a "package" of standard commercial coverage, such as fire, hazard, liability, and casualty. Special coverage for earthquakes and floods is also available.

escrow account

Many lenders require that borrowers provide a reserve fund to meet future real estate taxes and property insurance premiums. This fund is called an escrow account (also called an impound account or trust account). When the mortgage or deed of trust loan is made, the borrower starts the reserve by depositing funds to cover the amount of unpaid real estate taxes. If a new insurance policy has just been purchased, the insurance premium reserve will be started with the deposit of one-twelfth of the insurance premium liability. The borrower's monthly loan payments will include principal, interest, tax, and insurance (PITI). Other costs such as private mortgage insurance premiums (PMI), flood insurance, or homeowners association dues may also be included.

Market Value Versus Market Price

Market value is an opinion of value based on an analysis of data. The data may include not only an analysis of comparable sales but also an analysis of potential income, expenses, and replacement costs (less any depreciation). Market price, on the other hand, is what a property actually sells for—its sales price.

Real Estate Education Advisory Council

Matters related to real estate education are handled by the Real Estate Education Advisory Council. The Advisory Council approves and regulates schools, curricula, sponsors, and programs and suggests administrative rules to IDFPR. Members are appointed for four-year staggered terms, with a 12-year lifetime limit. Two of the council's five members must be current members of the Board, one must be a representative of an Illinois real estate trade organization (someone who is not a member of the Board), one must be a representative of an approved prelicensing school or CE school, and one must be from an institution of higher education that offers prelicensing and CE courses.

Each room of a house was preassembled at a factory, driven to the building site on a truck, and then lowered onto its foundation by a crane. Later, workers finished the structure and connected plumbing and wiring before the owners moved in. Which term BEST describes this type of home?

Modular

Tax Reserves and Insurance Reserves (Escrow or Impound Accounts)

Most mortgage lenders require that borrowers provide reserve funds or escrow accounts to pay future real estate taxes and insurance premiums. A borrower starts the account at closing by depositing funds to cover at least the amount of unpaid real estate taxes from the date of lien to the end of the current month (the buyer receives a credit from the seller at closing for any unpaid taxes). Afterward, an amount equal to one month's portion of the estimated taxes is included in the borrower's monthly mortgage payment.

Liens for Municipal Utilities

Municipalities often have the right to impose a specific, equitable, involuntary lien on the property of an owner who refuses to pay bills for municipal utility services.

Uniqueness

No two parcels of land are ever exactly the same. The characteristics of each property, no matter how small, differ from those of every other. At a minimum, all parcels differ geographically because each parcel has its own location.

Exclusive Right-to-Sell Listing

One authorized broker receives a commission regardless of who sells the property.

Guaranteed Sales Plans

One of the areas noted for discipline is the offering of an improperly constructed guaranteed sales plan—any real estate purchase or sales plan in which a sponsoring broker enters into an unconditional written contract with a seller, promising to purchase the seller's property for a specified price if the property has not sold within an agreed period of time on terms acceptable to the seller. A licensee is subject to disciplinary action if she offers a guaranteed sales plan without complying with the Act's requirements for such agreements.

Private Mortgage Insurance

One way a borrower can obtain a mortgage loan with a lower down payment is by obtaining private mortgage insurance (PMI). In a PMI program, the borrower purchases an insurance policy that provides the lender with funds in the event the borrower defaults on the loan. This allows the lender to assume more risk so that the LTV ratio is higher than for other conventional loans.

OWNERSHIP IN SEVERALTY

Ownership in severalty occurs when property is owned by one individual or corporation. The term comes from the fact that this sole owner is "severed" or "cut off" from other owners.

front-end ratio

PITI, as well as mandatory assessments and private mortgage insurance if applicable (28%)

Factors That Affect the Demand of Real Estate

Population Demographics Employment and wage levels

Keeping the property in good condition involves the following four types of maintenance:

Preventive maintenance Repair or corrective maintenance Routine maintenance Tenant improvements

The basic costs of owning a home may be remembered by the acronym PITI:

Principal Interest Taxes Insurance

Probate Proceedings

Probate is a formal judicial process that proves or confirms the validity of a will, determines the precise assets of the deceased person, and identifies the persons to whom the assets are to pass

PROOF OF OWNERSHIP

Proof of ownership is evidence that title is marketable. A deed by itself is not considered sufficient evidence of ownership in Illinois. Even though a warranty deed conveys the grantor's interest, it contains no proof of the condition of the grantor's title at the time of the conveyance. The grantee needs some assurance that he actually is acquiring ownership and that the title is marketable. A certificate of title, title insurance, or a Torrens certificate is commonly used to prove ownership.

PROPERTY MANAGER

Property management involves the leasing, managing, marketing, and overall maintenance of real estate owned by others. Basic management duties include budgeting, setting rental rates, selecting tenants, collecting rent, maintaining the property, complying with legal requirements, and providing periodic financial and operational reports to the owner.

Settlement Statement (HUD-1)

RESPA requires that the Settlement Statement (HUD-1) itemize all charges that are normally paid by a borrower and a seller in connection with settlement, whether required by the lender or another party, or paid by the lender or any other person. Charges required by the lender that are paid before closing are indicated as paid outside of closing (POC). The third page of the HUD-1 provides for a comparison of the original GFE estimates to the actual charges appearing on the HUD-1. Lenders are permitted to "correct" any violation of the fee tolerances by reimbursing the borrower within 30 days of settlement.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)

RESPA's Consumer Protections * CLO regulation * CBA disclosure * Settlement cost booklet * Good Faith Estimate (GFE) * Settlement Statement (HUD-1) * Prohibition of kickbacks and unearned fees

Radon

Radon is a naturally occurring gas that is a suspected cause of lung cancer.

Assessment

Real estate is valued for tax purposes by county or township assessors or appraisers. This official valuation process is called assessment. A property's assessed value generally is based on the sales prices of comparable properties, although practices may vary. Land values may be assessed separately from buildings or other improvements, and different valuation methods may be used for different types of property. State laws may provide for property to be periodically reassessed.

tax sale

Real estate taxes that have remained delinquent for the statutory period can be collected through a tax sale

Recording

Recording is the act of placing documents in the public record.

Rescission

Rescission, in which one party may cancel or terminate the contract as though it had never been made. Cancellation terminates a contract without a return to the original position. Rescission, however, returns the parties to their original positions before the contract, so any monies that have been exchanged must be returned. Rescission is normally a contractual remedy for a breach, but a contract may also be rescinded by the mutual agreement of the parties.

5 Types of Real Property

Residential Commercial Industrial Agricultural Special purpose

Riparian rights

Riparian rights are common-law rights granted to owners of land along the course of a river, stream, or similar body of flowing water.

Disclosure of Property Condition

Seller disclosure of property conditions is required by law in Illinois. These disclosures normally cover a wide range of structural, mechanical, and other conditions that a prospective purchaser should know about to make an informed decision. Brokers should caution sellers to make truthful disclosures to avoid litigation arising from fraudulent or careless misrepresentations. A property disclosure statement must be given to the buyer before an offer is made and accepted or the buyer will have three days in which to rescind the contract, based on any negative disclosures.

Variable Lease

Several types of leases allow for increases in the rental charges during the lease period. One of these is the graduated lease, which provides for specified rent increases at set future dates. Another is the index lease, which allows rent to be increased or decreased periodically, based on changes in the consumer price index or some other economic indicator.

Steering

Steering is the channeling of homeseekers to particular neighborhoods. It also includes discouraging potential buyers or renters from considering certain areas. In either case, it is an illegal limitation of a purchaser's options. In the rental process, steering occurs when the landlord puts members of a protected class on a certain floor or in a certain building.

Surety bonds

Surety bonds. Surety bonds cover an owner against financial losses resulting from an employee's criminal acts or negligence while performing assigned duties.

The following notices are required by Illinois statute:

Tenancy from year to year. At least 60 days' written notice is required at any time within the four-month period before the last 60 days of the lease period. Tenancy from month to month. In any periodic estate having a term of less than year to year but greater than week to week, 30 days' written notice is required. Tenancy from week to week. Seven days' written notice is required. Farm tenancies from year to year. Parties must give at least four months' written notice to terminate and may do so only at the end of the period. To vacate March 1, farm tenancy notice must be given by November 1.

CE Course Content

The CE requirement may be satisfied by successfully completing coursework consisting of three hours per year from core courses and three hours per year of electives. The goal of the Advisory Council in setting core curriculum guidelines is to instruct licensees on new laws and changes to existing laws as well as to offer a refresher on aspects of license law and IDFPR policy that the council considers key to keeping licensees in compliance with the Real Estate License Act of 2000, thereby protecting the people of Illinois.

CERCLA

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly called the Superfund, was enacted in 1980. It established a fund of $9 billion to clean up uncontrolled hazardous waste sites and to respond to spills. It created a process for identifying potentially responsible parties (PRPs) and ordering them to take responsibility for the cleanup action. CERCLA is administered and enforced by the EPA.

Agricultural Loan Programs

The Farm Service Agency (FSA) is an agency of the U.S. Department of Agriculture. The FSA offers programs to help families purchase or operate family farms. Through the Rural Housing and Community Development Service (RHCDS), it also provides loans to help families purchase or improve single-family homes in rural areas. FSA loan programs fall into two categories: guaranteed loans, made and serviced by private lenders and guaranteed for a specific percentage by the FSA, and loans made directly by the FSA.

Reserve Requirements

The Fed requires that each member bank keep a certain level of assets on hand as reserve funds. These reserves are unavailable for loans or any other use. This requirement not only protects customer deposits but also provides a means of manipulating the flow of cash in the money market.

FHA-Insured Loans

The Federal Housing Administration (FHA), which operates under HUD, neither builds homes nor lends money. The common term FHA loan refers to a loan that is insured by the agency. The FHA insurance provides security to the lender in addition to the real estate. As with PMI, the FHA insures lenders against loss from borrower default. FHA loans must be made by FHA-approved lending institutions.

Fannie Mae

The Federal National Mortgage Association, usually called Fannie Mae, is a government-sponsored enterprise that provides a secondary market for mortgage loans, dealing in conventional, Federal Housing Administration (FHA), and Department of Veterans Affairs (VA) loans. Fannie Mae buys a pool of mortgages from a lender, and that pool may then be used as collateral for mortgage-backed securities that are sold on the global market.

Good-Faith Estimate of Settlement Costs

The Good Faith Estimate (GFE) must contain the exact language specified by HUD, making it easier for borrowers to compare loan conditions from one lender to another

Ginnie Mae

The Government National Mortgage Association, usually called Ginnie Mae, administers special-assistance programs and guarantees mortgage backed securities using FHA and VA loans as collateral. The Ginnie Mae pass-through certificate is a security interest in a pool of mortgages that provides for a monthly pass-through of principal and interest payments directly to the certificate holder. Such certificates are guaranteed by Ginnie Mae.

HARP (Home Affordable Refinance Program)

The HARP program is designed to allow borrowers who owe more than their home is worth the opportunity to refinance their mortgage. To be eligible for a HARP refinance, the loan must be owned or guaranteed by Fannie Mae or Freddie Mac and the current loan-to-value (LTV) ratio must be greater than 80%. The borrower must be current on mortgage payments with no late payments in the past 6 months and no more than one late payment in the last 12 months. This program is set to expire December 31, 2015.

Home Mortgage Disclosure Act

The Home Mortgage Disclosure Act requires that all institutional mortgage lenders with assets in excess of $36 million and one or more offices in a given geographic area make annual reports. The reports must detail all mortgage loans the institution has made or purchased, broken down by census tract. This law enables the government to detect patterns of lending behavior that might constitute redlining.

Mortgage Servicing Disclosure Statement

The Mortgage Servicing Disclosure Statement tells the borrower whether the lender intends to service the loan or to transfer it to another lender. It will also provide information about resolving complaints.

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) is a federal consumer law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the costs of settlement services, such as kickbacks and referral fees that can increase settlement costs for homebuyers. RESPA is administered by HUD.

Small Business Liability Relief and Brownfields Revitalization Act (also called the Brownfields Law)

The Small Business Liability Relief and Brownfields Revitalization Act (also called the Brownfields Law) was signed into law in 2002. This law provides funds to assess and clean up brownfields, clarifies liability protections, and provides tax incentives to enhance response programs. The law is also important for property owners and developers because it shields innocent developers from liability for toxic wastes that existed at a site before the purchase of property. In effect, a property owner who neither caused nor contributed to the contamination is not liable for the cleanup.

Interstate Land Sales Full Disclosure Act of 1968

The U.S. Congress created the federal Interstate Land Sales Full Disclosure Act of 1968 to facilitate regulation of interstate land sales and to protect consumers from fraud and abuse in the sale or lease of land. The act required land developers to register subdivisions of 100 or more nonexempt lots with HUD and to provide each purchaser with a disclosure document called a property report. The property report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement.

Budget Comparison Statement

The budget comparison statement compares the actual results with the original budget, often giving either percentages or a numerical variance of actual versus projected income and expenses. Budget comparisons are especially helpful in identifying trends in order to help with future budget planning.

The Cost Approach

The cost approach to value also is based on the principle of substitution. The cost approach consists of five steps: * Estimate the value of the land as though it were vacant and available to be put to its highest and best use. * Estimate the current cost of constructing the buildings and improvements. * Estimate the amount of accrued depreciation resulting from the property's physical deterioration, functional obsolescence, and external depreciation. * Deduct the accrued depreciation (step 3) from the current construction cost (step 2). * Add the estimated land value (step 1) to the depreciated cost of the building and site improvements (step 4) to arrive at the total property value.

Importance of Credit Scores

The creditworthiness of buyers is a key element in qualifying for a conventional loan. Underwriters consider several factors known about the applicant (e.g., credit scores and payment history) before determining whether to make the loan. Today, with the exception of FHA loans and a few nonconforming loans, the interest rate available to borrowers is largely based on credit scores, which range from 300 to 850. The higher the credit score, the lower the risk to the lender.

Remainder and Reversion

The fee simple owner who creates a conventional life estate must plan for future ownership. When the life estate ends, it is replaced by a fee simple estate. The future owner of the fee simple estate may be designated in one of two ways:

The Duty of Obedience

The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical.

HAMP (Home Affordable Modification Program)

The goal of HAMP is to help delinquent borrowers modify the terms of their home mortgage loan to an affordable level (i.e., no more than 31% of the borrower's pretax monthly income) using a combination of three factors: reduce the interest rate, increase the term up to 40 years, and reduce the principal on which interest is charged until the loan is repaid. Modifications are only available to owner occupants of one- to four-family dwellings with loan amounts not exceeding $729,750 for a single-family dwelling (amounts increase for two-, three-, or four-unit dwellings). This program is set to expire December 31, 2015.

Covenant of quiet enjoyment

The grantor guarantees that the grantee's title will be good against third parties who might bring court actions to establish superior title to the property. If the grantee's title is found to be inferior, the grantor is liable for damages.

Covenant of warranty forever

The grantor promises to compensate the grantee for the loss sustained if the title fails at any time in the future.

Covenant of further assurance

The grantor promises to obtain and deliver any instrument needed to make the title good. For example, if the grantor's spouse has failed to sign away dower rights, the grantor must deliver a quitclaim deed (discussed later) to clear the title.

Covenant against encumbrances

The grantor warrants that the property is free from liens or encumbrances, except for any specifically stated in the deed. Encumbrances generally include mortgages, mechanics' liens, and easements. If this covenant is breached, the grantee may sue for the cost of removing the encumbrances.

reversionary right

The landlord retains a reversionary right to possession after the lease term expires. The lessor's interest is called a leased fee estate plus reversionary right.

alienation clause

The lender may want to prevent a future purchaser of the property from being able to assume the loan, particularly if the original interest rate is low. For this reason, some lenders include an alienation clause (also called a resale clause, due-on-sale clause, or call clause) in the note. An alienation clause provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at the current market interest rate.

A single woman bought a home 18 months ago and is now selling because she found a new job in another city. A married couple filing joint taxes has owned a nine-bedroom home for three years. Now, the couple wants to move to a small condominium unit. A single man owned his home for 17 years, sold it, and will use the proceeds from the sale to purchase a larger house. Based on these facts, which of these people is entitled to the $500,000 capital gains exclusion? a.The single woman b. The married couple c. The married couple and the single man d. The single woman and the single man

The married couple

Destruction of Premises

The obligation to pay rent for damaged or destroyed premises differs depending on the type of property and the lease. Usually, residential tenants are permitted to reduce their rent payments in proportion to the amount of space they are unable to use. Likewise, tenants who lease only part of a building, such as office or commercial space, generally are not required to continue to pay rent after the leased premises are destroyed. In fact, in some states, if the property was destroyed as a result of the landlord's negligence, the tenant can recover damages.

sheriff's deed

The owner of the certificate of sale receives a quitclaim deed, in this situation called a sheriff's deed, and gains the right to possession.

A person buys a parcel of natural forest. The person then immediately cuts down all the trees and constructs a large shed out of old sheets of rusted steel for storing turpentine, varnish, and industrial waste products. Which of these statements is TRUE about this rusty shed? a. The owner's action constitutes improvement of the property. b. The shed is personal property. c. If the owner is in the business of storing toxic substances, the shed is a trade fixture. d. Altering the property in order to construct a shed is not included in the bundle of rights.

The owner's action constitutes improvement of the property.

The Primary Mortgage Market

The primary mortgage market is made up of the lenders that originate mortgage loans. These lenders make money available directly to borrowers. From a borrower's point of view, a loan is a means of financing an expenditure; from a lender's point of view, a loan is an investment. All investors look for profitable returns on their investments.

Express Agency

The principal and agent may enter into an express contract (also called an express agreement) in which the parties formally express their intention to establish an agency relationship and state its terms and conditions. The agreement may be either oral or written.

The Duty of Loyalty

The principal's interests come first, even above the self-interest of the agent. Agents must not consider how the result of negotiations will serve their own interests (for example, by providing them with a commission). Rather, agents must perform all services with the goal of promoting the principal's interests. Agents are not permitted to buy property listed with them for their accounts—or buy or sell property in which they have personal interest—unless they have made that interest known to the principal or purchaser and received that party's consent.

Plottage

The principle of plottage holds that merging or consolidating adjacent lots into a single, larger one produces a greater total land value than the sum of the two sites valued separately. For example, two adjacent lots valued at $35,000 each might have a combined value of $90,000 if consolidated. The process of merging two separately owned lots under one owner is called assemblage. Plottage is the amount that value is increased by successful assemblage.

Broker's Commission

The responsibility for paying the broker's commission will have been determined by previous agreement. If the broker is the agent for the seller, the seller normally is responsible for paying the commission. If an agency agreement exists between a broker and the buyer, or if two agents are involved (one for the seller and one for the buyer), the commission may be distributed as an expense between both parties or according to some other arrangement.

Air Rights

The rights to use the space above the earth may be sold or leased independently, provided those rights have not been preempted by law. Air rights can be an important part of real estate, particularly in large cities where air rights must be purchased to construct office buildings. Examples of construction based on air rights include the MetLife Building in New York City and One Prudential Plaza in Chicago. To construct such a building, the developer must purchase not only the air rights but also numerous small portions of the land's subsurface for the building's foundation supports.

Land Sales Registration Act of 1999

The sale or promotion within Illinois of subdivided land is regulated by the Land Sales Registration Act of 1999. This act regulates the offering, sale, lease, or assignment of any improved or unimproved land divided into 25 or more lots and offered as a part of a common promotional plan.

Recording Expenses

The seller usually pays for recording charges (filing fees) necessary to clear all defects and furnish the purchaser with a marketable title. Items customarily charged to the seller include the recording of release deeds or satisfaction of mortgages, quitclaim deeds, affidavits, and satisfaction of mechanics' liens. The buyer pays for recording charges that arise from the actual transfer of title. Such items usually include recording the deed that conveys title to the purchaser and a mortgage or deed of trust executed by the buyer.

enabling acts

The states' police power is their inherent authority to create regulations needed to protect the public health, safety, and welfare. Through enabling acts, states delegate to counties and local municipalities the authority to enact ordinances in keeping with general laws (see Chapter 2). The increasing demands placed on finite natural resources have made it necessary for cities, towns, and villages to increase their limitations on the private use of real estate. There are now controls over noise, air, and water pollution as well as population density.

Lot-and-Block System

The third method of legal description is the lot-and-block system (also called the recorded plat system). This system uses lot-and-block numbers referred to in a plat map filed in the public records of the county where the land is located. The lot-and-block system is often used to describe property in subdivisions and urban areas. A lot-and-block survey is performed in two steps. First, a large parcel of land is described either by metes and bounds or by rectangular survey. Once this large parcel is surveyed, it is broken into smaller parcels. As a result, a lot-and-block legal description is always a smaller part of a metes-and-bounds or rectangular survey description.

Lis Pendens

There is often a considerable delay between the time a lawsuit is filed and the time final judgment is rendered. When any suit is filed that affects title to real estate, a special notice called a lis pendens (Latin for "litigation pending") is recorded.

Supervision (Managing Broker)

These supervisory duties include the following: * Implementation of office policies and procedures established by the sponsoring broker * Training of licensees or unlicensed assistants * Assisting licensees as necessary in real estate transactions * Supervising escrow accounts over which the sponsoring broker has delegated responsibility to the managing broker in order to ensure compliance with the escrow account provisions of the Real Estate License Act of 2000 * Supervising all advertising of any service for which a license is required * Familiarizing sponsored licensees with the requirements of federal and state laws relating to the practice of real estate * Compliance with the rules for licensees and offices under his supervision

Special Information Booklet

This HUD booklet, which must be given at the time of application or provided within three days of loan application, provides the borrower with general information about settlement (closing) costs. It also explains the various provisions of RESPA, including a line-by-line description of the Uniform Settlement Statement.

Title Insurance

Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title. A title insurance company determines whether the title is insurable based on a review of the public records.

Liquidated Damages

To avoid a lawsuit if one party breaches the contract, the parties may agree on a certain amount of money that will compensate the nonbreaching party. That money is called liquidated damages. If a sales contract specifies that the earnest money deposit is to serve as liquidated damages in case the buyer defaults, the seller will be entitled to keep the deposit if the buyer refuses to perform without good reason. The seller who keeps the deposit as liquidated damages may not sue for any further damages if the contract provides that the deposit is the seller's sole remedy.

controlled business arrangement (CBA)

To streamline the settlement process, a real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers, a system called a controlled business arrangement (CBA). RESPA permits a CBA as long as a consumer is clearly informed of the relationship among the service providers; that participation is not required; that other providers are available; and that the only thing of value received by one business entity from others, in addition to permitted payments for services provided, is a return on ownership interest or franchise relationship.

land contract

Under a land contract (also called a contract for deed or installment contract), the buyer (called the vendee) agrees to make a down payment and a monthly loan payment that includes interest and principal directly to the seller. The payment also may include real estate tax and insurance reserves. The seller (called the vendor) retains legal title to the property during the contract term, and the buyer is granted equitable title and possession. At the end of the loan term, the seller delivers clear title.

Tax Stamps and Land Trusts

Under the Land Trust Recordation and Transfer Tax Act (765 ILCS 420), a land trustee has the obligation to record a facsimile of the assignment of beneficial interest. The names of the beneficiaries need not be disclosed, and privacy is maintained. The tax rate and the exemptions are the same for the assignment as for the transfer of real property.

Destruction of the Premises

Under the common law of contracts, the buyer always bore the risk of loss in the event the property was damaged or destroyed before closing. A few states still adhere to this common-law principle. The laws and court decisions of most states, however, have increasingly placed the risk of loss on the seller. As a practical matter, the seller should be certain the property is fully insured for sale price value up until the closing is completed and possession has been given.

Contribution

Under the principle of contribution, the value of any part of a property is measured by its effect on the value of the whole. Installing a swimming pool, greenhouse, or tennis court may not add value to the property equal to the cost, but remodeling an outdated kitchen or bathroom might.

Substitution

Under the principle of substitution, the maximum value of a property tends to be set by how much it would cost to purchase an equally desirable and valuable substitute property. Substitution is the foundation of the sales comparison approach.

Marketable Title (3)

Under the terms of the typical real estate sales contract, the seller is required to deliver marketable title to the buyer at the closing. To be marketable, a title must * disclose no serious defects and not depend on doubtful questions of law or fact to prove its validity; * not expose a purchaser to the hazard of litigation or threaten the quiet enjoyment of the property; and * convince a reasonably well-informed and prudent purchaser, acting on business principles and with knowledge of the facts and their legal significance, that he could sell or mortgage the property at a later time.

Underground storage tanks (USTs)

Underground storage tanks (USTs) are commonly found on sites where petroleum products are used or where gas stations and auto repair shops are located. They also may be found in a number of other commercial and industrial establishments—including printing and chemical plants, wood treatment plants, paper mills, paint manufacturers, dry cleaners, and food-processing plants—for storing chemicals or process wastes. Military bases and airports are also common sites for underground tanks. In residential areas, they are used to store heating oil.

Fractional Sections and Government Lots

Undersized or oversized sections are called fractional sections. Fractional sections may occur for a number of reasons. In some areas, for example, the rectangular survey may have been made by separate crews, and gaps less than a section wide remained when the surveys met. Areas smaller than full quarter-sections were numbered and designated as government lots by surveyors. These lots can be created by the curvature of the earth, by land bordering or surrounding large bodies of water, or by artificial state borders.

Unilateral contract

Uni means one—has only one promise. One party makes a promise to induce a second party to do something. The second party is not legally obligated to act. However, if the second party does comply, the first party is then obligated to keep the promise. An option contract to retain one's option to possibly make a purchase later is an example of a unilateral contract.

Methods of Title Transfer (4)

Voluntary Involuntary Will Descent

Voluntary alienation

Voluntary alienation is the legal term for the voluntary transfer of title. The owner may voluntarily transfer title by either making a gift or selling the property. To transfer during one's lifetime, the owner must use some form of deed of conveyance.

Which factor MOST likely influences the demand for real estate?

Wage levels and employment opportunities

Special Warranty Deed Two warranties:

Warranty that grantor received title Warranty that property was unencumbered by grantor

sheriff's sale

When a default is not cured by redemption or reinstatement, the entry of a decree of foreclosure will lead to a judicial sale of the property, usually called a sheriff's sale. Each defendant to the suit must be given written personal notice of the sale, and public notice of the sale must be published in a newspaper of general circulation. The successful bidder at the sale receives a certificate of sale, not a deed. Only after the sale is confirmed by the court will the certificate holder receive a sheriff's deed.

Transfer of Title by Descent

When a person dies intestate (without a valid will), her state's law of descent governs how and to whom her property will be distributed.

Balloon Payment Loans

When the periodic payments are not enough to fully amortize the loan by the time the final payment is due, the final payment is larger than the others—this is called a balloon payment. A balloon loan is a partially amortized loan because principal is still owed at the end of the term. It is frequently assumed that if payments are made promptly, the lender will extend the balloon payment for another limited term. The lender, however, is not legally obligated to grant this extension and can require payment in full when the note is due.

CO-OWNERSHIP

When title to one parcel of real estate is held by two or more individuals, those parties are called co-owners or concurrent owners. Individuals may co-own property as tenants in common, joint tenants, or tenants by the entirety, or they may co-own community property in states recognizing community property.

Zoning ordinances

Zoning is a regulatory tool that helps communities regulate and control how land is used. Zoning ordinances are local laws that implement the comprehensive plan and regulate and control the use of land and structures within designated land-use districts. If the comprehensive or master plan is the big picture, zoning makes up the details of that picture.

Two sponsoring brokers evenly split the 6% commission on a $73,000 home. The selling broker was paid 70% of his sponsoring broker's share. The listing broker was paid 30% of her sponsoring broker's share. How much did the listing broker receive? a. $657 b. $1,314 c. $1,533 d. $4,380

a $657 $73,000 sales price × 6% (0.06) = $4,380 full commission $4,380 full commission ÷ 2 sponsoring brokers = $2,190 sponsoring broker's share of the commission $2,190 sponsoring broker's share of the commission × 30% (0.30) = $657 listing broker's commission

Under the Mortgage Disclosure Improvement Act, a lender must extend the closing how many days if the APR is increased before closing? a Three b Two c Five d Seven

a Three

An owner placed her farm in a trust, naming herself as the beneficiary. When the owner died, her will directed the trustee to sell the farm and distribute the proceeds of the sale to her heirs. The trustee sold the farm in accordance with the will. What type of deed was delivered at settlement? a Trustee's deed b Trustor's deed c Deed in trust d Reconveyance deed

a Trustee's deed

In a settlement statement, the selling price ALWAYS is a a debit to the buyer. b a debit to the seller. c a credit to the buyer. d greater than the loan amount.

a a debit to the buyer.

A buyer makes an offer on a property and the seller accepts. Three weeks later, the buyer announces that "the deal's off" and refuses to go through with the sale. If the seller is entitled to keep the buyer's earnest money deposit, it is MOST likely because the sales contract contains a a liquidated damages clause. b a contingent damages clause. c an actual damages clause. d a revocation clause.

a a liquidated damages clause.

A grandmother grants a life estate to her grandson and stipulates that on the grandson's death, the title to the property will pass to her son-in-law. This second estate is called a a remainder. b a reversion. c an estate at sufferance. d an estate for years.

a a remainder

A building that is remodeled into residential units and is no longer used for the purpose for which it was originally built is an example of

a converted-use property.

Intent of the parties, method of attachment, adaptation to real estate, and agreement between the parties are the legal tests for determining whether an item is

a fixture or personal property.

An office building is valued at $800,000 when the annual net income is capitalized at a rate of 20%. If the operating expenses and vacancy and rent loss total 40% of the gross income, what is the approximate gross annual income? a. $266,667 b. 321,412 c. $400,000 d. $507,312

a. $266,667

A specific parcel of real estate has a market value of $160,000 and is assessed for tax purposes at 75% of market value. The tax rate for the county in which the property is located is 4%. The tax bill will be a. $4,800. b. $5,000. c. $5,200. d. $6,400.

a. $4,800.

Which of these formulas BEST expresses the statutory month variation method of calculating a daily prorated charge for an annual prepaid expense? a. (Total charge ÷ 12) ÷ actual days in month of closing = daily prorated charge b. (Total charge ÷ 360) × 12 = daily prorated charge c. (Total charge ÷ 360) × actual days in month of closing = daily prorated charge d. (Total charge ÷ 365 = y) (y ÷ 12) × actual days in closing month = daily prorated charge

a. (Total charge ÷ 12) ÷ actual days in month of closing = daily prorated charge

Which of these BEST defines the term planned unit development (PUD)? a. A development where land is set aside for mixed-use purposes, such as residential, commercial and public areas b. A development established entirely by inverse condemnation c. A planned area where a nonconforming use is never allowed d. A development registered with the U.S. Department of Housing and Urban Development

a. A development where land is set aside for mixed-use purposes, such as residential, commercial and public areas

Which of these is NOT exempt from disclosure regulations of the Residential Lead-Based Paint Hazard Reduction Act? a. A duplex built before 1978 b. Studio apartments where the living area is not separated from the sleeping area c. Senior-citizen housing d. Residences for the disabled

a. A duplex built before 1978

Which of these is considered dual agency? a. A licensee acting for both the buyer and the seller in the same transaction b. Two brokerage companies cooperating with each other c. A licensee representing two or more sellers at the same time d. A licensee listing and then selling the same property

a. A licensee acting for both the buyer and the seller in the same transaction

In Illinois, which of these needs to hold a real estate license? a. A person who employs fewer than three apartment leasing agents b. A licensed attorney acting under a power of attorney to convey real estate c. A resident apartment manager working for an owner, if the manager's primary residence is the apartment building being managed d. A partnership selling a building owned by the partners

a. A person who employs fewer than three apartment leasing agents

A real estate licensee was representing a buyer. At their first meeting, the buyer explained that he planned to operate a dog grooming business out of any house he bought. The licensee did not check the local zoning ordinances to determine in which parts of town such a business could be conducted. Which agency duty did the licensee violate? a.Care b. Obedience c. Loyalty d. Accountability

a. Care

Which of these is NOT a governmental power? a. Easement in gross b. Police power c. Eminent domain d. Taxation

a. Easement in gross

A buyer makes an offer on a seller's house, and the seller accepts. Both parties sign the sales contract. At this point, the buyer has what type of title to the property? a. Equitable b. Voidable c. Escrow d. Contract

a. Equitable

Title to land in Illinois may be held and conveyed in which of these ways? a. In the name of a partnership b. As joint tenants only if the property is owned by a husband and wife as their principal residence c. As tenants in common with rights of survivorship d. All of these

a. In the name of a partnership

Which of these is TRUE pursuant to the Illinois Human Rights Act? a. It is a civil rights violation to refuse to sell or rent because the prospective buyer or tenant has a service animal. b. Tenants can never be held liable for any damages to the premises caused by a service animal. c. It is not a civil rights violation to discriminate against a person who is blind. d. It is not a civil rights violation to discriminate against a person who is hearing impaired.

a. It is a civil rights violation to refuse to sell or rent because the prospective buyer or tenant has a service animal.

Which of these is FALSE about underground water contamination? a. It is a minor problem in the United States. b. Any contamination of underground water can threaten the supply of pure, clean water from private wells and public water systems. c. Protective state and federal laws concerning water supply have been enacted. d. Real estate licensees need to be aware of potential contamination sources.

a. It is a minor problem in the United States.

Every co-owner of real estate in Illinois has the right to file a suit for partition when the property is held in which of these ways? a. Joint tenancy or tenancy in common b. Land trust c. Condominium or cooperative d. Time-share use or estate

a. Joint tenancy or tenancy in common

The first installment of the tax bill for all counties except Cook is due on a. June 1. b. September 1. c. the first business day in March. d. the day after the actual amount of the current year's tax is determined.

a. June 1.

Mary sold her home to Lynn. Lynn moved into the home but did not record the deed. A few weeks later, Mary died. Her heirs in another city were unaware that she had sold the home. The heirs conveyed title to David, who actually recorded the deed. Who owns the property? a. Lynn b. David c. Mary's heirs d. Both Lynn and David

a. Lynn

What can terminate an easement? a. Owner of either property becomes sole owner of both b. Continued use of the easement c. Release of the easement by the servient tenement d. Maintenance of the easement

a. Owner of either property becomes sole owner of both

In question 5, the owners of the lesser-valued houses in the neighborhood may find that the values of their homes are affected by what principle? a. Progression b. Increasing returns c. Competition d. Regression

a. Progression

Which of these statements BEST explains why instruments affecting real estate are recorded? a. Recording gives constructive notice to the world of the rights and interests of a party in a particular parcel of real estate. b. Failing to record will void the transfer. c. The instruments must be recorded to comply with the terms of the statute of frauds. d. Recording proves the execution of the instrument.

a. Recording gives constructive notice to the world of the rights and interests of a party in a particular parcel of real estate.

If a seller collected rent of $1,400, payable in advance, from an attic tenant on August 1, which of these is TRUE at the closing on August 15? a. Seller owes buyer $700 b. Buyer owes seller $700 c. Seller owes buyer $1,400 d. Buyer owes seller $1,400

a. Seller owes buyer $700

A seller listed his property with a brokerage company. The agency relationship between the seller and the sponsoring broker is what type of agency? a. Special b. General c. Implied d. Universal

a. Special

Under the Americans with Disabilities Act (ADA), which of these is TRUE? a. The ADA requires that employers make reasonable accommodations that enable a person with a disability to perform essential job functions. b. Business and commercial real estate are exempt from the ADA. c. The provisions of the ADA do not apply to employers with fewer than 50 employees. d. The ADA does not apply to public buildings.

a. The ADA requires that employers make reasonable accommodations that enable a person with a disability to perform essential job functions.

When a landlord rented an apartment in his six-unit building to a young couple, he didn't notice that the woman was pregnant. After the baby was born, the landlord canceled their lease, citing the lease's no-children clause. Which of these statements is TRUE? a. The landlord is violating the Illinois Human Rights Act regarding the exclusion of children. b. The landlord is acting legally under an exemption to the Illinois Human Rights Act. c. The landlord must give the tenants 60 days in which to find a new apartment. d. The landlord may refuse to rent to families with children only if he lives in the building.

a. The landlord is violating the Illinois Human Rights Act regarding the exclusion of children.

In Illinois, which of these statements is TRUE regarding a lease for more than one year? a. The lease must be in writing and signed to be enforceable in court. b. The lease must include a provision for interest to be paid on all security deposits. c. The lease must be recorded to give actual notice of the resident tenant's right of possession. d. The lease may be terminated only by written notice to the tenant, even if it contains a definite expiration date.

a. The lease must be in writing and signed to be enforceable in court.

Which of these is necessary to convert an apartment building to condominium ownership in Illinois? a. The owner records a condominium declaration with a three-dimensional plat. b. The owner must record a certificate stating that the current tenants have been duly surveyed and that a majority of all tenants are in favor of the conversion. c. The existing tenants elect a board of directors having the power to act as legal administrator for the property, and the board petitions the state under the Condominium Property Act for certification as a condominium. d. The owner must execute and record a declaration of condominium under the Uniform Condominium Act as adopted in Illinois.

a. The owner records a condominium declaration with a three-dimensional plat.

Which of these is TRUE regarding asbestos? a. The removal of asbestos can cause further contamination of a building. b. Asbestos causes health problems only when it is eaten. c. The level of asbestos in a building is affected by weather conditions. d. HUD requires all asbestos-containing materials to be removed from all residential buildings.

a. The removal of asbestos can cause further contamination of a building.

Under a typical land contract, when does the vendor give the deed to the vendee? a. When the contract is fulfilled and all payments have been made b. At the closing c. When the contract for deed is approved by the parties d. After the first year's real estate taxes are paid

a. When the contract is fulfilled and all payments have been made

A landowner who wants to use property in a manner prohibited by a local zoning ordinance but which would benefit the community can apply for a. a conditional-use permit. b. a prescriptive easement. c. an occupancy permit. d. a property dedication.

a. a conditional-use permit.

A restriction in a seller's deed may be enforced by a. a court injunction. b. the zoning board of appeal. c. the city building commission. d. the state legislature.

a. a court injunction.

A husband who works for an international corporation has already moved out of the country. To authorize his wife to act on his behalf in his absence, he signed a. a power of attorney. b. a release deed. c. a quitclaim deed. d. an acknowledgment.

a. a power of attorney.

A subdivision declaration reads, "No property within this subdivision may be further subdivided for sale or otherwise, and no property may be used for any purpose other than single-family housing." This is an example of a. a restrictive covenant. b. an illegal reverter clause. c. R-1 zoning. d. a conditional-use clause.

a. a restrictive covenant.

A man owns a large tract of land. After an adequate study of all the relevant facts, the man legally divides the land into 30 lots suitable for the construction of residences. In this situation, the man is acting as a. a subdivider. b. a developer. c. a land planner. d. an urban planner.

a. a subdivider.

The type of easement that is a right-of-way for a utility company's power lines is a. an easement in gross. b. an easement by necessity. c. an easement by prescription. d. a nonassignable easement

a. an easement in gross.

IDFPR has revoked a sponsoring broker's license. The sponsoring broker may a. appeal the license revocation to the local circuit court. b. have the license reinstated by signing an irrevocable release of liability and filing it within 60 days of the disciplinary action. c. continue to conduct business for 90 days after the revocation by posting a bond with the recovery fund. d. allow his sponsored licensees to continue in business for 90 days because they were not found guilty of any offense.

a. appeal the license revocation to the local circuit court.

Encouraging people to sell or rent their homes by claiming that entry of a protected class of people into the neighborhood will have a negative impact on property values constitutes a. blockbusting. b. steering. c. a violation of the ADA. d. redlining.

a. blockbusting.

A sponsoring broker offers the seller the following inducement to sign his listing agreement: "I'll buy your property if it doesn't sell in 90 days." Under these facts, the sponsoring broker may NOT a. buy the property at the agreed figure at any time during the 90 days. b. market the property as if no special agreement existed. c. show the seller evidence of the sponsoring broker's financial ability to buy the property. d. show the seller written details of the plan before any contract of guaranty is executed.

a. buy the property at the agreed figure at any time during the 90 days.

Security deposits are listed on a closing statement as a credit to the a. buyer. b. seller. c. lender. d. broker.

a. buyer.

Zoning powers are conferred on municipal governments a. by state enabling acts. b. through the master plan. c. by popular local vote. d. through city charters.

a. by state enabling acts.

A buyer bought a house in a subdivision zoned residential. The buyer wanted to open a day care in the home. To do so legally, the buyer should obtain a a. conditional use permit b. nonconforming use permit c. bulk zoning permit d. permit for a buffer zone

a. conditional use permit

The sales contract says a man will purchase only if his wife approves the sale by the following Saturday. His wife's approval is a a. contingency. b. reservation. c. warranty. d. consideration.

a. contingency.

In an appraisal process, the relationship between basic and non-basic employment patterns as a means of predicting population and income is known as: a. economic-base analysis b. economic life c. market analysis d. income approach

a. economic-based analysis

In preparing a sales contract, an Illinois licensee may a. fill in factual and business details in the blank spaces of a customary preprinted form. b. draft riders to alter a preprinted contract to fit the transaction. c. fill out and sign an offer to purchase for the customer. d. advise a buyer or a seller of the legal significance of certain parts of the contract.

a. fill in factual and business details in the blank spaces of a customary preprinted form.

Every deed must be signed by the a. grantor. b. grantee. c. grantor and grantee. d. devisee.

a. grantor.

Pledging property for a loan without giving up possession of the property itself is called a. hypothecation. b. defeasance. c. alienation. d. novation.

a. hypothecation.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. The buyer then signs a note and a mortgage. In this example, the buyer is the a. mortgagor. b. beneficiary. c. mortgagee. d. vendor.

a. mortgagor.

A town enacts a new zoning code. Under the new code, commercial buildings are not permitted within 1,000 feet of the lake. A commercial building that is permitted to continue in its former use even though it is built on the lakeshore is an example of a. nonconforming use. b. variance. c. special use. d. adverse possession.

a. nonconforming use.

The date and time a document was recorded establish a. priority. b. abstract of title. c. subrogation. d. marketable title.

a. priority.

Under the federal law designed to protect the public from fraudulent interstate land sales, a developer involved in interstate land sales of 100 or more lots must a. provide each purchaser with a printed report disclosing details of the property. b. pay the prospective buyer's expenses to see the property involved. c. provide preferential financing. d. allow a 30-day cancellation period.

a. provide each purchaser with a printed report disclosing details of the property.

In Illinois, legal descriptions of land are usually based on the a. rectangular survey system. b. Third, Fourth, and Fifth Principal Meridians. c. three base lines running through the central part of the state. d. nearest principal meridian.

a. rectangular survey system.

A lender's refusal to lend money to potential homeowners attempting to purchase properties located in predominantly African American neighborhoods is called a. redlining. b. blockbusting. c. steering. d. prequalifying.

a. redlining.

After a mortgagor makes final payment to the mortgagee, the mortgagee would give the mortgagor a a. satisfaction of mortgage. d. release deed. c. deed of trust. d. mortgage estoppel.

a. satisfaction of mortgage.

The person who prepares an abstract of title for a parcel of real estate a. searches the public records and then summarizes the events and proceedings that affect title. b. insures the condition of the title. c. inspects the property. d. issues a certificate of title.

a. searches the public records and then summarizes the events and proceedings that affect title.

A tenant has a one-year lease on an apartment. If the tenant fails to pay his rent when it is due, the landlord may a. serve notice on the tenant to pay the delinquent rent within five days. b. terminate the tenant's lease without notice when the rent is more than 10 days past due. c. hire a moving company to remove the tenant's furniture and personal property from the premises. d. serve notice on the tenant to pay the rent within five days and proceed with a suit for possession regardless of whether or not the tenant pays the past-due rent.

a. serve notice on the tenant to pay the delinquent rent within five days.

The basic requirements for a valid conveyance are governed by a. state law. b. local custom. c. national law. d. the law of descent.

a. state law.

In MOST market areas, rents are determined by a. supply-and-demand factors. b. the local apartment owners' association. c. HUD's annually published rental guidelines. d. a tenants' union.

a. supply-and-demand factors.

If property is held by two or more owners as tenants with survivorship rights, the interest of a deceased cotenant will be passed to the a. surviving owner(s). b. heirs of the deceased. c. state under the law of escheat. d. trust under which the property was owned.

a. surviving owner(s).

The buyer and the seller of a home are debating whether a certain item is real or personal property. The buyer says it is real property and should convey with the house; the seller says it is personal property and would not convey without a separate bill of sale. In determining whether an item is real or personal property, a court would NOT consider a. the cost of the item when it was purchased. b.whether its removal would cause severe damage to the real estate. c. whether the item is clearly adapted to the real estate. d. any relevant agreement of the parties in their contract of sale.

a. the cost of the item when it was purchased.

Which of the following is the most important element for a property manager to consider when selecting rental rates? a. the rental rates for similar units in the area b. the types of tenants desired for the property c. the number of units available to rent d. the square footage of each of the units

a. the rental rates for similar units in the area

The documents called title evidence include a. title insurance. b. warranty deeds. c. security agreements. d. a deed.

a. title insurance.

A legal arrangement under which the title to real property is held to protect the interests of a beneficiary is a a. trust. b. corporation. c. limited partnership. d. general partnership.

a. trust

The borrower under a deed of trust is called the a. trustor. b. trustee. c. beneficiary. d. vendee.

a. trustor.

A deed contains a guarantee that the grantor will compensate the grantee for any loss resulting from the title's failure in the future. This is an example of a. warranty forever. b. further assurance. c. quiet enjoyment. d. seisin.

a. warranty forever.

real estate licensee

acts as a point of contact between two or more people in negotiating the sale, purchase, or rental of property. A real estate licensee may be the agent for the buyer, for the seller, or for both

General liens

affect all the property, both real and personal, of a debtor. This includes judgments, estate and inheritance taxes, decedent's debts, corporate franchise taxes, and Internal Revenue Service taxes. A lien on real estate differs from a lien on personal property. A lien attaches to real property at the moment it is filed. In contrast, a lien does not attach to personal property until the personal property actually is levied on or seized by the sheriff.

residential

all property used for single-family or multifamily housing, whether in urban, suburban, or rural areas

improvement

any artificial addition to land, such as a building or a fence

appurtenance

anything associated with the property, although not necessarily a direct part of it. Typical appurtenances include parking spaces in multiunit buildings, easements, water rights, and other improvements. An appurtenance is connected to the property, and ownership of the appurtenance normally transfers to the new owner when the property is sold.

Parking spaces in multiunit buildings, water rights, and other improvements are classified as

appurtenances.

Onsite improvements

are additions or enhancements within the buildings or lots being sold that increase the value of the properties within the development. Onsite improvements include roads and infrastructure or new buildings.

Tie-in Agreements

are agreements to sell one product only if the buyer purchases another product as well. The sale of the first (desired) product is "tied" to the purchase of a second, less desirable, product. Tie-in agreements are illegal.

In Illinois, which of these must be disclosed? a Stigmatized property b Multiple clients represented by the same agent c Registered sex offenders d Single agency

b Multiple clients represented by the same agent

If a borrower must pay $2,700 for points on a $90,000 loan, how many points is the lender charging for this loan? a. 2 b. 3 c. 5 d. 6

b. 3

To meet the continuing education requirement in Illinois, brokers must obtain how many hours of continuing education per year? a. 4 b. 6 c. 10 d. 18

b. 6

A property contains 10 acres. How many lots of not less than 50 feet by 100 feet can be subdivided from the property if 26,000 square feet are dedicated for roads? a. 80 b. 81 c. 82 d. 83

b. 81

Which of these activities requires a real estate license? a. A resident manager who collects rent on behalf of a building owner b. A service that, for a fee (not a commission), matches individuals from different parts of the country who want to exchange properties and assists them in doing so c. A multiple listing service providing listing information to members d. An executor selling a decedent's building

b. A service that, for a fee (not a commission), matches individuals from different parts of the country who want to exchange properties and assists them in doing so

Under the negotiated terms of a particular residential lease, the landlord is required to maintain the water heater. If a tenant is unable to get hot water because of a faulty water heater that the landlord has failed to repair after repeated notification, which remedy would be available to the tenant? a. Suing the landlord for damages b. Abandoning the premises under constructive eviction c. Being refunded back rent by the landlord d. Assigning the lease agreement

b. Abandoning the premises under constructive eviction

A buyer makes an offer in writing to purchase a house for $220,000, including its draperies, with the offer set to expire on Saturday at noon. The seller replies in writing on Thursday, accepting the $220,000 offer, but excluding the draperies. On Friday while the buyer considers this counteroffer, the seller decides to accept the original offer, draperies included, and states that in writing. At this point, which of these statements is TRUE? a. The buyer is legally bound to buy the house, although the buyer has the right to insist that the draperies be included. b. The buyer is not bound to buy. c. The buyer must buy the house and is not entitled to the draperies. d. The buyer must buy the house but may deduct the value of the draperies from the $220,000.

b. The buyer is not bound to buy.

What is necessary for a deed to be recorded in Illinois? a. The names of the grantor and grantee typed or printed below their signatures b. The full address of the grantee c. An escrow exemption statement d. Permanent tax index number

b. The full address of the grantee

A method of sealing off disintegrating asbestos is called a. capping. b. encapsulation. c. containment. d. contamination closure.

b. encapsulation.

The characteristics of value include a. progression. b. scarcity. c. anticipation. d. balance.

b. scarcity.

The three types of real estate licenses for individuals in Illinois are:

broker, managing broker, and leasing agent.

llinois license categories

broker, managing broker, and leasing agent

commercial

business property, including office space, shopping centers, stores, theaters, hotels, and parking facilities;

An investment property worth $180,000 was purchased seven years ago for $142,000. At the time of the purchase, the land was valued at $18,000. Assuming a 31½-year life for straight-line depreciation purposes, what is the present book value of the property? a $95,071 b $113,071 c $114,444 d $126,000

c $114,444

A woman earns an annual income of $60,000, and her husband earns $2,400 per month. How much can the couple pay monthly for their total housing payment if the lender uses a 28% qualifying ratio? a. $672 b. $1,400 c. $2,072 d. $2,352

c $2,072 $60,000 annual salary ÷ 12 months = $5,000 wife's monthly salary + $2,400 husband's monthly salary = $7,400 total monthly salary $7,400 total monthly salary × 28% (0.28) = $2,072 monthly payment

A person who successfully completed her Illinois real estate education requirement on November 1, 2014, may take the state license exam no later than a October 31, 2017. b December 31, 2017. c October 31, 2018. d November 1, 2018.

c October 31, 2018.

Certain figures must be determined by an appraiser before value can be computed by the income approach. Which of these is NOT used by an appraiser applying the income approach to value? a. Annual net operating income b. Capitalization rate c. Accrued depreciation d. Annual gross income

c. Accrued depreciation

Which law requires removing existing barriers when readily achievable in public buildings and adding Braille markings to elevator buttons? a. Fair Housing Act b. Equal Credit Opportunity Act c. Americans with Disabilities Act d. Regulation Z

c. Americans with Disabilities Act

A real estate licensee showed a pre-World War I house to a prospective buyer. The buyer has two toddlers and is worried about potential health hazards. Which of these is TRUE? a. There is a risk that urea-foam insulation was used in the original construction. b. The licensee is authorized to inspect for lead and remove any lead risks. c. Because the house was built before 1978, lead-based paint is likely present. d. Removal of lead-based paint and asbestos hazards is covered by standard title insurance policies.

c. Because the house was built before 1978, lead-based paint is likely present.

Mold and mildew found in the home fall into which category of pollutants? a. Pesticides b. Formaldehyde c. Biological d. Hazardous waste

c. Biological

A property owner wants to use water from a river that runs through his property to irrigate a potato field. To do so, the owner is required by his state's law to submit an application to the Department of Water Resources describing in detail the beneficial use he plans for the water. If the department approves the property owner's application, it will issue a permit allowing a limited amount of river water to be diverted onto the property. Based on these facts, what doctrine of law is the state likely relying upon in requiring the property owner to submit this application? a. Common-law riparian rights b. Common-law littoral rights c. Doctrine of prior appropriation d. Doctrine of highest and best use

c. Doctrine of prior appropriation

Which of these has NOT been proven to pose health hazards? a. Asbestos fibers b. Carbon monoxide c. Electromagnetic fields d. Lead-based paint

c. Electromagnetic fields

If a seller refuses to sell her home to a buyer on the basis of that buyer's race, what law is violated? a. ADA b. Fair Steering Act c. Fair Housing Act d. Fair Advertising Act

c. Fair Housing Act

Land in the northwest corner of Illinois is described with reference to which principal meridian? a. Second b. Third c. Fourth d. Fifth

c. Fourth

A tenant signs a lease that includes a schedule of rent increases on specific dates over the course of the lease term. What type of lease has the tenant signed? a. Percentage b. Net c. Graduated d. Index

c. Graduated

The agency primarily responsible for protecting Illinois's natural resources against pollution and other hazards is the a. Pollution Control Board of Illinois (PCB). b. Illinois Department of Environmental Affairs (IDEA). c. Illinois Environmental Protection Agency (IEPA). d. Illinois Department of Environmental Regulation (IDER).

c. Illinois Environmental Protection Agency (IEPA).

On Tuesday, a sponsoring broker received $1,750 in earnest money from a buyer. The seller accepted the offer on Thursday. Where and when must the sponsoring broker deposit the buyer's money? a. In the sponsoring broker's personal checking account by Wednesday b. In a special trust account no later than midnight on Thursday c. In a special non-interest-bearing trust account by Friday d. In a special non-interest-bearing trust account by Wednesday

c. In a special non-interest-bearing trust account by Friday

Which of these appraisal methods uses a rate of investment return? a. Sales comparison approach b. Cost approach c. Income approach d. Gross income multiplier method

c. Income approach

Which of these describes the theory of the mortgagor/mortgagee relationship in Illinois? a. Title theory b. Lien theory c. Intermediate mortgage theory d. Conventional theory

c. Intermediate mortgage theory

Which of these is classified as a general lien? a. Mechanic's lien b. Bail bond lien c. Judgment d. Real estate taxes

c. Judgment

A guest slips on an icy stair at an apartment building and is hospitalized. A claim against the building owner for medical expenses may be paid under which of these policies held by the owner? a. Workers' compensation b. Casualty c. Liability d. Fire and hazard

c. Liability

Which statement is TRUE regarding a cooperative? a. Title to the land and building are held by different owners. b. Unit owners hold real property interests. c. Maintaining and operating a cooperative is paid for by the corporation from charges assessed to unit owners, generally in the form of monthly fees. d. Because their proprietary leases are real property, unit owners are exempt from the fees or assessments condominium owners are often required to pay for building maintenance and operation.

c. Maintaining and operating a cooperative is paid for by the corporation from charges assessed to unit owners, generally in the form of monthly fees.

Mortgage title policies protect which parties from loss? a. Buyers b. Sellers c. Mortgagees d. Buyers and lenders

c. Mortgagees

In Illinois, which of these is TRUE when a decedent's real property escheats? a. The decedent's heirs must receive just compensation for the property's fair market value, measured at the time of the decedent's death. b. The state laws of eminent domain apply. c. Ownership of the property goes to the county in which it is located. d. Ownership of the property goes to the s

c. Ownership of the property goes to the county in which it is located.

Which of these statements BEST describes special assessment liens? a. They are general liens. b. They are paid on a monthly basis. c. They take priority over mechanics' liens. d. They cannot be prepaid in full without penalty.

c. They take priority over mechanics' liens.

A buyer bought a home from an owner. The owners agreed to owner-finance the property. The parties agreed to amortize the loan over a 15 year period. The buyer became the owner of record of the property,, and the seller had a lien against the property. What type of instrument was used to purchase the property? a. a loan assumption b. a land contract c. a purchase money mortgage d. a reverse annuity mortgage

c. a purchase money mortgage

A legally enforceable agreement under which two parties agree to do something for each other is called a.an escrow agreement. b.a legal promise. c. a valid contract. d. an option agreement.

c. a valid contract.

The market value of a parcel of real estate is a. an estimate of its future benefits. b. the amount of money paid for the property. c. an estimate of the most probable price it should bring. d. its value without improvements.

c. an estimate of the most probable price it should bring.

From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents a. the remaining economic life of the building. b. remodeling costs to increase rentals. c. loss of value due to any cause. d. costs to modernize the building.

c. loss of value due to any cause.

In Illinois, an individual who wishes to engage only in activities related to the leasing of residential real property a. must obtain a broker's license and associate with a sponsoring broker who specializes in residential leases. b. may obtain a certified leasing agent designation by completing a 20-hour training course and passing a written examination. c. may obtain a limited leasing agent license by completing 15 hours of instruction and passing a written examination. d. may engage in residential leasing activities without obtaining a license or other certification.

c. may obtain a limited leasing agent license by completing 15 hours of instruction and passing a written examination.

One result of the capital gains tax law is that MOST homeowners a. will pay capital gains tax at an 8% lower rate on their home sales. b. may build more equity in their primary residence. c. may use the $250,000 capital gains exclusion if they lived in the property for two out of the last five years. d. will be permitted to use the $125,000 over-55 exclusion more than once.

c. may use the $250,000 capital gains exclusion if they lived in the property for two out of the last five years.

The term encapsulation refers to the a. process of sealing a landfill with three to four feet of topsoil. b. way in which asbestos insulation is applied to pipes and wiring systems. c. method of sealing disintegrating asbestos. d. way in which asbestos becomes airborne.

c. method of sealing disintegrating asbestos.

A tenant enters into a commercial lease that requires a monthly rent based on a minimum set amount plus an additional amount determined by the tenant's gross receipts exceeding $5,000. This type of lease is called a a. standard lease. b. gross lease. c. percentage lease. d. net lease.

c. percentage lease.

A map illustrating the sizes and locations of streets and lots in a subdivision is called a a. gridiron plan. b. survey. c. plat. d. property report.

c. plat.

Avoid, control, transfer, or retain are the four alternative techniques of a. tenant relations. b. acquiring insurance. c. risk management d. property management.

c. risk management

voluntary lien

created intentionally by the property owner's action, such as when someone takes out a mortgage loan.

A 100-foot-by-125-foot lot sold for $125,000. What was the price per front foot? a. $10 b. $556 c. $1,000 d. $1,250

d $1,250 per front foot $125,000 sales price ÷ 100 front feet = $1,250 per front foot

What would you pay for a building producing $11,250 annual net income and showing a minimum rate of return of 9%? a. $101,250 b. $122,625 c. $123,626 d. $125,000

d $125,000 price $11,250 annual net income ÷ 9% (0.09) = $125,000 price

A conventional loan was closed on July 1 for $57,200 at 13.5% interest amortized over 25 years at $666.75 per month. On September 1, what would the principal amount be after the monthly payment was made? a $56,533.25 b $56,556.50 c $57,065.35 d $57,176.75

d $57,176.75

Which of these escrow records must be kept by a broker? a Journal b Ledger c Monthly reconciliation statements d All of these

d All of these

The rescission provisions of the Truth in Lending Act apply to which transactions? a Agricultural loans b Construction lending c Business financing d Consumer credit

d Consumer credit

What type of lease establishes a rental payment and requires that the lessor pay for the taxes, insurance, and maintenance on the property? a Percentage b Net c Expense only d Gross

d Gross

When searching the public record regarding title to a specific property, what is the researcher MOST likely to find? a Encroachments b Rights of parties in possession c Inaccurate survey d Judgments

d Judgments

In a township of 36 sections, which of these statements is TRUE? a Section 31 lies to the east of Section 32. b Section 18 is by law set aside for school purposes. c Section 6 lies in the northeast corner of the township. d Section 16 lies to the north of Section 21.

d Section 16 lies to the north of Section 21.

From what source do Illinois local units of government receive their powers of eminent domain? a A grant of authority signed by the governor b Article 5 of the U.S. Constitution c The Illinois Statehood Charter of 1818 and the Code of Administrative Procedure d The Illinois Constitution and Code of Civil Procedure

d The Illinois Constitution and Code of Civil Procedure

What is the annual real estate tax on a property valued at $135,000 and assessed for tax purposes at $47,250, with an equalization factor of 125%, when the tax rate is 2.5%? a. $945 b. $1,181 c. $1,418 d. $1,477

d. $1,477

A building was purchased for $285,000, with 10% down and a loan for the balance. If the lender charged the buyer two discount points, how much cash did the buyer need to come up with at closing if the buyer incurred no other costs? a. $28,500 b. $30,200 c. $31,700 d. $33,630

d. $33,630

A buyer of a $300,000 home has paid $22,000 as earnest money and has a loan commitment for 70% of the purchase price. How much more cash does the buyer need to bring to the closing, provided the buyer has no closing costs? a. $30,000 b. $58,000 c. $61,600 d. $68,000

d. $68,000

A buyer purchased a one-acre parcel for $2.15 per square foot. What is the selling price of the parcel? a. $344 b. $1,376 c. $46,827 d. $93,654

d. $93,654

Which lien affects all real and personal property of a debtor? a. Specific b. Voluntary c. Statutory d. General

d. General

Under Illinois law, which of the following is NOT required in order for a deed to be valid? a. Grantee's present address b. Grantor's signature c. Recital of consideration d. Grantee's signature

d. Grantee's signature

A buyer and a seller agree to the purchase of a house for $200,000. The contract states that closing will occur on April 30, 2014, and contains a clause stating that "time is of the essence." Which of these statements is TRUE? a. The closing must occur within three business days of execution of the contract. b. A "time is of the essence" clause is not binding on either party. c. The closing date cannot be stated as a particular calendar date. d. If the specified April 30, 2014, closing date passes and no closing takes place, the contract may have been breached.

d. If the specified April 30, 2014, closing date passes and no closing takes place, the contract may have been breached.

A landlord rented an apartment to a person with a disability, and the tenant wants to make certain changes to the unit to accommodate her disability. Which of these does NOT constitute a reasonable modification? a. Widen the doorways b. Lower the kitchen cabinets c. Lower the light switches d. Install a dog run for service animals in the lobby

d. Install a dog run for service animals in the lobby

Which of these is included in the definition of mortgage contained in the Illinois Mortgage Foreclosure Law? a. Installment contracts payable over a maximum of five years b. Assignments of beneficial interests in living trusts c. Deeds in trust d. Installment contracts payable over at least five years, with a 20% down payment

d. Installment contracts payable over at least five years, with a 20% down payment

On February 1, a licensee with ABC Realty takes a 3-month exclusive right-to-sell listing on a house. On March 1, the licensee moves out of state and inactivates his license. What happens to this listing? a. It is automatically terminated b. It becomes an open listing contract c. It is voidable by the owner because the licensee is no longer active d. It remains a valid exclusive right-to-sell listing contract with ABC Realty

d. It remains a valid exclusive right-to-sell listing contract with ABC Realty

A man and a woman enter into a real estate sales contract. Under the contract's terms, the man will pay the woman $500 a month for 10 years. The woman will continue to hold legal title to the property. The man will live on the property and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do these two people have? a. Option contract b. Contract for mortgage c. Unilateral contract d. Land or installment contract

d. Land or installment contract

In Illinois, which party usually pays the state and county transfer taxes? a. Buyer b. Buyer pays state taxes; seller pays county and municipal taxes c. Whichever party is specified in the local ordinance d. Seller

d. Seller

What do the terms condemnation and escheat have in common? a. They are examples of voluntary alienation. b. They are processes used in adverse possession claims. c. They are methods of transferring title by descent. d. They are examples of involuntary alienation.

d. They are examples of involuntary alienation.

Property deeded to a town "so long as it is used for recreational purposes" conveys a a. fee simple absolute. b. fee simple on condition precedent. c. leasehold interest. d. fee simple determinable.

d. fee simple determinable.

Under the covenant of quiet enjoyment, the grantor a. promises to obtain and deliver any instrument needed to make the title good. b. guarantees that if the title fails in the future, she will compensate the grantee. c. warrants that she is the owner and has the right to convey title to the property. d. guarantees that the title will be good against the title claims of third parties.

d. guarantees that the title will be good against the title claims of third parties.

A 15-year-old boy inherited many parcels of real estate from his late father and decided to sell one of the parcels. If the boy enters into a deed conveying his interest in the property to a purchaser, such a conveyance will be a. valid. b. void. c. invalid. d. voidable.

d. voidable.

When surveying land, a surveyor refers to the principal meridian that is a. nearest the land being surveyed. b. in the same state as the land being surveyed. c. not more than 40 townships or 15 ranges distant from the land being surveyed. d. within the rectangular survey system area in which the land being surveyed is located.

d. within the rectangular survey system area in which the land being surveyed is located.

To determine whether a location can be put to future use as a retail store, one would examine the a. building code. b. list of permitted nonconforming uses. c. housing code. d. zoning ordinance.

d. zoning ordinance.

Which of these statements is TRUE with respect to an earnest money deposit? a. It is generally provided with the closing or settlement instructions. b. It may never exceed $25,000. c. It is always required if the contract provides that "time is of the essence." d. It is evidence of the buyer's intention to carry out the terms of the contract in good faith.

d.It is evidence of the buyer's intention to carry out the terms of the contract in good faith.

Manufactured housing

defined as dwellings that are built off site and trucked to a building lot where they are installed or assembled. Manufactured housing includes modular, panelized, precut, and mobile homes. However, the term mobile home usually refers to factory-built housing constructed before 1976.

Detailed information about the age, education, behavior, and other characteristics of members of a population group is called

demographics.

The Junk Fax Prevention Act

does not legalize unsolicited fax advertisements or solicitations but does allow for an established business relationship exception. As a rule, a real estate licensee may not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the recipient.

express contract

exists when the parties state the terms and show their intentions in words. An express contract may be oral or written.

fiduciary standard

fiduciary standard is a legal standard that holds a licensee to the highest ethical standards that the law provides. Licensees have the duties of advice and counsel to the represented client and must be fair, honest, and accurate in dealing with consumers and customers whom they do not represent.

Taxation

is a charge on real estate to raise funds to meet the public needs of a government. Taxes on real estate include annual real estate taxes assessed by local governmental entities, including school districts; taxes on income realized by individuals and corporations on the sale of property; and special fees that may be levied for special projects. Nonpayment of taxes may give government the power to claim an interest in the subject property

fee simple determinable

is a fee simple defeasible estate that may be inherited. This estate is qualified by a special limitation (which is an occurrence or event). The language used to distinguish a special limitation—words such as so long as, while, or during—is the key to creating this special limitation.The former owner retains a possibility of reverter. If the limitation is violated, the former owner (or heirs or successors) can reacquire full ownership with no need go the court. The deed is automatically returned to the former owner.

designated agent

is a person authorized by the sponsoring broker to act as the agent of a specific principal. A designated agent is the only licensee in the company who has a fiduciary responsibility toward that principal. When one licensee in the company is a designated agent, the others are free to act as agents for the other party in a transaction. In this way, two licensees from the same real estate company may represent opposite sides in a property sale without entering dual agency.

universal agent

is a person empowered to do anything the principal could do personally. The universal agent's authority to act on behalf of the principal is virtually unlimited. In Illinois, a written power of attorney is required to create a universal agency.

mortgage lien

is a voluntary lien on real estate given to a lender by a borrower as security for a real estate loan. It becomes a lien on real property when the lender records the documents in the county where the property is located.

special agent

is authorized to represent the principal in one specific act or business transaction only, under detailed instructions. A real estate licensee usually is a "special" agent to a client. If hired by a seller, the licensee is limited to finding a ready, willing, and able buyer for the property.

Confidential information

is information given by a client to a licensee during the term of a brokerage agreement that the client requests (in writing or verbally) the licensee keep in confidence, relates to the client's negotiating position, or could damage the client's negotiating position if disclosed. This information must not be shared unless the client gives authorization for the licensee to share the information, the information must be shared by law, or the information is revealed by some person or entity other than the licensee.

involuntary lien

is not a matter of choice; it is created by law.

Financing

is the business of providing the funds that make real estate transactions possible. Most transactions are financed by means of mortgage loans or trust deed loans secured by the property.

Curtesy

is the identical interest that a husband has in the real estate of his deceased wife. Dower and curtesy provide that the nonowning spouse has a right to a one-half or one-third interest in the real estate for the rest of the spouse's life, even if the owning spouse wills the estate to others

Dower

is the life estate that a wife has in the real estate of her deceased husband. Dower and curtesy provide that the nonowning spouse has a right to a one-half or one-third interest in the real estate for the rest of the spouse's life, even if the owning spouse wills the estate to others

Novation

is the substitution of contracts. Substitution of a new contract for an existing contract is called novation. The new agreement may be between the same parties, or a new party may be substituted for either (this is novation of the parties). The parties' intent must be to discharge the old obligation. For example, when a real estate purchaser assumes the seller's existing mortgage loan, the lender may choose to release the seller and substitute the buyer as the party primarily liable for the mortgage debt.

Freehold estates

last for an indeterminate length of time, such as for a lifetime or forever. They include fee simple (or indefeasible fee), defeasible fee, and life estates. The first two of these estates continue for an indefinite period and may be passed along to the owner's heirs. A life estate is based on the lifetime of a person and ends when that individual dies.

Percentage Lease

lessee pays basic rent plus percent of gross sales (may pay property charges) A gross lease or a net lease may be a percentage lease. In a percentage lease, the rent is based on a minimum fixed rental fee plus a percentage of the gross income generated by the tenant doing business on the leased property. This type of lease is usually used for retail businesses and restaurants. The percentage charged is negotiable and varies depending on the nature of the business, the location of the property, and general economic conditions.

Negligent misrepresentation

occurs when the licensee should have known that a statement about a material fact was false. If the buyer relies on the licensee's statement, the licensee is liable for any damages that result.

Group boycotting

occurs when two or more businesses conspire against another business, or agree to withhold their patronage, in order to reduce competition. Group boycotting is illegal.

A homeowner is building a new enclosed front porch on his home. A truckload of lumber has been left in his driveway for use in building the porch. At this point, the lumber is considered

personal property.

A community that merges housing, recreation, and commercial units into one self-contained development is called a

planned unit development (PUD).

When demand for a commodity decreases and supply remains the same,

price tends to fall.

In general, when the supply of a certain commodity increases,

prices tend to drop

Real Estate Investment Trust

real estate investors take advantage of the same tax benefits as do mutual fund investors. A real estate investment trust does not have to pay corporate income tax as long as 95% of its income is distributed to its shareholders. To qualify as a REIT, at least 75% of the trust's income must come from real estate. Investors purchase certificates in the trust, which in turn invests in real estate or mortgages (or both). Profits are distributed to investors.

Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)

requires that each individual state must license and register mortgage loan originators (MLOs). An MLO is anyone who, for compensation or expectation of compensation, takes a residential mortgage loan by phone or in person. Among those exempt from license requirements are those who perform only clerical or administrative tasks and real estate licensees unless compensated by a loan originator.

Lien waivers (also called waivers of lien)

should be collected by the landowner from each contractor and subcontractor to create a continuing record that all lien claimants have released their lien rights. Materials suppliers and property managers should also be approached for releases.

Prepaid items

such as fuel oil in a tank, are expenses to be prorated that have been prepaid by the seller but not fully used up. They are therefore credits to the seller.

Offsite improvements

such as water lines and storm sewers, are made on public lands to serve the new development.

agency coupled with an interest

the agent has an interest in the subject of the agency, such as the property being sold. An agency coupled with an interest cannot be revoked by the principal or be terminated on the principal's death. FOR EXAMPLE A broker agrees to provide the financing for a condominium building being constructed by a developer in exchange for the exclusive right to sell the units once the building is completed. The developer may not revoke the listing agreement once the broker has provided the financing because this is an agency coupled with an interest.

remainder interest

the creator of the life estate may name a remainderman as the person to whom the property will pass when the life estate ends

The phrase bundle of legal rights is properly included in

the definition of real property.

Land

the earth's surface extending downward to the center of the earth and upward to infinity. Land includes not only the surface of the earth but also the underlying soil. Land also refers to objects that are naturally attached to the earth's surface, such as boulders and plants. Land includes the minerals and substances that lie far below the earth's surface (subsurface). It even includes the air above the earth, all the way up into space (airspace)

statutory law

the laws, rules, and regulations enacted by legislatures and other governing bodies

common law

the rules of a society established by court decisions

industrial

warehouses, factories, and land in industrial districts;

Sale-Leaseback Arrangements

Sale-leaseback arrangements are used to finance large commercial or industrial properties. The land and building, usually used by the seller for business purposes, are sold to an investor. The real estate is then leased back by the investor to the seller, who continues to conduct business on the property as a tenant. The buyer becomes the landlord (lessor), and the original owner becomes the tenant (lessee). This enables a business to free money tied up in real estate for use as working capital.

A new sponsored real estate licensee wants to find new business among the firm's expired listings. Under the National Do Not Call Registry, for how long after the listing has expired may the licensee solicit business from the firm's previous listings? a. 30 days b. 90 days c. 6 months d. 18 months

D. 18 months

Which of these may a sponsoring broker dictate to an independent contractor? a. Number of hours the person would have to work b. Work schedule that the person would need to follow c. Number of vacation days the person would receive d. Compensation the person would receive

D. Compensation the person would receive

Which of the following is true about prepayment penalties on VA or FHA loans for single family dwellings? a. The VA requires a prepayment penalty of 2% of the outstanding loan balance b. The FHA requires a prepayment penalty of 2% of the original principal amount c. Both the VA and the FHA require prepayment penalties of 3% of the outstanding loan balance. D. Neither the VA nor the FHA allows prepayment penalties.

D. Neither the VA nor the FHA allows prepayment penalties.

The broker's commission was $8,200. If the commission rate was 6%, what was the selling price of the property? a. $132,666.67 b. $136,666.67 c. $154,232.50 d. $175,452.48

B. $136,666.67

Under a listing agreement, the broker is entitled to sell the property for any price, as long as the seller receives $185,000. The broker may keep any amount over $185,000 as a commission. This type of listing is called a. an exclusive right-to-sell listing. b. an exclusive-agency listing. c. an open listing. d. a net listing.

D. a net listing.

Under Illinois law, an unlicensed assistant may a. negotiate commissions. b. engage in prospecting. c. sit at a property that is not open to the public. d. host a broker open house.

C. sit at a property that is not open to the public.

Capping (Landfill)

Capping is the process of laying two to four feet of soil over the top of the site and then planting grass on it to enhance the landfill's aesthetic value and prevent erosion. A ventilation pipe runs from the landfill's base through the cap to vent off accumulated natural gases created by the decomposing waste. Test wells around landfill operations are installed to constantly monitor the groundwater in the surrounding area, and soil analyses test for contamination.

Carbon Monoxide

Carbon monoxide is a by-product of fuel combustion that may result in death in poorly ventilated areas. Carbon monoxide (CO) is a colorless, odorless gas that occurs due to incomplete combustion as a by-product of burning such fuels as wood, oil, and natural gas. Furnaces, water heaters, space heaters, fireplaces, and wood stoves all produce CO as a natural result of combustion. When these appliances function properly and are properly ventilated, CO emissions are not a problem. However, when improper ventilation or equipment malfunctions permit large quantities of CO to be released into a residence or commercial structure, it poses a significant health hazard. The effects of CO are compounded by the fact that it is so difficult to detect. CO is quickly absorbed by the body, where it inhibits the blood's ability to transport oxygen and results in dizziness and nausea. As the concentrations of CO increase, the symptoms become more severe. More than 300 deaths from CO poisoning occur each year, with thousands of others requiring hospital emergency room care.

The six common-law fiduciary duties may be remembered by the acronym COLD AC

Care Obedience Loyalty Disclosure Accounting Confidentiality

During property inspection, there are indications that a methamphetamine laboratory had been in the house. This may constitute: a. an environmental hazard b. a latent defect c. curable obsolescence d. physical deterioration

a. an environmental hazard

A title search in the public records may be conducted by a. anyone. b.attorneys and abstractors only. c. attorneys, abstractors, and real estate licensees only. d.anyone who obtains a court order under the Freedom of Information Act.

a. anyone.

On a settlement statement, the cost of the lender's title insurance policy required for a new loan is usually shown as a a credit to the seller. b credit to the buyer. c debit to the seller. d debit to the buyer.

d debit to the buyer.

An investor hires a real estate licensee to locate suitable properties for investment purposes. When the licensee finds a property that the investor might be interested in buying, she is careful to find out as much as possible about the property's owners and why their property is on the market. The licensee's efforts to keep the investor informed of all facts that could affect a transaction is the common-law duty of a care. b truth. c obedience. d disclosure.

d disclosure.

The effective gross annual income from a property is $112,000. Total expenses for this year are $53,700. What capitalization rate was used to obtain a valuation of $542,325? a. 9.75% b. 10.25% c. 10.5% d. 10.75%

d. 10.75%

A vacant lot on a commercial street is rectangular in shape, contains 17,550 square feet, and has a depth of 150'. The owner of the lot plans to build and needs more space. Two lots are available; one on each side of the existing lot. Each of the adjacent lots is 150' in depth and contains 6,000 sq ft. If both lots are acquired and combined with the original lot, what is the total street frontage? a. 176' b. 181' c. 189' d. 197'

d. 197'

General real estate taxes

are based on the value of the property being taxed (ad valorem is Latin for "according to value"). They are specific, involuntary, statutory liens.

Ministerial acts

are informative or clerical services provided by a licensee to a consumer. Providing ministerial acts is not equivalent to active representation.

Specific liens

are secured by specific property and affect only that particular property. Specific liens on real estate include mechanics' liens, mortgage liens, real estate tax liens, and liens for special assessments and utilities.

Special service areas (SSAs)

are special taxing districts in municipalities that are established by ordinance, often at the request of developers of new housing subdivisions, in order to pass on the costs of the streets, landscaping, water lines, and sewer systems to homeowners who reside within the SSA. The SSA assessments pay off the municipal bonds that are issued to pay for the infrastructure. Assessments are billed annually on property tax bills, generally for a period of 20 to 30 years.

The legal presumption that information can be obtained through diligent inquiry is called a. actual notice. b. constructive notice. c. priority. d. subrogation.

b. constructive notice.

The equalization factor used in Illinois taxation is designed to a. increase the tax revenues of the state. b. correct discrepancies between the assessed values of similar parcels of land in various counties. c. correct inequities in taxes for senior citizens and disabled persons. d. decrease taxes for the poor and unemployed.

b. correct discrepancies between the assessed values of similar parcels of land in various counties.

A real estate licensee's responsibility to keep the principal informed of all the facts that could affect a transaction is the duty of a. care. b. disclosure. c. obedience. d. accounting.

b. disclosure.

All of these rights are included in the right to control one's property EXCEPT a.sell the property to a neighbor. b. exclude utility meter readers. c. erect No Trespassing signs. d. enjoy profits from its ownership.

b. exclude utility meter readers.

A person has a one-year leasehold interest in a house. The interest automatically renews itself at the end of each year. The person's interest is called a tenancy a. for years. b. from period to period. c. at will. d. at sufferance.

b. from period to period.

The appraised value of a residence with four bedrooms and one bathroom would probably be reduced because of a. external obsolescence. b. functional obsolescence. c. curable physical deterioration. d. incurable physical deterioration.

b. functional obsolescence.

A property manager who enters into a management agreement with an owner is usually a a. special agent. b. general agent. c. universal agent. d. designated agent.

b. general agent.

Fractional sections in the rectangular survey system along the northern or western borders of a check that are less than a quarter-section in area are called a. fractional parcels. b. government lots. c. portional sections. d. fractional townships.

b. government lots.

To qualify as a tax-deferred exchange, a property must: a. a principle residence b. held for productive use in trade or business c. financed through a federal institution d. amortized over a 30 year period

b. held for productive use in trade or business

The unauthorized practice of law was dealt with in which Illinois Supreme Court case? a. Illinois State Bar Association v. Illinois Board of REALTORS® b. Chicago Bar Association, et al. v. Quinlan and Tyson, Inc. c. Attorney Registration and Disciplinary Commission v. Illinois State Department of Professional Regulation d. Quinlan Associates, Inc. v. Illinois Real Estate Commission

b. hicago Bar Association, et al. v. Quinlan and Tyson, Inc.

A Lithuanian American real estate broker offers a special discount to Lithuanian American clients. This practice is a. legal in certain circumstances. b. illegal. c. legal but ill-advised. d. an example of steering.

b. illegal.

Calculate eight months' interest on a $5,000 interest-only loan at 9.5%. a. $39.58 b. $237.50 c. $316.67 d. $475.00

c $316.67 $5,000 loan × 9.5% (0.095) = $475 annual interest $475 annual interest ÷ 12 months × 8 months = $316.67 interest

The monthly rent on a warehouse is $1 per cubic yard. Assuming the warehouse is 36 feet by 200 feet by 12 feet high, what is the annual rent? a $3,200 b $9,600 c $38,400 d $115,200

c $38,400

An individual wants to be an appraiser in the northwest suburbs of Chicago. While she is willing to appraise residential properties, her real interest is in appraising commercial properties. If she wants to be qualified to conduct appraisals under FIRREA, this individual must a. become an associate real estate trainee appraiser. b. become a certified residential real estate appraiser. c. become a certified general real estate appraiser. d. do nothing, because individuals who wish to conduct appraisals under FIRREA must receive federal appraisal certification rather than state licensing.

c. become a certified general real estate appraiser.

Net Lease

lessee pays basic rent plus all or some property charges. In a net lease, the tenant pays all or some of the operating expenses in addition to the rent. The monthly rental constitutes net income for the landlord after operating costs have been paid. Leases for commercial or industrial buildings and the land on which they are located are usually net leases. In a triple-net lease (also called a net-net-net lease), the tenant pays all operating and other expenses in addition to rent. These expenses include taxes, assessments, insurance, maintenance, utilities, and other charges related to the premises.

Accrued items

such as water bills, Illinois real estate taxes, and interest on an assumed mortgage that is paid in arrears, are expenses to be prorated that are owed by the seller but later will be paid by the buyer. The seller therefore pays for these items by giving the buyer credits for them at closing.

To keep the principal meridian and range lines as near to six miles apart as possible, a correction called a government check is made. How large is a government check? a. 1 square mile b. 20 square miles c. 6 miles square d. 24 miles square

d. 24 miles square

A license has a property under contract with a financing contingency. The mortgage lender calls the licensee and asks if the contract price on a property can be decreased by $5,000. The mortgage lender explains that this will help the buyer qualify for a loan and help the seller close. Which of the following should the licensee do? a. prepare an addendum to the contract to indicate the price change. b. notify the sellers that the buyer is not financially qualified c. contact a new mortgage lender for the buyer d. refuse to change the price as this is illegal

d. refuse to change the price as this is illegal

accretion

increases in the land resulting from the deposit of soil by the water's action

comparative market analysis (CMA)

A CMA analyzes properties similar to the subject property in size, location, and amenities. It is distinctly different from an appraisal report offered by a licensed appraiser that is based only on an analysis of properties that have actually sold.

leasehold estate

A tenant's right to possess real estate for the term of the lease is called a leasehold estate (also called a less-than-freehold estate). A leasehold is generally considered personal property.

A highrise development that includes office space, stores, theaters, and apartment units is an example of

a mixed-use development (MUD).

What is the amount of profit excluded from capital gains for a principle residence by a single taxpayer?

$250,000

statutory year

(also called a banker's year) or a calendar year. A statutory year contains 12 months with 30 days in each month, for a total of 360 days. In a proration problem, you will be told whether to prorate through the day of closing or to the day of closing. This is very important when calculating the days owed. When prorating through the day of closing, the seller is responsible for the day of closing. When prorating to the day of closing, the buyer is responsible for the day of closing.

All exclusive brokerage agreements must specify that the sponsoring broker, through its sponsored licensees, will provide the following required minimum services: (3)

* Accept delivery of and present to the client all offers and counteroffers to buy, sell, or lease the client's property or the property the client seeks to purchase or lease * Assist the client in developing, communicating, negotiating, and presenting offers, counteroffers, and notices that relate to the offers and counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived * Answer the client's questions relating to the offers, counteroffers, notices, and contingencies

Illinois recognizes three categories of appraisers:

* Associate real estate trainee appraiser. Entry level appraiser; all reports must be cosigned by a state-certified residential real estate appraiser or state-certified general real estate appraiser. * Certified residential real estate appraiser. Qualified to appraise residential property of one unit to four units without regard to transaction value or complexity, but with restrictions in accordance with Title XI, USPAP, and criteria established by the AQB. * Certified general real estate appraiser. Qualified to appraise all types of real property without restrictions as to the scope of practice subject to USPAP requirements.

Requirements of a Valid Lease (4)

* Capacity to contract. The parties must have the legal capacity to contract. * Legal objectives. The objectives of the lease must be legal. *Offer and acceptance. The parties must reach a mutual agreement on all the terms of the contract. *Consideration. The lease must be supported by valid consideration. Rent is the normal consideration given for the right to occupy the leased premises. However, the payment of rent is not essential as long as consideration was granted in creating the lease itself. Sometimes, for example, this consideration is labor performed on the property. Because a lease is a contract, it is not subject to subsequent changes in terms unless these changes are executed in the same manner as the original lease.

Types of Buyer Agency Agreements

* Exclusive buyer agency agreement. Also called an exclusive right to represent, this is a true exclusive agency agreement. The buyer is legally bound to compensate the broker whenever the buyer purchases a property of the type described in the contract. The broker is entitled to payment regardless of whether she locates the property. Even if the buyer finds the property independently, the broker is entitled to payment. A sample exclusive buyer agency contract appears in Figure 6.2. * Exclusive-agency buyer agency agreement. Like an exclusive buyer agency agreement, this is an exclusive contract between the buyer and the broker. However, this agreement limits the broker's right to payment. Brokers are only entitled to payment if they locate the property the buyer ultimately purchases. The buyer retains the right to locate and buy property without financial obligation to the broker. Under this type of agreement, brokers risk "educating" buyers about the purchase process and showing many homes only to find that the buyers avoid compensating the broker by working directly with the owners of an unlisted property. * Open buyer agency agreement. This agreement is a nonexclusive buyer representation agreement between a broker and a buyer. It permits the buyer to enter into similar agreements with an unlimited number of brokers. The buyer is obligated to compensate only the broker who locates the property the buyer ultimately purchases.

the CAN-SPAM Act requires the following: (4)

* False or misleading header information is banned. An email's "From," "To," and routing information—including the original domain name and email address—must be accurate and identify the person who initiated the email. * Deceptive subject lines are prohibited. The subject line cannot mislead the recipient about the contents or subject matter of the message. * Email recipients must have an opt-out method. You must provide a return email address or another internet-based response mechanism that allows a recipient to ask you not to send future email messages to that email address, and requests must be honored. * Commercial email must be identified as an advertisement and include the sender's valid physical postal address.

Income on the loan is realized from two sources:

* Finance charges (collected at closing, such as loan origination fees and discount points) * Recurring income (the interest collected during the term of the loan)

Maximum Liability Against the Real Estate Recovery Fund

* For one act: $25,000 * Combined acts of any one licensee: $100,000 * Maximum to attorneys: 15% of award Licensees can receive payments from the fund only in cases of intentional misconduct that resulted in losses. The maximum fund liability of $100,000 must be spread equally among all co-owners.

Although the forms of ownership available are controlled by state laws, a fee simple estate may be held in three basic ways:

* In severalty, where title is held by one individual * In co-ownership, where title is held by two or more individuals * In trust, where a third individual holds title for the benefit of another

The Junk Fax Prevention Act does the following: (5)

* It sets out guidelines for what constitutes an established business relationship (EBR). * It does not place time limitations on EBRs. * It requires companies to offer a free method by which fax recipients may opt out of receiving future fax communications. The opt-out method must be available at any time of day, every day; and the opt-out information must be made available on the first page of the fax. * It permits businesses to send faxes to numbers that they had access to via an EBR before July 9, 2005, when the act became law. * It requires businesses to receive direct consent from EBR customers for whom they did not already have fax numbers before the effective date of the legislation, or to obtain these numbers via some other source to which the EBR customer willingly provided them with permission for such use by other parties (including the sender).

Encumbrances may be divided into two classifications:

* Liens (usually monetary charges) * Physical encumbrances (restrictions, easements, licenses, and encroachments)

In describing a lot from a recorded subdivision plat, three identifiers are used:

* Lot-and-block number * Name or number of the subdivision plat * Name of the county and state

Three basic methods are used to describe real estate:

* Metes and bounds * Rectangular (or government) survey * Lot and block (recorded plat)

The buyer's broker provides the following services throughout the real estate transaction: (5)

* Needs assessment. Determine and evaluate the needs, wants and financial capacity of the buyer. * Property selection. Locate the best property for the buyer by notifying buyers of new listings and for-sale-by-owner properties. * Viewing properties. Provide an objective evaluation of the property and show buyers how to compare properties. Disclose material facts that are pertinent to the property. * Negotiate. Strategize with the buyer, suggesting techniques that strengthen the buyer's position. Then, implement those strategies on the buyer's behalf. Provide price counseling and prepare a comparative market analysis (CMA) on the property the buyer is considering. * Follow-up. Resolve any issues that could prevent a closing from occurring. Provide ongoing communications with the client, preferably by e-mail for maintaining records.

Elements of a Contract (5)

* Offer and acceptance * Consider‐ation * Legally competent parties * Consent * Legal purpose

The four unities necessary to create a joint tenancy may be remembered by the acronym PITT:

* Possession * Interest * Time * Title

Factors to consider when preparing a CMA. (5)

* Property condition. Does the property need a lot of repairs? * Length of time on the market. This indicates the selling pace of the market, the level of inventory, or a potential problem with the property. * Supply and demand. Essentially, when supply increases and demand remains stable, prices go down; when demand increases and supply remains stable, prices go up. Greater supply means sellers need to attract more buyers, so they lower prices. Greater demand means producers can raise their prices because buyers compete for the product. * Seller's motivation. Is the property in distress, pre-foreclosure, or requiring a short sale? * Terms and contingencies. The fewer the contingencies, the stronger the offer, making it more attractive to the seller or bank (if property is bank owned or requires bank approval for a short sale).

Breach of Contract: Buyer Remedies

* Suit for specific performance * Suit for damages * Rescind contract

Breach of Contract: Seller Remedies

* Suit for specific perform‐ance * Suit for damages * Declare contract forfeited

In order to be treated as an independent contractor for federal tax purposes, a licensee must meet three specific criteria set out by the Internal Revenue Service:

* The individual must hold an active real estate license. * The individual must agree in writing not to be treated as an employee for federal tax purposes. * At least 90% of the individual's income as a licensee must be based on sales production rather than hours worked. * Independent contractors are responsible for paying their own income taxes and Social Security taxes.

Commissions and Disclosures (4)

* The sponsoring broker's compensation and policy with cooperating brokers who represent other parties in a transaction must always be disclosed. * If there is compensation from two parties to a transaction—from both the buyer and the seller—that needs to be disclosed in writing as well. * If a licensee refers the client to another source for services related to the transaction and the licensee has an interest greater than 1% in that source, it must be disclosed. * In addition, a licensee must disclose to a client all sources of compensation related to the transaction received by the licensee from a third party.

Exclusive-Agency Listing (3)

* There is one authorized broker. * Broker receives a commission only if she is the procuring cause. * Seller retains the right to sell without obligation

Four "unities" are required to create a joint tenancy:

* Unity of possession. All joint tenants hold an undivided right to possession of the property. * Unity of interest. All joint tenants hold equal ownership interests in the property. * Unity of time. All joint tenants acquire their interests at the same time. * Unity of title. All joint tenants acquire their interests by the same deed.

An employment agreement may be canceled for the following reasons: (7)

* When the agreement's purpose is fulfilled * When the agreement's term expires without a successful transfer * If the property is destroyed or its use is changed by some force outside the client's control, such as a zoning change or condemnation by eminent domain * If title to the property is transferred by operation of law, as in the case of the client's bankruptcy or foreclosure * If the broker and the client mutually agree to end the agreement * If either the broker or the client dies or becomes incapacitated * If either the broker or the client breaches the contract, the agreement is terminated and the breaching or canceling party may be liable to the other for damages.

A tenancy by the entirety may be terminated by (4)

* a court-ordered sale of the property to satisfy a judgment against the husband and the wife as joint debtors (the tenancy is dissolved so that the property can be sold to pay the judgment); * the death of either spouse (the surviving spouse becomes sole owner in severalty); * agreement between both parties through the execution of a new deed; or * divorce, which leaves the parties as tenants in common

A contract must

* be voluntary—no one may be forced into a contract; * an agreement or a promise—a contract is essentially a legally enforceable promise; * be made by legally competent parties—the parties must be viewed by the law as capable of making a legally binding promise; * be supported by legal consideration—a contract must be supported by something of value that induces a party to enter into the contract, and that something must be legally sufficient to support a contract; and * have to do with a legal act—no one may legally contract to do something illegal.

Real estate licensees can avoid liability with environmental issues by (4)

* becoming familiar with common environmental problems in their area, * looking for signs of environmental contamination, * advising (and including as a contingency) an environmental audit if contamination is expected, and * not giving specific opinions on environmental issues.

The most common deed forms are the (7)

* general warranty deed, * special warranty deed, * bargain and sale deed, * quitclaim deed, * deed in trust, * trustee's deed, and * deed executed pursuant to a court orde

If the transaction is not consummated, the real estate broker may still be entitled to a commission if the seller

* had a change of mind and refused to sell, * has a spouse who refused to sign the deed, * had a title with uncorrected defects, * committed fraud with respect to the transaction, * was unable to deliver possession within a reasonable time, * insisted on terms not in the listing (e.g., the right to restrict the use of the property), or * had a mutual agreement with the buyer to cancel the transaction.

Managing Brokers

* has taken additional courses and received a managing broker license. * A sponsoring broker may also be the managing broker of an office or may appoint a managing broker to serve as the managing broker * the managing broker is responsible for the supervision of all real estate activities performed by affiliated licensees. * each managing broker is responsible for recordkeeping, maintenance of the employment agreements entered into with each sponsored licensee, and maintenance of escrow monies.

The written agreements most commonly used by brokers and managing brokers are (6)

* listing agreements and buyer agency agreements, * real estate sales contracts, * options agreements, * escrow agreements, * leases, and * land contracts or contracts for deed.

Advertising Regulations - Licensees must (4)

* never advertise in only their name, * always include the firm's name, * never advertise another sponsoring broker's listings without permission, and * always keep advertisements up to date and clear.

Exemptions to the Fair Housing Act (3)

* owner-occupied buildings with no more than four units, * single-family housing sold or rented without the use of a real state licensee, and * housing operated by organizations and private clubs that limit occupancy to members.

The CMA is based on (3)

* recently closed (sold) properties, * properties currently on the market (properties in competition with the subject property), and * properties that did not sell (expired listings in the area).

Agency Relationship (225 ILCS 454/15-35) Before a listing agreement, buyer agency agreement, or any other brokerage agreement may be created, a consumer must be told in writing (4)

* that a designated agency exists, * the name or names of designated agent(s), * the sponsoring broker's compensation policy insofar as cooperating with brokers who represent other parties in a transaction, and * that the licensee is not acting as the agent of the customer at a time intended to prevent disclosure of confidential information.

The Real Estate License Act of 2000 Section 10-40 requires that "every brokerage company or entity, other than a sole proprietorship with no other sponsored licensees, shall adopt a company or office policy dealing with topics" such as

* the agency policy of the entity; * fair housing, nondiscrimination, and harassment; * confidentiality of client information; and * advertising.

Exemptions to the Fair Housing Act - The sale or rental of a single-family home is exempt when

* the home is owned by an individual who does not own more than three such homes at one time (and who does not sell more than one every two years), * a real estate licensee is not involved in the transaction, and * discriminatory advertising is not used.

All ads prepared by licensees, whether print, online, or via some other electronic media, must contain all the information necessary to communicate to the public in an accurate, direct, and readily comprehensible manner. At the very least, all ads should include (3)

* the licensee's name, * the company's name (as registered with IDFPR) and location (city and state), and * the city or area of the advertised property.

In Illinois, exclusive listing agreements must be in writing. All written exclusive listing agreements must include (8)

* the list price of the property, * the agreed-upon amount of commission and the time of payment, * the duration of the agreement, * the names of the broker and seller, * the identification of the property involved (address or legal description), * the duties of the listing broker, * a statement of nondiscrimination, and * a statement regarding antitrust.

Trade fixtures differ from other fixtures in two ways:

1. Fixtures belong to the owner of the real estate, but trade fixtures are usually owned and installed by a tenant for the tenant's use. 2. Fixtures are considered a permanent part of a building, but trade fixtures are removable

Tax write offs for home owners

1. Homeowners may deduct from their income some or all of the mortgage interest paid, 2. Deduct real estate taxes 3. certain loan origination fees in the year of purchase 4. loan discount points in the year of purchase

Physical Characteristics of Real Estate (3)

1. Immobility 2. Indestructibility 3. Uniqueness

Loss of a Branch Office Manager In the event a sponsoring broker dies or a managing broker leaves a branch office unexpectedly, a request may be made to IDFPR within __ days of the loss to grant an extension for continued office operations. The extension may be granted for up to __ days unless extended by IDFPR for good cause shown and upon written request by the broker or representative.

15 days 60 days

Unexpected Loss of Managing Broker - If a managing broker unexpectedly leaves a branch how long does the branch have to file for an extension and how long of an extension can be granted?

15 days 60 days

Disclosure of Special Compensation

A broker is prohibited from accepting "any finder fees, commissions, discounts, kickbacks, or other compensation from any financial institution, title insurance company, or any other person other than another licensee, without full disclosure in writing of such receipt to all parties to the transaction." Sponsored licensees receive any such compensation only through their respective sponsoring brokers.

Disclosure of Interest

A broker must disclose in writing to the parties to the transaction her status as a broker and any direct or indirect interest she has or may have in the subject property. For example, if the buyer or the seller is a licensed broker, this must be clearly stated in the contract.

Disclosure of Material Facts

A broker must not withhold material facts concerning a property of which she has knowledge from any purchaser, prospective purchaser, seller, lessee, lessor, or other party to the transaction. Material facts are any facts on which a reasonable person would base a contractual decision.

Broker's Price Opinion (BPO)

A broker's price opinion (BPO) is a less-expensive alternative of valuating properties often used by lenders working with home equity lines, refinancing, portfolio management, loss mitigation, and collections. Both Fannie Mae and Freddie Mac provide forms that are used by real estate licensees who perform BPOs for a fee. Although some BPOs are more extensive and include information about the neighborhood and interior analysis, many are simply "drive bys" that verify the existence of the property, along with a listing of comparable sales. A BPO should not be confused with an appraisal, which consists of more in-depth analysis of gathered information and which may be performed only by a licensed appraiser.

brokerage agreement

A brokerage agreement is an agreement for an agent or firm to provide brokerage services to a consumer and to receive compensation for providing those services. In Illinois, any exclusive brokerage agreement must be in writing.

Buydowns

A buydown is a way to temporarily (or permanently) lower the initial interest rate on a mortgage or deed of trust loan. Perhaps a homebuilder wishes to stimulate sales by offering a lower-than-market rate, or a first-time residential buyer may have trouble qualifying for a loan at the prevailing rates. In any case, a lump sum is paid in cash to the lender at the closing. The payment offsets (and so reduces) the interest rate and monthly payments during the mortgage's first few years.

Buyer Agency

A buyer agency relationship is established in the same way as any other agency relationship: by contract, agreement, or implication. The buyer's agent may receive a fee from the buyer or share in the seller-paid commission to the listing sponsoring broker or both, depending on the terms of the agency agreement. In Illinois, it is common for the listing sponsoring broker to share the listing commission with the buyer's sponsoring broker.

Chain of Title

A chain of title is the record of a property's ownership. Beginning with the earliest owner, title may pass to many individuals. Each owner is linked to the next so that a chain is formed. An unbroken chain of title can be traced through linking conveyances from the present owner back to the earliest recorded owner. Chain of title does not include liens and encumbrances or any other document not directly related to ownership.

Closing Agent or Closing Officer

A closing agent may be a representative of the title company, the lender, the real estate broker, or the buyer's or the seller's attorney. Some title companies and law firms employ paralegal assistants who conduct closings for their firms. The closing agent orders and reviews the title insurance policy or title certificate, surveys, property insurance policies, and other items. After reviewing the agreement of sale (purchase agreement), the agent prepares a closing statement indicating the division of income and expenses between the parties.

When is a commission earned?

A commission is usually considered earned when the work for which the real estate broker was hired has been accomplished. Most sales commissions are payable when the sale is consummated by delivery of the seller's deed. When the sales or listing agreement specifies no time for the payment of the broker's commission, the commission is usually earned when *a completed sales contract has been executed by a ready, willing, and able buyer; * the contract has been accepted and executed by the seller; and * copies of the contract are in possession by all parties.

conditional-use permit

A conditional-use permit (or special-use permit) is usually granted to a property owner to allow a special use of property, defined as an allowable conditional use, within that zone, such as a day care center in a residential district. For a conditional-use permit to be appropriate, the intended use must meet certain standards set by the municipality.

contract

A contract is a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.

Conventional Life Estate

A conventional life estate is created intentionally by the owner. It may be established either by deed at the time the ownership is transferred during the owner's life or by a provision of the owner's will after the owner's death. The estate is conveyed to an individual who is called the life tenant. The life tenant has full enjoyment of the ownership for the duration of his life. When the life tenant dies, the estate ends and its ownership passes, often as a fee simple to another designated individual, or returns to the previous owner.

Corporations

A corporation is a legal entity created under the authority of the laws of the state from which it receives its charter. A corporation is managed and operated by its board of directors. The charter sets forth the powers of the corporation, including its right to buy and sell real estate (based on a resolution by the board of directors). Because the corporation is a legal entity, it can own real estate in severalty or as a tenant in common.

Datum

A datum is a point, line, or surface from which elevations are measured or indicated. A surveyor would use a datum in determining the height of a structure or establishing the grade of a street. While there are established national and international datums, virtually all large cities instead use official local datums. For example, the official datum for Chicago is called the Chicago City Datum.

Granting Clause

A deed must contain a granting clause (also called words of conveyance) that states the grantor's intention to convey the property.

Deed of Trust

A deed of trust conveys naked title or bare legal title—that is, title without the right of possession. The deed is given as security for the loan to a third party, called the trustee. The trustee holds title on behalf of the lender, who is called the beneficiary. The beneficiary is the holder of the note. The conveyance establishes the actions that the trustee may take if the trustor (borrower) defaults under any of the deed of trust terms (Figures 15.1 and 15.2 compare mortgages and deeds of trust). In states where a deed of trust is generally preferred, foreclosure procedures for default are usually simpler and faster than for mortgage loans.

Federal Tax Liens

A federal tax lien (also called an IRS tax lien) results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes. A federal tax lien is a general, statutory, involuntary lien on all real and personal property held by the delinquent taxpayer. Its priority, however, is based on the date of filing or recording; it does not supersede previously recorded liens.

Fee Simple Defeasible

A fee simple defeasible (also called defeasible fee) estate is a qualified estate—that is, it is subject to the occurrence or nonoccurrence of some specified event. Two categories of defeasible estates exist: those subject to a condition subsequent or by a fee simple determinable (qualified by a special limitation).

Fixtures

A fixture is personal property that has been so affixed to land or a building that, by law, it becomes part of the real property. Examples of fixtures are heating systems, elevator equipment in highrise buildings, radiators, kitchen cabinets, attached bookcases, light fixtures, doors, and plumbing fixtures. Almost any item that has been added as a permanent part of a building is considered a fixture.

General Warranty Deed

A general warranty deed provides the greatest protection of any deed. It is called a general warranty deed because the grantor is legally bound by certain covenants or warranties (promises). In most states, the warranties are implied by the use of certain words specified by statute.

Growing Equity Mortgages (GEMs)

A growing equity mortgage (GEM) (also called a rapid-payoff mortgage) uses a fixed interest rate, but payments of principal are increased according to an index or a schedule. Thus, the total payment increases, and the loan is paid off more quickly. A GEM is most frequently used when the borrower's income is expected to keep pace with the increasing loan payments.

homestead

A homestead is a legal life estate in real estate occupied as the family home. In effect, the home is protected from unsecured creditors during the occupant's lifetime. In states that have homestead exemption laws, a portion of the area or value of the property occupied as the family home is exempt from certain judgments for debts such as credit card balances. The homestead is not protected from real estate taxes levied against the property or from a mortgage for the purchase or cost of improvements. In other words, if the debt is secured by the property, the property cannot be exempt from a judgment on that debt.

joint venture

A joint venture is a form of partnership in which two or more people or firms carry out a single business project. The joint venture is characterized by a time limitation resulting from the fact that the joint venturers do not intend to establish a permanent relationship.

Judgments

A judgment is an order issued by a court that settles and defines the rights and obligations of the parties to a lawsuit. When the judgment establishes the amount a debtor owes and provides for money to be awarded, it is called a money judgment. A judgment is a general, involuntary, equitable lien on both real and personal property owned by the debtor.

lease

A lease is a contract between an owner of real estate (the lessor) and a tenant (the lessee). It is a contract to transfer the lessor's rights to exclusive possession and use of the property to the tenant for a specified period. The lease establishes the length of time the contract is to run, the amount the lessee is to pay for use of the property, and other rights and obligations of the parties.

Options

A lease may contain an option that grants the lessee the privilege of renewing the lease (called a renewal option). However, the lessee must give notice of his intention to exercise the option. Some leases grant the lessee the option to purchase the leased premises (called a purchase option). This option normally allows the tenant the right to purchase the property at a predetermined price within a certain period, possibly the lease term. The lease might also contain a right of first refusal clause, allowing the tenant the opportunity to buy the property before the owner accepts an offer from another party.

Lease Purchase

A lease purchase is used when a tenant wants to purchase the property but is unable to do so. Perhaps the tenant cannot obtain favorable financing or clear title, or the tax consequences of a current purchase would be unfavorable. In this arrangement, the purchase agreement is the primary consideration, and the lease is secondary. Part of the periodic rent is applied toward the purchase price of the property until that price is reduced to an amount for which the tenant can obtain financing or purchase the property outright, depending on the terms of the lease-purchase agreement.

Leasing Agent's License

A leasing agent is limited to "leasing or renting residential real property, or attempting, offering, or negotiating to lease or rent residential real property, or supervising the collection, offer, attempt, or agreement to collect rent for the use of residential real property" (225 ILCS 454/5-5). Licensed brokers and managing brokers do not need a leasing agent license for these activities. Note that a person may engage in residential leasing activities for a period of 120 consecutive days without being licensed, so long as the person is acting under the supervision of a licensed managing broker and that managing broker has notified IDFPR that the person is pursuing licensure.

Legal Life Estate

A legal life estate is not created voluntarily by an owner. Rather, it is a form of life estate established by state law. It becomes effective automatically when certain events occur.

lien

A lien is a charge against property that provides security for a debt or an obligation of the property owner. If the obligation is not repaid, the lienholder is entitled to have the debt satisfied from the proceeds of a court-ordered or forced sale of the debtor's property.

Pur Autre Vie

A life estate also may be based on the lifetime of a person other than the life tenant. This is called a life estate pur autre vie ("for the life of another"). Although a life estate is not considered an estate of inheritance, a life estate pur autre vie provides for the life tenant's "ownership" only until the death of the person against whose life the estate is measured.

Life Estate

A life estate is a freehold estate limited in duration to the life of the owner or the life of some other designated person or persons. Unlike other freehold estates, a life estate is not inheritable. It passes to future owners according to the prearranged provisions of the life estate.

life tenant

A life tenant is entitled to the rights of ownership and can benefit from both possession and ordinary use and profits arising from ownership, just as if the individual held a fee simple interest. The life tenant's ownership may be sold, mortgaged, or leased, but it is always subject to the limitation of the life estate. Because the ownership will terminate on the death of the person against whose life the estate is measured, a purchaser, lessee, or lender can be affected if the life tenant has sold his rights. Because the interest is less desirable than a fee simple estate, the life tenant's limited rights must be disclosed if the property is sold. The new purchaser will lose the property at whatever point in time the original life tenant would have lost it.

Nonresidents and License by Reciprocity

A managing broker or broker who lives in a state that has a reciprocal licensing agreement with Illinois may be issued an Illinois license if the following conditions are met.

Managing Broker's License

A managing broker supervises licensees in one or more offices and is appointed as such by the sponsoring broker. An applicant may act as a manager broker for up to 90 days after her appointment as a managing broker has been filed with IDFPR without obtaining a managing broker's license.

material fact

A material fact is any fact that, if known, might reasonably be expected to affect the course of events.

Mechanics' Liens

A mechanic's lien is a specific, involuntary lien that gives security to persons or companies that perform labor or furnish material to improve real property. A mechanic's lien is available to contractors, subcontractors, architects, equipment lessors, surveyors, laborers, and other providers. This type of lien is filed when the owner has not fully paid for the work or when the general contractor has been compensated but has not paid the subcontractors or material suppliers.

mortgage

A mortgage is a voluntary lien on real estate. The person who borrows money to buy a piece of property voluntarily gives the lender the right to take that property if the borrower fails to repay the loan.

Net Listing

A net listing provision specifies that the seller will receive a net amount of money from any sale, with the excess going to the listing broker as commission. The broker is free to offer the property at any price greater than the net amount the seller wants; the difference is the broker's fee. Because a net listing can create a clear conflict of interest between the broker's fiduciary responsibility to the seller and the broker's profit motive, net listings are illegal in many states and are discouraged in others.

nondisturbance clause

A nondisturbance clause is a mortgage clause stating that in the event that the mortgagee forecloses on the mortgagor-lessor's building, the mortgagee agrees not to terminate the tenancies of lessees who pay their rent.

Nonrecourse Loans

A nonrecourse loan is one in which the borrower is not held personally responsible for the loan. The lender has no recourse against the borrower personally in the event of a default. Nonrecourse loans are common in those situations in which the lender is highly confident that the value of the property involved is itself sufficient security. Nonrecourse loans are more common in commercial and investment real estate transactions than in residential situations.

intermediate mortgage theory

A number of states have adopted an intermediate mortgage theory based on the principles of title-theory states but still requiring the mortgagee to formally foreclose to obtain legal title.

Package Loans

A package loan includes real and personal property. Package loans usually include furniture, drapes, kitchen range, refrigerator, dishwasher, washer, dryer, freezer, and other appliances as part of the sales price of the home.

Tenancy in Common

A parcel of real estate may be owned by two or more people as tenants in common. In a tenancy in common, each tenant holds an undivided fractional interest in the property. A tenant in common may hold, for example, a one-half or one-third interest in a property. The physical property, however, is not divided into a specific half or third. The deed creating a tenancy in common may or may not state the fractional interest held by each co-owner. If no fractions are stated, the tenants are presumed to hold equal shares. For example, if five people hold title, each would own an undivided one-fifth interest. Because the co-owners own separate interests, they can sell, convey, mortgage, or transfer their individual interests without the consent of the other co-owners. However, no individual tenant may transfer the ownership of the entire property. When one co-owner dies, the tenant's undivided interest passes according to the co-owner's will or living trust.

Partnerships

A partnership is an association of two or more persons who carry on a business for profit as co-owners. In a general partnership, all the partners participate in the operation and management of the business and share full liability for business losses and obligations. A limited partnership, on the other hand, consists of one or more general partners as well as limited partners. The business is run by the general partner or partners. The limited partners are not legally permitted to participate, and each can be held liable for business losses only to the extent of his or her investment.

Bail Bond Liens

A real estate owner who is charged with a crime for which she must face trial may post bail in the form of real estate rather than cash. The execution and recording of such a bail bond creates a specific, statutory, voluntary lien against the owner's real estate. If the accused fails to appear in court, the lien may be enforced by the court.

Land Contracts

A real estate sale can be made by a land contract, also called a contract for deed, an installment contract, or articles of agreement for warranty deed. Under a typical land contract, the seller (or vendor) retains legal title. The buyer (or vendee) takes possession and gets equitable title to the property. The buyer agrees to give the seller a down payment and pay regular monthly installments of principal and interest over a number of years. The buyer also agrees to pay real estate taxes, insurance premiums, repairs, and upkeep on the property. Although the buyer obtains possession under the initial land contract, the seller is not obligated to execute and deliver a deed to the buyer until the terms of the contract have been satisfied. Also, a land contract usually is assumable by subsequent purchasers, but this must be approved and agreed to by the seller.

Reverse Mortgages

A reverse mortgage allows people 62 or older to borrow money against the equity they have built in their home. Reverse mortgages are the opposite of conventional mortgages in that the homeowner's equity diminishes as the loan amount increases. The money may be used for any purpose, and the borrowers may opt to receive the money in a lump sum, fixed monthly payments, an open line of credit, or other options. The borrower is charged a fixed rate of interest, and no payments are due until the property is sold or the borrower defaults, moves, or dies.

Short Sales

A short sale is the process by which a lender accepts less than the amount owed on the property. A short sale most often occurs when the owner/borrower is unable to make the mortgage payments and cannot sell the house for what is owed on the property. The lender agrees to accept less because the lender may lose more money by acquiring the property through a foreclosure process and then holding the property until another buyer is found. The lender, however, may reserve the right to file suit to acquire the missing amount, called a deficiency. Where the deficiency amount is forgiven in the short sale, the IRS may consider this amount to be taxable income for the borrower.

straight loan

A straight loan (also called an interest-only loan or term loan) is a nonamortized loan that essentially divides the loan into two amounts to be paid off separately. The borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the term.

Latent Defects

A structural defect that would not normally be uncovered over the course of an ordinary inspection (due to the placement or type of defect, for example) is called a latent defect. The seller has a duty to disclose any known latent defects that threaten structural soundness or personal safety.

Statute of Limitations

A suit that may ultimately result in collection from the Real Estate Recovery Fund must be commenced within two years after the date the alleged violation occurred. IDFPR must initiate any action it plans to take against an individual licensee within five years of the violation.

Delivery and Acceptance

A title is not considered transferred until the deed is actually delivered to and accepted by the grantee. The grantor may deliver the deed to the grantee either personally or through a third party. The third party (called a settlement agent or escrow agent) will deliver the deed to the grantee as soon as certain requirements have been satisfied.

title search

A title search is an examination of all the public records to determine whether any defects exist in the chain of title. The records of the conveyances of ownership are examined, beginning with the present owner. Then the title is traced backward to its origin.

Living and Testamentary Trusts

A trust is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party.

valid contract

A valid contract meets all the essential elements that make it legally sufficient or enforceable and is binding in a court of law.

Consideration

A valid deed must contain a clause acknowledging that the grantor has received consideration. Generally, the amount of consideration is stated in dollars. When a deed conveys real estate as a gift to a relative, "love and affection" may be sufficient consideration. In most states, however, it is customary to recite at least a nominal consideration, such as "$10 and other good and valuable consideration."

variance (zoning)

A variance (also called an exception), on the other hand, provides relief if zoning regulations deprive an owner of the reasonable use of the property. To qualify for a variance, the owner must demonstrate the unique circumstances that make the variance necessary. In addition, the owner must prove that she is harmed and burdened by the regulations. Any such variance is said to "run with the land," meaning the exception is passed on to any later owners after a change has been made.

void contract

A void contract has no legal force or effect because it lacks some or all of the essential elements of a contract. A void contract was never a legal contract.

voidable contract

A voidable contract appears on the surface to be valid but may be rescinded or disaffirmed by one or both parties based on some legal principle. If it is not disaffirmed, a voidable contract may nevertheless end up being executed. A voidable contract is considered by the courts to be valid if the party who has the option to disaffirm the agreement does not do so within a period of time prescribed by state law.

Transfer of Title by Will

A will is an instrument made by an owner to convey title to real or personal property after the owner's death. A will is a testamentary instrument; that is, it takes effect only after death. This differs from a deed, which must be delivered during the lifetime of the grantor and conveys a present interest in property. While the testator (the person who makes a will) is alive, any property included in the will can still be conveyed by the owner. The parties named in a will have no rights or interests as long as the party who made the will lives; they acquire interest or title only after the owner's death.

Wraparound Loans

A wraparound loan enables a borrower with an existing mortgage or deed of trust loan to obtain additional financing from a second lender without paying off the first loan. The second lender gives the borrower a new, increased loan at a higher interest rate and assumes payment of the existing loan. The total amount of the new loan includes the existing loan as well as the additional loan taken out by the borrower. The borrower makes payments to the new lender based on the total amount, and the new lender in turn makes payments on the original loan out of the borrowers' payments. A wraparound loan is only possible if the original loan permits it. An alienation clause or a due-on-sale clause in the original loan documents may prevent a sale under a wraparound loan. An alienation clause prevents the borrower from transferring the property, and the due-on-sale clause means that if a property is sold, full payment must be made to the lender and the loan ends.

A property was listed with a broker who belonged to a multiple listing service and was sold by another member broker for $153,500. The total commission was 6% of the sales price. The selling broker received 60% of the commission, and the listing broker kept the balance. What was the listing broker's commission? a. $3,684 b. $4,464 c. $5,526 d. $36,840

A. $3,684

Under what conditions is a disclosure of contemporaneous offers required? a. When a buyer's agent is acting as designated agent for more than one buyer interested in buying the same property b. When a seller's agent is also representing the buyer on the same transaction c. When a buyer's agent does not want to engage in dual agency d. When a buyer wants the agent to also represent the seller on the sale of her property

A. When a buyer's agent is acting as designated agent for more than one buyer interested in buying the same property

Anticipation

According to the principle of anticipation, value is created by the expectation that certain events will occur. Value can increase or decrease in anticipation of some future benefit or detriment. For example, the value of a house may be affected if rumors circulate that an adjacent property may be converted to commercial use in the near future.

Contingencies

Additional conditions that must be satisfied before a sales contract is fully enforceable are called contingencies. A contingency includes the following three elements: * The specific actions necessary to satisfy the contingency * The time frame within which the actions must occur * Who is responsible for paying any costs involved

abstract of title

An abstract of title is a summary report of what the title search found in the public record. The person who prepares this report is called an abstractor. The abstractor searches all the public records and then summarizes the various events and proceedings that affected the title throughout its history.

addendum

An addendum is an addition. an addendum is any provision added to an existing contract without altering the content of the original. An addendum is essentially a new contract between the parties that includes the original contract's provisions "by reference"; that is, the addendum mentions the original contract. An addendum must be signed by both parties. For example, an addendum might be an agreement to split the cost of repairing certain flaws discovered in a home inspection.

Implied Agency

An agency also may be created by implied contract. This occurs when the actions of the licensee indicate that she has formed an agency relationship with a party. Even though the licensee may not have consciously planned to create an agency relationship, the parties can create one unintentionally, inadvertently, or accidentally by their actions.

listing agreement

An agency relationship between a seller and a sponsoring broker is generally created by a written employment contract, commonly called a listing agreement, which authorizes the sponsoring broker (or designated licensees) to find a buyer or a tenant for the owner's property.

Creation of Agency

An agency relationship may be based on a formal agreement between the parties (express agency) or it may result from the parties' behavior (implied agency).

agent

An agent is the individual who is authorized and consents to represent the interests of another person. In the real estate business, a firm's sponsoring broker is the agent and shares this responsibility with the licensees who work for him.

amendment

An amendment is a change. An amendment is a change to an existing contract. Amendments must be signed or initialed by all parties.

REAL ESTATE APPRAISAL

An appraisal is an opinion of value based on supportable evidence and approved methods. An appraisal report is an opinion of market value on a property given to a lender or client with detailed and accurate information. An appraiser is an independent person trained to provide an unbiased opinion of value in an impartial and objective manner, according to the appraisal process. Appraising is a professional service performed for a fee.

Easement by Condemnation

An easement by condemnation is acquired for a public purpose, through the right of eminent domain. The owner of the servient tenement must be compensated for any loss in property value.

easement in gross

An easement in gross is an individual or company interest in or right to use someone else's land (see Figure 7.5). A railroad's right-of-way is an easement in gross, as are the rights-of-way of utility easements (such as for a pipeline or high-tension power line). Commercial easements in gross may be assigned, conveyed, and inherited.

easement

An easement is the right to use the land of another for a particular purpose. It may exist in any portion of the real estate, including the airspace above or a right-of-way across the land. Easements are by agreement at any time or created by a seller when a property is conveyed.

Easement by Necessity

An easement that is created when an owner sells a parcel of land that has no access to a street or public way except over the seller's remaining land is an easement by necessity.

encumbrance

An encumbrance is a claim, charge, or liability that attaches to real estate. An encumbrance does not give a possessory interest in real property; it is not an estate. In essence, an encumbrance is a right or an interest held by someone other than the property owner that affects title to the real estate but does not necessarily prevent a transfer of title. As such, an encumbrance may decrease the value or obstruct the use of the property.

encumbrance

An encumbrance is any charge or claim that attaches to real property and lessens its value or impairs its use. An encumbrance does not necessarily prevent the transfer or conveyance of the property, but because it is "attached" to the property, it transfers along with it. Liens differ from other encumbrances, however, because they are financial or monetary in nature and attach to the property because of a debt.

estate at sufferance

An estate at sufferance (also called a tenancy at sufferance) arises when a tenant who lawfully possessed real property continues in possession of the premises without the landlord's consent after the rights expire (a holdover). This estate can arise when a tenant for years fails to surrender possession at the lease's expiration and continues until the landlord completes the eviction process. A landlord has the option of considering an estate at sufferance (a holdover tenant's action) as being a willful withholding of possession, in which case the landlord is entitled to charge double rent.

estate at will

An estate at will (also called a tenancy at will) gives the tenant the right to possess property with the landlord's consent for an unspecified or uncertain term. An estate at will is a tenancy of indefinite duration; it continues until it is terminated by either party giving proper notice. An estate at will may be created by express agreement or by operation of law and is automatically terminated by the death of either the landlord or the tenant. During the existence of an estate at will, the tenant has all the rights and obligations of a lessor-lessee relationship, including the duty to pay rent at regular intervals.

estate for years

An estate for years (also called a tenancy for years or fixed-term tenancy) is a leasehold estate that continues for a definite period of time. That period may be years, months, weeks, or even days. An estate for years always has specific beginning and ending dates. If both parties agree, the estate for years may be terminated before the expiration date. Otherwise, neither party may terminate without showing that the lease agreement has been breached. Any extension of the tenancy requires that a new contract be negotiated.

holdover tenancy

An estate from period to period also might be created when a tenant with an estate for years remains in possession (holds over) after the lease term expires. If no new lease agreement has been made, a holdover tenancy is created. The landlord's acceptance of rent usually is considered conclusive proof of acceptance of the periodic (holdover) tenancy. Some leases stipulate that in the absence of a renewal agreement, a tenant who holds over does so as a month-to-month tenant. In Illinois, a holdover tenancy is for the same term as the estate from period to period.

estate in land

An estate in land is the degree, quantity, nature, and extent of an owner's interest in real property. Many types of estates exist, but not all interests in real estate are estates. To be an estate in land, an interest must allow possession, meaning the holding and enjoyment of the property either now or in the future, and must be measured according to time. Historically, estates in land have been classified primarily by their length of time of possession (i.e., as freehold estates and leasehold estates).

executory contract

An executory contract exists when one or both parties still have an act to perform. A sales contract is an executory contract from the time it is signed until closing: ownership has not yet changed hands, and the seller has not received the sales price. At closing, the sales contract is executed.

buyer agency agreement

An express agency relationship between a buyer and a sponsoring broker is created by a buyer agency agreement. Similar to a listing agreement, it stipulates the activities and responsibilities the buyer expects from the sponsoring broker (or designated licensees) in finding the appropriate property for purchase or rent.

severance

An item of real property can become personal property by severance. For example, a growing tree is real estate until the owner cuts it down, severing it from the property. Similarly, an apple becomes personal property once it is picked from a tree, and a wheat crop becomes personal property once harvested.

offer

An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree. Proposing any deviation from the terms of the offer constitutes a rejection of the original offer and creates a new offer. The original offer ceases to exist because the seller has rejected it.

Open-End Loans

An open-end loan secures a note executed by the borrower to the lender. It also secures any future advances of funds made by the lender to the borrower. The interest rate on the initial amount borrowed is fixed, but interest on future advances may be charged at the market rate in effect. An open-end loan is often a less costly alternative to a home improvement loan. It allows the borrower to "open" the mortgage or deed of trust to increase the debt to its original amount, or the amount stated in the note, after the debt has been reduced by payments over a period of time. The mortgage usually states a maximum amount that can be secured, the terms and conditions under which the loan can be opened, and the provisions for repayment.

Options

An option is a contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or lessee) the right to buy or lease the owner's property at a fixed price within a certain period. The optionee pays a fee (agreed-on consideration) for this option right. The optionee has no other obligation until he decides to either exercise the option right or allow the option to expire. An option is enforceable by only one party—the optionee.

Option Listing

An option listing provision gives the broker the right to purchase the listed property at some point in the future. The specific length of the time period is by agreement and usually matches the length of the listing. Use of an option listing may open the broker to charges of fraud unless the broker is scrupulous in fulfilling all obligations to the property owner. In some states, a broker who chooses to exercise such an option must first inform the property owner of the broker's profit in the transaction and secure in writing the owner's agreement to it.

General Warranty Deed Five covenants:

Covenant of seisin Covenant against encumbrances Covenant of quiet enjoyment Covenant of further assurance Covenant of warranty forever

unenforceable contract

An unenforceable contract may seem on the surface to be valid; however, neither party can sue the other to force performance. A contract may be unenforceable because it is not in writing, as may be required under the statute of frauds. If a contract contains any ambiguity, the courts generally interpret the agreement against the party who prepared it.

Legal Requirements for Making a Will

Any person 18 or older, who is of sound mind and memory, may make a will. A will must be in writing and signed and declared by the maker (the testator) in the presence of two or more witnesses to be her last will and testament. Witnesses cannot be beneficiaries under the will because their gifts will likely be voided by the probate court

Civil Penalty for the Unlicensed Practice of Real Estate

Anyone who does so is subject to a civil fine (in addition to any other penalties provided by law) of up to $25,000 for each offense as determined by IDFPR. The civil fine is assessed by and payable to IDFPR after a disciplinary hearing. IDFPR has the authority to investigate any and all unlicensed activity. The civil fine must be paid within 60 days after the effective date of the order.

deed in lieu of foreclosure

As an alternative to foreclosure, a lender may accept a deed in lieu of foreclosure from the borrower. This is sometimes called a friendly foreclosure because it is carried out by mutual agreement rather than by lawsuit. The major disadvantage of the "deed in lieu" is that the mortgagee takes the real estate subject to all junior liens. In a foreclosure action, all junior liens are eliminated. Also, by accepting a deed in lieu of foreclosure, the lender usually loses any rights pertaining to FHA or private mortgage insurance or VA guarantees. Finally, a deed in lieu of foreclosure is still considered an adverse element in the borrower's credit history.

Asbestos

Asbestos is a fire-resistant mineral that was once used extensively as insulation and to strengthen other building materials. Asbestos was found in most construction, including residential, until its use was banned in 1978. The EPA estimates that, even today, about 20% of the nation's commercial and public buildings have asbestos-containing materials (ACMs). Asbestos was used to cover pipes, ducts, and heating and hot water units. Its fire-resistant properties made it a popular material for use in floor tile, exterior siding, roofing products, linoleum flooring materials, joint compounds, wallboard material, backing, and mastics. Though some ACMs are easy to identify (e.g., insulation around heating and water pipes), identifying asbestos may be more difficult when it is behind walls or under floors. Asbestos is highly friable, meaning that as it ages, asbestos fibers break down easily into tiny filaments and particles. This makes asbestos especially harmful when it is disturbed or exposed and becomes airborne, as often occurs during renovation or remodeling. Those who inhale asbestos fibers often develop serious and deadly respiratory diseases decades later. While federal regulations establish guidelines for owners of public and commercial buildings to test for ACMs, there are no guidelines regarding the presence of asbestos in residential properties. Because improper removal may further contaminate the air within the structure, asbestos removal requires state-licensed technicians and specially sealed environments. The waste generated must be disposed of at a licensed facility, which further adds to the cost of removal. Encapsulation, or the sealing off of disintegrating asbestos, is an alternate method of asbestos control that may be preferable to removal in certain circumstances. However, an owner must periodically monitor the condition of the encapsulated asbestos to make sure it is not disintegrating.

"To recover a commission for brokerage services, a sponsoring broker must be employed as the agent of the seller." Which of these statements BEST explains this sentence? a. The sponsoring broker must work in a real estate office. b. The seller must have made an express or implied agreement to pay a commission to the sponsoring broker for selling the property. c. The sponsoring broker must have asked the seller the price of the property and then found a ready, willing, and able buyer. d.The sponsoring broker must have one or more sponsored licensees employed in the office.

B. The seller must have made an express or implied agreement to pay a commission to the sponsoring broker for selling the property.

After a particularly challenging transaction finally closes, the client gives the sponsored broker representing the client a check for $500 "for all your extra work." Which statement is TRUE? a. While such compensation is irregular, it is appropriate for the sponsored broker to accept the check. b. The sponsored broker may receive compensation only from the sponsoring broker. c. The sponsored broker should accept the check and deposit it immediately in a special escrow account. d. The sponsoring broker is entitled to 80% of the check.

B. The sponsored broker may receive compensation only from the sponsoring broker.

Illinois requires that listing agreements contain a. a multiple listing service (MLS) clause. b. an automatic expiration date or statement of client's right to terminate. c. an automatic extension clause. d. a broker protection clause.

B. an automatic expiration date or statement of client's right to terminate.

A comparative market analysis a. is the same as an appraisal. b. can help the seller price the property. c. by law must be completed for each listing taken. d. should not be retained in the property's listing file.

B. can help the seller price the property.

In Illinois, the usual "proof" that the listing broker has earned commission is the a.submission to the seller of a signed offer from a ready, willing, and able buyer. b. closing of the sale. c. signing of an exclusive listing contract. d. deposit of the buyer's earnest money into escrow.

B. closing of the sale.

An Illinois real estate licensee who is engaged as an independent contractor a. is considered an employee by the IRS for tax purposes. b. must have a written contract with the sponsoring broker. c. must be covered by workers' compensation. d. may work as an independent contractor for two or more sponsoring brokers.

B. must have a written contract with the sponsoring broker.

A seller listed her residence with a broker. The broker brought an offer at full price and satisfying terms of the listing from buyers who were ready, willing, and able to pay cash for the property. However, the seller changed her mind and rejected the buyers' offer. In this situation, the seller a. must sell her property. b. owes a commission to the broker. c. is liable to the buyers for specific performance. d. is liable to the buyers for compensatory damages.

B. owes a commission to the broker.

Theft, smoke damage, and damage from fire are covered under which type of homeowners insurance policy?

Basic form

Fee Simple Estate

Because fee simple estates are of unlimited duration, they are said to run "forever." Upon the death of the owner, a fee simple passes to the owner's heirs or as provided by will. A fee simple estate is also called an estate of inheritance (because that is how it passes unless the owner chooses to sell the property) or fee ownership. There are two major divisions of fee ownership: fee simple absolute and fee simple defeasible.

Benchmarks

Benchmarks are permanent reference points that have been established throughout the United States. They are usually embossed brass markers set into solid concrete or asphalt bases. While used to some degree for surface measurements, their principal use is for marking datums.

Blockbusting

Blockbusting (also called panic selling) is the act of encouraging people to sell or rent their homes by claiming that the entry of a protected class of people into the neighborhood will have some sort of negative impact on property values.

A listing agreement expires on May 2. Which event would NOT terminate the listing? a. The agreement is not renewed after May 2. b. The broker dies on April 29. c. On April 15, the seller tells the broker that he is dissatisfied with the broker's marketing efforts. d. The seller's house is destroyed by fire on April 25.

C. On April 15, the seller tells the broker that he is dissatisfied with the broker's marketing efforts.

Which statement is TRUE regarding the Junk Fax Prevention Act of 2005? a. Real estate licensees are not required to search the national registry before making telemarketing calls to solicit listings or to solicit potential buyers. b. Real estate licensees are exempt from telemarketing laws. c. Real estate licensees may phone or fax any visitors to an open house who provide their phone numbers on a sign-in sheet, but only where the visitor is given either an option to opt out or notice that they will be called. d. Real estate licensees may not advertise their listings by faxing promotional homebuyers with whom they have an existing business relationship.

C. Real estate licensees may phone or fax any visitors to an open house who provide their phone numbers on a sign-in sheet, but only where the visitor is given either an option to opt out or notice that they will be called.

Two real estate companies agreed to boycott the services of a title company so that a new title company can take over the corresponding market share. The two real estate companies are violating the a. Antiboycotting Act. b. Illinois Lincoln Antitrust Act. c. Sherman Antitrust Act. d. Lincoln Fair Trade Act.

C. Sherman Antitrust Act.

A real estate broker and a seller enter into a listing agreement that contains the following language: "Seller will receive $100,000 from the sale of the subject property. Any amount greater than $100,000 will constitute Broker's sole and complete compensation." Which of these statements is TRUE? a. This agreement is an example of an option listing. b. If the seller's home sells for exactly $100,000, the broker still will be entitled to receive the standard commission in the area. c. The broker may offer the property for any price over $100,000, but the agreement may be unethical. d. This type of listing is called an open listing because the selling price is left open.

C. The broker may offer the property for any price over $100,000, but the agreement may be unethical.

A city decides to build a new library. Which of these terms BEST describes the action taken by the city to acquire the land for the new library? a. Zoning allows the city to take the land by granting a variance for the library. b. County laws permit the city to take the land by escheatment so long as the property owners are paid just compensation. c. The city has the right to take the land by eminent domain as long as just compensation is paid the property owners. d. The sheriff sells the property at a public sale and pays the owners just compensation, and then the city could build the

C. The city has the right to take the land by eminent domain as long as just compensation is paid the property owners.

According to the Illinois license law, a sponsored real estate licensee may NOT a. represent both buyer and seller. b. buy or sell real estate for himself. c. accept a commission from another broker unless previously earned. d. engage in dual agency.

C. accept a commission from another broker unless previously earned.

Community Property

Community property laws are based on the idea that a husband and a wife are equal partners in the marriage and therefore any property acquired during a marriage is considered to be obtained by mutual effort. Community property consists of all other property, both real and personal, acquired by either spouse during the marriage. Any conveyance or encumbrance of community property requires the signatures of both spouses. When one spouse dies, the survivor automatically owns one-half of the community property. The other half is distributed according to the deceased spouse's will.

Anyone who has an interest in a parcel of real estate can take certain steps, called giving notice, to ensure that others know about the individual's interest. There are two basic types of notice:

Constructive notice: Could or should know with reasonable inquiry. Constructive notice is the legal presumption that information may be obtained by an individual through due diligence. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest. Actual notice: Knows for certain by personal service. Actual notice (also called direct knowledge) means not only that the information is available but also that someone has been given the information and actually knows it. An individual who has searched the public records and inspected the property has actual notice

Federal regulations on unsolicited email a. require prior permission of recipients in order to send email to them. b. require that email lists be scrubbed every 31 days. c. exempt phone calls to individuals with whom the real estate office has a prior business relationship. d. require commercial emails to include a physical address, among other things, for the sender.

D. require commercial emails to include a physical address, among other things, for the sender.

The final decision on a property's listed price should be determined by the a. broker based on information from the local MLS. b. broker and the appraiser. c. broker and seller equally. d. seller based on the broker's CMAs and advice.

D. seller based on the broker's CMAs and advice.

Increasing reserve requirements raises rates:

Decreases money flow Slows economy and purchases Slows inflation

Eminent Domain

Eminent domain is the government's right to acquire property for public use. Condemnation is the actual process of taking the property. In the taking of property, just compensation must be paid to the owner, and the rights of the property owner must be protected by due process of law.

Discount Rate

Federal Reserve member banks are permitted to borrow money from the district reserve banks in order to expand their lending operations. The discount rate is the rate charged by the Fed when it lends money to its member banks. The prime rate (the short-term interest rate charged to a bank's largest, most creditworthy customers) is strongly influenced by the Fed's discount rate. In turn, the prime rate is often the basis for determining a bank's interest rate on other loans, including home mortgages. When the Fed discount rate is high, bank interest rates are high. When bank interest rates are high, fewer loans are made and less money circulates in the marketplace. A lower discount rate results in lower interest rates, more bank loans, and more money in circulation.

Estate and Inheritance Tax Liens

Federal estate taxes and state inheritance taxes (as well as the debts of decedents) are general, statutory, involuntary liens that encumber a deceased person's real and personal property. These are normally paid or cleared in probate court proceedings.

Foreclosure

Foreclosure is a legal procedure in which property pledged as security for a loan is sold to satisfy the debt.

Appropriation

Formal appropriation is the way a taxing body actually authorizes the expenditure of funds and provides for the sources of the funding. Appropriation generally involves the adoption of an ordinance or the passage of a law that states the specific terms of the proposed taxation. The amount to be raised from the general real estate tax is then imposed on property owners through a tax levy. A tax levy is the formal action taken to impose the tax, usually by way of a vote of the taxing district's governing body.

Nonconforming Use (zoning)

Frequently, a lot or an improvement does not conform to the zoning law because it existed before the enactment or amendment of the zoning ordinance. Such a nonconforming use may be allowed to continue legally as long as it complies with the regulations governing nonconformities in the local ordinance or until the improvement is destroyed or torn down or the current use is abandoned. If the nonconforming use is allowed to continue indefinitely, it is grandfathered into the new zoning.

Termination of Sponsorship

If a broker, managing broker, leasing agent, or licensed personal assistant terminates employment with the sponsoring broker for any reason, the licensee must obtain his license from the sponsoring broker, or managing broker, if so designated by the sponsoring broker. The sponsoring broker signs and dates the license, which indicates that the relationship has been terminated. The sponsoring broker must send IDFPR a copy of the terminated license within two days of the termination or be subject to discipline for failure to do so. The signed license automatically becomes inoperative, as does the licensee's ability to practice real estate, until a new sponsorship is designated. If the licensee is simply changing brokers, the new sponsoring broker must immediately complete a sponsor card (45-day permit) for the licensee to carry until a new license and pocket card (with the new firm's name indicated as sponsor) arrives. The sponsoring broker prepares and sends a duplicate sponsor card to IDFPR for this transition period, along with the original endorsed license from the previous sponsoring broker within 24 hours of sponsorship, along with the required fee.

cooperative commission

If another real estate office "brought in" the buyer, the concept of cooperative commission allows the listing broker to pay the selling broker the amount of cooperative commission advertised in advance on the multiple listing service (MLS) listing. This check is issued by the listing broker's office to the selling broker's office, and checks then are cut by each of these sponsoring brokers to any respective licensees who were directly involved in the transaction.

Superfund Amendments and Reauthorization Act

In 1986, the U.S. Congress amended CERCLA with the Superfund Amendments and Reauthorization Act (SARA). The amended statute contains stronger cleanup standards for contaminated sites and five times the funding of the original Superfund, which expired in September 1985. The amended act also sought to clarify the obligations of lenders. As mentioned, liability under the Superfund extends to both the present and all previous owners of the contaminated site. Real estate lenders found themselves either as present owners or somewhere in the chain of ownership through foreclosure proceedings. The amendments created a concept called innocent landowner immunity—it was recognized that in certain cases, a landowner in the chain of ownership was completely innocent of all wrongdoing and therefore should not be held liable. The innocent landowner immunity clause established the criteria by which to judge whether a person or a business could be exempted from liability.

Expiration of Lien Right and Commencement of Suit

In Illinois, the contractor's lien right will expire two years after completion of that contractor's work, unless he files suit within that time to foreclose the lien. Suits to enforce mechanics' liens must be filed within two years after the last labor and/or materials were supplied.

Cooperative Ownership

In a cooperative, a corporation holds title to the land and building and then offers shares of stock to prospective purchasers. The purchaser becomes a shareholder in the corporation by virtue of this stock ownership and receives a proprietary lease to a designated apartment for the life of the corporation. Because stock is personal property, the cooperative tenant-owners do not own real estate. Instead, they own an interest in a corporation that has only one asset: the building.

Sale-and-leaseback Arrangement

In a sale-and-leaseback arrangement, the owners of property sell the property and then lease it back again for an agreed period. A sale-and-leaseback is often used when extra capital is needed on a construction project. The original owners pull out their equity to use on other projects and reduce their taxable income when they pay rent to the new owner. The new owner now has a reliable source of rental income for an extended time.

Exclusive Right-to-Sell Listing Agreement

In an exclusive right-to-sell listing, one broker is appointed as the seller's sole agent. The listing broker is given the exclusive right, or authorization, to market the seller's property. If the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property: the listing broker, another broker, or even if the seller finds a buyer without the broker's assistance. Sellers benefit from this form of agreement because the broker feels freer to spend time and money actively marketing the property, making a timely and profitable sale more likely. From the broker's perspective, an exclusive right-to-sell listing offers the greatest opportunity to receive a commission. Most residential listing agreements in Illinois are exclusive right-to-sell listing agreements.

Open Listing Agreement

In an open listing (called a nonexclusive listing in some areas), the seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is financially obligated only to that broker who successfully produces a ready, willing, and able buyer. If the seller personally sells the property without the aid of any of the brokers, the seller is not obligated to pay a commission.

Dual Agency

In dual agency, the agent represents two principals in the same transaction. Dual agency requires equal loyalty to two separate principals at the same time. The challenge is to fulfill the fiduciary obligations to one principal without compromising the interests of the other, especially when the parties' interests may not only be separate but even opposite.

Reading a Rectangular Survey Description

In general, if a rectangular survey description does not use the conjunction and or a semicolon (indicating two or more parcels are combined), the longer the description, the smaller the tract of land it describes.

Equalization

In some jurisdictions, when it is necessary to correct inequalities in statewide tax assessments, an equalization factor is used to achieve uniformity. An equalization factor may be applied to raise or lower assessments in a particular district or county.

cooperative commissions

In spite of these relatively clear lines regarding whose agent is whose, sellers often still pay the fees for both agents in a transaction. These fees are called cooperative commissions. In an Illinois MLS listing data sheet, this is typically stated as "co-op: X% or as a flat fee." Paying someone a commission does not create agency in Illinois.

sales comparison approach

In the sales comparison approach (or market data approach), an estimate of value is obtained by comparing the property being appraised (the subject property) with recently sold comparable properties (properties similar to the subject, called comps). Because no two parcels of real estate are exactly alike, each comparable property must be analyzed for differences and similarities between it and the subject property.

secondary mortgage market

In the secondary market, various agencies purchase existing mortgages from banks and savings associations and assemble those mortgages into packages called blocks or pools. Securities that represent shares in these pooled mortgages are then sold to investors or other agencies

buyer agency agreement

In this case, the broker is employed as the buyer's agent. The buyer, rather than the seller, is the principal. The purpose of the agreement is to find a suitable property. A buyer agency agreement gives the buyer a degree of representation possible only in a fiduciary relationship. A buyer's broker must protect the buyer's interests at all points in the transaction.

Legal Tests of a Fixture (3)

Intent 1. Method of attachment. How permanent is the method of attachment? Can the item be removed without causing damage to the surrounding property? 2. Adaptation to real estate. Is the item being used as real property or personal property? 3. Agreement. Have the parties agreed in writing on whether the item is real or personal property? What does the contract say?

mutual assent

It means that there must be a meeting of the minds, or complete agreement about the purpose and terms of the contract. Courts look to the objective intent of the parties to determine whether there was intent to enter into a binding agreement.

Leased Equipment

It must be determined whether leased equipment—security systems, cable television boxes, water softeners, special antennas—will be left with the property. If so, the seller is responsible for notifying the equipment's lessor of the change of property ownership.

Judicial Foreclosure

Judicial foreclosure allows the property to be sold by court order after the mortgagee has given sufficient public notice. When a borrower defaults, the lender may accelerate the due date of the remaining principal balance, along with all overdue interest, penalties, and administrative costs. The lender's attorney then can file a suit to foreclose the lien. After presentation of the facts in court, the property is ordered sold. A public sale is advertised and held, and the real estate is sold to the highest bidder.

Scarcity

Land is not usually considered a rare commodity, but only a quarter of the earth's surface is dry land; the rest is water. The total available supply of land is not limitless. While a considerable amount of land remains unused or uninhabited, the supply in a given location or of a particular quality is generally considered limited.

Maintenance of Premises

Lessors of residential property are required to maintain dwelling units in a habitable condition. Landlords must make any necessary repairs to common areas such as hallways, stairs, and elevators, and they must maintain safety features such as fire sprinklers and smoke alarms. The tenant does not have to make any repairs but must return the premises in the same condition they were received, with allowances for ordinary wear and tear. Lessees of commercial and industrial properties, however, usually maintain the premises and are often responsible for making their own repairs.

Expiration and Renewal of License

Licenses may be renewed—by paying required fees and meeting CE requirements—within the 90 days before expiration of the license. Newly licensed brokers are required to complete and provide evidence of completing 30 hours of Advisory Council-approved postlicensing education. Fifteen of these 30 hours must consist of classroom instruction or some other means of interactive, real-time instruction and discussion between student(s) and instructor and must cover situational and case studies. These individuals must also take and pass an IDFPR-approved examination given by the education provider before their licenses can be renewed. The 30-hour postlicensing courses also satisfy the 12-hour CE requirement for this first renewal period.

comprehensive plan

Local governments, municipalities, and counties establish development goals by creating a comprehensive plan. The comprehensive plan (also called the master plan) is not a regulatory document but rather a guide to planning for change rather than reacting to proposals. The comprehensive plan is usually long term—20 years or longer—and often includes (1) a general plan that can be revised and updated more frequently, (2) plans for specific areas, and (3) strategic plans.

What Must Be Disclosed (7)

Material facts of a property Known latent physical defects Agency relationships Designated agency Dual agency Lack of agency (to a purchasing customer) Compensation sources

Mold

Mold can infest homes and may produce toxins that cause allergic reactions and asthma attacks. Mold can be found almost anywhere and can grow on almost any organic substance, so long as moisture, oxygen, and an organic food source are present. Some molds can cause serious health problems, including allergic reactions and asthma attacks, and some molds are known to produce potent toxins and/or irritants. Moisture feeds mold growth. If a moisture problem is not discovered or addressed, mold growth can eventually destroy what it is growing on. Some moisture problems in homes and buildings have been directly linked to construction practices, resulting in buildings that are too tightly sealed, preventing adequate ventilation. Building materials, such as drywall, may not allow moisture to escape properly. The material used in drywall wicks moisture to the glue and paper (food sources for molds). Vinyl wallpaper and exterior insulation finish systems (EIFS) (also called synthetic stucco) do not allow moisture to escape. Other moisture problems include roof leaks, unvented combustion appliances, and landscaping or gutters that direct water to the building.

Excluded Coverage (E&O insurance)

Most E&O policies exclude certain ancillary real estate-related activities. These exclusions include a licensee's involvement in areas that do not require an Illinois real estate license, such as * property development * insurance agency operations.

security deposit

Most leases require that the tenant provide some form of security deposit to be held by the landlord during the lease term. If the tenant defaults on payment of rent or damages the premises, the lessor may keep all or part of the deposit to compensate for the loss. Some state laws set maximum amounts for security deposits and specify how they must be handled. Some prohibit security deposits from being used for both nonpayment of rent and property damage. Some require that lessees receive annual interest on their security deposits. In Illinois: Landlords who receive security deposits on residential leases of units in properties containing five or more units may not withhold any part of a security deposit as compensation for property damage unless they give the tenant an itemized statement listing the alleged damage. This statement must be delivered within 30 days of the date on which the premises are vacated.

building codes

Most municipalities have enacted ordinances called building codes to specify construction standards that must be met when repairing or erecting buildings. Building codes set the requirements for kinds of materials and standards of workmanship, sanitary equipment, electrical wiring, fire prevention, and similar issues. In addition to adhering to building codes, a property owner who wants to build a structure or alter or repair an existing building usually must obtain a building permit. Through the permit requirement, municipal officials are made aware of new construction or alterations and can verify compliance with building codes and zoning ordinances.

Exemptions From General Taxes

Most state laws exempt certain real estate from taxation. Such property must be used for tax-exempt purposes, as defined in the statutes. The most common exempt properties are owned by various municipal organizations (such as schools, parks, and playgrounds), cities and counties, state and federal governments, religious and charitable organizations, hospitals, and educational institutions.

equitable right of redemption

Most states give defaulting borrowers a chance to redeem their property through the equitable right of redemption. If, after default but before the foreclosure sale, the borrower pays the lender the amount in default, plus costs, the debt will be reinstated and regular payments may be resumed. In some cases, the person who redeems may be required to repay the accelerated loan in full.

Transfer Tax

Most states require some form of transfer tax, conveyance fee, or tax stamps on real estate conveyances. This expense is most often borne by the seller, although customs vary. In addition, many cities and local municipalities charge transfer taxes. In Illinois, state and county transfer taxes are usually paid by the seller in accordance with most sales contracts. Some local ordinances establish additional municipal transfer taxes that are to be paid for by the seller, the buyer, or both.

The Duty of Accounting

Most states' license laws require that agents periodically report the status of all funds or property received from or on behalf of the principal. Similarly, most state license laws require that licensees give accurate copies of all documents to all affected parties and keep copies on file for a period of time.

Quitclaim Deed

No express or implied covenants or warranties: Used primarily to convey less than fee simple or to cure a title defect. A quitclaim deed provides the grantee with the least protection of any deed. It carries no covenants or warranties and generally conveys only whatever interest the grantor may have when the deed is delivered. If the grantor has no interest, the grantee will acquire nothing. Nor will the grantee acquire any right of warranty claim against the grantor. A quitclaim deed can convey title as effectively as a warranty deed if the grantor has good title when she delivers the deed, but it provides none of the guarantees that a warranty deed does. Through a quitclaim deed, the grantor only "remises, releases, and quitclaims" her interest in the property, if any. A quitclaim deed frequently is used to cure a defect, called a cloud on the title. For example, if the name of the grantee is misspelled on a warranty deed filed in the public record, a quitclaim deed with the correct spelling may be executed to the grantee to perfect the title.

Bargain and Sale Deed

No express warranties: Implication that grantor holds title and possession. In some states, a bargain and sale deed contains no express warranties against encumbrances. It does, however, imply that the grantor holds title and possession of the property.

erosion

On the other hand, an owner may lose land through erosion—the gradual and imperceptible wearing away of the land by natural forces such as wind, rain, and flowing water.

Priority Priority

Priority Priority refers to the order of rights in time. Many complicated situations can affect the priority of rights in a parcel of real estate—who recorded first, which party was in possession first, who had actual or constructive notice. FOR EXAMPLE In May, John purchased a property from Mary and received a deed. John did not record the deed but took possession of the property in June. In November, Mary sold the same property to Samuel who received a deed, which he promptly recorded. Samuel never inspected the property to determine whether someone was in possession of it. By taking possession of the property, John has the superior right to the property even though John did not record the deed.

PUBLIC RECORDS

Public records contain detailed information about each parcel of real estate in a city or a county. These records are crucial in establishing ownership, giving notice of encumbrances, and establishing priority of liens. They protect the interests of real estate owners, taxing bodies, creditors, and the general public.

A licensee who has several years of experience in the industry decided to retire from actively marketing properties. Now this licensee helps clients choose among the various alternatives involved in purchasing, using, or investing in property. What is the licensee's profession?

Real estate counselor

Property Exchanges

Real estate investors can defer taxation of capital gains by making property exchanges. Even property that has appreciated greatly since its initial purchase may be exchanged for other property. A property owner will incur tax liability on a sale only if additional capital or property is also received; the tax is deferred, not eliminated. Whenever the investor sells the property, the capital gain will be taxed. In many states, state income taxes can also be deferred by using the exchange form of property transfer. To qualify as a tax-deferred exchange, the properties involved must be of like kind as defined under Section 1031 of the Internal Revenue Code. The exchanged property must be real estate of equal value and same use. Any additional capital or personal property included in the transaction to even out the value of the exchange is called boot. The IRS requires tax on the boot to be paid at the time of the exchange by the party who receives it. The value of the boot is added to the basis of the property for which it is given. Tax-deferred exchanges are governed by strict federal requirements, and competent guidance from a tax professional is essential.

Comparative Market Analysis

Real estate licensees often must help a seller arrive at a listing price or assist a buyer in determining an offering price for property without the aid of a formal appraisal report. In such a case, the licensee would use a comparative market analysis (CMA), as discussed in Chapter 6. A CMA is distinctly different from an appraisal report offered by a licensed appraiser. An appraisal is based on an analysis of properties that have actually sold. The CMA, in contrast, features properties similar to the subject property in size, location, and amenities

Disclosed Dual Agency

Real estate licensing laws permit dual agency only if the buyer and the seller are informed and consent to the licensee's representation of both in the same transaction. Although the possibility of conflict of interest still exists, disclosure is intended to minimize the risk for the licensee by ensuring that both principals are aware of the effect of dual agency on their respective interests. The disclosure alerts the principals that they may have to assume greater responsibility for protecting their interests than they would if each had independent representation.

Real Property vs Personal Property (deed vs bill of sale)

Real property is conveyed by deed, while personal property is conveyed by a bill of sale

Redlining

Redlining is the practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the applicant's financial qualifications. Redlining refers to literally or figuratively drawing a line around particular areas. Redlining is often based on racial grounds rather than on any real objection to an applicant's creditworthiness. A lending institution can, however, refuse a loan solely on sound, documentable financial grounds.

Title Expenses

Responsibility for title expenses varies according to local custom. In most areas, the seller is required to furnish evidence of good title and pay for the title search. If the buyer's attorney inspects the evidence or if the buyer purchases a title insurance policy, the buyer is charged for the expense. Because the seller usually is required by the contract to furnish evidence of good title, the seller customarily pays for the owner's title insurance policy. The buyer customarily pays for the lender's policy, which ensures that the lender has a valid first lien. ■

Restrictive covenants

Restrictive covenants are limitations to the use of property imposed by a past owner or the current owner and are binding on future grantees.

Mortgage Disclosure Improvement Act

Since its effective date of July 31, 2009, the Mortgage Disclosure Improvement Act (MDIA) has changed how buyers and sellers, lenders, mortgage brokers, title agents, and real estate licensees prepare for a closing. The timeliness of certain disclosures now affects the date of closings. Lenders and licensees should keep in mind the numbers 3, 7, and 3: * 3 business days from application to provide the truth-in-lending disclosure (TIL) statement and Good Faith Estimate (GFE) * 7 business days before the signing of loan documents, after the borrower receives the final TIL statement and GFE * 3 business days to wait for closing if the APR has changed more than 0.125% from the original or most recent TIL and GFE

Nonjudicial Foreclosure

Some states allow nonjudicial foreclosure procedures to be used when the security instrument contains a power-of-sale clause. In nonjudicial foreclosure, no court action is required.

Tenancy by the Entirety

Some states, including Illinois, allow husbands and wives to use a special form of co-ownership called tenancy by the entirety for their personal residence. The term entirety refers to the fact that the owners are considered one indivisible unit: Under early common law, a married couple was viewed as one "legal person." In this form of ownership, each spouse has an equal, undivided interest in the property.

conversion

Sponsoring brokers may never use escrow funds for personal use; this illegal act is called conversion

Composition of the Board

The Board is composed of nine members appointed by the governor, all of whom must have been residents and citizens of Illinois for at least six years before their appointment date. Six of the nine must have been active real estate managing brokers, brokers, or salespeople for at least 10 years before the appointment. The remaining three must be unlicensed, unconnected with the real estate profession, and represent consumer interests. None of the consumer members (or their spouses) or a person who has an ownership interest in a real estate brokerage business may hold licenses. Members are appointed to four-year staggered terms. Appointments to fill vacancies are for the unexpired portion of the replaced member's term. Board members may be reappointed, but no individual may serve more than a total of 12 years in a lifetime. Missing more than four board meetings annually is grounds for termination. The governor may also terminate board members on the basis of his own judgment if there is cause.

The CAN-SPAM Act

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act of 2003) established requirements for sending commercial email; establishes penalties for noncompliance; and gives consumers the right to have emailers (not just "spammers") stop emailing them. The act does not apply to "transactional or relationship content," that is, those messages meant to facilitate or alter existing customer agreements (for example, by giving a customer additional information about an existing agreement or conducting business as part of an existing agreement). However, these emails must not explicitly or implicitly operate for the purposes of advertising or promotion, as this is in violation of the law.

VA-Guaranteed Loans

The Department of Veterans Affairs (VA) is authorized to guarantee loans to purchase or construct homes for eligible veterans and their spouses (including unremarried spouses of veterans whose deaths were service-related). Like the FHA loan, the VA loan is something of a misnomer. The VA does not normally lend money; rather, it guarantees loans made by lending institutions approved by the agency. The VA also issues a certificate of reasonable value (CRV) for the property being purchased. The CRV states the property's current market value based on a VA-approved appraisal and places a ceiling on the amount of a VA loan allowed for the property. If the purchase price is greater than the amount cited in the CRV, the veteran may pay the difference in cash.

Federal Reserve System (the Fed)

The Federal Reserve System (the Fed) maintains sound credit conditions, helps counteract inflationary and deflationary trends, and creates a favorable economic climate. The Fed divides the country into 12 Federal Reserve Districts, each served by a Federal Reserve Bank. All nationally chartered banks must join the Fed and purchase stock in its district reserve banks. The Fed regulates the flow of money and interest rates in the marketplace through its member banks by controlling reserve requirements and discount rates.

implied warranty of habitability

The Illinois Supreme Court first confirmed the concept of an implied warranty of habitability in residential tenancies in 1972. Since then, Illinois courts have repeatedly confirmed and amplified the warranty. A landlord must deliver and maintain throughout the duration of the lease any residential leasehold free from defects that would render the use of the dwelling "unsafe or unsanitary" and unfit for human occupancy. Nothing may be present on the premises that could seriously endanger the life, health, or safety of the tenant.

THE REAL ESTATE RECOVERY FUND

The Real Estate Recovery Fund provides a means of compensation for actual monetary losses (as opposed to losses in market value) suffered by any person as a result of * a violation of the Real Estate License Act of 2000, including its rules and regulations; or * act of embezzlement of money or property, obtaining money or property by false pretenses, artifice, trickery, forgery, fraud, misrepresentation, deceit, or discrimination by a licensee or a licensee's unlicensed employee.

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) applies to any residential real estate transaction involving a new first mortgage loan. RESPA is designed to ensure that buyer and seller are fully informed of all settlement costs.

Truth in Lending Act (TILA)

The Truth in Lending Act (TILA), often called Regulation Z, requires that credit institutions inform borrowers of all finance charges and the true interest rate before a loan is completed. The finance charge disclosure must include any loan fees, finder's fees, service charges, and points, as well as interest.

Real Estate Transfer Declaration (In Illinois)

The amount of consideration used for determining transfer taxes must be shown on the Real Estate Transfer Declaration form. The form must be signed by the buyer and the seller or their agents, and it provides for the inclusion of the property description, manner of conveyance, and type of financing used. The financing data helps the Department of Revenue accurately determine equalization factors between different counties and eliminate inconsistencies caused by the use of nonconventional or creative financing.

Permanence of Investment

The capital and labor used to build an improvement represent a large fixed investment. Although even a well-built structure can be razed to make way for a newer building, improvements such as drainage, electricity, water, and sewage systems often remain.

consideration

The contract must be based on consideration—something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act. There must be a definite statement of consideration in a contract to show that something of value was given (or promised) in exchange for the other party's promise.

Broker's Authority and Responsibilities

The contract should specify details such as whether the broker may place a sign on the property or advertise and market the property through social media. Another major consideration is whether the broker is permitted to notify buyers' brokers of the listing through an MLS and the internet. It should also address whether or not the broker may accept earnest money on behalf of the seller and the responsibilities for holding such funds.

A man inherited a farm from his uncle. As a new owner, the first thing he did with the vacant property was to remove all the topsoil, which he sold to a landscaping company. He then removed a thick layer of limestone and sold it to a construction company. Finally, he dug 40 feet into the bedrock and sold it for gravel. When the farm owner died, he left the farm to his daughter. Which of these statements is TRUE?

The daughter inherits a large hole in the ground, but it is still a farm, down to the center of the earth.

Joint Tenancy

The feature that distinguishes a joint tenancy from a tenancy in common is unity of ownership. Title is held as though all the owners, collectively, constitute one unit. Joint tenancy includes the right of survivorship: Upon the death of a joint tenant, the deceased's interest transfers directly to the surviving joint tenant(s). Essentially, there is one less owner. The joint tenancy continues until only one owner remains.

The Income Approach

The income approach to value is based on the present value of the rights to future income. It assumes that the income generated by a property will determine the property's value. The income approach is used for valuation of income-producing properties such as apartment buildings, office buildings, and shopping centers.

Ranges

The land on either side of a principal meridian is divided into six-mile-wide strips by lines running north and south, parallel to the meridian. These north-south strips of land are called ranges (see Figure 9.3). They are designated by consecutive numbers east or west of the principal meridian. For example, Range 3 East would be a strip of land between 12 and 18 miles east of its principal meridian.

satisfaction of mortgage

This document returns to the borrower all interest in the real estate originally conveyed to the lender. Entering this release in the public record shows that the mortgage lien has been removed from the property.

If a tenant defaults on the payment of rent, the landlord has two options:

The landlord may elect to serve the tenant with five days' written notice, demanding payment of the delinquent rent within five days after the notice is received. If the tenant fails to pay the rent, the landlord may terminate the lease automatically and sue for possession without further notice. If the tenant pays the past-due rent, the lease continues in full force. Alternatively (and in cases in which the tenant's breach is other than by nonpayment of rent), the landlord may terminate the tenancy by serving the tenant with 10 days' written notice, including a demand for possession. After the 10-day period expires, the landlord may sue for possession without further notice, even if the default is cured.

Formaldehyde

The largest source of formaldehyde in any building is likely to be the off-gassing from pressed-wood products made from using adhesives that contain urea-formaldehyde (UF) resins. Pressed-wood products include particleboard, hardwood plywood paneling, and medium-density fiberboard. It is also used in carpeting and ceiling tiles. Since 1985, HUD has regulated the use of plywood and particleboard so that they conform to specified formaldehyde-emission levels in the construction of prefabricated homes and manufactured housing (mobile homes).

Limited Liability Companies

The limited liability company (LLC) combines the most attractive features of limited partnerships and corporations. The members of an LLC enjoy the limited liability offered by a corporate form of ownership and the tax advantages of a partnership. In addition, the LLC offers flexible management structures without the complicated requirements of S corporations or the restrictions of limited partnerships.

metes-and-bounds method

The metes-and-bounds method is the oldest type of legal description (metes means distance and bounds means compass directions or angles). The method relies on a property's physical features to determine the boundaries and measurements of the parcel. A metes-and-bounds description always starts at a designated place on the parcel, called the point of beginning (POB). From there, the surveyor proceeds around the property's boundaries. The boundaries are recorded by referring to linear measurements, natural and artificial landmarks (called monuments), and directions. A metes-and-bounds description always ends back at the POB so that the tract being described is completely enclosed.

LIENS

The ownership of real estate is subject to certain obligations imposed by governmental powers, usually in the form of taxes. Creditors and courts can also make claims against property to secure payment for debts, by way of a lien. A lien is a charge or claim against property that is made to enforce the payment of money.

Loan Origination Fee

The processing of a mortgage application is called loan origination. When a mortgage loan is originated, a loan origination fee is charged by most lenders to cover the expenses involved in generating the loan. These include the loan officer's salary, paperwork, and the lender's other costs of doing business. While a loan origination fee serves a different purpose from discount points, both increase the lender's yield. Therefore, the federal government treats the fee like discount points. It is included in the annual percentage rate, and the IRS lets a buyer deduct the loan origination fee.

hypothecation

The right to foreclose on the pledged property in the event a borrower defaults is contained in a security agreement, such as a mortgage or a deed of trust.

Surface and Subsurface Rights

The right to use the surface of the earth is called surface rights. However, real property ownership also can include subsurface rights, which are the rights to the natural resources lying below the earth's surface. The two rights are distinct; an owner may transfer surface rights without transferring the subsurface rights.

A bookstore owner rents space in a commercial building. The bookstore has large tables fastened to the walls where customers are encouraged to sit and read. Shelves create aisles from the front of the store to the back. The shelves are bolted to both the ceiling and the floor. Which of these BEST characterizes these tables and shelves?

The shelves and the tables are trade fixtures and must be removed before the bookstore's lease expires; the tenant is responsible to the landlord for any damage that their removal causes to the premises.

Location

This economic characteristic, sometimes called situs, does not directly refer to a geographic location but rather to people's preferences for given areas. It is the unique quality of these preferences that results in different values for similar units. Location is the most important economic characteristic of land.

Equity in Eminent Domain Act

This law places the obligation on the government to prove that an area is blighted before forcing property owners to sell their property for private development projects. In addition, the act helps owners receive fair market value for their property, requires relocation costs for displaced residents and businesses, and pays attorneys' fees when property owners successfully sue to keep their property.

statutory right of reinstatement

This option is applicable when the defaulting mortgagor wishes to cure the default and reinstate the loan as though no acceleration had occurred. The mortgagor has the right to exercise this statutory right for a period of 90 days after service of summons or publication date. At the lender's discretion, expressed through an attorney, the right of reinstatement may be extended to run as long as the equitable right of redemption.

coinsurance clause

This provision usually requires that the owner maintain insurance equal to a specified percentage (usually 80%) of the replacement cost of the dwelling (not including the price of the land). An owner who has this type of policy may make a claim for the full cost of the repair or replacement of the damaged property without deduction for depreciation or annual wear and tear.

Attachments

To prevent a debtor from conveying title to such previously unsecured real estate while a court suit is being decided, a creditor may seek a writ of attachment. By this writ, the court retains custody of the property until the suit concludes.

accession

Trade fixtures that are not removed become the real property of the landlord. Acquiring the property in this way is called accession. Personal property that "turns into" real property does so by attachment.

Plants (type of property)

Trees, perennial shrubbery, and grasses that do not require annual cultivation are considered real estate. They attach to the land.

Ground Lease

When a landowner leases unimproved land to a tenant who agrees to erect a building on the land, the lease is usually called a ground lease. Ground leases usually involve separate ownership of the land and buildings. These leases must be for a long enough term to make the transaction desirable to the tenant investing in the building, and often run for terms of 50 to 99 years. Ground leases are generally net leases—the lessee must pay rent on the ground as well as real estate taxes, insurance, maintenance, and utilities.

Collection from the Real Estate Recovery Fund

When a lawsuit might result in a claim against the Real Estate Recovery Fund, IDFPR must be notified in writing by the aggrieved person at the time the action is commenced—specifically, within seven days of filing. Failure to notify IDFPR of the potential liability precludes any recovery from the fund. Additionally, legal action must have commenced no later than two years after the aggrieved person knew of the acts or omissions that gave rise to possible right of recovery from the fund.

subrogation

When a title company makes a payment to settle a claim covered by a policy, the company generally acquires the right to any remedy or damages available to the insured.

Single Agency

When an agent or firm represents only one party (buyer, seller, landlord, or tenant) exclusively in a real estate transaction, this relationship is called single agency. The agent and firm's fiduciary and statutory duties are provided only to that one party (the principal). While a single agency licensee may represent both sellers and buyers, that licensee cannot represent both in the same transaction. This avoids conflict and results in client-based service and loyalty to only one client. On the other hand, it traditionally rules out the sale of in-house listings to represented buyers.

net operating income (NOI)

When appraising income-producing property, the value is estimated by using the annual net operating income (NOI) and the current market rate of return or capitalization rate. Annual scheduled gross income is adjusted for vacancies and credit losses to arrive at the annual effective gross income. The annual operating expenses are deducted from the annual effective gross income to arrive at the annual NOI. Vacancy/credit loss is usually expressed as a percentage of the scheduled gross.

A real estate professional who performs a visual survey of a property's structure and systems and prepares an analytical report for a purchaser or an owner is acting as

a home inspector.

An FHA-insured loan for $57,500 at 8.5% for 30 years was closed on July 17, 2013. The first monthly payment is due on September 1. Because interest is paid monthly in arrears, what was the amount of the interest adjustment the buyer owes at the settlement, using the statutory method? a $190.07 b $230.80 c $407.29 d $4,887.50

a $190.07

A man earns $20,000 per year and can qualify for a monthly PITI payment equal to 25% of his monthly salary. If the annual tax and insurance is $678.24, what loan amount will he will qualify for if the monthly PI payment factor is $10.29 per $1,000 of loan amount? a. $35,000 b. $40,500 c. $43,000 d. $66,000

a $35,000 $20,000 annual salary ÷ 12 months = $1,666.67 monthly salary $1,666.67 monthly salary × 25% = $416.67 monthly PITI payment $678.24 annual taxes and insurance ÷ 12 months = $56.52 monthly taxes and insurance $416.67 monthly PITI payment - $56.52 monthly TI = $360.15 monthly PI payment $360.15 monthly PI payment ÷ $10.29 × $1,000 = $35,000 loan

How are members of the Illinois Real Estate Administration and Disciplinary Board selected? a Appointed by the governor b Appointed by the commissioner of real estate c Elected by licensees d Elected in statewide elections every six years

a Appointed by the governor

A married couple lives in Springfield, Illinois. The wife is the owner of their home. If the couple decide to sell their home and move to Wisconsin, who is required to sign the listing agreement? a Both the husband and the wife must sign the listing. b Because the wife is the sole owner of their home, she is the only party legally required to sign the listing. c Because the husband and the wife are married, the signature of either spouse is legally sufficient. d The husband is required to sign the listing only if the wife plans to use the capital gains exclusion.

a Both the husband and the wife must sign the listing.

What is the relationship between the Illinois agency statutes and the common law of agency? a Illinois agency statutes supersede the common law of agency in Illinois. b Illinois agency statutes and the common law of agency both govern agency relationships in Illinois. c Agency statutes are simply an administrative codification of the common law of agency. d The Illinois agency statutes govern managing broker's relationships with clients, while the common law of agency applies to broker relationships.

a Illinois agency statutes supersede the common law of agency in Illinois.

An appraiser has been hired to prepare an appraisal report of a property for loan purposes. The property is an elegant old mansion that is now leased out as a restaurant. To which approach to value should the appraiser probably give the greatest weight when making this appraisal? a Income b Sales comparison c Replacement cost d Reproduction cost

a Income

An Illinois resident was born on March 6, 2011. When will this person become of legal age? a March 6, 2029 b March 7, 2029 c March 6, 2032 d March 7, 2032

a March 6, 2029

A man conveys a life estate to his sister. Under the terms of the man's conveyance, the property will pass to his niece upon his sister's death. Which of these BEST describes the niece's interest in the property during the sister's lifetime? a Remainder b Reversion c Life estate pur autre vie d Redemption

a Remainder

The capitalization rate on a property reflects which of these factors? a Risk of the investment b Replacement cost of the improvements c Real estate taxes d Debt service

a Risk of the investment

A father owns two properties. He conveys one property to his daughter with no restrictions; the daughter holds all rights to this property forever. The man then conveys the second property to his son "so long as no real estate licensee ever sets foot on the property." If a licensee visits the second property, ownership will revert to the father. Based on these two conveyances, which of these statements is TRUE? a The daughter holds the first property in fee simple; the son holds the second property in fee simple determinable. b The daughter holds the first property in fee simple absolute; the son holds the second property in fee simple defeasible, subject to a condition subsequent. c The son may not transfer ownership of the second property without his father's permission. d The father has retained a right of reentry regarding the second property.

a The daughter holds the first property in fee simple; the son holds the second property in fee simple determinable.

Under the Real Estate License Act of 2000, when the license of any sponsoring broker is suspended or revoked, what is TRUE regarding sponsored licensees' agreements with that sponsoring broker? a They expire on the date of suspension. b Each licensee has 10 days in which to find another sponsoring broker. c A licensee can continue to work through the suspension. d The licensee has 30 days in which to finish all deals.

a They expire on the date of suspension.

A defect or a cloud on title to property may be cured by a obtaining proof of satisfaction from all appropriate parties. b bringing an action to register the title. c paying cash for the property at the settlement. d bringing an action to repudiate the title.

a obtaining proof of satisfaction from all appropriate parties.

Property Management

a person or company hired to maintain and manage property on behalf of its owner.

Against a recorded deed from the owner of record, the party with the weakest position is a a person with a prior unrecorded deed who is not in possession. b person in possession with a prior unrecorded deed. c tenant in possession with nine months remaining on the lease. d painter who is half-finished painting the house at the time of the sale and who has not yet been paid.

a person with a prior unrecorded deed who is not in possession.

A man owns a condominium town house in Cook County and a weekend retreat in Sangamon County, both in Illinois. He also owns investment property in Montana. If one of his creditors sues him in a Cook County court and a judgment is issued against him and is recorded in both Cook and Sangamon counties, which of these is TRUE? a. The judgment becomes a lien on the property located in both Cook and Sangamon counties. b. The judgment becomes a lien on the weekend retreat, the man's speedboat, and all other items of real and personal property in Sangamon County. c. The judgment becomes a lien on all of the man's real and personal property, wherever located. d. The judgment becomes a lien on the Cook County town house only.

a. The judgment becomes a lien on the property located in both Cook and Sangamon counties.

Which of these statements BEST describes enabling statutes in Illinois? a. They grant counties, cities, and villages the power to make and enforce local zoning ordinances. b. They make all counties, cities, and villages subject to Illinois state zoning laws. c. They require all Illinois counties, cities, and villages to adopt the requirements of the federal municipal planning commission. d. They set environmental controls on current land use.

a. They grant counties, cities, and villages the power to make and enforce local zoning ordinances.

Under which of the following circumstances may a seller keep the earnest money deposit of a defaulting buyer? a. if the seller wants to declare the sales contract forfeited, and there is a forfeiture clause in the contract b. if the seller wants to put the buyer on notice that the contract is being rescinded c. if the seller suspects that the buyer never intended to execute the contract d. under no circumstances

a. if the seller wants to declare the sales contract forfeited, and there is a forfeiture clause in the contract

When should a licensee provide the owners a copy of their listing agreement form? a. immediately upon signature of the owners b. when an offer has been presented to the owners c. after an offer has been accepted by the owners d. after is has been processed through the local multiple listing service

a. immediately upon signature of the owners

Encumbrances on real estate a. include easements and encroachments. b. make it impossible to sell the encumbered property. c. must all be removed before the title can be transferred. d. are established by condition subsequent.

a. include easements and encroachments.

When a broker passes the license examination, the first proof of eligibility to engage in real estate activities in Illinois is a a. sponsor card. b. pocket card. c. license. d. pass card.

a. sponsor card

Special assessments

are taxes levied on real estate to fund public improvements to the property. Property owners living nearest to the improvements are required to pay for them because their properties benefit directly from the improvements. For example, the installation of paved streets, curbs, gutters, sidewalks, storm sewers, or street lighting increases the values of the affected properties.

sponsoring broker

as the entity holding the company real estate license, whether the entity is an individual who operates as a sole proprietorship, partnership, limited liability company, corporation or registered limited liability partnership. The sponsoring broker entity must be licensed and may be self-sponsored. There may be only one sponsoring broker for any one real estate company. Even though the sponsoring broker may delegate authority, ultimately, the sponsoring broker is responsible for all activities.

Police powers include a deed restrictions. b zoning. c restrictive covenants. d taxation.

b zoning.

Which of these statements in a deed would establish a valid tenancy by the entirety in Illinois? a "To A and B, a lawfully married couple, as tenants by the entirety" b "To A and B, husband and wife, not as joint tenants or tenants in common but as tenants by the entirety" c "To A and B jointly, as married tenants by the entirety" d "To A and B as tenants by the entirety in accordance with Illinois law"

b "To A and B, husband and wife, not as joint tenants or tenants in common but as tenants by the entirety"

You attempt to appraise a 28-unit apartment house, employing the income approach. Each unit rents for $775 per month, an amount that seems consistent with similar rental units in the vicinity. For the past five years, the annual expenses of operation have averaged $82,460. The complex has maintained a consistent vacancy rate of 5%. A potential investor is only interested if the return is 9.5%. What value would you arrive at using these variables? a. $868,000 b. $1,736,000 c. $1,873,100 d. $2,741,100

b $1,736,000 $775 monthly rent × 28 units × 12 months = $260,400 annual scheduled gross income $260,400 annual scheduled gross income - 5% vacancy rate = $247,380 annual effective gross income $247,380 annual effective gross income - $82,460 annual expenses = $164,920 annual net operating income $164,920 annual net income ÷ 9.5% (0.095) = $1,736,000 value

A man agrees to purchase a house for $84,500. He pays $2,000 as earnest money and obtains a new mortgage loan for $67,600. The purchase contract provides for a March 15 settlement. He and the sellers prorate the present year's real estate taxes of $1,880.96, which have been prepaid. The man has additional closing costs of $1,250, and the sellers have other closing costs of $850. Using the actual number of days method, how much cash must the man bring to the settlement? a $16,389 b $17,650 c $17,840 d $19,639

b $17,650

A buyer is granted a 90% loan of $340,500. How much will her monthly principal and interest payment be, using a loan payment factor of $7.16 per $1,000 of loan? a. $2,194.18 b. $2,437.98 c. $3,064.50 d. $4,755.59

b $2,437.98 $340,500 loan ÷ $1,000 × $7.16 = $2,437.98 monthly principal and interest payment

An office building produces $68,580 annual net operating income. What price would you pay for this property to show a minimum return of 12% on your investment? a. $489,857 b. $571,500 c. $685,800 d. $768,096

b $571,500 $68,580 annual net operating income ÷ 12% (0.12) = $571,500 price

A condo was purchased for $125,000. It appraised for $120,500 and previously sold for $118,250. Based on these facts, if the purchaser applies for an 80% mortgage, what amount of the loan will the purchaser receive? a $94,600 b $96,400 c $100,000 d $106,750

b $96,400

Find the number of square feet in a lot with a frontage of 75 feet 6 inches and a depth of 140 feet 9 inches. a. 216.25 b. 10,626.63 c. 10,652.04 d. 25,510.81

b 10,626.63 6" ÷ 12 = 0.5' + 75' = 75.5' frontage 9" ÷ 12 = 0.75' + 140' = 140.75' depth 140.75' × 75.5' = 10,626.63 square feet

A buyer pays $2,500 each for four parcels of land. He subdivides them into six parcels and sells each of the six parcels for $1,950. What was the buyer's percentage of profit? a. 14.5% b. 17% c. 52% d. 78%

b 17% $2,500 cost × 4 parcels = $10,000 total cost $1,950 sales price × 6 parcels = $11,700 sales price $11,700 sales price - $10,000 cost = $1,700 profit $1,700 profit ÷ $10,000 cost = 0.17 or 17% profit

Which of these would be required to be surveyed and have a plat recorded under the Illinois Plat Act? a An owner divides a 30-acre parcel into five equal lots. b An owner divides a 20-acre parcel into five equal lots. c An owner conveys a single 20-acre parcel. d An owner divides a single 20-acre parcel into two 6-acre lots and an 8-acre lot.

b An owner divides a 20-acre parcel into five equal lots.

What is the expiration date of every broker's license in Illinois? a The broker's birthday, every other year b April 30 of each even-numbered year c May 31 of each odd-numbered year d Every other anniversary date of the individual broker's license

b April 30 of each even-numbered year

When appraising a single-family home, an appraiser considers which of these in determining the value of a property? a Racial demographics b Date sold c Properties located within a 10-mile radius d Pending property sales

b Date sold

A sponsoring broker received an earnest money deposit along with a sales contract from a buyer. Under Illinois law, what must the sponsoring broker do with the money? a Open a special, separate escrow account that will contain funds for this transaction only, separate from funds received in any other transaction b Deposit the money in an existing special noninterest-bearing escrow account in which all earnest money received from buyers may be held at the same time c Immediately (or by the next business day) commingle the funds by depositing the earnest money in his personal interest-bearing checking or savings account d Hold the earnest money deposit in a secure place in his real estate brokerage office until the offer is accepted

b Deposit the money in an existing special noninterest-bearing escrow account in which all earnest money received from buyers may be held at the same time

A broker signs a contract with a buyer. Under the contract, the broker agrees to help the buyer find a suitable property and to represent the buyer in negotiations with the seller. Although the buyer may not sign an agreement with any other broker, she may look for properties on her own. The broker is entitled to payment only if the broker locates the property that is purchased. What kind of agreement has this broker signed? a Exclusive buyer agency agreement b Exclusive-agency buyer agency agreement c Open buyer agency agreement d Option contract

b Exclusive-agency buyer agency agreement

For which of the following acts is IDFPR required to suspend or revoke a licensee's license? a Failing to perform as promised in a guaranteed sales plan b Having been found liable in a civil trial for illegal discrimination c Commingling others' money or property with the licensee's own d Failing to provide information requested by IDFPR within 30 days of the request as part of a complaint or audit procedure

b Having been found liable in a civil trial for illegal discrimination

Which provision could legally be placed in an Illinois installment contract? a. "Buyer may not record this contract." b. "Seller will retain legal title." c. "Recording does not constitute notice." d. "Buyer will forfeit $1,000 for recording."

b. "Seller will retain legal title."

A buyer enters into an exclusive-agency buyer agency agreement with a real estate broker. Based on these facts, which of these statements is TRUE? a The buyer is obligated to pay the broker's compensation regardless of who finds a suitable property. b If the buyer finds a suitable property without the broker's assistance, she is under no obligation to pay the broker. c The buyer may enter into other, similar agreements with other brokers. d If the buyer finds a suitable property without the broker's assistance, the buyer will have to pay the broker's compensation.

b If the buyer finds a suitable property without the broker's assistance, she is under no obligation to pay the broker.

A real estate sponsoring broker commonly names individual sponsored licensees in her brokerage office as the exclusive agents of certain clients, leaving the other sponsored licensees free to represent other parties in a transaction. Which of these statements is TRUE regarding this practice? a Because it is a common office practice, it is permitted as an exception to the general statutory prohibition against such arrangements. b Illinois agency law specifically permits designated agency arrangements such as this. c This is an example of designated agency, which is an illegal relationship under Illinois agency law. d The sponsoring broker will be considered an undisclosed dual agent under these facts and will be in violation of Illinois law.

b Illinois agency law specifically permits designated agency arrangements such as this.

A buyer wants to have a clause included in the sales contract under which the seller offers assurances that no one has died in the home. Which of these statements is TRUE in Illinois?' a The licensee may include the clause because such standard disclosures are in general usage. b Only the buyer or a licensed attorney may prepare the clause for inclusion in the sales contract. c In Illinois, licensees are permitted to add additional clauses to blank form contracts, such as the clause described here, that do not directly involve the conveyance of title to real property. d Under Illinois law, a clause such as the one described here is not permitted and any contract containing such a clause will be void.

b Only the buyer or a licensed attorney may prepare the clause for inclusion in the sales contract.

Which is a requirement for a deed to be recorded in Illinois? a The name of the grantee typed or printed below the grantee's signature b Payment of required tax stamps c A blank page for use by the recorder d The name, address, and age of the grantee

b Payment of required tax stamps

In Illinois, the amount of consideration used to determine transfer taxes must be shown on the a Recording Form. b Real Estate Declaration of Transfer. c Blue Sheet. d Tax Code Sheet.

b Real Estate Declaration of Transfer.

A deed of conveyance contained only the following guarantee: "This property was not encumbered during the time the grantor owned it except as noted in this deed." What type of deed did the grantor give to the grantee? a General warranty b Special warranty c Bargain and sale d Quitclaim

b Special warranty

A landlord has a "no pets" policy in his apartment building. If a visually impaired person wants to rent an apartment from the landlord, but owns a guide dog, which of these statements is TRUE? a If the landlord's "no pets" policy is applied uniformly, in a nondiscriminatory manner, it may be legally applied to the guide dog as well. b The Illinois Human Rights Act specifically prohibits the landlord from refusing to rent the apartment to the visually impaired person on the basis of the landlord's "no pets" policy. c Under the Illinois Human Rights Act, the landlord may not discriminate against the visually impaired person on the basis of a "no pets" policy, but the landlord may require the tenant to pay an additional damage fee. d The Illinois Human Rights Act does not address the issue of guide, hearing, or support dogs.

b The Illinois Human Rights Act specifically prohibits the landlord from refusing to rent the apartment to the visually impaired person on the basis of the landlord's "no pets" policy.

A buyer's agent is showing properties to a young mother of three children whose safety is paramount to her. Which of these is NOT appropriate? a The agent tells the mother she can check addresses of convicted but released sex offenders online. b The agent decides to show only certain neighborhoods. c The licensee checks properties surrounding an interesting subject property carefully for any signs of oil leaks, USTs, formaldehyde odors, gas odors, bogs, or fire/explosion hazards. d The buyer's agent recommends radon testing, carbon monoxide detectors, and water testing.

b The agent decides to show only certain neighborhoods.

An approximately straight line (except for corrections) connecting Rockford and Cairo is the a Second Principal Meridian. b Third Principal Meridian. c Fourth Principal Meridian. d Centralia Base Line.

b Third Principal Meridian.

Is there any limitation on an original grantor's right of reverter in Illinois? a Yes; both an original grantor's right of reverter and the enforceability of the underlying condition expire by law after 20 years. b Yes; the original grantor's right of reverter continues for 40 years, although the underlying condition remains enforceable. c Yes; both the original grantor's right of reverter and the underlying condition automatically expire after 99 years. d No; under Illinois law there is no limitation on an original grantor's future interest.

b Yes; the original grantor's right of reverter continues for 40 years, although the underlying condition remains enforceable.

In Illinois, if an owner defaults on a mortgage loan and the property is ordered sold at a foreclosure sale, the owner may redeem the property a before the sale, under the statutory right of redemption. b before the sale, under the equitable right of redemption. c after the sale, under the statutory right of redemption. d after the sale, under the statutory right of reinstatement.

b before the sale, under the equitable right of redemption.

Real estate licensees in Illinois must disclose a minor problems in the neighborhood of which they have knowledge. b designated agency. c special compensation found outside the scope of their agency relationship. d all of these.

b designated agency.

A sponsoring broker took a listing and later discovered that a court had previously declared the client incompetent. At this point, the status of the listing is a unaffected because the sponsoring broker acted in good faith as the owner's agent. b of no value to the sponsoring broker because the contract is void. c the basis for recovery of a commission from the client's guardian or trustee if the sponsoring broker produces a buyer. d on hold, and may be renegotiated between the broker and the client, based on the new information.

b of no value to the sponsoring broker because the contract is void.

A woman purchased 4.5 acres of land for $78,400. A man who owns adjoining property wants to purchase a strip of the woman's land measuring 150 feet by 100 feet. What should this strip cost the man if the woman sells it for the same price per square foot she originally paid for the property? a. $3,000 b. $6,000 c. $7,800 d. $9,400

b. $6,000

A parcel of land is 400 feet by 640 feet. The parcel is cut in half diagonally by a stream. How many acres are there in each half of the parcel? a. 2.75 b. 2.94 c. 5.51 d. 5.88

b. 2.94

As an office policy, a sponsoring broker requires that sponsored licensees show prospective buyers from racial or ethnic minority groups only properties that are in certain areas of town where few members of their groups currently live. The sponsoring broker prepares a map illustrating the appropriate neighborhoods for each racial or ethnic group. Through this policy, the sponsoring broker hopes to achieve racial balance in residential housing. Which of these statements is TRUE regarding the sponsoring broker's policy? a. While the sponsoring broker's policy may appear to constitute blockbusting, application of the effects test proves its legality. b. Because the effect of the sponsoring broker's policy is discriminatory, it constitutes illegal steering regardless of his intentions. c. The sponsoring broker's policy clearly shows the intent to discriminate. d. While the sponsoring broker's policy may appear to constitute steering, application of the intent test proves its legality.

b. Because the effect of the sponsoring broker's policy is discriminatory, it constitutes illegal steering regardless of his intentions.

What is rent? a. Contractual consideration to a third party b. Consideration for the use of real property c. All monies paid by the lessor to the lessee d. Total balance owed under the terms of a lease

b. Consideration for the use of real property

Which charge noted on the Good Faith Estimate (GFE) must be the same or less than the charge noted on the HUD-1? a. Cost of settlement service when the lender selects the provider b. Lender charges for taking and underwriting the loan c. Cost of settlement services when the borrower elects the provider from the list provided by the lender d. Cost of homeowners insurance

b. Lender charges for taking and underwriting the loan

Which action is legal under Illinois law? a. Encouraging a seller to reject an offer because the prospective buyer is a Methodist b. Placing a For Sale sign in front of a house after asking the seller's permission and receiving written permission to do so c. Advertising that individuals who attend a promotional presentation will receive a prize without mentioning that they will also have to take a day trip to a new subdivision site d. Standing in the hallway outside the testing room and offering employment to new licensees as soon as they receive their passing score at the testing center

b. Placing a For Sale sign in front of a house after asking the seller's permission and receiving written permission to do so

Which of these is legal? a. Charging a family with children a higher security deposit that those with no children b. Requiring a person with a disability to establish an escrow account for the cost to restore a property after it has been modified c. Picturing only white people in a brochure as the "happy residents" in a housing community d. Refusing to sell a house to a person who has a history of mental illness

b. Requiring a person with a disability to establish an escrow account for the cost to restore a property after it has been modified

What is NOT included in public land-use controls? a. Subdivision regulations b. Restrictive covenants c. Environmental protection laws d. Comprehensive plan specifications

b. Restrictive covenants

A property manager is offered a choice of three insurance policies with different deductibles. If the property manager selects the policy with the highest deductible, which risk management technique is being used? a. Avoiding risk b. Retaining risk c. Controlling risk d. Transferring risk

b. Retaining risk

Which of these is NOT a legal deed restriction? a. The types of buildings that may be constructed b. The allowable ethnic origins of purchasers c. The activities that are not to be conducted at the site d. The minimum size of buildings to be constructed

b. The allowable ethnic origins of purchasers

A listing licensee has an exclusive right to represent a new subdivision. She shows properties in the subdivision to prospective buyers who are not working with other licensees. She prepares the offers for those who decide to buy. Which of the following statements best describes this situation? a. The buyers are represented by the listing licensee b. The buyers are not represented by a licensee c. The licensee owes these buyers the duty of obedience d. The licensee owes half of her commission to the developer

b. The buyers are not represented by a licensee

If the deed of conveyance to Illinois land transfers title to two or more co-owners without defining the character of the co-ownership, which of these statements is TRUE? a. The property is construed as being held in joint tenancy. b. The co-owners are tenants in common. c. While proper in some states, such a deed would be an invalid conveyance under Illinois law. d. By statute, such co-owners would have the right of survivorship.

b. The co-owners are tenants in common.

When using the sales comparison approach, a licensee determines that a comparable property's tile floor in the entry hall is worth $2,000. The subject property does not have tile floors at all. Which of the following adjustments should be made? a. The comparable should be adjusted upwards b. The comparable should be adjusted downward c. The subject property should be adjusted upward d. The subject property should be adjusted downward

b. The comparable should be adjusted downward.

A landlord who owns a 20-unit apartment building in Decatur, Illinois, has held a tenant's security deposit for three months. The tenant, who is on a month-to-month lease, informs the landlord that he will be vacating the apartment in 30 days. Based on these facts, which of these statements is TRUE? a. The landlord must pay the tenant four months' interest on the security deposit. b. The landlord owes the tenant no interest on the security deposit. c. The tenant is entitled to three months' interest on the security deposit. d. If the tenant vacates the premises in these circumstances, the landlord is entitled to retain the security deposit as statutory damages.

b. The landlord owes the tenant no interest on the security deposit.

An owner operated a glass station for 15 years. The city has decided to rezone the area from commercial to residential use. Which of the following is true regarding this situation? a. The owner can continue to operate the station only if he obtains a variance b. The owner has a non-conforming use and can continue to operate the gas station c. The owner will have to stop using the property as a gas station because of the rezoning of the area d. The owner will need to sell the property and limit it to residential buyers only

b. The owner has a non-conforming use and can continue to operate the gas station

Which of these is NOT permitted under the federal Fair Housing Act? a. An expensive club in Chicago rents rooms only to members who are graduates of a particular university. b. The owner of a 20-unit residential apartment building rents to white men only. c. A Catholic convent refuses to furnish housing for a Jewish man. d. An owner refuses to rent the other side of her duplex to a family with children

b. The owner of a 20-unit residential apartment building rents to white men only.

A seller lists his home with a real estate broker for $289,500 and has given written permission for dual agency. Later the same day, a potential buyer comes into the broker's office and asks for general information about homes for sale in the $250,000-$300,000 price range. Based on these facts, which of these statements is TRUE? a. The seller and potential buyer are both the broker's customers. b. The seller is the broker's client; the broker must obtain written consent for dual agency from the buyer if intending to show properties including the new listing. c. The broker owes fiduciary duties to both the seller and the potential buyer. d. If the potential buyer asks the broker to be his buyer representative, the broker must decline because of the pre-existing agreement with the seller.

b. The seller is the broker's client; the broker must obtain written consent for dual agency from the buyer if intending to show properties including the new listing.

A zoning law passed by a village conflicts with an existing county zoning law. Both the village and the county are home-rule units of government. In this situation, which of these statements is TRUE? a. Under the Illinois constitution, the county law will prevail because its zoning laws affect a larger geographic area. b. The village's law will prevail because municipal ordinances supersede county ordinances under the Illinois constitution. c. The Illinois constitution provides that a conflict between the laws of two home-rule units must be resolved in the appropriate circuit court. d. Whichever law is most restrictive will prevail, unless the issue involves a constitutional question, in which case the law least restrictive of private property rights will supersede the more restrictive law.

b. The village's law will prevail because municipal ordinances supersede county ordinances under the Illinois constitution.

Under the Mortgage Disclosure Improvement Act (MDIA), a lender must extend the closing how many days if the APR is increased before closing? a. Two b. Three c. Four d. Five

b. Three

What is the purpose of the Real Estate Recovery Fund? a. To ensure that Illinois real estate licensees have adequate funds available to pay their licensing and continuing education fees b. To provide a means of compensation for actual monetary losses suffered by individuals as a result of the acts of a licensee who violated the license law or committed other illegal acts related to a real estate transaction c. To protect IDFPR from claims by individuals that they have suffered a monetary loss as the result of the action of a licensee who violated the license law or committed other illegal acts related to a real estate transaction d. To provide an interest-generating source of revenue to fund IDFPR's activities

b. To provide a means of compensation for actual monetary losses suffered by individuals as a result of the acts of a licensee who violated the license law or committed other illegal acts related to a real estate transaction

A broker has violated the license law, resulting in monetary damages to a consumer. What is the latest date on which the injured party may file a lawsuit that may result in a collection from the Real Estate Recovery Fund? a. One year after the alleged violation occurred b. Two years after the alleged violation occurred c. Three years after the alleged violation occurred d. Three years after the date on which a professional relationship of trust and accountability commenced

b. Two years after the alleged violation occurred

Which of these creates a lien on real estate? a. Easement running with the land b. Unpaid mortgage loan c. License d. Encroachment

b. Unpaid mortgage loan

Which of these describes the process of creating a landfill site? a. Waste is liquefied, treated, and pumped through pipes to "tombs" under the water table. b. Waste and topsoil are layered in a pit, mounded up, and then covered with dirt and plants. c. Waste is compacted and sealed into a container, then placed in a "tomb" designed to last several thousand years. d. Waste is buried in an underground concrete vault.

b. Waste and topsoil are layered in a pit, mounded up, and then covered with dirt and plants.

Which of these is an example of an appurtenance? a. Personal property b. Water rights c. A fixture A trade fixture

b. Water rights

An adult buyer who is illiterate signs a contract to purchase property from a seller. The buyer understands the nature of the contract because the terms were explained orally. Is the contract binding? a. Yes, because all adults are considered legally competent b. Yes, because the buyer understands the terms of the contract c. No, because the buyer is illiterate and, therefore, legally incompetent d. No, because a conservator must sign for the buyer

b. Yes, because the buyer understands the terms of the contract

A buyer's licensee described the boundaries of a property to a client without disclosing that the boundaries described were not exact. After purchasing the property, the new owner extended a fence within the described boundaries. A neighbor then brought an injunction against the new owner because the fence extended beyond the actual property boundaries. Can the licensee be accountable for misrepresentation? a. Yes, because the licensee must present a lot and block survey before closing b. Yes, because the licensee knew the boundaries cited could be false c. No, because the licensee's description was oral d. No, because the prospective buyer is responsible for obtaining a survey before closing

b. Yes, because the licensee knew the boundaries cited could be false

During a listing presentation, a real estate licensee said to the seller, who owned two residential properties, "I hear they're moving in, and you'd better put your house on the market before values drop!" Has the licensee violated any fair housing law? a. Yes, the licensee is guilty of steering. b. Yes, the licensee is guilty of blockbusting. c. No, because the seller owns fewer than three houses. d. No, because the licensee does not intend to publicly advertise the property.

b. Yes, the licensee is guilty of blockbusting.

A licensee entered into a buyer agency agreement with Japanese man. The licensee showed him only properties where it was obvious that other Japanese people lived. Has the licensee violated any fair housing law? a. Yes, the licensee is guilty of blockbusting. b. Yes, the licensee is guilty of steering. c. No, because a Japanese buyer would want to live in a Japanese neighborhood. d. No, because as a buyer agent it is the licensee's responsibility to make decisions for the buyer

b. Yes, the licensee is guilty of steering.

Real property taxes are taxes on a. cars, boats and trailers b. a house and the land on which it sits c. underdeveloped land only d. all home furnishings and outbuildings

b. a house and the land on which it sits

A net lease is a. an agreement in which the tenant pays a fixed rent and the landlord pays all taxes, insurance, and other charges on the property. b. a lease in which the tenant pays rent plus maintenance and property charges. c. a lease in which the tenant pays the landlord a percentage of the monthly profits derived from the tenant's commercial use of the property. d. a lease-purchase agreement in which the landlord agrees to apply part of the monthly rent toward the ultimate purchase price of the property.

b. a lease in which the tenant pays rent plus maintenance and property charges.

A tenant still has five months remaining on a one-year apartment lease. When the tenant moves to another city, she transfers possession of the apartment to a friend for the entire remaining term of the lease. The friend pays rent directly to the tenant. In this situation, the tenant has become a. an assignor. b. a sublessor. c. a sublessee. d. a lessor.

b. a sublessor.

A woman signed a deed transferring ownership of her property to a man. To provide evidence that the woman's signature was genuine, she executed a declaration before a notary. This declaration is called an a. affidavit. b. acknowledgment. c. affirmation. d. estoppel.

b. acknowledgment.

General real estate taxes levied for the operation of the government are called a. assessment taxes. b. ad valorem taxes. c. special taxes. d. improvement taxes.

b. ad valorem taxes.

Tenant improvements are a. always construed to be fixtures. b. adaptations of space to suit tenants' needs. c. removable by the tenant. d. paid for by the landlord.

b. adaptations of space to suit tenants' needs.

A property owner has the legal right to pass over the land owned by her neighbor. This is a. an estate in land. b. an easement. c. a police power. d. an encroachment.

b. an easement.

A buyer is interested in a house that fits most of her needs, but it is located in a busy area where she is not sure she wants to live. Her concern about the property's location is called a. physical deterioration. b. area preference. c. permanence of investment. d. immobility.

b. area preference.

In Illinois, the homestead exemption a. must be recorded with the county recorder to be in effect. b. is limited to $15,000 for single persons. c. can never be released. d. is limited to littoral rights of $15,000 per residence.

b. is limited to $15,000 for single persons.

The property manager of a small, 20-unit apartment building requires a security deposit. In this case, the property manager a. must pay interest on the security deposit. b. is not required to pay interest on the security deposit. c. is not required to deposit the security deposit into an escrow account. d. may deposit the security deposit into the general operating fund.

b. is not required to pay interest on the security deposit.

The population of Outlet County is 54,000. In Outlet County, the recorder of deeds a. must be elected. b. is the county clerk. c. is the county treasurer. d. is appointed by the secretary of state.

b. is the county clerk.

When a tenant holds possession of a landlord's property without a current lease agreement and without the landlord's approval, the a. tenant is maintaining a gross lease. b. landlord can file suit for possession. c. tenant has no obligation to pay rent. d. landlord may be subject to a constructive eviction.

b. landlord can file suit for possession.

In describing real estate, the system that uses feet, degrees, and natural and artificial markers as monuments is a. rectangular survey. b. metes and bounds. c. government survey. d. lot and block.

b. metes and bounds.

A person wants to lease a small building to use as a coffee shop. The tenant and the landlord agree upon a lease where the tenant will pay all utilities and taxes, in addition to rent. The landlord will pay the insurance. This type of lease is best known as a a. gross lease b. net lease c. gross rent multiplier d. flat lease

b. net lease

A builder is obtaining a construction loan of $95,000 for a single family residence. Under the Truth-in-Lending Act, disclosure of a prepayment penalty by the lender is a. not required when the amount of the loan is less than $100,000 b. not required for a business loan c. required for new construction under $100,000 d. required for a single-family dwelling

b. not required for a business loan

A person bought property from a seller and received a general warranty deed. Two years later, the seller's brother came forth and claimed he had an ownership interest in the property. The brother stated he knew the court would uphold his interest. In a general warranty deed, the buyer is protected from this situation by the covenant a. Of further assurance b. of seisin c. against encumbrances d. of special warranty

b. of seisin

Priority of liens refers to the a. order in which a debtor assumes responsibility for payment of obligations. b. order in which liens will be paid if property is sold to satisfy a debt. c. dates liens are filed for record. d. fact that specific liens have greater priority than general liens.

b. order in which liens will be paid if property is sold to satisfy a debt.

All encumbrances and liens shown on the report of title (other than those waived or agreed to by the purchaser and listed in the contract) must be removed so that the title can be delivered free and clear. The removal of such encumbrances is the duty of the a. buyer. b. seller. c. broker. d. title company.

b. seller.

The document that provides borrowers with general information about settlement costs, RESPA provisions, and the Settlement Statement (HUD-1) is the a. mortgage disclosure statement. b. special information booklet. c. Good Faith Estimate (GFE). d. closing statement.

b. special information booklet.

If a sponsored broker is found guilty of violating the Real Estate License Act of 2000, her sponsoring broker also may be disciplined if the a. sponsored broker was a convicted criminal. b. sponsoring broker had prior knowledge of the violation. c. sponsoring broker failed to conduct the four-step, pre-employment investigation of the sponsored broker's background and character required by the license law. d. sponsoring broker failed to keep all local business licenses current.

b. sponsoring broker had prior knowledge of the violation.

Environmental regulations in Illinois are a. all more stringent than federal regulations. b. substantially equivalent to federal regulations. c. less restrictive than federal regulations. d. not subject to federal regulations.

b. substantially equivalent to federal regulations.

The Real Estate License Act of 2000 designates three categories of real estate licensees:

broker managing broker leasing agent

If the savings and loan gives you a 90% loan on a house valued at $88,500, how much additional cash must you produce as a down payment if you have already paid $4,500 in earnest money? a. $3,500 b. $4,000 c. $4,350 d. $8,850

c $4,350 due at closing 100% value - 90% LTV = 10% down payment $88,500 × 10% (0.10) = $8,850 down payment $8,850 down payment - $4,500 earnest money = $4,350 due at closing

The buyer has agreed to pay $175,000 in sales price, 2.5 loan discount points, and a 1% origination fee. If the buyer receives a 90% loan-to-value ratio, how much will the buyer owe at closing for points and the origination fee? a. $1,575.00 b. $3,937.50 c. $5,512.50 d. $6,125.00

c $5,512.50 2.5 points loan discount + 1 point origination fee = 3.5 points $175,000 loan × 90% or (0.90) = $157,500 sales price $157,500 loan × 3.5% (0.035) = $5,512.50 for points and origination fee

A property has a net income of $30,000. An appraiser decides to use a 12% capitalization rate rather than a 10% rate on this property. What is the result of using the higher capitalization rate? a 2% increase in the appraised value b $50,000 increase in the appraised value c $50,000 decrease in the appraised value d No change in the appraised value

c $50,000 decrease in the appraised value

What percentage of profit would you make if you paid $10,500 for a lot, built a home on the lot that cost $93,000, and then sold the lot and house together for $134,550? a. 13% b. 23% c. 30% d. 45%

c 30% $10,500 cost of lot + $93,000 cost of home = $103,500 total cost $134,550 sales price - $103,500 total cost = $31,050 profit $31,050 profit ÷ $103,500 total cost = 0.3 or 30%

Three people decide to form a partnership to buy and sell real estate. One partner plans to specialize in residential real estate, the second in commercial real estate, and the third does not plan to list, sell, or rent, but to supervise the office décor and to plan holiday parties. Under these facts, which of the general partners needs to be licensed for the partnership to qualify for a broker's license in Illinois? a None; under Illinois law, a partnership is an independent entity that may obtain a managing broker's license regardless of the status of any individual partner. b Either of the two who are listing and selling, depending on whether the partnership's emphasis will be residential or commercial properties. c All general partners in a general partnership must hold a broker or managing broker license. d All three partners must be licensed real estate managing brokers.

c All general partners in a general partnership must hold a broker or managing broker license.

Which of these is required to adopt a company policy manual? a Sole proprietorship with no other sponsored licensees b Self-sponsored broker with no sponsored licensees c Brokerage company with sponsored licensees d None of these

c Brokerage company with sponsored licensees

In Illinois, which agency is responsible for licensing leasing agents? a Division of Real Estate b Department of Financial Institutions c Illinois Department of Financial and Professional Regulation d Department of Insurance Registration

c Illinois Department of Financial and Professional Regulation

What principle of landlord-tenant relations was established by the Illinois Supreme Court in 1972? a Interest payments required on all security deposits b Landlord damages for a tenant's failure to vacate the premises c Implied warranty of habitability in residential tenancies d Landlord may forcibly remove a tenant without court action under the doctrine of "self-help"

c Implied warranty of habitability in residential tenancies

In Illinois, which property is totally exempt from paying general real estate taxes? a Retirement housing for the elderly b Properties financed with FHA funds c Private schools d Housing owned by a disabled veteran

c Private schools

A borrower defaulted on his home mortgage loan payments, and the lender obtained a court order to foreclose on the property. At the foreclosure sale, the property sold for $164,000; the unpaid balance on the loan at the time of foreclosure was $178,000. What must the lender do to recover the $14,000 that the borrower still owes? a Sue for specific performance b Sue for damages c Seek a deficiency judgment d Seek a judgment by default

c Seek a deficiency judgment

Property owners give a neighbor permission to park a camper in their yard for a few weeks. The property owners do not charge rent for the use of the yard. The property owners have given the neighbor a an easement. b an estate for years. c a license. d a permissive encroachment.

c a license.

When a woman died, a deed was found in her desk drawer. While the deed had never been recorded, it was signed, dated, and acknowledged. The deed gave the woman's house to a local charity. The woman's will, however, provided as follows: "I leave all of the real and personal property that I own to my beloved nephew." In this situation, the house MOST likely will go to the a charity, because acknowledgment creates a presumption of delivery. b charity, because the woman's intent was clear from the deed. c nephew, because the woman still owned the house when she died. d nephew, because the deed had not been recorded.

c nephew, because the woman still owned the house when she died.

A commercial lease calls for a minimum rent of $1,200 per month plus 4% of the annual gross business exceeding $150,000. If the total rent paid at the end of one year was $19,200, how much business did the tenant do during the year? a. $159,800 b. $250,200 c. $270,000 d. $279,200

c. $270,000

If the annual real estate taxes on a property were $2,129 last year, what would be the per diem amount for prorations this year using the actual-number-of-days method? a. $4.90 b. $5.83 c. $5.86 d. $5.98

c. $5.86

In Illinois, how many years are required to acquire title by adverse possession? a. 5 b. 7 c. 20 d. 30

c. 20

How many days' advance notice is required to terminate a month-to-month tenancy in Illinois? a. 5 b. 15 c. 30 d. 60

c. 30

What is the major difference between a general warranty deed and a quitclaim deed? a. A general warranty deed provides the least protection for the buyer; a quitclaim deed provides the most protection for the buyer. b. A general warranty deed can be used only in foreclosure sales; a quitclaim deed is used only in residential sales. c. A general warranty deed provides the most protection for the buyer; a quitclaim deed provides the least protection for the buyer. d. A general warranty deed creates an indefeasible title; a quitclaim deed creates a defeasible title.

c. A general warranty deed provides the most protection for the buyer; a quitclaim deed provides the least protection for the buyer.

Which of these BEST describes an agent? a. A person who gives someone else the legal power to act on her behalf b. A person who is in a customer-agent relationship c. A person who is placed in a position of trust and confidence d. Two agents who work for the same brokerage firm

c. A person who is placed in a position of trust and confidence

Before entering into a service relationship with a prospective tenant, a rental-finding service must provide the prospective tenant with a written contract that discloses what information? a. The total amount to be paid over the lease term b. A statement that the contract will be invalid if information about a rental unit is provided when the unit has been unavailable for more than five days c. A statement that information about rental units may be up to two days old d. A copy of the brokerage agreement between the owner and the rental-finding service

c. A statement that information about rental units may be up to two days old

Which of these might indicate that rents are too low? a. A poorly maintained building b. Many For Lease signs in the area c. High building occupancy d. High tenant turnover rates

c. High building occupancy

Which of these is a legal life estate? a. Leasehold b. Fee simple absolute c. Homestead d. Determinable fee

c. Homestead

Which of these is a voluntary, specific lien? a. IRS tax lien b. Mechanic's lien c. Mortgage lien d. Special assessment

c. Mortgage lien

A woman owns two multiunit apartment buildings: a two-flat on Oak Street and a 12-unit building on Main Street. She lives in an apartment in the Main Street property. Which of her properties, if any, is exempt from the Illinois Human Rights Act? a. The Oak Street property only b. The Main Street property only c. Neither property d. Both properties

c. Neither property

The real estate market in a property owner's area is deflated. during a listing period of 6 months, the owner lowered the price of her property a total of $20,000 before finally selling. Upset at taking such a loss on the property, the owner tells the licensee that she is going to lower the percent of commission on the property. Does the owner have a legal basis for this action? a. Yes, the loss that the owner took on the property should rightfully be shared by the licensee through a lower commission rate b. Yes, since commission rates are negotiated, they can be changed at any time by the licensee of the seller c. No, once a commission rate has been negotiated and agreed upon in the listing contract, it cannot be changed unless both parties agree d. No, commission rates are set by the state real estate commission and cannot be changed

c. No, once a commission rate has been negotiated and agreed upon in the listing contract, it cannot be changed unless both parties agree

A man wants the city zoned to prohibit all fast food restaurants. Which of these is his BEST course of action? a. Petition the Illinois legislature to amend the state zoning laws b. File suit to force the city to conform with existing Illinois zoning laws c. Persuade the town government to change the local zoning laws d. Ask HUD to force the city to zone against fast food restaurants under its Fifth Amendment powers

c. Persuade the town government to change the local zoning laws

Which of these taxes targets homeowners in particular? a. Personal property tax b. Sales tax c. Real property tax d. Luxury tax

c. Real property tax

Under the Fair Housing Act, which action is legally permitted? a. Altering the terms of a loan to discriminate against a member of a minority group b. Refusing to rent an apartment to an individual because of his physical disability c. Restricting occupancy in an apartment complex to senior citizens, if qualified and registered as housing for seniors d. Telling a minority individual that an apartment has been rented when in fact it has not

c. Restricting occupancy in an apartment complex to senior citizens, if qualified and registered as housing for seniors

The section due west of Section 18, Township 5 North, Range 8 West, is a. Section 19, T5N, R8W. b. Section 17, T5N, R8W. c. Section 13, T5N, R9W. d. Section 12, T5N, R7W.

c. Section 13, T5N, R9W.

In Illinois, which party customarily prepares the closing statement? a. Buyer's attorney b. Listing broker c. Seller's attorney d. Seller's lender

c. Seller's attorney

Which of these BEST proves one's right to live in a cooperative? a. Tax bill for the individual unit b. Existence of a reverter clause c. Shareholder's stock certificate d. Right of first refusal

c. Shareholder's stock certificate

Which of these statements is TRUE of the successful bidder on property offered at an annual tax sale? a. She owns the property after paying the outstanding taxes. b. She bids the highest percentage of interest she will accept if the property is redeemed. c. She may obtain a tax deed if the property is not redeemed within the redemption period. d. She receives a tax deed at the time of the sale.

c. She may obtain a tax deed if the property is not redeemed within the redemption period.

A buyer wants to buy a larger house and open a beauty salon in her home. She tells the listing licensee her plans and looks at property with that licensee. They find a property she likes and she makes an offer that is accepted. After closing and moving into the property, she finds out there are deed restrictions in the subdivision that prohibit a business operating out of one's home. Which of the following is true? a. The buyer was solely responsible for researching the deed restrictions before buying the property b. The licensee was representing the seller and had no duty to the buyer to investigate the restrictions c. Since the licensee knew of the buyer's intended use, the licensee should have ascertained whether or not the property could be used for that purpose d. The seller was solely liable for not telling the buyer she would be unable to open a beauty shop in the property.

c. Since the licensee knew of the buyer's intended use, the licensee should have ascertained whether or not the property could be used for that purpose

Step 1: A man decided to convey his property to a woman. Step 2: The man signed a deed transferring title to the woman. Step 3: The man gave the signed deed to the woman, who accepted it. Step 4: The woman took the deed to the county recorder's office and had it recorded. At which step did title to the property actually transfer or pass to the woman? a. Step 1 b. Step 2 c. Step 3 d. Step 4

c. Step 3

A broker lists a residence. The owner of the residence must sell the house quickly. To expedite the sale, the broker tells a prospective purchaser that the seller will accept at least $5,000 less than the asking price for the property. Based on these facts, which of these statements is TRUE? a. The broker has not violated his agency responsibilities to the seller. b. The broker should have disclosed this information, regardless of its accuracy. c. The disclosure was improper, regardless of the broker's motive. d. The relationship between the broker and the seller is called a general agency relationship.

c. The disclosure was improper, regardless of the broker's motive.

A lot is valued at $25,000, and the house is valued at $75,000. If the house is totally destroyed by fire, under a guaranteed replacement cost policy with a coinsurance clause, which of these would MOST likely occur? a. The insurance company would pay $100,000 to the owner. b. The insurance company would pay $75,000 to the owner. c. The insurance company would pay $60,000 to the owner. d. The insurance company would pay $80,000 to the owner.

c. The insurance company would pay $60,000 to the owner.

A tenant rents an apartment in a 100-unit highrise in a Chicago suburb for $900 per month. The tenant decides to move when she learns that her rent will be raised by 25% at the expiration of her one-year lease. When she moved in, the tenant deposited $1,200 as a security deposit. How will the interest paid on the tenant's deposit be determined? a. The interest paid should be based on the prime rate as of December 31 of the calendar year preceding the rental agreement. b. The interest paid should be 5% per year, from the date of deposit. c. The interest rate should be computed at a rate equal to that paid on a minimum deposit passbook savings account at the state's largest commercial bank. d. Under these facts, the tenant is not entitled to receive interest on her security deposit

c. The interest rate should be computed at a rate equal to that paid on a minimum deposit passbook savings account at the state's largest commercial bank.

A real estate licensee tells a single man with two small children that homes for sale in a condominium complex are available only to married couples with no children. Which statement is TRUE? a. Because a single-parent family can be disruptive if the parent provides little supervision of the children, the condominium is permitted to discriminate against the family under the principle of rational basis. b. Condominium complexes are exempt from the fair housing laws and can therefore restrict children. c. The man may file a complaint alleging discrimination on the basis of familial status. d. Restrictive covenants in a condominium take precedence over the fair housing laws.

c. The man may file a complaint alleging discrimination on the basis of familial status.

Which statement is TRUE regarding the lender's title insurance? a. The lender's protection increases with each principal payment that is made. b. The seller is usually required to purchase the lender's policy. c. The mortgagee's policy covers only the mortgagee. d. The mortgagee's premium is paid monthly with the mortgage payment.

c. The mortgagee's policy covers only the mortgagee.

Under its zoning authority, what may a town legally regulate? a. Building ownership b. Business ownership c. The number of buildings d. Enabling acts

c. The number of buildings

A listing licensee is preparing an offer for a buyer. The property is listed for $205,000. The buyers want to offer $200,000 and require that the new free-standing stove and refrigerator remain with the property. The licensee prepares the offer, the buyers sign it, and the licensee presents the offer to the seller. The seller accepts the price and will leave the stove, but will not leave the refrigerator. The licensee removes the part about the refrigerator staying, and the seller and his wife initial, sign, and date the document. Which of the following is true about this situation? a. The offer has been signed and accepted by all parties and is now considered a contract b. Neither the seller, nor his licensee, has a right to make any changes to the original offer c. The original offer is now terminated and a counteroffer has been created d. If the buyers refuse to give up the refrigerator, the seller can accept their original offer.

c. The original offer is now terminated and a counteroffer has been created

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of these statements is TRUE? a. Illinois law no longer regulates this situation. b. The broker should refer the buyer to another broker to negotiate the sale. c. The seller and the buyer must be informed of the situation and agree to the broker's representation of both of them. d. The buyer should not have been shown a house listed by the broker.

c. The seller and the buyer must be informed of the situation and agree to the broker's representation of both of them.

Under what conditions may a sponsoring broker who lives in a state that has a reciprocal licensing agreement with Illinois be issued an Illinois license? a. The sponsoring broker maintains an office in Illinois. b. The sponsoring broker passes the Illinois managing broker's license exam. c. The sponsoring broker's home state has a reciprocal licensing agreement with Illinois. d. The sponsoring broker's sponsored licensees have reciprocal licenses in Illinois.

c. The sponsoring broker's home state has a reciprocal licensing agreement with Illinois.

A tenant's tenancy for years will expire in two weeks. The tenant plans to move to a larger apartment across town when the current tenancy expires. What must the tenant do to terminate this agreement? a. The tenant must give the landlord two weeks' prior notice. b. The tenant must give the landlord one week's prior notice. c. The tenant needs to do nothing; the agreement will terminate automatically. d. The agreement will terminate only after the tenant signs a lease for the new apartment.

c. The tenant needs to do nothing; the agreement will terminate automatically.

A man purchases an interest in a house. He is entitled to the right of possession only between July 10 and August 4 of each year. Which of these is MOST likely the type of ownership the man purchased? a. Cooperative b. Condominium c. Time-share estate d. Life estate

c. Time-share estate

Which are exempt from radon disclosure under the Illinois Radon Awareness Act? a. Residential rentals, if radon has been detected and remediated in the past b. Properties with six or more units c. Transfers between co-owners d. Transfers between neighbor

c. Transfers between co-owners

In Illinois, when may a mortgagor in default exercise the right of reinstatement? a. At any time before the foreclosure sale b. Up to six months after the foreclosure sale c. Up to 90 days after service of summons d. Up to 90 days after the payments become delinquent but before summons

c. Up to 90 days after service of summons

When a property manager is establishing a budget for the building, what should be included as an operating expense? a. Replacement reserves b. Debt service c. Utilities d. Depreciation

c. Utilities

In Illinois, when must a release be delivered to a mortgagor or trustor once the mortgage or deed of trust has been fully satisfied? a. Within 48 hours of full payment and satisfaction b. Within five business days after full payment and satisfaction c. Within one month after full payment and satisfaction d. Within 90 days after full payment and satisfaction

c. Within one month after full payment and satisfaction

A seller delivered a deed to a buyer at the closing. A title search disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact nor did it appear to expose the buyer to possible litigation. The seller's title did not appear to present a threat to the buyer's quiet enjoyment, and the title policy was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be called a. a certificate of title. b. an abstract of title. c. a marketable title. d. an attorney's opinion of title.

c. a marketable title.

Residential leases are usually expressed as a. an annual or monthly rate per square foot. b. a percentage of total space available. c. a monthly rate per unit. d. an annual rate per room.

c. a monthly rate per unit.

The legal description "the NW¼ of the SW¼ of Section 6, Township 4 North, Range 7 West" is defective because there is no reference to a. lot numbers. b. boundary lines. c. a principal meridian. d. a record of survey.

c. a principal meridian.

The term reconciliation refers to a. loss of value due to any cause. b. separating the value of the land from the total value of the property to compute depreciation. c. analyzing the results obtained by the different approaches to value to determine a final estimate of value. d. the process by which an appraiser determines the highest and best use for a parcel of land.

c. analyzing the results obtained by the different approaches to value to determine a final estimate of value.

In a dual agency situation, a licensee may represent both the seller and the buyer if a. the licensee informs either the buyer or the seller of this fact. b. the buyer and the seller are related by blood or marriage. c. both parties give their informed consent, in writing, to the dual agency. d. both parties are represented by attorneys.

c. both parties give their informed consent, in writing, to the dual agency.

An unlicensed man has been twice found to be engaging in activities for which a real estate license is required. He is subject to a a. fine not to exceed $1,000. b. fine not to exceed $5,000 and one year imprisonment. c. civil penalty not to exceed $25,000 per violation. d. civil penalty not to exceed $25,000 per violation and a mandatory prison term not to exceed five years.

c. civil penalty not to exceed $25,000 per violation.

At closing, the listing broker's commission usually is shown as a a. credit to the seller. b. credit to the buyer. c. debit to the seller. d. debit to the buyer.

c. debit to the seller.

Under the statute of frauds, all contracts for the sale of real estate must be a. originated by a real estate broker. b. on preprinted forms. d. in writing to be enforceable. d. accompanied by earnest money deposits.

c. in writing to be enforceable.

A homeowner wants to sell her property but cannot find her deed. In this situation, she a. may need a suit to quiet title. b. must buy title insurance. c. does not need the deed to sell if it was recorded. d. should execute a replacement deed to herself.

c. does not need the deed to sell if it was recorded.

In Illinois, a prescriptive easement may be a. established by 15 years of continuous, uninterrupted use without the owner's approval or permission. b. prevented by posting a No Trespassing sign in a prominent place on or near the boundary of the property. c. established by 20 years of continuous, uninterrupted, exclusive use under claim of right and without the owner's permission. d. defeated by showing that the adverse possession was not exercised by a single individual for the requisite period, but by successive parties in interest.

c. established by 20 years of continuous, uninterrupted, exclusive use under claim of right and without the owner's permission.

A licensee who has contracted with a condominium owner to manage a highrise apartment is probably a a. transactional broker. b. buyer's agent. c. general agent. d. special agent.

c. general agent.

For Illinois courts to recognize a will, it must a. be handwritten. b. have no amendments. c. have two witnesses. d. be modified by codicil.

c. have two witnesses.

A listing licensee has which of the following obligations to a buyer? a. accounting b. negotiation c. honesty d. loyalty

c. honesty

The four unities of possession, interest, time, and title are associated with a. community property. b. severalty ownership. c. joint tenancy. d. tenants in common.

c. joint tenancy

In regulations regarding lead-based paint, HUD requires that a. homeowners test for its presence. b. paint be removed from surfaces before selling. c. known paint hazards be disclosed. d. only licensed contracts deal with its removal.

c. known paint hazards be disclosed.

Which of the following is a purpose of staked survey? a. estimating the value of a property b. determining assessed value c. locating property boundaries d. evaluating marketability of title

c. locating property boundaries

A homeowner decided to add a family room onto his house. An electrician was hired to wire the room but has not been paid. The electrician has the right to a. tear out his work. b. record a notice of the mechanic's lien. c. record a notice of the mechanic's lien and file a court suit within the time required by state law. d. have personal property of the owner sold to satisfy the lien.

c. record a notice of the mechanic's lien and file a court suit within the time required by state law.

The Residential Lead-Based Paint Hazard Reduction Act establishes procedures for disclosing the presence of lead in a. all residential properties offered for sale. b. new residential construction only. c. residential properties built before 1978. d. residential properties built before 1990.

c. residential properties built before 1978.

The Settlement Statement (HUD-1) must be used to illustrate all settlement charges for a. every real estate transaction. b. transactions financed by VA and FHA loans only. c. residential transactions financed by federally related mortgage loans. d. all transactions involving commercial property.

c. residential transactions financed by federally related mortgage loans.

Because a corporation is a legal entity, real estate owned by it is owned in a. trust. b. partnership. c. severalty. d. survivorship tenancy.

c. severalty

According to the Mortgage Tax Escrow Act, an individual who has owned his home for 12 years and reduced his mortgage balance to 65% of its original amount may a. receive a 50% rebate from the lender on his escrow account. b. earn the statutory interest rate on his escrow account deposit. c. terminate his escrow account. d. obtain a second loan with only a token down payment.

c. terminate his escrow account.

Radon poses the greatest potential health risk to humans when it is a. contained in insulation material used in residential properties during the 1970s. b. found in high concentrations in unimproved land. c. trapped and concentrates in inadequately ventilated areas. d. emitted by malfunctioning or inadequately ventilated appliances.

c. trapped and concentrates in inadequately ventilated areas.

Which of these licensee statements is appropriate in Illinois? a Licensee answering a call-in customer's question: "The standard commission is 6%." b Listing agent to buyer's agent: "List price is $200,000, but my seller will probably sell for about $195,000." c Buyers' agent to listing agent: "My buyers need to buy this weekend, so I think we can get this deal together." d Licensee to a licensed personal assistant: "Thanks for your help on this transaction, but I can't cut you a check."

d Licensee to a licensed personal assistant: "Thanks for your help on this transaction, but I can't cut you a check."

A sponsoring broker decides to "sweeten" an MLS listing for a property by making a blanket offer of subagency. Is the sponsoring broker's action acceptable? a Yes, because Illinois law permits the creation of subagency relationships only through multiple listing services. b Yes, because a subagency relationship may be created by either a blanket offer in an MLS or through a specific agreement between parties. c No, because subagency is illegal under Article 15 of the Real Estate License Act of 2000. d No, because subagency relationships may not be offered through an MLS in Illinois.

d No, because subagency relationships may not be offered through an MLS in Illinois.

Prepaid insurance and tax reserves, in which the buyer assumes the mortgage, will appear on a typical closing statement as a a credit to the buyer and a debit to the seller. b credit to the seller only. c debit to the seller only. d debit to the buyer and a credit to the seller.

d debit to the buyer and a credit to the seller.

Three weeks before a man begins his Illinois real estate prelicense class, he offers to help his neighbor sell her house. The neighbor agrees to pay him a 5% commission. An offer is accepted while the man is taking the class and closes the day before the man passes the examination and receives his real estate license. The neighbor refuses to pay the man the agreed commission. Can the man sue to recover payment? a Yes; because the man was formally enrolled in a course of study intended to result in a real estate license at the time an offer was procured and accepted, the commission agreement is binding. b No; in Illinois, a real estate licensee must be sponsored by a broker who has a permanent office in affiliate licenses are displayed in order to collect a commission from a seller. c Yes; while the statute of frauds forbids recovery on an oral agreement for the conveyance of real property, Illinois law permits enforcement of an oral commission contract under these facts. d No; Illinois law prohibits lawsuits to collect commissions unless the injured party is a real estate licensee and the license was in effect before the agreement was reached.

d No; Illinois law prohibits lawsuits to collect commissions unless the injured party is a real estate licensee and the license was in effect before the agreement was reached.

A large manufacturing company agrees to relocate to an economically depressed neighborhood of Chicago if the city can provide suitable property in a short period. The property needed is a large vacant lot owned by an investment partnership that refuses to sell. If the City of Chicago wants to relieve unemployment in the neighborhood and improve commercial conditions in the city by bringing in the manufacturer immediately, what can the city legally do? a Nothing; private real property is exempt from the power of eminent domain b Obtain title to the property by escheat through the provisions of Article I, Section 15, of the Illinois Constitution c Obtain title to the property through a court action seeking condemnation of the property d Obtain immediate rights of possession and use by depositing a sum of money that a court preliminarily considers to be just compensation with the county treasurer through a process called a quick-take

d Obtain immediate rights of possession and use by depositing a sum of money that a court preliminarily considers to be just compensation with the county treasurer through a process called a quick-take

In one commercial building, the tenant intends to start a health food shop using her life savings. In an identical adjacent building is a showroom leased to a major national retailing chain. Both tenants have long-term leases with identical rents. Which of these statements is TRUE? a If the values of the buildings were the same before the leases, the values will be the same after the leases. b An appraiser would most likely use a higher capitalization rate for the store leased to the national retailing chain. c The most accurate appraisal method an appraiser could use would be the sales comparison approach to value. d The building with the health food shop will probably appraise for less than the other building.

d The building with the health food shop will probably appraise for less than the other building.

An applicant applies for a mortgage, and the loan officer suggests that she might consider a term mortgage loan. Which of these statements BEST explains what the loan officer means? a All the interest is paid at the end of the term. b The debt is partially amortized over the life of the loan. c The length of the term is limited by state law. d The entire principal amount is due at the end of the term.

d The entire principal amount is due at the end of the term.

Because the owner of an apartment building failed to perform routine maintenance, the apartment building's central heating system broke down in the fall. The owner neglected to have the heating system repaired, and a tenant had no heat in her apartment for the first six weeks of winter. Although eight months remained on the tenant's lease, she moved out of the apartment and refused to pay any rent. If the owner sues to recover the outstanding rent, which of the following would be the tenant's BEST defense? a Because the tenant lived in the apartment for more than 25% of the lease term, she was entitled to move out at any time without penalty. b The tenant was entitled to vacate the premises because the landlord's failure to repair the heating system constituted abandonment. c Because the apartment was made uninhabitable, the landlord's actions constituted actual eviction. d The landlord's actions constituted constructive eviction.

d The landlord's actions constituted constructive eviction.

If a minor enters into a contract in Illinois, what is the statutory period within which the minor may legally void the contract after reaching the age of majority? a 6 months b 1 year c After the minor reaches the age of majority, the contract is binding d There is no statutory period

d There is no statutory period

Under Illinois law, what is the statutory ceiling on the prepayment penalty a lender may charge on loans secured by real estate that bear more than 8% annual interest? a 1% b 3% c 8% d There is none

d There is none

A broker lists the seller's home. Under the terms of the agreement, when the property sells, the seller will receive a guaranteed $75,000. Any amount left over after the seller's $75,000 will constitute the broker's compensation. Based on these facts, which of these statements is TRUE in Illinois? a This type of arrangement, called a guaranteed sales agreement, is illegal in Illinois, and the broker will be disciplined for entering into it. b This type of arrangement, called a net listing, is illegal in Illinois, and the broker will be disciplined for entering into it. c This is an example of a guaranteed sales agreement, which is permissible in Illinois if the broker provides the seller with the necessary disclosures. d This is an example of a net listing, which is discouraged (but not illegal) in Illinois.

d This is an example of a net listing, which is discouraged (but not illegal) in Illinois.

How much do local (city or town) tax stamps in Illinois cost? a $1.50 per $1,000 b $2.00 per $500 c Vary by street d Vary by town

d Vary by town

An owner paid the first installment of her Illinois general real estate tax on July 1. The amount due was $2,380. If the county assessor issued the owner's bill 30 days before the penalty date of June 1, does the owner owe any penalty? a No; the penalty date for the payment of all Illinois general real estate taxes is September 1. b Yes; the owner will have to pay $35.70 as a penalty in addition to the real estate tax owed. c No; the assessor is required by statute to issue tax bills 60 days before any penalty date. d Yes; the owner will have to pay $71.40 as a penalty in addition to the real estate tax owed.

d Yes; the owner will have to pay $71.40 as a penalty in addition to the real estate tax owed.

Which of these statements correctly describes the requirements for recording a tax deed? a. A tax deed must be recorded within 30 days after expiration of the redemption period. b. A tax deed may be recorded at any time before or after the redemption period. c. Tax deeds are specifically exempted from recording deadlines and are effective regardless of whether or not they have been recorded. d. A tax deed must be recorded within one year after expiration of the redemption period or it will become null and void.

d. A tax deed must be recorded within one year after expiration of the redemption period or it will become null and void.

A and B held title to an apartment building in Illinois as joint tenants with rights of survivorship. A and B had an argument, and A didn't like the possibility that B would acquire total ownership of the building if A died. Therefore, A executed a deed to himself as a tenant in common and later willed his interest to C. Which of these statements accurately describes A's action? a. A's action is illegal under Illinois law. b. While not necessarily illegal, A's action has no effect on the joint tenancy. c. A's goal of severing the joint tenancy can be accomplished only by a partition suit. d. A's action legally severs the joint tenancy.

d. A's action legally severs the joint tenancy.

Which of these constitutes acceptable proof of ownership? a. A subrogation agreement b. Physical possession c. A deed signed by the last seller d. An abstract and attorney's opinion

d. An abstract and attorney's opinion

In Illinois, all real estate brokers' licenses expire on a. January 31 of every odd-numbered year. b. January 31 of every even-numbered year. c. March 31 of every even-numbered year. d. April 30 of every even-numbered year.

d. April 30 of every even-numbered year.

Which of these environmental hazards poses a risk due to particles or fibers in the air? a. Carbon monoxide b. Radon c. UFFI d. Asbestos

d. Asbestos

Broker A tells a prospective buyer, "This property has the most beautiful view." In fact, the view includes the back of a shopping center. In a separate transaction, broker B fails to mention to some enthusiastic potential buyers that a six-lane highway is planned for construction within 10 feet of a house the buyers think is perfect. Based on these facts, which of these statements is TRUE? a. Broker A has committed fraud. b. Broker B has committed puffing. c. Both brokers are guilty of intentional misrepresentation. d. Broker A is merely puffing; broker B has misrepresented the property.

d. Broker A is merely puffing; broker B has misrepresented the property.

A man and a woman sign a contract under which the man will convey his property to the woman. The man changes his mind, and the woman sues for specific performance. What is the woman seeking in this lawsuit? a. Money damages b. New contract c. Deficiency judgment d. Conveyance of the property

d. Conveyance of the property

Which of these is TRUE pursuant to the Fair Housing Act? a. A landlord may unilaterally increase her customarily required security deposit if the tenant is disabled. b. Good intentions are always a defense to allegations of a Fair Housing Act violation. c. Steering is not illegal if it is based on the licensee's reasonable expectations. d. Landlords must make reasonable accommodations to existing policies or practices to permit disabled persons to have equal enjoyment of the premises.

d. Landlords must make reasonable accommodations to existing policies or practices to permit disabled persons to have equal enjoyment of the premises.

In Illinois, which of these is TRUE concerning designated agency? a. Designated agency is always illegal. b. Designated agency is the same as creating an implied agency. c. License law requires that the seller and the buyer be represented by different companies. d. License law requires the licensee to disclose that a designated agency relationship exists.

d. License law requires the licensee to disclose that a designated agency relationship exists.

In two weeks, a general contractor will file a suit against a homeowner for nonpayment. The contractor just learned that the homeowner has listed the property for sale with a real estate broker. In this situation, which of the following will the contractor's attorney use to protect the contractor's interest? a. Seller's lien b. Buyer's lien c. Assessment d. Lis pendens

d. Lis pendens

A prospective buyer says he only has $1,000 for earnest money, but he anticipates receiving $4,000 as a gift from his aunt. The licensee accepts the $1,000 and a promissory note for the remaining $4,000 as a deposit. Must the promissory note be tied to the buyer's mortgage? a. Yes, the note is negotiable and becomes part of the mortgage b. Yes, the note is part of the financing instrument required by the lender c. No, the note is only a personal document that is unsecured and not part of the mortgage d. No, the note is a personal promise to repay a debt and is complete contract alone

d. No, the note is a personal promise to repay a debt and is complete contract alone

A property manager's total compensation consists of a monthly salary, a 12% commission based on annual rental for each vacant unit the property manager fills, and the free use of one of the apartments as the property manager's personal primary residence. Based on these facts, is the property manager required by Illinois law to obtain a real estate broker or managing broker license? a. Yes. Any person who is compensated for performing real estate activities for a commission must have a broker or managing broker license, regardless of any other form of compensation. b. Yes. Because the property manager's compensation is based in part on recruiting new tenants rather than simply collecting rents, the property manager must have a broker or managing broker license. c. No. Property managers are not required to have real estate licenses in Illinois. d. No. Persons acting as resident managers, who live in the managed property, are specifically exempt from the general licensing requirements.

d. No. Persons acting as resident managers, who live in the managed property, are specifically exempt from the general licensing requirements.

Under what circumstances can a limited liability company (LLC) receive a real estate managing broker's license? a. Only if every managing member holds a managing broker's license b. Only if at least 50% of the ownership interest in the LLC is controlled by individuals who are licensed real estate brokers c. Only if no licensed brokers holds stock or any other ownership interest in the entity d. None of these

d. None of these

What is the Illinois usury ceiling for loans secured by real property? a. 8% b. 9½% c. A fluctuating rate based on the quarterly federal reserve rate d. None of these

d. None of these

The real cost of owning a home includes certain costs/expenses that many people overlook. Which of these is NOT such a cost/expense of home ownership? a. Income lost on cash invested in the home b. Interest paid on borrowed capital c. Maintenance and repair expenses d. Personal property taxes

d. Personal property taxes

A homeowner constructs an eight-bedroom brick house with a tennis court, greenhouse, and indoor pool in a neighborhood of modest two- and three-bedroom frame houses on narrow lots. The value of this house is likely to be affected by what principle? a. Progression b. Assemblage c. Change d. Regression

d. Regression

Which of these BEST describes the economic characteristics of real estate? a. Location, uniqueness, and indestructibility b. Scarcity, immobility, and improvements c. Attachment, location, and improvements d. Scarcity, improvements, and location

d. Scarcity, improvements, and location

Which of these is NOT a cost or expense of owning a home? a. Interest paid on borrowed capital b. Homeowners insurance c. Maintenance and repairs d. Taxes on personal property

d. Taxes on personal property

Which of these is a form of co-ownership? a. Severalty b. Sole owner c. Tenancy at will d. Joint tenancy

d. Tenancy at will

What is the difference between tenancy in common and joint tenancy? a. Tenancy in common is characterized by right of survivorship; joint tenancy is characterized by unity of possession. b. Tenancy in common ownership must contain specific wording; joint tenancy is presumed by the law when two or more people own property unless the deed states otherwise. c. Under tenancy in common ownership, each owner has the right to sell, mortgage, or lease her interest without the consent of the other owners; joint tenancy can be implied or created by operation of law. d. Tenancy in common is an inheritable estate; joint tenancy is characterized by the right of survivorship.

d. Tenancy in common is an inheritable estate; joint tenancy is characterized by the right of survivorship.

A borrower has defaulted on a loan. Which of these BEST describes the rights of the lender in this situation? a. The escalation clause in the note allows the lender to collect all future interest due on the loan should a buyer default. b. The defeasance clause in the note stipulates that the lender may begin foreclosure proceedings to collect the remaining mortgage balance. c. The alienation clause in the note allows the lender to convey the mortgage to a buyer at the foreclosure sale. d. The acceleration clause in the note gives the lender the right to have all future installments due and payable immediately on default.

d. The acceleration clause in the note gives the lender the right to have all future installments due and payable immediately on default.

The following ad appeared in the newspaper: "For sale: 4 BR brick home; Redwood School District; excellent Elm Street location; next door to St. John's Church and right on the bus line. Move-in condition; priced to sell." Which of these statements is TRUE? a. The ad is appropriate. b. Fair housing laws do not apply to newspaper advertising. c. The ad should state that the property is available to families with children. d. The ad should not mention St. John's Church.

d. The ad should not mention St. John's Church.

When married homeowners who file jointly realize a profit from the sale of their home that exceeds $500,000, which of these is TRUE? a. The homeowners will not pay capital gains tax if they are over 55. b. Up to $125,000 of the excess profit will be taxed as a capital gain. c. The excess gain will be taxed at the homeowners' income tax rate. d. The profit exceeding $500,000 will be taxed at the current applicable capital gains rate.

d. The profit exceeding $500,000 will be taxed at the current applicable capital gains rate.

Which of these statements is TRUE according to Illinois' Real Estate Timeshare Act? a. Developers, but not their agents, are required to register with the IDFPR. b. Purchasers must be given a disclosure statement about the property immediately after signing the purchase contract. c. Purchasers have 24 hours in which to request a disclosure statement from a developer. d. The statute guarantees purchasers a five-day right to rescind a time-share purchase contract.

d. The statute guarantees purchasers a five-day right to rescind a time-share purchase contract.

Which of these documents transfers title to real estate at the death of the owner? a. Warranty deed b. Special warranty deed c. Trustee's deed d. Will

d. Will

A seller agreed to list an older house for sale on an "as is" basis. He told the licensee that the roof leaked occasionally and that the plumbing and electrical systems were old and outdated. After signing the listing agreement, the seller had the house inspected for termites and rot damage. Both termite and rot damage were present, and the seller notified the licensee. if neither the seller nor the licensee told the buyer about the damage and the buyer personally inspected the property before closing, would the buyer be able to sue at a later date when the termite damage is found? a. No, because the seller sold the property on an "as is" basis. b. No, because the buyer was free to inspect the property and ask any questions prior to the sale. c. Yes, because the damages were from more than one cause. d. Yes, because the licensee did not alert the buyer once he discovered the damage.

d. Yes, because the licensee did not alert the buyer once he discovered the damage.

If an aggrieved person is awarded a judgment against a real estate licensee for violations of the Real Estate License Act of 2000, under the license law, the aggrieved party has the right to a. immediately apply for payment from the recovery fund for the full judgment amount, plus court costs and attorney's fees. b. a maximum award amount of $100,000 from the recovery fund, including court costs and attorney's fees. c. seek satisfaction from the licensee in a private civil action after being compensated from the recovery fund. d. a $25,000 maximum recovery from the recovery fund, plus limited court costs and attorney's fees.

d. a $25,000 maximum recovery from the recovery fund, plus limited court costs and attorney's fees.

A tenant who rents an apartment from the owner of the property holds a. an easement. b. a license. c. a freehold interest. d. a leasehold interest.

d. a leasehold interest.

A person has permission from a property owner to hike on the owner's property during the autumn months. The hiker has a. an easement by necessity. b. an easement by prescription. c. a determinable freehold interest. d. a license.

d. a license.

Chain of title refers a. to a summary or history of all documents and legal proceedings affecting a specific parcel of land. b. a report of the contents of the public record regarding a particular property. c. an instrument or document that protects the insured parties (subject to specific exceptions) against defects in the examination of the record and hidden risks such as forgeries, undisclosed heirs, and errors in the public records. d. a record of a property's ownership.

d. a record of a property's ownership.

For appraisal purposes, depreciation is NOT caused by a. functional obsolescence. b. physical deterioration. c. external obsolescence. d. accelerated capitalization.

d. accelerated capitalization.

A contract is said to be bilateral if a. one of the parties is a minor. b. the contract has yet to be fully performed. c. only one party to the agreement is bound to act. d. all parties to the contract are bound to act.

d. all parties to the contract are bound to act.

If the owner of real estate does not take action against a persistent trespasser before the statutory period has passed, the trespasser may acquire a. an easement by necessity. b. a license. c. title by eminent domain. d. an easement by prescription.

d. an easement by prescription.

A tenant's lease has expired. The tenant has neither vacated the premises nor negotiated a renewal lease, and the landlord has declared that she does not want the tenant to remain in the building. This form of possession is called a. an estate for years. b. a periodic estate. c. an estate at will. d. an estate at sufferance.

d. an estate at sufferance.

A married couple owns a mansion with a right of survivorship. Theirs is MOST likely a. severalty ownership. b. community property. c. a tenancy in common. d. an estate by the entirety.

d. an estate by the entirety.

A property is sold to satisfy a judgment lien. There are also annual real estate taxes, a first mortgage, and a second mortgage due. Which of the following must be paid first? a. first mortgage b. judgment lien c. second mortgage d. annual real estate taxes

d. annual real estate taxes

If a property has encumbrances that will outlast the closing, the property a. cannot be sold. b. can be sold only if title insurance is provided. c. cannot have a deed recorded without a survey. d. can be sold if a buyer agrees to take it subject to the encumbrances.

d. can be sold if a buyer agrees to take it subject to the encumbrances.

An Illinois broker does NOT need written consent of both parties to a transaction to a. disburse interest accrued on an earnest money account. b. fill in the blanks on a sales offer as directed by principals. c. make changes in the terms of a signed sales contract. d. change the commission payment terms designated in the listing agreement.

d. change the commission payment terms designated in the listing agreement.

A licensee is listing a rural property. The property was owned by a woman who is now deceased. The woman had six grown children. Two of the sons are listing the property for sale. Before completing the listing agreement, the licensee should do which of the following? a. Check the woman's will to ascertain who the heirs are. b. Require all six children ton sign quitclaim deeds c. have the woman's attorney sign a release of title d. check the ownership of record

d. check the ownership of record

In a land contract, the vendee a. is not responsible for the real estate taxes on the property. b. does not pay interest and principal. c. obtains legal title at closing. d. has possession during the term of the contract.

d. has possession during the term of the contract.

An Illinois real estate broker's license can be revoked for a. agreeing with a seller to accept a listing for more than the normal commission rate. b. disclosing her agency relationship. c. showing buyers with the same specifications the same properties. d. depositing escrow money in her personal checking account.

d. depositing escrow money in her personal checking account.

A licensee who finds a buyer a house listed with his own firm and is paid a fee by the buyer for finding a suitable house has what type of agency? a. universal b. general c. implied d. dual

d. dual

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to a. make sure buyers do not borrow more than they can repay. b. make real estate licensees more responsive to buyers' needs. c. establish standard escrow and appraisal procedures. d. ensure that buyers know all settlement costs.

d. ensure that buyers know all settlement costs.

Contaminated groundwater, toxic fumes from paint and carpeting, and lack of proper ventilation are all examples of a. issues beyond the scope of a property manager's job description. b. problems faced only in newly constructed properties. c. issues that arise under the Americans with Disabilities Act. d. environmental concerns that a property manager may have to address.

d. environmental concerns that a property manager may have to address.

In a standard sales contract, several words were crossed out and others were inserted. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to a. write a letter to each party listing the changes. b. have each party write a letter to the other approving the changes. c. redraw the entire contract. d. have both parties initial or sign in the margin, along with date, near each change.

d. have both parties initial or sign in the margin, along with date, near each change.

Examples of policy efforts to increase home ownership include a. requiring higher down payments. b. requiring higher credit scores. c. penalizing first-time homebuyers for using funds from IRAs. d. lower closing costs for first-time homebuyers.

d. lower closing costs for first-time homebuyers.

A sponsoring broker licensed in Illinois by reciprocity with another state may be exempt from the requirement of maintaining a definite place of business in Illinois if the sponsoring broker a. employs no sponsored licensees. b. has been licensed for at least 10 years. c. does not plan on engaging in any real estate activities. d. maintains an office in her home state.

d. maintains an office in her home state.

All advertising by an affiliated licensee must include the a. licensee's license number. b. expiration date of the license. c. licensee's home address. d. name of the licensee's sponsoring broker.

d. name of the licensee's sponsoring broker.

Which of the following could be deducted as expenses from annual income taxes on an investment property? a. making additional principal payments b. replacing a roof c. installing a new furnace d. painting a structure

d. painting a structure

Your neighbors regularly use your driveway to reach their garage, which is on their property. Your attorney explains that ownership of the neighbor's real estate includes an easement appurtenant giving them the right to do this. Your property is the a. dominant tenement. b. license property. c. a leasehold interest. d. servient tenement.

d. servient tenement.

Liability under CERCLA is a. limited to the owner of record. b. joint and several and retroactive, but not strict. c. voluntary. d. strict, joint and several, and retroactive.

d. strict, joint and several, and retroactive.

If a tenant moved out of a rented store building because access to the building was blocked as a result of the landlord's negligence, the a. tenant would have no legal recourse against the landlord. b. landlord would be liable for the rent until the expiration date of the lease. c. landlord would have to provide substitute space. d. tenant would be entitled to recover damages from the landlord.

d. tenant would be entitled to recover damages from the landlord.

A person owns a primary residence and two apartment buildings. She pays property taxes on two of the three properties. The delinquent taxes will result in a lien on a. all three properties. b. all real and personal property that she owns. c. only her primary residence. d. the property on which she has not paid the taxes.

d. the property on which she has not paid the taxes.

An owner has accepted an offer. Another buyer approaches the licensee with an offer on the same property. The licensee should tell this second offeror that: a. there is a contract on the property and this offer cannot be presented b. this offer will be presented and he will encourage the owner to cancel his existing contract c. he will present this offer for consideration since the title has not yet been transferred d. this offer can be presented as a back up offer only.

d. this offer can be presented as a back up offer only.

equitable lien

is created by a court to ensure the payment of a judgment as well as by agreement

statutory lien

is created by statute. A real estate tax lien, then, is an involuntary, statutory lien. It is created by statute without the property owner taking it on voluntarily

Real Estate

is defined as land at, above, and below the earth's surface, plus all things permanently attached to it. Real estate is similar to land but means much more: Real estate includes the natural land along with all human-made improvements.

Appraisal

is the process of estimating a property's market value based on established methods and the appraiser's professional judgment.

Agency

is the relationship in which a consumer has given consent (express or implied) to a real estate licensee to represent the consumer in a real property transaction. Consent may be given to a licensee directly or through an affiliated licensee.

Subdivision

is the splitting of a single property into smaller parcels.

general agent

may represent the principal in a broad range of matters related to a particular business or activity. The general agent may, for example, bind the principal to any contract within the scope of the agent's authority. A property manager is typically considered a general agent to the property owner. Brokers and managing brokers are general agents to their sponsoring broker.

When the supply of a commodity decreases while demand remains the same, price tends to

rise.

Property management, leasing, appraisal, financing, and development are all examples of

specializations within the real estate industry.

Condominium Ownership

the owner of each unit holds a fee simple title to the unit. The individual unit owners also own a specified share of the undivided interest in the remainder of the building and land, called the common elements. Common elements typically include such items as land, courtyards, lobbies, the exterior structure, hallways, elevators, stairways, and the roof, as well as recreational facilities such as swimming pools, tennis courts, and golf courses. The individual unit owners own these common elements as tenants in common.

Agency (Define)

the relationship that a broker, managing broker, or leasing agent (representing the sponsoring broker) may have with buyers, sellers, landlords, or tenants. Those who hire are clients, or principals, and those who are hired are agents. The agent owes the client, or principal, a duty of loyalty. This duty of loyalty rises above any personal interests of the agent.