real estate exam

How many hours of continuing education are required for real estate license renewal in Illinois?

12

How many members are there in Illinois Real Estate Administration and Disciplinary Board in total?

15

Johnny, a real estate broker, has violated license law, resulting in monetary damages to Phil. What is the latest date on which Phil may file a lawsuit resulting in a collection from the Real Estate Recovery Fund?

2 years

Within how long must a licensee notify the Department of a change of residence address?

24 hours

How many days must an aggrieved person give written notice to the Department within 30 days of the entry of any judgment that may result in collection from the Real Estate Recovery Fund?

30 days

How long are terms for members of the Illinois Real Estate Administration and Disciplinary Board?

4 years

How long must real estate brokers keep records in Illinois?

5 years

How long must a member of the Illinois Real Estate Administration and Disciplinary Board be a resident of the state of Illinois?

6 years

Public grant

: A public grant of land is just the opposite of dedication; the government actually is giving property to private individuals.

Dedication

: When you dedicate property, you essentially give it up voluntarily to the government. An example is a developer giving up streets in a subdivision.

Condominium/cooperative

A condominium owner actually owns real estate. This ownership is usually the air space and an interest as a tenant in common of the land. A cooperative owner owns shares in a corporation that owns a building. The shareholder also gets a proprietary lease, which enables the shareholder to occupy a unit.

Why does a lender want to make sure a home does not have a high loan to value ratio?

A high LTV means that the amount of the balance of the loan is close to the value of the property. With low equity in the property, the lender is less likely to sell the home at an amount that will pay off the balance of the mortgage in the event of foreclosure. Low LTV minimizes the lender's risk.

When two parties discuss key understandings about the purchase of real estate that is non-binding, what is this called?

A letter of intent merely identifies the key understandings between two parties. It is non-binding.

erosion

A little like avulsion, erosion is the gradual loss of land by an act of nature, like property lost along the bank of a river.

partition

A partition is a legal proceeding to divide property owned by two or more people.

A pure discount loan occurs when the loan _____.

A pure discount loan is one where the issuer sells a bond to an investor at a discount. The issuer repays the face value of the note at maturity. No interest is earned over the term of the bond.

Tax credit/tax deduction:

A tax credit is subtracted from taxes due. A tax deduction is subtracted from income. If all things are equal, a tax credit generally is more valuable than a tax deduction of the same amount.

Exclusive agency listing

Agents get paid in this type of agreement only if they sell the property. No fee is earned if the owner alone sells the property.

Tenancy in severalty

Although it may sound like more, this type of ownership is by one person or a corporation.

Amortization

Amortization is the process of paying back a loan over time using installment (regular, recurring) payments.

Which parties must be involved in a contract assignment?

An assignment involves the transfer of rights and obligations from an original party to a contract to another person. Not all assignments require the consent of both parties to a contract if the assignor is willing to remain obligated under the contract.

For a bilateral contract to be valid, there must be consideration. What is consideration?

Consideration must be present for a contract to be valid and it includes money or something of value. That does not mean it must be expensive, but it must represent value to the parties in the contract.

What are the 3 Cs of conventional finance underwriting?

Credit, Capacity, & Collateral

What is the name of the act that became law in 2000 that allows electronic signatures to be legally binding?

ESIGN act

Tenancy in common

Equal or unequal undivided ownership between two or more people is what characterizes this type of ownership. If an owner dies, the deceased person's share is conveyed to his or her heirs, not the other owners.

Foreclosure/forfeiture:

Foreclosure is the loss of property to pay off a debt. Forfeiture is losing the property because of disobeying a condition in the deed.

hybrid loan

Hybrid loans combine the popular elements of both the fixed rate and adjustable rate mortgages. The loan rate remains constant for a set time frame - usually three, five or seven years. During that time the mortgage payment doesn't change. After that the loan becomes similar to an ARM and adjusts each year, along with a new amortization schedule.. Like an ARM, the interest rate is less than an equivalent term fixed rate mortgage.

What differentiates a bilateral contract from a unilateral contract?

In a bilateral contract, both parties agree to do something

What is the main difference between an executed contract and an executory contract?

In an executed contract promises are fulfilled immediately while an executory contract, promises are fulfilled in the future.

Open listing

In this type of agreement, sellers have the right to use as many brokers as they want. However, the seller isn't obligated to pay any of them if he or she sells the property without the broker's help.

Joint tenancy: The four unities that must exist for this type of ownership to exist are

Interest: Each owner has the same interest. Possession: All owners hold an undivided interest. Time: All owners receive their interest at the same time. Title: All owners acquire their interest with the same deed. If one owner of a joint tenancy dies, that owner's interest reverts to the other owners. This right of survivorship may vary by state.

In the case McDonald v. Hewitt, why did the court rule that McDonald could not receive a remedy from Hewitt?

Nelson held the title for the timber because all of the promises in the executory contract had not been fulfilled.

Tenancy by the entirety

Ownership that's available only to married couples, tenancy by the entirety means that property may not be sold without the agreement of both parties. The right of survivorship exists to the extent that if one spouse dies, his/her interest reverts to the other spouse.

Which of the following is implied in law to avoid an injustice?

Quasi is Latin for 'as if.' The court treats the situation as if there was a contract in order to avoid an unjust result.

What is severance?

Removing an attachment and making it personal property- Taking the shed from the backyard

What do we call a category of future interests that are held by a grantor or devisor?

Reversionary interests

open listing

Shane can contract with as many brokers as he wants, and whichever broker is able to facilitate a sale gets the commission. The other brokers get nothing (except for the buyer's broker, who probably will split the commission with the seller's broker). Moreover, if Shane is able to sell the property himself, he pays no commission.

exclusive agency listing agreement

Shane only has to pay the broker a commission if the broker sells the real estate. If Shane's friend comes to him directly and offers to buy the house, Shane can sell it and not pay a commission because the sale wasn't facilitated through the broker.

Wanda holds a 25% undivided interest in a property with Zack, her husband, who owns the other 75% undivided interest. What type of tenancy is this?

Tenancy in common

Allan and Beth hold a piece of property as joint tenants. Allan decides to sell his interest to Charles. How do Beth and Charles hold their interest?

Tenants in common

Why is an APR often higher than just a regular interest rate?

The APR calculates the cost of financing, such as mortgage origination charges, in conjunction with the interest rate to give an effective interest rate. The APR assumes the loan balance will be repaid on schedule for the life of the loan and reflects a percentage rate rather than a sum of all finance charges.

APR FORMULA

The APR formula is APR = (2 x Number of Payments per Year x Total Finance Charges) / (Original Loan Proceeds x Total Number of Payments + 1)

Ethel, owner of Biddy's Bonnets, needed to purchase a few cases of straw hats for an upcoming event. She faxed a purchase order to Island Top Hats, a company with whom she often does business. They received the request and immediately shipped Ethel's order. Why does the Uniform Commercial Code deem this to be a legal transaction?

The UCC determined that the use of a purchase order is an invitation to accept an offer

Calvin and Carrie execute a contract for the sale of nine bushels of oranges. Their written contract states that any claim for breach of contract must be brought within four years. Their state law states that any claim for breach of contract must be brought within three years. Which statement accurately reflects the statute of limitations for this contract?

The court will follow the 4 year rule that they agreed to

Grantor/grantee

The grantor gives, sells, or transfers the property to the grantee. The grantee receives the property.

How do you know if something qualifies as personal property?

The item is moveable

Leasehold/leased fee

The leasehold interest is the tenant's interest in the property. The tenant holds the lease. The leased fee interest is the owner or landlord's interest.

LTV FORMULA (loan to value)

The loan to value ratio formula is LTV = Mortgage balance / Appraised property value

Mortgagor/mortgagee:

The mortgagor is the borrower. The mortgagee is the lender. The borrower gives a mortgage to the lender. The lender gives money to the borrower.

How does a joist relate to the subfloor?

The subfloor sits ontop of a joist

Replacement cost/reproduction cost:

These terms are associated with the cost approach to valuing a property. Replacement cost is the cost to produce a structure that is essentially the same as the existing structure but using modern materials and standards. Reproduction cost is an estimate of the cost to produce exactly the same structure with the same materials.

Net listing

This type of agreement may be illegal in your state. The agent gets to keep everything he can get that's more than the sale price the owner wants.

interest only mortgage

This type of loan requires a borrower to initially repay only the interest due on the balance. Since the principal isn't being reduced, the balance doesn't shrink. After a certain period, the loan re-amortizes based on the remaining length of the mortgage. Let's say a buyer takes a 30-year loan with an interest only payment for 10 years. At the end of that 10 years, the loan payments will be scheduled to pay interest and principal off over a 20 year period. The result is a dramatically increased mortgage payment.

In order to prove that there was a breach of a unilateral contract, what would one have to prove?

Unilateral contracts involve only the promisor while bilateral contracts involve both a promisor and a promisee. The promisor in a unilateral contract is obligated to fulfill its promise.

Adverse possession

When someone uses your property for a long period of time, you may end up losing the property or having your rights to the property restricted.

Ben holds a piece of real estate during the life of Abby. What estate does Ben have?

While a life estate ends upon the death of the grantee, a life estate pur autre vie ends upon the death of a person other than the grantee.

Which of the following is an example of intangible property?

a lease

David wills his real property to Darlene but specifies that Douglas can live on and possess the property until Douglas' death. What type of interest does Douglas possess?

a life estate

What's the best description of an action you can commence in court to resolve a boundary dispute?

a quiet title action

Nathan conveys a piece of real estate to Martha for life and then to Oliver in fee simple. What type of future interest does Oliver have?

a remainder

The designated address recorded by the Department in the applicant's or licensee's application file or license file as maintained by the Department is called what?

address of record

Which of the following is NOT required for the application of promissory estoppel?

admission by the promisor

What obligations and rights does an owner have when he has an estate at severalty?

all obligations and rights are his own

VA home loan

allows eligible veterans and the unmarried spouses of deceased veterans to buy the home they want. There are also other spouses who may be eligible, such as those whose veteran spouse is missing in action. Surviving spouses who get remarried after age 57 are also eligible.

Federal Housing Administration (FHA)

allows low-to-moderate-income borrowers a chance to secure a loan. These borrowers may have a lower than desirable credit score, or just do not have enough funds to cover the minimum down payment. FHA financing is different from other financing in that the FHA insures the lender against borrower default on the loan. So, if the borrower misses payments or stops making payments, the lender does not have to worry about losing money as the FHA will take over the loan. FHA financing is available for single family homes as well as multi-family residences, such as duplexes.

If Keelan lets a roommate move into his home, what type of estate does he have now?

an estate in severalty

The process by which personal property becomes part of real property is known as what?

annexation

In Illinois, when do all real estate brokers' licenses expire?

april 30th (in even years)

Fixed rate loans

are the simplest of all mortgages. The most common terms are 15 or 30 years but 10-year and 20-year loans are also possible. The mortgage payment is the same every month for the whole term.

What is an example of an addendum to a real estate contract?

buyers loan approval letter

A statute of frauds requires that _____.

certain contracts must be evidenced in writing

Penelope saved all of her money so she could have a tummy tuck and a nose job. She signed a contract with Dr. Shapiro and paid him in full and the operation scheduled in a week. In the meantime, Dr. Shapiro had an unforeseen accident in his ceramics class. He burned his hands while taking a vase he created out of the kiln. Unfortunately, he will never be able to perform surgery again. What can Dr. Shapiro do to get out of the contract with Penelope?

claim objective impossibility

Fannie Mae

common name for the Federal National Mortgage Association (FNMA). It was founded in 1938 during the Great Depression as part of the New Deal economic revitalization program. This program sought to increase mortgage lending and home ownership. In 1968, it became a publicly traded company. The Housing and Community Development Act of 1992 placed a legal obligation on Fannie Mae to increase lending to low- and moderate-income households. The U.S. subprime lending crisis led to the to the September 2008 decision by the Federal Housing Finance Agency (FHFA) to place Fannie Mae into government conservatorship. FHFA control came with major capital infusions from the U.S. Treasury and Federal Reserve. These actions bailed out Fannie Mae from the losses of unpaid loans, and as a result, conservatorship introduced more restrictive lending rules.

Which of the following is an Illinois agency fiduciary duty that survives beyond the end of an agency relationship?

confidentiality

Anne has a future interest in a house, but she only is entitled to possession of the house if Don stops using it as a residence. What type of future interest does Anne have?

contingent interest

A managing broker who has supervisory responsibilities for licensees in one or, in the case of a multi-office company, more than one office and who has been appointed as such by the sponsoring broker registered with the Department is called what?

designated managing broker

A buyer representation agreement

details the services the home buyer is entitled to and the services the representative agrees to render the home buyer. The main purpose of a buyer agency agreement is to describe or establish the relationship between a buyer and a representative by clarifying the expectations between the two parties involved.

A deposit in real estate is also known as _____.

earnest money

Tess has the right to use a path that crosses her neighbor's property in order to reach a public street. What's the best description of her property right?

easement

Which power permits the government to take your private property even if you don't want it to do so?

eminent domain

What maximum loan-to-value ratio do lenders want on a conventional mortgage?

enders want a loan-to-value ratio of 80% or less. Anything higher is considered a high LTV loan.

How often is continuing education required for Illinois Real Estate Professionals?

every two years

Sometimes a court will award money damages to an innocent party to compensate the loss of future income caused by a breach of contract. These damages are called:

expectation damages

Mary owns her home outright. She can sell it, deed it, or will it to someone else if she wishes. What type of estate is this?

fee simple absolute

Net present value

financial calculation useful for evaluating investment properties, but it is not an appraisal approach. That formula would typically be used by an investor for their own research purposes or to convince another investor or lender, but not an appraiser.

In Krysa vs. Payne, Payne intentionally misrepresented facts about the truck they were trying to sell to the Krysa family. They knowingly misrepresented these facts hoping the Krysa family would believe them and buy the truck. What is this called?

fraud

A _____ is a non-possessory interest in real estate where you may have right of possession one day.

future interest

xclusive right to sell listing agreement

gives the broker the exclusive right to sell the property. Here, the broker will earn a sales commission if Shane's house is sold during the duration of the agreement even if the broker wasn't the one that sold the house. For example, if Shane's friend bypasses the broker and makes an offer directly to Shane, the broker gets a commission even though they didn't really do anything.

Beth signed a contract to buy Bob's house. To convince Beth to purchase the home Bob informed her that he replaced the home's heater last year. However, Beth has discovered that the heater is more than 20 years old and that Bob lied to her. Beth may be able to rescind (cancel) their contract due to what type of contingency?

good faith

An easement

grants a person the right to make a specific use of a piece of property. Keep in mind that the right of use is limited to what is contained in the easement.

net listing agreement.

he broker and seller will agree to a minimum price the seller will accept and the broker gets to keep all the money in excess of this minimum price. For example, if Shane agrees to set the minimum price at $200,000 and the broker sells the house for $225,000, the broker earns $25,000.

protection period

if Shane sells the property to a buyer who was introduced to the property through the broker's efforts within the protection period, then the broker is entitled to a commission on the sale.

Which of the following is an economic characteristic of land?

improvements

The federal housing administration ____ loans.

insures

Market allocation

involves two companies conspiring to divide a market in order for two businesses to sell similar products at higher prices to drive away competition.

encroachment

is a physical factor wherein some structure invades the boundary of the subject property.

balloon mortgage

is considered to be risky to some borrowers and lenders. The borrower pays a fixed rate for a specified period of years. The payment is structured the same as if it were a fixed rate mortgage. Most of a mortgage payment goes toward interest in the early years. Each month less interest is paid and more principal goes toward the balance. The remaining principal balance will be high relative to the purchase price - and at the end of a specified period, the entire balance of the loan will be due in one large payment. Imagine a balloon suddenly getting very large and then popping. With balloon mortgages there's a sudden increase in the size of the payment, then the loan ends. The balloon payment isn't a problem if the borrower can refinance the home before it becomes due. If not, the borrower is stuck with a very large bill and risks foreclosure.

A quiet title action

is filed to have a court resolve defects in title or to resolve claims made by someone on title to the property. What's the best description of an action you can commence in court to resolve a boundary dispute?

Which of the following is a disadvantage of a life estate?

its difficult to sell to third parties

If Keelan purchased a car with his wife and they both signed the loan documents for the car, what type of liability do they have?

joint and several liability

What's the best source to determine the legally recognizable location and boundaries of a parcel of real estate?

legal description in deed. the legal description will tell you the location and boundaries of the property and will have control over any other description that may conflict with it.

What characteristic of land involves its value and its situs?

location

Shelly wants to open a smoothie shop in her neighborhood. She hires Wayne to do market research for her. Wayne is obligated to research the need for a smoothie shop in that neighborhood. Wayne conducts the research and delivers his report to Shelly, along with a bill for $1000. Shelly reviews the research and discovers that Wayne accidentally researched the wrong neighborhood. Shelly sues Wayne for breach of contract. The court should enforce a remedy suitable for which type of contract breach?

material breach

Curable obsolescence

means it's economically wise to repair something. It is generally cheaper to replace a broken pane of glass than to replace the whole window. In the other examples making the repairs or replacements mentioned would typically cost more than the alternative option.

Performance

means the contract ended because both parties fulfilled their promises that were outlined in the contract.

Exclusive right to sell listing:

n this agreement, the agent gets paid no matter who sells the property, regardless of whether it's the agent or the seller.

How does the sales comparison approach estimate property value?

nearby comparable sold home prices are adjusted up or down relative to the subject property to estimate the subject's value. It is comparing the properties to get an estimate.

A _____ listing agreement is illegal in some states.

net

how to calculate cap rate

net operating income over the value

Is Illinois a Community Property state?

no

A contract in which both parties have fully performed is what type of contract?

non-executory

Ginnie Mae Government National Mortgage Association or GNMA

nown as the Government National Mortgage Association or GNMA for short. It is a government-owned enterprise and is a part of the U.S. Department of Housing and Urban Development. Its purpose is to provide reasonable home loans to borrowers who have little income or are first-time home buyers. Ginnie Mae began in 1968 and is its own government agency. Ginnie Mae does not create or advance mortgages, but instead uses a pool of approved lenders to issue the loan. For a lender to be allowed to issue a GNMA loan, they must be approved and in good standing with the FHA. Once a lender is approved, they can choose a mortgage loan from a pool of loans and request that Ginnie Mae provides mortgage-backed securities or MBS.

ontract assignment

occurs when some or all of the rights under a contract are legally transferred to someone else. For example, you may enter into a purchase agreement to buy a duplex for investment purposes, but you transfer your right to purchase the property to another person. The person doing the transferring is called an assignor and the person receiving the transfer is called the assignee. Most contracts can be transferred so long as the contract doesn't have a provision that prohibits assignments.

assumable mortgage loan

one where a seller can take over, or assume, the payments instead of acquiring new financing for the purchase.

What is the minimum amount of time the veteran or surviving spouse must plan on living in a VA mortgaged home?

one year

Anne doesn't own her house, she rents it and has the right to occupy it. What type of property right best describes Anne's right to occupy the house?

possession

Your neighbor refuses to clean his swimming pool, which gives off a noxious odor and has become a breeding ground for mosquitos. This makes it impossible for you to enjoy your backyard. Which of the following restrictions on private property rights best helps you out?

private nuisance law

In seller financing, what is the name of the document that the buyer and seller write that outlines the terms of the loan?

promissory note

What does private mortgage insurance do?

protects the lender from losses in case of foreclosure. With a high LTV, selling the property in foreclosure might not fully reimburse the lender. PMI covers this difference.

Which Illinois fund was established for any person aggrieved by an act, representation, transaction, or conduct of a licensee or unlicensed employee of a licensee constitutes embezzlement of money or property, trickery, or forgery or by reason of any fraud, misrepresentation, and more?

real estate recovery fund

Which Illinois fund was established for research and education at state institutions of higher education or other organizations for research and for education to further the advancement of education in the real estate industry?

real estate research and education fund

What is the definition of conventional lending?

refers to mortgages that meet Fannie Mae and Freddie Mac underwriting standard. These loans can be easily bundled into mortgage backed securities because of their relative uniformity.

When Pamona's doorbell rang at her San Francisco, California condo and the mailman was standing there with a big box with her name on it, she could only think her boyfriend finally remembered her birthday. Much to her dismay, it was not a birthday gift from him. Rather, it was a new food processor from a company she did not recognize. What happens now?

retaining as a gift isn't considered accepting in certain states

What is the purpose of the reconciliation of value?

serves as a way for the appraiser to explain their justification and decision-making process in a narrative form as part of the final report.

In lien theory

states banks or mortgage lenders never retain title to the property. Instead, the mortgage lender holds a lien against the property. Illinois is a lien theory state.

novation

substituting an original contract with a new one that is equivalent to the old one, but a new party replaces one of the original parties to the old contract. Once the novation is completed, the party leaving the deal not only loses the benefits and rights she had under the old contract, but is also discharged from all burdens and obligations under it.

What is an example of severance?

taking the shed from the backyard

What does capacity refer to?

the buyer's ability to repay the loan. It considers income, type and length of employment, and any reserve or emergency funds.

In an ARM or adjustable rate mortgage loan,

the mortgage interest rate changes during the life of the loan, typically on an annual basis. ARMs offer teaser interest rates to attract borrowers. This rate can rise or fall during the term. The adjustment is based on an index value like the current 1-year Constant Maturity Treasury rate or the London Interbank Offered Rate (LIBOR). Each time the loan adjusts, a new loan amortization schedule is created. This is called re-amortization. Like a fixed rate loan, at the end of the term the borrower gets a clear title.

From whom does a real estate salesperson receive their compensation in Illinois?

the sponsoring broker

Avulsion

the sudden loss of land by an act of nature like a landslide.

Why is seeing the contract in writing sometimes important in considerations involving statutes of frauds?

the writing proves the contract existed

What is the latest an action can be started for judgment that subsequently results in a post-judgment order for collection from the Real Estate Recovery Fund?

two years

Jennifer is injured and can't work. She has bills to pay and debt collectors calling her. A debt service contacts Jennifer and offers to pay her bills for her. In return, Jennifer will pay the debt service $100 every month for the next 20 years. This is much more than Jennifer owes for her bills, but it makes her monthly payments more manageable so she agrees. What is this an example of?

unconscionable contract

Illinois licensees who allow their licenses to expire have how long to reinstate their licenses?

up to two years

Chicago Bar Association, et al. v. Quinlan and Tyson, Inc.

was an Illinois Supreme Court case that places certain limitations on real estate licensees in drafting a contract of sale. Licensees are only authorized to fill in blanks. All insertions and deletions must be at the direction of the principals based on the negotiations. In this example, agent Matt is in violation of changes brought about by the Quinlan and Tyson decision.

The cost approach method

weighs the cost of building an identical new house to an existing house. From a cost perspective, it doesn't make sense to spend more money than is necessary to accomplish the same goal.