SU # 13__Property Condition Disclosure Report

Question 1

Several buyers are competing for the last available home in a desirable new subdivision. One buyer calls the owner-developer directly on the phone and offers $10,000 over and above the listed price. The developer accepts the offer. At this point,

a. the parties have a valid, enforceable sale contract on the home.
b. the parties have completed a verbal, executory contract.
c. the parties may not cancel their contract.
d. the developer could not entertain other offers on the property.

Answer 1

b. the parties have completed a verbal, executory contract.

Question 2

An owner completes a contract to sell her property. Before closing, the seller runs into financial trouble and assigns the contract to her principal creditor. The buyer cries foul, fearing the property will be lost. Which of the following is true?

a. The buyer can sue the assignee to disallow the illegal assignment.
b. The buyer can take legal action against the assignor.
c. The assignor has completed a legal action.
d. The sale contract is nullified.

Answer 2

c. The assignor has completed a legal action.

Question 3

During the executory period of a sale contract, the buyer acquires an equitable title interest in the property. This means that

a. the buyer can potentially force the seller to transfer ownership.
b. both parties own the property equally.
c. if contract contingencies are not met, the buyer takes legal title.
d. the buyer owns equity in the subject property to the extent of the funds deposited in escrow

Answer 3

a. the buyer can potentially force the seller to transfer ownership.

Question 4

The purpose of an escrow account is to

a. entrust deposit monies to an impartial fiduciary.
b. enable the principals to access the funds in escrow without interference from the other party.
c. ensure that the broker receives her commission.
d. prevent the buyer from withdrawing the offer

Answer 4

a. entrust deposit monies to an impartial fiduciary.

Question 5

A sale contract contains an open-ended financing contingency: if the buyer cannot obtain financing, the deal is off. Six months later, the buyer still cannot secure financing. Which of the following is true?

a. The seller may cancel the contract, since it can be ruled invalid.
b. The buyer can continue indefinitely to seek financing, and the seller’s property must remain off the market.
c. The seller must return the buyer’s deposit.
d. The seller can force a lender to commit to a loan under fair financing laws.

Answer 5

a. The seller may cancel the contract, since it can be ruled invalid.

Question 6

In the event of a buyer’s default, a provision for liquidated damages in a sale contract enables a seller to

a. sue the buyer for the anticipated down payment.
b. force the buyer to quitclaim equitable title.
c. sue the buyer for all liquid assets lost as a result of the default.
d. claim the deposit as relief for the buyer’s failure to perform.

Answer 6

d. claim the deposit as relief for the buyer’s failure to perform.

Question 7

Which of the following best characterizes a conventional sale contract?

a. Voluntary, unilateral, and executory
b. Involuntary, bilateral, and contingent
c. Voluntary, bilateral, and executory
d. Involuntary, unilateral, and executory

Answer 7

c. Voluntary, bilateral, and executory

Question 8

A due-on-sale clause in a sale contract puts parties on notice that

a. the full price of the property is due the seller at closing.
b. any loans surviving closing become immediately payable.
c. all of the seller’s debts must be retired before or upon closing.
d. third-party loans surviving closing may be accelerated by the lender

Answer 8

d. third-party loans surviving closing may be accelerated by the lender

Question 9

A sale contract may specifically deal with tax withholding responsibility if the seller is a foreigner. What is this responsibility?

a. The buyer must withhold 15% of the purchase price at closing for the seller’s capital gain tax payment.
b. The buyer must withhold 15% of the purchase price at closing for the buyer’s capital gain tax payment.
c. The seller must withhold 15% of the buyer’s funds as a deposit on the buyer’s capital gain tax.
d. The seller must withhold 15% of the sale price to pay the seller’s capital gain tax

Answer 9

a. The buyer must withhold 15% of the purchase price at closing for the seller’s capital gain tax payment.

Question 10

An important legal characteristic of an option-to-buy agreement is that

a. the potential buyer, the optionee, is obligated to buy the property once the option agreement is completed.
b. the optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.
c. the contract can be executed at no cost to the optionee.
d. it is a bilateral agreement

Answer 10

b. the optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.

Question 11

A tenant has an option-to-purchase agreement with the landlord that expires on June 30. On July 1, the tenant frantically calls the landlord to exercise the option, offering the apology that she was busy with a death in the family. Which of the following is true?

a. Since options contain grace periods, the landlord must sell.
b. The tenant loses the right to buy, but can claim the money paid for the option from the landlord.
c. The landlord does not have to sell, but must renew the option.
d. The option is expired, and the tenant has no rightful claim to money paid for the option.

Answer 11

d. The option is expired, and the tenant has no rightful claim to money paid for the option.

Question 12

A tenant exercises an option to buy a condominium. The landlord agrees, but raises the agreed price by $3,000, claiming financial distress. The landlord does, however, offer the tenant two months of free rent before closing as an offset. Which of the following is true?

a. The tenant can force the sale at the original terms.
b. The landlord has taken a fully legal action which the tenant must abide by.
c. The option is null, and the optionee may reclaim any option money paid.
d. The landlord must offer sufficient free rent to equal the $3,000 price increase.

Answer 12

a. The tenant can force the sale at the original terms.

Question 13

Which of the following is true regarding the legal nature of option contracts?

a. They are not assignable.
b. They are enforceable, whether written or oral.
c. They give the optionee an equitable interest in the property.
d. They must be recorded to be valid.

Answer 13

c. They give the optionee an equitable interest in the property.

Question 14

An important distinction between a contract for deed and a contract for sale is

a. a contract for deed requires no action on the part of the seller.
b. a contract for deed requires no action on the part of the buyer.
c. the seller retains legal title in a contract for deed transaction until fully executed.
d. the buyer acquires legal title in a contract for deed transaction.

Answer 14

c. the seller retains legal title in a contract for deed transaction until fully executed.

Question 15

While a property is under a contract for deed, the seller, or vendor, mortgages her equity in the property, and has a separate judgment lien placed on the property. Faced with financial loss, the vendor assigns the contract to another party, then leaves town. What can the vendee do in this case?

a. rightfully cancel the agreement and reclaim all deposits.
b. sue the creditor for removal of the judgment lien.
c. disclaim the lien and the mortgage due to homestead rights.
d. comply with the contract and take legal title when its terms are fulfilled.

Answer 15

d. comply with the contract and take legal title when its terms are fulfilled.

Question 16

A potential danger involved in a contract for deed is that

a. the vendor may rightfully sell legal title to another party during the contract period.
b. the vendor’s rights to encumber the property are extinguished.
c. the vendee may not have a right of redemption.
d. the vendee must make an inordinately high down payment, which can be lost.

Answer 16

c. the vendee may not have a right of redemption.

Question 17

Who can and cannot fill out the property condition disclosure documents?

Answer 17

Disclosure documents must be completed by the seller or seller’s attorney or power of attorney. The licensee must never complete the disclosure forms.

Question 18

What happens if a material defect is disclosed in the Residential Real Property Disclosure Report, either after acceptance by the prospective buyer of a sellers’ offer or counter-offer OR after the execution of an offer made by a prospective buyer that is accepted by the seller?

Answer 18

The prospective buyer has a 3 business-day right of rescission, meaning the buyer has the right to terminate the contract or other agreement without any liability or recourse and to have his or her earnest money deposit returned.

Question 19

What must be printed on or be included with the Residential Real Property Disclosure Report form?

Answer 19

A copy of the actual Disclosure Act

Question 20

What became part of the disclosure form after 2010?

Answer 20

Disclosure of a meth lab on a property

Question 21

Which statement is FALSE?

Seller Pete is not liable for any error, inaccuracy, or omission of any information delivered in the property condition report if he did not have actual knowledge of the problem.

Seller Amanda is not liable for any error, inaccuracy, or omission of any information delivered in the property condition report if she thought the problem had already been corrected.

The Property Disclosure Act obligates the seller to make a specific investigation or inquiry in an effort to complete the disclosure statement.

Seller Greg will be liable for any undisclosed material defects of which he had actual knowledge.

Answer 21

The Property Disclosure Act obligates the seller to make a specific investigation or inquiry in an effort to complete the disclosure statement.

Question 22

Which of these transfers of residential real property are exempt from the Illinois Property Disclosure Act?

Jim sold his home to one of his fraternity brothers.

Builder Frank sold a newly-constructed home that has never been occupied.

Seller Sally exchanged her Illinois home with a buyer from New Jersey.

Seller Gary was selling his condominium unit.

Answer 22

Builder Frank sold a newly-constructed home that has never been occupied.

Question 23

What MUST be printed on or included with the Property Disclosure Report?

A copy of the actual Disclosure Act

A copy of the inspection report

An affidavit signed by the managing broker who has the listing

The seller’s contact information including phone number and email address

Answer 23

A copy of the actual Disclosure Act

Question 24

To which of these transfers of residential real property does the Property Disclosure Act apply?

Transfers between spouses resulting from a judgment of dissolution of marriage or legal separation

Transfers from a mortgagor to a mortgagee by deed in lieu of foreclosure or consent judgment

Transfer by sale, exchange, or assignment of beneficial interest

Transfers by a trustee in bankruptcy

Answer 24

Transfer by sale, exchange, or assignment of beneficial interest

Question 25

What happens if a seller lists a defect on the disclosure report?

The home must sell as is.

The seller must repair it before the home transfers.

The buyer is required to have an inspector verify the problem.

The buyer could take that information into account when structuring an offer.

Answer 25

The buyer could take that information into account when structuring an offer.

Question 26

Under the Illinois Property Disclosure Act, who is exempt from disclosure?

Beneficiary of a trust

Contract purchaser or lessee of a ground lease

Owner

Any person who has never occupied, nor managed, the property

Answer 26

Any person who has never occupied, nor managed, the property

Question 27

How long does a person have to initiate an action for a violation of the Property Disclosure Act?

6 months

One year

Two years

Five years

Answer 27

One year