Test Questions (new)

Question 1

Joseph, an Illinois real estate broker, has a new listing that is generating a lot of activity. One buyer he has personally shown it to wants to make an offer. Which of the following is INCORRECT?

A » Joseph could sell the property as a dual agent and receive both sides of the commission
B » Joseph could sell the property declaring “no agency” to the buyer and receive both sides of the commission
C » Joseph could refer the buyer to another agent to write the offer and receive the listing commission as well as a referral fee from the selling side
D » Joseph could become a “transactional agent”, represent neither side, and receive both sides of the commission

Answer 1

Illinois does not have “transactional agents.” The other three scenarios are all possible, assuming that proper disclosures are made in each case.

Joseph could become a “transactional agent”, represent neither side, and receive both sides of the commission

Question 2

Broker B owns and operates an Illinois real estate company. Which of the following is a requirement of the License Act?

A » Be the managing broker for just one office
B » Get a corporation license from the State of Illinois
C » Hang all licenses in a public area
D » In advertisements which have a list of agents’ names, identify himself as the “managing broker”

Answer 2

D » In advertisements which have a list of agents’ names, identify himself as the “managing broker”

This is now required in Illinois. Licenses must be available, but no longer must be displayed on a wall.

Question 3

Broker Susan has listed the properties of two clients, the Smiths and the Jones. The Smith listing is an “exclusive right to sell” contract with a 120 day protection period, while the Jones is an “open” listing contract. Without having previously viewed each other’s properties, Smith and Jones decide to buy each other’s homes 30 days after their respective listings have expired. Under these circumstances, Broker Susan is entitled to collect:

A » two commissions, one each from Smith and Jones
B » one commission, only from client Smith
C » one commission, only from client Jones
D » no commission from either client

Answer 3

D » no commission from either client

No commission is due. A protection clause is only valid when the buyers have viewed the property during the listing period. Neither buyer had toured the other’s property while it was listed. Additionally, the seller of an “open” listing is always free to sell it and not pay the broker any fee.

Question 4

Tim, an interior decorator, has developed a website for his business. One section of the website shows consumers how to “stage” their home to make it sell faster. Is it legal, under Illinois License Law, for him to collect these “leads” and sell them to a friend who is a real estate broker?

A » Yes, but Tim can receive no more than $25 per lead
B » Yes, as long as the friend’s managing broker approves this arrangement
C » No, Tim cannot receive a referral fee, as he is not a licensed real estate broker
D » No, Tim cannot receive cash, but could accept gift certificates

Answer 4

C » No, Tim cannot receive a referral fee, as he is not a licensed real estate broker

Selling leads is a licensed activity in Illinois.

Question 5

An assumed loan in a real estate transaction would appear on the closing statement as a:

A » credit to the buyer only
B » debit to the buyer, credit to the seller
C » debit to the seller, credit to the buyer
D » neither a debit nor credit to the seller

Answer 5

C » debit to the seller, credit to the buyer

(C) The seller still owes on the loan - hence the debit to the seller; the buyer receives the loan money to help buy the property - hence the credit to the buyer. (A) Credit buyer only is wrong as the seller owes the money (debit). (B) This answer is simply backwards. (D) It would show as a debit to the seller.

Question 6

A purchase agreement was accepted with earnest money given as part of the contract. The broker deposited the earnest money in the broker’s escrow account. How would the earnest money appear on the closing statement?

A » Debit buyer, no entry for seller
B » Credit buyer, no entry for seller
C » Debit buyer and credit seller
D » Credit seller, no entry for the buyer

Answer 6

B » Credit buyer, no entry for seller

(B) The earnest money is a credit to the buyer only and does not appear on the seller`s statement. The seller gets credited for the full sale price of the property. This credit to the buyer simply shows the buyer receives the earnest money and is applying this amount to the purchase price. (A) It is NOT a debit to the buyer but rather a credit. (C) and (D) It is NOT a credit to the seller.

Question 7

Is it permissible, as a buyer representative, to dispense advice to your purchaser client?

A
No. A buyer representative should only dispense assistance, not advice.
B
Yes. A buyer representative should be able to dispense advice on all areas, including inspections, technical issues, etc.
C
Yes. A buyer representative should advise the client on matters of which he/she has knowledge. It is important to advise the client to obtain expert advice on areas in which the licensee is not an expert.
D
No. A buyer representative should remain neutral and simply aid in the transaction.

Answer 7

C Yes. A buyer representative should advise the client on matters of which he/she has knowledge. It is important to advise the client to obtain expert advice on areas in which the licensee is not an expert.

There is no conflict of interest by advising on matters the buyer representative has knowledge.

Question 8

Looking at shopping centers in the appraisal process, the social fiber of the community and distances from schools is called

neighborhood analysis.
B
market data approach.
C   
site analysis.
D
social analysis.

Answer 8

C neighborhood analysis

This involves more than just driving around. It is a formal process of identifying, measuring and analyzing the influences that help determine a neighborhood’s vitality and desirability.

Question 9

An owner advertised “beautiful acreage; only $5,000 down; owner will personally finance down payment.” Would this be in violation of the Truth in Lending Act?

A
Yes. Acreage is not exempt from Regulation Z.
B
Yes–since a down payment was stated.
C
No. Owners are not covered by Regulation Z.
D
No. Brokers can advertise the down payment.

Answer 9

C
No. Owners are not covered by Regulation Z.

Regulation Z requires disclosure of all financing terms and conditions if an interest rate, downpayment or other enticement is featured in an ad. This does not apply in this case, however, because Regulation Z applies only to institutions, not individuals selling their own property.

Question 10

A buyer wants to take out an FHA loan. The broker should refer the buyer directly to

A
any approved lending institution such as a bank or savings and loan association.
B
an FHA appraiser in the area.
C
the Federal Housing Administration Office.
D
the Federal National Mortgage Association.

Answer 10

A any approved lending institution such as a bank or savings and loan association

Lenders must be approved by the Federal Housing Authority before they can offer FHA loans. Part of the approval process includes waiving fees customarily charged on conventional mortgages.

Question 11

How does one determine the gross rent multiplier?

A
Monthly rent divided by the capitalization rate
B
Property value divided by the monthly rent
C
Property value divided by the net income
D
Property value divided by the gross income

Answer 11

C Property value divided by the monthly rent

This is used as a quick, short-hand “guesstimate” for a property’s approximate value. Far more detailed calculations are necessary to determine a complex property’s market value (e.g., shopping center.)

Question 12

Which is a TRUE statement about the Americans with Disabilities Act?

A
The act applies to AIDS victims.
B
The act applies to all structures built in the last 50 years.
C
An apartment manager might be required to widen all doorways to 60 inches .
D
Shopping centers are exempt if built after March 13, 1991.

Answer 12

A The act applies to AIDS victims.

The Americans with Disabilities Act applies to any person has a physical or mental disability or handicap (including hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex and mental retardation) that substantially limits one or more major life activities, has a record of such a disability or is regarded as having such a disability.

Question 13

Why is the RESPA closing statement allowed to be examined on or before closing?

A
To allow the buyer to see costs at or before closing to see if he/she can get the loan at a cheaper price
B
To make sure the title insurance came from the right company
C
To check for errors
D
To provide for special fees to specific parties for business related to the real estate transaction

Answer 13

C
To check for errors

This is not a step that should be dismissed. With the increased volume in home mortgages, the fact is a significant amount of closing statements do contain errors and it’s easer and better to correct them before closing than after.

Question 14

The Adams family purchased the largest and most expensive house in a new subdivision. Five years later, when they were ready to move, they discovered the monetary value of the home had gone up proportionately less than the other houses in the neighborhood. This phenomenon is an example of the principle of

A
diminishing return.
B   
balance.
C   
regression.
D
substitution.

Answer 14

C
regression.

The regression principle is the reason people are cautioned against owning the most expensive house in the neighborhood. It’s an observation of the fact that lower priced homes (and commercial buildings) have a much greater downward pull on the value of higher end properties than the other way around.

Question 15

Which of the following provides a buyer with the best assurance of clear, marketable title?

A
Certificate of title
B   
Title insurance
C
Abstract of title
 D  
General warranty deed

Answer 15

B
Title insurance

Title insurance provides the best assurance of marketable title.

Question 16

In Illinois, which statement is correct regarding agency coupled with an interest?

A
Agency coupled with an interest is allowed.
B
This form of agency is allowed only when no principal is assigned.
C
This type of agency requires approval by the brokerage.
D
A designated agent must be assigned the to the transaction.

Answer 16

A
Agency coupled with an interest is allowed.

Agency coupled with an interest is legal in Illinois.

Question 17

Anna owns 50 acres of land with 500 feet of frontage on a desirable recreational lake. She wishes to subdivide the parcel into salable lots, but she wants to retain control over the lake frontage while allowing lot owners to have access to the lake. Which of the following types of access rights would provide the greatest protection for a prospective purchaser?

A
An easement in gross
B   
An appurtenant easement
C
An easement by necessity
D
A license

Answer 17

B
An appurtenant easement

Appurtenant easements afford the most protection since they are generally a permanent feature of the property. Thus, in the case of sale, the lake access passes to any new owners. By contrast, an “easement in gross” is between two individuals, which would severely limit the attractiveness and value of the property if the original owner wished to sell.

Question 18

A property management agreement between a landlord and a manager

A
Must have an automatic renewal provision.
B
May not be for a period longer than two years.
C
Must be in writing and have an expiration date.
D
Is an employment contract, not a brokerage agreement.

Answer 18

C
Must be in writing and have an expiration date.

Exclusive brokerage agreements (including property management agreements between a landlord and a manager) must be in writing and have an expiration date.

Question 19

Which of the following closing costs is typically paid by the buyer?

A   
Private mortgage insurance (PMI)
B
Broker's commission
C   
Satisfy existing liens
D
A flip tax

Answer 19

A
Private mortgage insurance (PMI)

A buyer has to pay private mortgage insurance if they did not have a 20%+ down payment (unless they have a VA or FHA loan). The others are paid by the seller.

Question 20

Seller Jolita lists her house with Broker Fred. Fred then buys Jolita’s house and collects the agreed-upon commission. This is an example of

A
commingling monies.
B
a Regulation Z violation.
C
truth in marketing.
D   
self-dealing.

Answer 20

D
self-dealing.

Fred is taking advantage of his position to collect a commission. Self-dealing qualifies as intentional misrepresentation.

Question 21

Carl Chauvinist, the owner of an apartment complex, lives in one unit of a triplex and routinely refuses to rent either of the other two units to a female. Can he do this?

A
Yes. He may do this if he does not use a broker or discriminate in advertising.
B
Yes. He may do this if he doesn’t ask the tenant’s age.
C
No. Carl can never discriminate on sex.
D
No. Carl must live in a single family home to discriminate.

Answer 21

A
Yes. He may do this if he does not use a broker or discriminate in advertising.

Although laws vary by state as to number of units that fall under this type of provision, if a person owns and lives in a unit, he or she is entitled to practice a certain measure of discrimination. The view is that a person’s dwelling (which includes units such as duplexes and triplexes) enjoys a degree of “sanctity” and the person may choose whom he or she brings into their “home.” Therefore, the owner could claim an exemption from federal Fair Housing laws.

Question 22

A licensee who violates license law the first time is guilty of which of the following?

A
A first-time offender is guilty of a Class A Felony.
B
A first-time offender is guilty of a Class B Felony.
C
A first-time offender is guilty of a Class A Misdemeanor.
D
A first-time offender is guilty of a Class C Felony.

Answer 22

C
A first-time offender is guilty of a Class A Misdemeanor.

Any person who is found working or acting as a managing broker, real estate broker, real estate salesperson, or leasing agent or holding himself or herself out as a licensed sponsoring broker, managing broker, real estate broker, real estate salesperson, or leasing agent without being issued a valid existing license is guilty of a Class A misdemeanor.

Question 23

Beginning after the 2013 renewal, individuals renewing or obtaining a managing broker’s license must complete how many CE credit hours?

A
4
B
6
C   
24
D  
12

Answer 23

C
24

Beginning after the 2013 renewal, individuals renewing or obtaining a managing broker’s license must complete the 24-hour broker management continuing education course each renewal period.

Question 24

If a single parent is applying for a real estate loan, when would the fact have to be revealed that part of the parent’s income is from child support?

A
When applying for a VA or FHA loan if the parent’s income is less than $25,000
B
If more than 50% of the parent’s income is from non-wage sources
C
If the parent was relying on the income for repayment of the loan
D
This type of income never needs to be disclosed. It would be a violation of ECOA.

Answer 24

C
If the parent was relying on the income for repayment of the loan

Income of any type–whether alimony, child support, freelance work or a second job–only needs to be disclosed if the applicant is relying on it to qualify for the loan.