Illinois Real Estate Practice Exam Questions and Answers Graded A

Illinois Real Estate Practice Exam Questions and Answers Graded A Objectives of Federal Reserve System To counteract inflationary and deflationary trends, to create a favorable economic climate, to maintain sound credit conditions but NOT to control the secondary mortgage market Remainder Interest A fee simple holder of a parcel of real estate grants a life estate to her daughter and stipulates that upon the daughters death, the property will pass to her grandson. The second estate is called A property buyer obtains a term loan to finance a home purchase. The entire loan principal is due at the end of the loan period Best evidence of marketable title Title Insurance Balloon Loan A borrower has a mortgage loan that requires monthly payments of $936.25 for 10 years and a final payment of $136,287. Type of loan? Commingling Brokers should deposit all earnest money checks they receive into an escrow account or trust account to prevent being accused. Conversion Fancy name for theft Puffing Exaggeration of a fact it is legal as long as it doesn't come in as a fraud In performing an appraisal of real estate, the appraiser: Estimates the property's market value Local zoning ordinances are used to regulate Allowable uses for buildings, building heights, population density NOT rules for the conducting open spaces After paying the brokers fee of 6%, a seller want to net $180,000 from the sale of his house. What must the property sell for to satisfy both the eh broker and the seller? 100%- 6%=94%=.94 180,000 / .94 = A property owner constructed a commercial building on the property. Three years later an ordinance was passed prohibiting commercial buildings in the owners area: The building is a nonconforming use Servient Tenement The owner of a parcel of land holds an easement right over an adjoining parcel of land. The parcel of land on which the easement runs is referred to as the: Dominant Tenement Benefits from the servient tenement What is the amount of real estate tax due on a property with a market value of $140,000 if it is assessed at 30% of market value, has an equalizer of 1.5, and a tax rate of $5.00 per $100.00 of assessed value? 140,000 x .30 = 42,000 42,000 x 1.5 = 63,000 63,000 x .05 = 3150 Easements Are rights of way on someone else's land Easement By Necessity A property owner subdivided a piece of property, selling the front half and retaining the back half. The back half of the property retained by the owner does not have access to any roads. The type of easement the courts might grant in this situation is Easement In Gross Utilities Easement By Prescription Trespassers rights due for a period of time you earn 20 years Easement Appurtenant For adjacent properties it's a right Personal Easement In Gross Individual access to property not transferable only till alive Adverse Possession Squatter Rights 20 years to earn it License Personal privilege last for specific period of time A property manager defaulted on a mortgage and the lender foreclosed on the property. The property sold at the foreclosure sale for less than the loan balance. To recover the remainder of the money, the lender may: Obtain a deficiency judgement On Wednesday, Sam offers to sell his house to Beau for $220,000. On Sunday, Beau makes a counter offer of $210,000. On Friday, Beau withdraws the counter offer of $210,000 and accepts Sam's offer of $220,000. In this situation, there is: No valid agreement because Beau's counteroffer ended Sam's offer (Just change one aspect and you kill the contract) Graduated Payment Loan Amount goes up after period of time Package Loan A home buyer obtains a loan to finance the purchase of the house as well as personal property Blanket Loan One loan secures multiple properties Wraparound Loan New loan pays off old loan Granting Clause Is a requirement for a valid deed (Signature of grantor is needed in Illinois) An investor purchase an apartment building for $360,000 by paying 10% down and financing the rest of the purchase price. The lender charge two points as a loan origination fee. How much was the investor charge for the fee? 360,000 x .90 = 324,000 324,000 x .02 = 6480 (Discount points are figured on loan & points are 1% of loan amount) A 55%/45% commission split is agreed to by a selling and listing brokerages. They then split their share of the commission evenly wit their salespeople. If a house sells for $190,000 and the commission rate is 6%, how much commission will the selling agent receive? 190,000 x .06 = 11400 11400 x .55 = 6270 6270 x .50 = 3135 Using the income approach to value, what is the value of an apartment building if it has gross income of $60,000, operating expenses of $10,000 and a capitalization rate of 8%? 60,000 - 10,000 = 50,000 50,000/.08 = 625,000 One of the provisions of the Truth In Lending Act (TILA) allows for a cooling off period (3 days) in which the loan can be rescinded. The recession provision would apply to which of the following loan? Consumer Credit Loan Title to property is transferred by a deed when the deed is: Delivered and accepted by the grantee (It only needs signature of grantor if you need it in court of law then it needs to be acknowledged = acknowledgment-notarized signature) Net Listing A broker and seller enter into a listing agreement. Under the terms of the listing, the seller will receive $$ from the sale and with any sales proceeds over that amount going to the broker. (Fee is above what seller want to net) Open Listing Multiple brokerages to sell property A homeowner wishes to make an improvement to the property that does not comply with the local zoning ordinances. The property owner should request a Variance What is the cost of installing a fence around a rectangular shaped lot if the cost of the fence is $3.25 per linear foot and the lot is 80 feet wide and 120 feet deep? 80 + 80 = 160 120 + 120 = 240 160 + 240 = 400 400 x 3.25 = 1300 The 1866 Civil Rights Act prohibits discrimination in all housing based on a person's Race A couple purchases a cooperative apartment unit. In this situation, the couple will Become shareholders in a corporation The property in a real estate sales transaction has a 450-gallon heating oil tank that is one-quarter full. The current cost of oil is $1.25 per gallon. What is the appropriate entry to be made on the closing statement? 450 / 4 = 112.50 112.50 x $1.25 = $140.63 (Credit the seller $140.63) Market Value The amount at which a willing and informed seller would sell and a willing and informed buyer would buy a property The difference between a specific lien and a general lien is that: A general lien covers all of a debtor's property while a specific lien covers a specific property Steering Leading prospective buyers to or away from certain areas Block Busting Panic peddling members of a protected class are moving in Red Lining Insurance company or mortgage charge different rates on protected class At the closing for the sale of a home, the lender requires the buyer to place a sum of money into an impound or escrow account. The purpose of this money is most likely for: Payment of future real estate taxes or property insurance Physical Curable Depreciation Broken windows, potholes in the driveway, and peeling paint are examples of Right Of Survivorship Owners holding title to real estate by joint tenancy Purchase Money Mortgage A couple purchased a house for $200,000, making a down payment of $15,000. The buyers assumed the seller's existing mortgage of $180,000 and financed the remaining $5,000 through a mortgage given to them by the seller. This $5,000 mortgage is (seller financing mortgage) In return for $5,000 a seller gives a prospective buyer an option to purchase the seller's property. In this situation the : Buyer does not have to purchase the property in the option period Functional Obsolescence An appraiser estimating the value of a house with outdated bathroom fixtures must take it into consideration External Obsolescene Environmental, anything that takes place outside of the environment this is always incurable. When estimating the value of a property using the cost approach, the appraiser should: Estimate the replacement cost of the property's improvements