Real Estate Broker License Exam Key
Concepts (IL)
Identify the major trade organizations that serve the real estate business. - Answer (1)
The National Association of Realtors (NAR) members called "Realtors" (2) The National
Association of Real Estate Brokers (NAREB) members called "Realtists"
List the Categories of real property. - Answer (1) Residential, (2) Commercial, (3)
Industrial, (4) Agricultural, (5) Special Purpose
List the factors that affect supply in the real estate market. - Answer (1) Labor force
costs, (2) Construction costs, (3) Government controls, (4) Financial policies
List the factors that affect demand in the real estate market. - Answer (1) Population, (2)
Demographics, (3) Employment, (4) Wage levels
What characteristics of land have the most impact on market value? - Answer (1)
Uniqueness, (2) Immobility
Identify the legal rights that convey with ownership of real property. - Answer (1)
Possession, (2) Control, (3) Enjoyment, (4) Exclusion, (5) Disposition
Identify the physical characteristics of real estate. - Answer (1) Immobility, (2)
Indestructibility, (3) Uniqueness
Identify various types of personality. - Answer (1) Manufactured Housing, (2) Chattals
(furniture, clothing, money, bonds, bank accounts, etc.), (3) Trade fixtures, (4) Plants
that require annual cultivation (also called emblements)
Identify the types of laws that affect real estate. - Answer (1) US Constitution, (2) Laws
passed by congress, (3) Rules of the regulatory agencies, (4) State Constitutions, (5)
State Statutes, (6) Local ordinances, (7) Common Law
Identify the economic characteristics of real estate. - Answer (1) Scarcity, (2)
Improvements, (3) Permanence of investment, (4) Location
List various types of housing choices available to homeowners - Answer (1) Apartment
complexes, (2) Condominiums, (3) Cooperatives, (4) Planned Unit Developments
(PUDs), (5) Retirement communities, (6) Multi-use developments (MUDs), (7)
Converted use properties, (8) Manufactured housing, (9) Time shares
What percentage of pre-tax (gross) monthly income should a prospective homebuyer
not exceed when estimating the monthly cost of buying & maintaining a home? -
Answer 28%
What percentage of pre-tax (gross) monthly income should a prospective homebuyer
not monthly exceed when estimating their total monthly debt load? - Answer 36%
,Real Estate Broker License Exam Key
Concepts (IL)
Explain the current tax benefits of home ownership. - Answer (1) up to $250,000 (single)
or $500,000 (joint) in home sale profits can currently be excluded from capital gains tax
(2) Homeowners may deduct real estate taxes, mortgage interest payments, loan
origination fees, loan discount points, and loan prepayment penalties.
Distinguish between the various types of homeowner's insurance policy coverage. -
Answer (1) Property insured for 80% of value or higher covers full cost of repair &
replacement (2) Property insured below 80% of value covers the cash value of damage
with depreciation or the prorated value of damage.
Identify the types of agency relationships common in the real estate profession and the
characteristics of each. - Answer (1) Universal Agent - a person empowered to do
anything the principal could do personally through power of attorney, (2) General agent
- may represent the principal in a broad range of matters related to a particular business
or activity, (3) Special Agent - is authorized to represent the principal in one specific act
or business transaction only, under detailed instructions, (4) Designated agent - is a
person authorized by the sponsoring broker to act as the agent of a specific principal.
What are the fiduciary/statutory duties involved in an agency relationship? - Answer (1)
Care, (2) Obedience, (3) Loyalty, (4) Disclosure, (5) Accounting, (6) Confidentiality -
COLD AC
Explain the process by which agency is created. - Answer (1) Express agency - The
principal and agent enter into a contract, or an express agreement, in which the parties
formally express their intention to establish an agency and state its terms and
conditions. The Real Estate License Act of 2000 requires that all exclusive brokerage
agreements must be written listing agreements. (2) Implied agency - An agency also
may be created by implied agreement. This occurs when the actions of the parties
indicate that they have mutually consented to an agency. A licensee acts on behalf of
another as agent. Even though the licensee may not have consciously planned to
create an agency relationship, the parties can create unintentionally through their
actions.
Identify the different circumstances by which agency relationship / listing can be
terminated. - Answer (1) Death or incapacity of either party (sponsoring broker only,
death of broker does not terminate), (2) Destruction or condemnation of the property, (3)
Expiration of the terms of the agency, (4) Mutual agreement by all parties to the
contract, (5) Breach by one of the parties, in which case the breaching party might be
liable for damages, (6) By operation of law, as in bankruptcy of the principal, (7)
Completion, performance, or fulfillment of the purpose for which the agency was
created.
, Real Estate Broker License Exam Key
Concepts (IL)
Explain the role of disclosure in agency relationships. - Answer In Illinois a consumer
must be advised in writing that a designated agency relationship exists unless there is a
written agreement between the sponsoring broker and the consumer providing for a
different brokerage relationship. This must occur no later than beginning to work as a
designated agent on behalf of the consumer. The name or names of the designated
agent or agents must be in writing, and the sponsoring broker's compensation and
policy with regard to cooperating with sponsoring brokers who represent other parties in
a transaction must be disclosed.
What is the difference between the duties owed by an agent to her client from those
owed to customers. - Answer Clients are owed Fiduciary duties (Care, Obedience,
Loyalty, Disclosure, Accounting, and Confidentiality - COLD AC), Customers are owed
reasonable care, skill, honesty, fair dealing, & disclosure of known facts.
Identify the various types of antitrust violations common in the real estate industry and
the penalties. - Answer (1) Price-Fixing, (2) Group Boycotting, (3) Allocation of
Customers or Markets, (4) Tie-in Agreements - The penalties for violating antitrust laws
are severe. For instance, under the Sherman Antiturst Act, people who fix prices or
allocate markets may be subject to a maximum $1 million fine and up to 10 years in
prison.
Explain how a licensee's compensation is usually determined. - Answer The
commission rate is always negotiable (by law) and determined by the listing broker and
their property owner client. After closing, the total commission is split evenly between
the listing sponsoring broker and the selling sponsoring broker. The sponsoring brokers
then divide disperse the individual commissions to their brokers based on rates
determined in their employment contract. (50/50, 40/60, 20/80, etc.)
Identify characteristics of an independent contractor. - Answer (1) They do not work
employer determined hours, (2) At least 90% of the individual's income must be derived
from sales rather than hours worked, (3) They decide when and how to do work, (4) The
individual must agree in writing not to be treated as an employee for federal tax
purposes.
Explain how employment is terminated with a sponsoring broker. - Answer Upon
termination the sponsoring broker must sign and date the license of the broker which
indicates that the relationship has been terminated. The sponsoring broker must then
send the IDFPR a copy the terminated license within two days of the termination or be
subject to discipline for failure to do so. The signed licensee automatically becomes
inoperative, as does the licensee's ability to practice real estate, until a new sponsorship
is designated.
Explain the process of transferring a license to a different broker. - Answer The new
sponsoring broker must immediately complete a sponsor card (45-day permit) for the
Concepts (IL)
Identify the major trade organizations that serve the real estate business. - Answer (1)
The National Association of Realtors (NAR) members called "Realtors" (2) The National
Association of Real Estate Brokers (NAREB) members called "Realtists"
List the Categories of real property. - Answer (1) Residential, (2) Commercial, (3)
Industrial, (4) Agricultural, (5) Special Purpose
List the factors that affect supply in the real estate market. - Answer (1) Labor force
costs, (2) Construction costs, (3) Government controls, (4) Financial policies
List the factors that affect demand in the real estate market. - Answer (1) Population, (2)
Demographics, (3) Employment, (4) Wage levels
What characteristics of land have the most impact on market value? - Answer (1)
Uniqueness, (2) Immobility
Identify the legal rights that convey with ownership of real property. - Answer (1)
Possession, (2) Control, (3) Enjoyment, (4) Exclusion, (5) Disposition
Identify the physical characteristics of real estate. - Answer (1) Immobility, (2)
Indestructibility, (3) Uniqueness
Identify various types of personality. - Answer (1) Manufactured Housing, (2) Chattals
(furniture, clothing, money, bonds, bank accounts, etc.), (3) Trade fixtures, (4) Plants
that require annual cultivation (also called emblements)
Identify the types of laws that affect real estate. - Answer (1) US Constitution, (2) Laws
passed by congress, (3) Rules of the regulatory agencies, (4) State Constitutions, (5)
State Statutes, (6) Local ordinances, (7) Common Law
Identify the economic characteristics of real estate. - Answer (1) Scarcity, (2)
Improvements, (3) Permanence of investment, (4) Location
List various types of housing choices available to homeowners - Answer (1) Apartment
complexes, (2) Condominiums, (3) Cooperatives, (4) Planned Unit Developments
(PUDs), (5) Retirement communities, (6) Multi-use developments (MUDs), (7)
Converted use properties, (8) Manufactured housing, (9) Time shares
What percentage of pre-tax (gross) monthly income should a prospective homebuyer
not exceed when estimating the monthly cost of buying & maintaining a home? -
Answer 28%
What percentage of pre-tax (gross) monthly income should a prospective homebuyer
not monthly exceed when estimating their total monthly debt load? - Answer 36%
,Real Estate Broker License Exam Key
Concepts (IL)
Explain the current tax benefits of home ownership. - Answer (1) up to $250,000 (single)
or $500,000 (joint) in home sale profits can currently be excluded from capital gains tax
(2) Homeowners may deduct real estate taxes, mortgage interest payments, loan
origination fees, loan discount points, and loan prepayment penalties.
Distinguish between the various types of homeowner's insurance policy coverage. -
Answer (1) Property insured for 80% of value or higher covers full cost of repair &
replacement (2) Property insured below 80% of value covers the cash value of damage
with depreciation or the prorated value of damage.
Identify the types of agency relationships common in the real estate profession and the
characteristics of each. - Answer (1) Universal Agent - a person empowered to do
anything the principal could do personally through power of attorney, (2) General agent
- may represent the principal in a broad range of matters related to a particular business
or activity, (3) Special Agent - is authorized to represent the principal in one specific act
or business transaction only, under detailed instructions, (4) Designated agent - is a
person authorized by the sponsoring broker to act as the agent of a specific principal.
What are the fiduciary/statutory duties involved in an agency relationship? - Answer (1)
Care, (2) Obedience, (3) Loyalty, (4) Disclosure, (5) Accounting, (6) Confidentiality -
COLD AC
Explain the process by which agency is created. - Answer (1) Express agency - The
principal and agent enter into a contract, or an express agreement, in which the parties
formally express their intention to establish an agency and state its terms and
conditions. The Real Estate License Act of 2000 requires that all exclusive brokerage
agreements must be written listing agreements. (2) Implied agency - An agency also
may be created by implied agreement. This occurs when the actions of the parties
indicate that they have mutually consented to an agency. A licensee acts on behalf of
another as agent. Even though the licensee may not have consciously planned to
create an agency relationship, the parties can create unintentionally through their
actions.
Identify the different circumstances by which agency relationship / listing can be
terminated. - Answer (1) Death or incapacity of either party (sponsoring broker only,
death of broker does not terminate), (2) Destruction or condemnation of the property, (3)
Expiration of the terms of the agency, (4) Mutual agreement by all parties to the
contract, (5) Breach by one of the parties, in which case the breaching party might be
liable for damages, (6) By operation of law, as in bankruptcy of the principal, (7)
Completion, performance, or fulfillment of the purpose for which the agency was
created.
, Real Estate Broker License Exam Key
Concepts (IL)
Explain the role of disclosure in agency relationships. - Answer In Illinois a consumer
must be advised in writing that a designated agency relationship exists unless there is a
written agreement between the sponsoring broker and the consumer providing for a
different brokerage relationship. This must occur no later than beginning to work as a
designated agent on behalf of the consumer. The name or names of the designated
agent or agents must be in writing, and the sponsoring broker's compensation and
policy with regard to cooperating with sponsoring brokers who represent other parties in
a transaction must be disclosed.
What is the difference between the duties owed by an agent to her client from those
owed to customers. - Answer Clients are owed Fiduciary duties (Care, Obedience,
Loyalty, Disclosure, Accounting, and Confidentiality - COLD AC), Customers are owed
reasonable care, skill, honesty, fair dealing, & disclosure of known facts.
Identify the various types of antitrust violations common in the real estate industry and
the penalties. - Answer (1) Price-Fixing, (2) Group Boycotting, (3) Allocation of
Customers or Markets, (4) Tie-in Agreements - The penalties for violating antitrust laws
are severe. For instance, under the Sherman Antiturst Act, people who fix prices or
allocate markets may be subject to a maximum $1 million fine and up to 10 years in
prison.
Explain how a licensee's compensation is usually determined. - Answer The
commission rate is always negotiable (by law) and determined by the listing broker and
their property owner client. After closing, the total commission is split evenly between
the listing sponsoring broker and the selling sponsoring broker. The sponsoring brokers
then divide disperse the individual commissions to their brokers based on rates
determined in their employment contract. (50/50, 40/60, 20/80, etc.)
Identify characteristics of an independent contractor. - Answer (1) They do not work
employer determined hours, (2) At least 90% of the individual's income must be derived
from sales rather than hours worked, (3) They decide when and how to do work, (4) The
individual must agree in writing not to be treated as an employee for federal tax
purposes.
Explain how employment is terminated with a sponsoring broker. - Answer Upon
termination the sponsoring broker must sign and date the license of the broker which
indicates that the relationship has been terminated. The sponsoring broker must then
send the IDFPR a copy the terminated license within two days of the termination or be
subject to discipline for failure to do so. The signed licensee automatically becomes
inoperative, as does the licensee's ability to practice real estate, until a new sponsorship
is designated.
Explain the process of transferring a license to a different broker. - Answer The new
sponsoring broker must immediately complete a sponsor card (45-day permit) for the
