Real Estate Broker License Exam Key Concepts (IL) Complete Solutions

Real Estate Broker License Exam Key Concepts (IL) Complete Solutions Identify the major trade organizations that serve the real estate business. ️(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. ️(1) Residential, (2) Commercial, (3) Industrial, (4) Agricultural, (5) Special Purpose List the factors that affect supply in the real estate market. ️(1) Labor force costs, (2) Construction costs, (3) Government controls, (4) Financial policies List the factors that affect demand in the real estate market. ️(1) Population, (2) Demographics, (3) Employment, (4) Wage levels What characteristics of land have the most impact on market value? ️(1) Uniqueness, (2) Immobility Identify the legal rights that convey with ownership of real property. ️(1) Possession, (2) Control, (3) Enjoyment, (4) Exclusion, (5) Disposition Identify the physical characteristics of real estate. ️(1) Immobility, (2) Indestructibility, (3) Uniqueness Identify various types of personality. ️(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. ️(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. ️(1) Scarcity, (2) Improvements, (3) Permanence of investment, (4) Location List various types of housing choices available to homeowners ️(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? ️28% What percentage of pre-tax (gross) monthly income should a prospective homebuyer not monthly exceed when estimating their total monthly debt load? ️36% Explain the current tax benefits of home ownership. ️(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. ️(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. ️(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? ️(1) Care, (2) Obedience, (3) Loyalty, (4) Disclosure, (5) Accounting, (6) Confidentiality - COLD AC Explain the process by which agency is created. ️(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. ️(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. Explain the role of disclosure in agency relationships. ️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. ️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. ️(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,