Illinois Real Estate : Principles and Practices

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ISBN: 9780324143867 | 0324143869
Cover: Paperback
Copyright: 2/1/2001

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Prepare for the Illinois Real Estate License Exam. Readable, integrated and user-friendly, this Illinois-specific text meets all requirements for pre-licensing. The comprehensive treatment provides appropriate information and guidance for passing the state-licensing exam.

Preface

xvii

Basic Real Estate Concepts

(14)

General Characteristics of Real Estate

(3)

Terminology and Classes of Property

(1)

Physical Characteristics

(1)

Economic Characteristics

(2)

General Concepts of Land Use and Investment

(2)

Physical Factors Affecting Land Use

(1)

Economic Factors Affecting Land Use

(1)

Highest and Best Use

(1)

Land Use Restrictions

(1)

Investment Objectives

(1)

The Real Estate Business

(3)

National Association of Relators®

(1)

National Association of Real Estate Brokers

(1)

Association of Real Estate License Law Officials

(1)

Real Estate Licensees

(1)

The Fundamentals of a Real Estate Transaction

(1)

The Real Estate Market

(1)

Important Points

(1)

Review Questions

(4)

Property Ownership and Interests

(30)

The Concept of Property

(6)

Bundle of Rights

(1)

Real Property

(2)

Personal Property

(1)

Land, Minerals, Fruits of the Soil

(1)

Fixtures

(1)

Trade Fixtures

(1)

Uniform Commercial Code (UCC)

(1)

Land, Tenements, and Hereditaments

(1)

Estates in Real Property

(1)

Definition of Estate

(1)

Groups of Estates in Land

(1)

Freehold Estates

(5)

Fee Simple Estates

(2)

Life Estates

(3)

Nonfreehold Estates (Leasehold Estates)

(1)

Ownership of Real Property

(4)

Ownership in Severalty

(1)

Concurrent Ownership

(4)

Combination Forms of Ownership

(3)

Condominiums

(1)

Planned Unit Developments (PUDs)

(1)

Cooperatives

(2)

Timesharing

(1)

Real Property Ownership by Business Organizations

(5)

Sole Proprietorship

(1)

Partnership

(1)

Corporation

(1)

Limited Liability Company

(1)

Syndication

(1)

Joint Venture

(1)

Trust

(1)

Important Points

(2)

Review Questions

(3)

Encumbrances and Government Restrictions

(18)

Easements

(4)

Easements in Gross

(1)

Easements Appurtenant

(3)

License

(1)

Liens

(7)

Priority of Liens

(1)

Specific Liens

(5)

General Liens

(1)

Restrictive Covenants

(1)

Encroachments

(1)

Government Restrictions on Real Property

(1)

Power of Eminent Domain

(1)

Police Power

(1)

Power of Taxation

(1)

Power of Escheat

(1)

Important Points

(1)

Review Questions

(3)

Brokerage and Agency

(20)

Classification of Agency Relationships

(1)

Common Law Agency

(3)

Creation of Agency

(1)

Fiduciary Relationship

(1)

Seller-Broker Relationship Under Common Law

(1)

Buyer-Broker Relationship Under Common Law

(1)

Buyer Agency Under Common Law

(1)

Dual Agency Under Common Law

(1)

Accidental Agency Under Common Law

(1)

Termination of Agency

(1)

Agency in Illinois-Designated Agency

(8)

Agency Relationships-Article 15

(4)

Escrow Accounts

(1)

Brokerage

(3)

Antitrust Violations

(1)

Important Points

(1)

Review Questions

(6)

Real Estate Contracts

(34)

Basic Contract Law

(3)

Terms and Classifications

(3)

Essential Elements of Contracts

(5)

Offer and Acceptance

(1)

Consideration

(1)

Legal Capacity of the Parties

(1)

Reality of Consent

(1)

Legality of Object

(1)

Possibility to Complete

(1)

Statute of Frauds

(1)

Illinois Residential Real Property Disclosure Act

(1)

Discharge of Contracts

(2)

Agreement of the Parties

(1)

Complete Performance

(1)

Impossibility of Performance

(1)

Operation of Law

(1)

Illinois Uniform Vendor and Purchaser Risk Act

(1)

Assignment of Contract Rights

(1)

Interpretation of Contracts

(1)

Contract Remedies

(1)

Specific Performance

(1)

Rescission

(1)

Compensatory Damages

(1)

Liquidated Damages

(1)

Auction Sales

(1)

Listing Contracts and Practices

(6)

Definition and Purpose

(1)

Commission Entitlement

(1)

Types of Listings

100

(1)

Listing Contract Provisions

101

(2)

Data Sheet

103

(1)

Termination

104

(1)

Competitive Market Analysis

104

(1)

Sales Contracts and Practices

105

(5)

Real Estate Sales Contract

105

(2)

Installment Agreement/Contract for Deed

107

(3)

Unilateral Contracts and Practices

110

(3)

Options

110

(1)

Right of First Refusal

111

(2)

Important Points

113

(1)

Review Questions

114

(4)

Transfer of Title to Real Property

118

(26)

Methods of Transferring Title

119

(3)

Intestate Descent

119

(1)

Testate Descent

120

(1)

Voluntary Alienation

120

(1)

Involuntary Alienation

121

(1)

Deeds

122

(7)

Essential Elements of a Valid Deed

122

(2)

Types of Deeds

124

(5)

Transfer Taxes

129

(1)

Illinois Real Estate Transfer Tax Act

129

(1)

Illinois Affordable Housing Act of 1989

130

(1)

Land Trust Recordation and Transfer Tax Act

130

(1)

Inspection Ordinances

130

(1)

Title Assurance

130

(4)

Title Examination

130

(1)

Abstract of Title with Attorney Opinion

131

(1)

Policy of Title Insurance

132

(1)

Recordation

133

(1)

Title Registration/Torrens System

133

(1)

Property Description

134

(6)

Monuments and Markings

134

(1)

Metes and Bounds

134

(2)

Government Rectangular Survey System

136

(2)

Subdivision, Lot, Block, and Tract

138

(2)

Vertical Land Description

140

(1)

Important Points

140

(1)

Review Questions

141

(3)

Real Estate Finance Principles

144

(18)

Notes

145

(1)

Principal, Interest, and Payment Plans

145

(1)

Mortgage and Deed of Trust

146

(3)

Requirements for Validity of a Mortgage or Deed of Trust

147

(1)

Mortgage Clauses and Covenants

148

(1)

Recordation

149

(1)

Priority and Subordination

149

(1)

Releases

149

(1)

Rights of Borrower

149

(1)

Rights of Lender

150

(2)

Foreclosure

150

(2)

Types of Sales Transactions

152

(1)

Cash Sales

152

(1)

New Financing

152

(1)

Mortgage Assumption

152

(1)

Taking ``Subject to'' a Mortgage

152

(1)

Primary Sources of Real Estate Finance

153

(2)

Savings and Loan Associations

153

(1)

Mutual Savings Banks

154

(1)

Commercial Banks

154

(1)

Mortgage Bankers

154

(1)

Rural Economic and Community Development

154

(1)

Life Insurance Companies

154

(1)

Credit Unions

155

(1)

Real Estate Investment Trusts (REITs)

155

(1)

Individual Investors

155

(1)

Secondary Mortgage Market

155

(3)

Secondary Market Activities

156

(2)

Other Aspects of the Market

158

(1)

Important Points

158

(1)

Review Questions

159

(3)

Real Estate Finance Practices

162

(42)

Leverage

163

(1)

Conventional Mortgage Loans

163

(10)

Homeowner's Protection Act of 1998

164

(1)

Types of Conventional Mortgage Loans

164

(9)

FHA-Insured Mortgage Loans

173

(5)

Types of FHA Mortgage Loans

174

(1)

FHA Mortgage Insurance Premium (MIP)

175

(1)

FHA Loan Qualification

175

(1)

FHA Maximum Loan Amount

175

(1)

FHA Loan Assumption Policies

176

(1)

FHA Changes

177

(1)

Contract Requirement

178

(1)

Department of Veteran Affairs Guaranteed Loan Program

178

(4)

Eligibility

178

(1)

Qualifying for VA Loans

179

(2)

Restoration of Eligibility

181

(1)

Unused Eligibility

181

(1)

History of Loan Guarantees

181

(1)

Other Aspects of FHA and VA Loans

182

(1)

Escrow Account

182

(1)

Down Payment

183

(1)

Miscellaneous

183

(1)

Residential Lending Practices and Procedures

183

(10)

Loan Origination

183

(5)

Loan Processing

188

(2)

Loan Underwriting

190

(2)

Discount Points

192

(1)

Closing or Settlement Costs

193

(1)

Financing Legislation

194

(6)

Truth-in-Lending Simplification and Reform Act (TILSRA)

194

(1)

Real Estate Settlement Procedures Act (RESPA)

195

(1)

HUD's New Escrow Rules

196

(4)

Illinois Mortgage Escrow Account Act

200

(1)

Equal Credit Opportunity Act (ECOA)

200

(1)

Important Points

200

(1)

Review Questions

201

(3)

Closing Real Estate Transactions

204

(24)

Methods of Closing

205

(1)

Face-to-Face Closing

205

(1)

Escrow Closing

205

(1)

Preliminaries to Closing

206

(3)

Parties

207

(1)

Survey and Location Endorsement

207

(1)

Pest Inspection

207

(1)

Title Examination, Insurance, and Defects

207

(1)

Property Inspection

207

(1)

Insurance

208

(1)

Perc and Soil Tests

208

(1)

Additional Documents

208

(1)

Prorations at Closing

209

(2)

Items Prorated

209

(1)

Proration Rules and Methods

209

(2)

Preparation of Closing Statements

211

(1)

Format and Entries

211

(1)

Handling Closing Funds

211

(1)

Cash Sale Statement

211

(4)

Analysis of the Cash Sale Statement

213

(2)

Purchase Money Mortgage Statement

215

(2)

Analysis of Purchase Money Mortgage Statement

216

(1)

Reconciliation

217

(1)

Mortgage Assumption Statement

217

(2)

Analysis of Mortgage Assumption Statement

218

(1)

New First Mortgage Statement

219

(2)

Analysis of New First Mortgage Statement

221

(1)

Important Points

221

(1)

Practice Problem 1: Mortgage Assumption

222

(1)

Practice Problem 2: New First Mortgage

223

(1)

Solutions to Practice Problems

224

(2)

Review Questions

226

(2)

Property Valuation

228

(26)

Defining Appraisal and Valuation

230

(2)

Valuation Versus Evaluation

230

(1)

Types of Value

230

(2)

Appraisal Versus Competitive Market Analysis

232

(1)

Basic Real Estate Appraisal Concepts

232

(2)

Characteristics of Real Property

232

(1)

Factors Affecting Value

233

(1)

Basic Economic Valuation Principles

234

(4)

Highest and Best Use

234

(1)

Substitution

235

(1)

Supply and Demand

235

(1)

Conformity

235

(1)

Progression and Regression

235

(1)

Anticipation

236

(1)

Contribution

236

(1)

Increasing and Decreasing (Diminishing) Returns

236

(1)

Competition

237

(1)

Balance

237

(1)

Change

237

(1)

Growth, Equilibrium, and Decline

237

(1)

Age

238

(1)

Appraisal Methodology

238

(1)

Approaches to Value: Market, Cost, Income

238

(12)

Market Data or Comparison Approach

238

(5)

Income Approach

243

(4)

Cost Approach or Approach by Summation

247

(1)

Depreciation

248

(2)

Correlation and Reconciliation

250

(1)

Important Points

250

(1)

Review Questions

251

(3)

Land Use Controls

254

(18)

Historical Development of Land Use Controls

255

(1)

Public Land Use Controls

256

(4)

Local Controls

256

(3)

State Controls

259

(1)

Environmental Concerns and Legislation

260

(6)

Illinois Environmental Protection Act

260

(2)

Environmental Protection Legislation

262

(1)

Environmental Hazards

262

(4)

Private Land Use Controls

266

(2)

Typical Restrictive Covenants

267

(1)

Enforcement of Covenants

268

(1)

Termination of Covenants

268

(1)

Important Points

268

(2)

Review Questions

270

(2)

Fair Housing

272

(14)

Civil Rights Act of 1866

273

(1)

Enforcement

273

(1)

Federal Fair Housing Act of 1968

273

(6)

1988 Amendments to Fair Housing Act

274

(1)

Prohibited Acts

275

(3)

Exemptions

278

(1)

Enforcement and Penalties

278

(1)

Community Reinvestment Act

279

(1)

Illinois Human Rights Act

279

(1)

Exemptions

280

(1)

Enforcement and Penalties

280

(1)

Equal Housing Opportunity Today

280

(1)

Discrimination in Sale of Real Estate Act

281

(1)

Americans with Disabilities Act

281

(1)

Important Points

282

(1)

Review Questions

283

(3)

Landlord and Tenant (Leasehold Estates)

286

(16)

Definitions Concerning The Landlord/Tenant Relationship

287

(1)

Essential Elements of a Lease

288

(2)

Property Description

288

(1)

Term

288

(1)

Rent

288

(1)

Other Lease Provisions

288

(1)

Written or Oral Provisions

288

(2)

Recordation

290

(1)

Obligations of Landlord and Tenant

290

(4)

Mutual Obligations

290

(1)

Landlord's Duties

290

(1)

Tenant's Duties

291

(1)

Law of Negligence

291

(1)

Lead Paint Disclosures

291

(1)

Withholding Rent

292

(1)

Security Deposits

292

(1)

Other Laws Affecting the Rental of Property

292

(1)

Termination and Eviction Remedies

293

(1)

Leasehold (Nonfreehold) Estates

294

(2)

Estate for Years

294

(1)

Periodic Estate (Estate from Year-to-Year)

295

(1)

Estate (Tenancy) at Will

295

(1)

Estate (Tenancy) at Sufferance

295

(1)

Types of Leases

296

(1)

Gross and Net Leases

296

(1)

Graduated Lease

296

(1)

Escalated Lease

296

(1)

Index Lease

296

(1)

Fixed Lease

297

(1)

Reappraisal Lease

297

(1)

Percentage Lease

297

(1)

Ground Lease

297

(1)

Oil and Gas Leases

297

(1)

Sale and Leaseback

297

(1)

Important Points

297

(1)

Review Questions

298

(4)

Property Management and Insurance

302

(12)

The Basics of Property Management

303

(2)

Types of Properties and Management

304

(1)

The Owner-Manager Relationship

305

(1)

Authority

305

(1)

Duties

306

(1)

Fees

306

(1)

Principal Functions of Property Managers

306

(2)

Rental Schedule

306

(1)

Budget

306

(1)

Marketing

307

(1)

Handling Funds

307

(1)

Legal Actions

307

(1)

Maintenance

307

(1)

Records

308

(1)

Basic Insurance Concepts and Terminology

308

(1)

Property Insurance

308

(1)

Liability Insurance

308

(1)

Package Policy (Homeowner's Policy)

308

(1)

Standardized Homeowner's Insurance Policies

309

(1)

Selected Legal Issues

309

(2)

Insurable Interest

309

(1)

Coinsurance

309

(1)

Unoccupied Building Exclusion

310

(1)

Policy Interpretation

310

(1)

Homeowner's Warranty (HOW) Policies

311

(1)

Important Points

311

(1)

Review Questions

312

(2)

Federal Income Taxation of Real Estate

314

(18)

Taxpayer Relief Act of 1997

315

(2)

Capital Gain

315

(1)

Depreciation

316

(1)

Passive Income

316

(1)

Tax Implications of Home Ownership

317

(6)

Capital Gain on a Principal Residence

317

(2)

Effect of Purchase and Sale

319

(1)

The Age-55-and-Over Exemption

320

(1)

Taxpayers with Two Properties

320

(1)

Computation of Gain

321

(1)

Inheritance Basis

322

(1)

Mortgage Interest Deduction

322

(1)

Points

322

(1)

Vacation Homes

322

(1)

Installment Sales

323

(1)

Investment Property

323

(3)

Depreciation

323

(1)

Income Shelter

324

(1)

Deductible Expenses

325

(1)

1031 Tax-Deferred Exchanges

325

(1)

Starker Exchange (Starker Trust)

326

(1)

Investment Syndicates

326

(1)

Important Points

327

(1)

Review Questions

328

(4)

Illinois Real Estate License Act of 2000

332

(32)

Administration of Licenses

333

(16)

Commissioner, Director of Real Estate, Deputy Director of Real Estate

333

(1)

Real Estate Administration and Disciplinary Board

334

(1)

Real Estate Education Advisory Council

334

(1)

Licensed Activities

334

(2)

License and Pocket Cards

336

(1)

Application for a Leasing Agent License

336

(1)

Application for a Salesperson or a Broker License

337

(1)

Illinois Auction License Act

338

(1)

Illinois Real Estates Licensing Exam

338

(1)

Employment and Termination of Agents, Sponsor Cards

339

(1)

Brokerage Offices

339

(1)

Branch Offices

340

(1)

License Expirations

340

(1)

Inoperative Licensees

340

(1)

Reciprocal Licensing

341

(1)

Continuing Education

342

(1)

Compensation and Disclosure of Compensation

342

(1)

Referral Fees and Affinity Relationships

343

(1)

Inducements

343

(1)

Licensed and Unlicensed Personal Assistants

343

(2)

Sponsoring Broker and Employment Agreements

345

(1)

Licensee's Corporation for Indirect Payment

345

(1)

Advertising

345

(1)

Internet Advertising

346

(1)

Rules Regarding the Sale of a Licensee's Own Property

347

(1)

Written Agreements

347

(1)

Brokerage Agreements

348

(1)

Stigmatized Properties

348

(1)

Guaranteed Sales Plan

349

(1)

Violations of the Act and Disciplinary Procedures

349

(7)

Unlicensed Practice

349

(1)

Violations of the Act

349

(2)

Returned Checks and Fees

351

(1)

Violations of the Tax Act, Delinquent Student Loans, and Delinquent Child Support

352

(1)

Illegal Discrimination

352

(1)

Recovery From the Real Estate Recovery Fund

353

(1)

Hearings, Investigation and Notice, Statute of Limitations

354

(2)

Real Estate License Administration Fund and Real Estate Research and Education Fund

356

(1)

Escrow Regulations

356

(3)

Escrow Moneys, Time of Deposit, and Bookkeeping Systems

356

(1)

Consent to Audit Escrow Accounts

357

(1)

Bookkeeping System

357

(2)

Record Keeping

359

(1)

Forms of Ownership

359

(1)

Ownership Restrictions

359

(1)

Review Questions

360

(4)

Real Estate Math

364

(28)

Applications of Real Estate Math

365

(2)

Finance

365

(1)

Appraisal

366

(1)

Closing

366

(1)

Miscellaneous Calculations

366

(1)

General Practice in Real Estate Mathematics

367

(3)

Percentages

367

(1)

Formulas

367

(1)

Commission Problems

367

(3)

Estimating Partial Sales of Land

370

(1)

Profit/Loss on Sale of Real Estate

370

(1)

Area Calculations

370

(3)

Acreage

371

(1)

Square Footage

372

(1)

Cost/Size

372

(1)

Ad Valorem Property Taxes

373

(2)

Transfer Tax Calculations

375

(1)

Prorations at Closing

375

(1)

Financial Calculations

376

(4)

Simple Interest

377

(1)

Principal and Interest

377

(1)

Debt Service

377

(1)

Fees and Points

378

(1)

Loan-to-Value Ratios

378

(1)

Yields

379

(1)

Qualifying for Loan

379

(1)

Appraisal Calculations

380

(1)

Captialization

380

(1)

Depreciation

380

(1)

Income Tax Calculations

381

(1)

Deductions

381

(1)

Basis

382

(1)

Miscellaneous Calculations

382

(1)

Review Questions

383

(5)

Solutions to Review Questions

388

(4)

Appendix A Basic House Construction

392

(12)

Appendix B Practice Questions: Illinois Portion of Exam

404

(6)

Appendix C Practice Exam 1: National Portion of Exam

410

(10)

Appendix D Practice Exam 2: National Portion of Exam

420

(13)

Answer Key

433

(6)

Glossary

439

(26)

Index

465

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Illinois Real Estate : Principles and Practices

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