Illinois Real Estate Broker Practice Exam

1. An owner conveys land to another person "for as long as the land is used as a public library." This grant creates an estate that could end automatically if the stated condition is violated. This is an example of which category of estate?

• A. A fee simple absolute
• B. A defeasible fee
• C. A life estate pur autre vie
• D. A tenancy at sufferance

2. An owner grants her neighbor the right to cross her driveway to reach a public road. The neighbor does not own or possess the land but has a right to use it for that limited purpose. This right is best described as:

• A. A fee simple interest
• B. An easement
• C. A freehold estate
• D. A homestead

3. Two people take title to a parcel together. Their deed states that upon the death of one owner, that owner's interest automatically passes to the survivor rather than to the deceased's heirs. Which form of co-ownership does this describe?

• A. Tenancy in common
• B. Joint tenancy with right of survivorship
• C. Ownership in severalty
• D. A leasehold estate

4. A charge or claim against a property that may affect its title or limit its use — such as a lien, easement, or restrictive covenant — is generally categorized as:

• A. An estate in land
• B. An encumbrance
• C. A freehold
• D. An allodial right

5. A single individual purchases a condominium unit and takes title in her name alone, with no other person holding an interest. This manner of holding title is known as:

• A. Tenancy by the entirety
• B. Ownership in severalty
• C. Community property
• D. Tenancy in common

6. A homeowner holds a bundle of legal interests in her property, including the right to occupy it, sell it, lease it, and exclude others. In property law, this concept is best described as which of the following?

• A. The bundle of rights
• B. An easement in gross
• C. A restrictive covenant
• D. A lien priority

7. A life estate is granted to a person "for the duration of her life." What happens to the property interest when the life tenant dies?

• A. It escheats to the state automatically in all cases
• B. It passes according to the terms of the original grant, to either a remainderman or by reversion to the grantor
• C. The life tenant may will it to her own heirs
• D. It converts into a tenancy in common

8. Which of the following best distinguishes real property from personal property?

• A. Real property is always more valuable than personal property
• B. Real property can be owned; personal property cannot
• C. Personal property is always exempt from taxation
• D. Real property includes land and things permanently affixed to it, while personal property is movable and not affixed

9. An item of personal property becomes so permanently attached to real estate that it is now legally treated as part of the real property. This converted item is referred to as:

• A. A fixture
• B. An emblement
• C. A chattel
• D. A trade appurtenance

10. Two unmarried business partners take title to an investment property as co-owners. Each holds an undivided fractional interest, they may own unequal shares, and each partner's interest passes to his own heirs upon death rather than to the other partner. Which form of co-ownership is described?

• A. Ownership in severalty
• B. Joint tenancy
• C. Tenancy in common
• D. Tenancy by the entirety

11. An owner holds title in fee simple absolute. Which statement correctly describes this estate?

• A. It is the highest and most complete form of ownership, freely inheritable and transferable
• B. It requires the grantor's consent before any resale
• C. It terminates automatically upon the owner's death and cannot be inherited
• D. It reverts to a remainderman when a named person dies

12. A document purporting to be a deed omits a legal description of the property but is otherwise in writing, names the parties, includes a granting clause, and is signed by the grantor and delivered and accepted. Is this deed effective?

• A. Yes, because delivery and acceptance are the only requirements
• B. No, because a legal description is one of the required elements of an effective deed
• C. Yes, because a granting clause substitutes for a legal description
• D. No, because only a notary's signature can cure the omission

13. A woman is granted the right to occupy and use a home for as long as she lives; upon her death the property is to pass to her nephew. What is the nephew's interest called?

• A. Reversion
• B. Remainderman
• C. Life tenant
• D. Grantor

14. A seller signs a deed and hands it to the buyer, who accepts it, but the deed does not name the buyer as a party. Under the required elements of a valid deed, what is the effect of this omission?

• A. The deed remains fully effective because delivery and acceptance occurred
• B. The deed fails to satisfy the requirement that a deed name the parties
• C. The deed is automatically converted into a quitclaim deed
• D. The omission is cured automatically once the deed is recorded

15. A homeowner fails to pay property taxes, and the county later records a tax lien. A mortgage lender recorded its mortgage lien years earlier. In a foreclosure, how is priority between these two liens determined?

• A. The mortgage lien always has priority because it was recorded first
• B. The tax lien generally has priority regardless of when it was recorded
• C. Priority is decided by which lienholder forecloses first
• D. The two liens are paid in equal shares regardless of recording date

16. An owner grants a neighbor an easement appurtenant across a strip of land to access a lake. The owner later sells the burdened parcel to a new buyer. Does the easement continue to bind the new buyer's parcel?

• A. Yes, but only if the new buyer is also the dominant tenement owner
• B. No, because only the original grantor remains bound personally
• C. Yes, because an easement appurtenant runs with the land and continues to burden the servient tenement
• D. No, because easements terminate automatically upon any sale of the servient tenement

17. Two neighboring lots exist: Lot A has no direct road access, so its owner uses a paved path across Lot B to reach the street. This right was created in the deeds and passes automatically to future owners of Lot A. Which best describes Lot A's interest?

• A. An easement in gross held personally by the current owner
• B. An easement appurtenant, with Lot A as the dominant tenement
• C. A life estate in Lot B
• D. A general warranty running with Lot B only

18. After closing, a buyer promptly records the deed in the public land records. What is the primary legal effect of recording?

• A. It automatically extinguishes any existing property tax liens
• B. It gives constructive notice to the world and establishes priority
• C. It converts a quitclaim deed into a general warranty deed
• D. It creates an easement appurtenant benefiting the buyer's neighbor

19. A buyer wants the strongest possible protection against title defects, including those that arose before the current seller ever owned the property. Which deed type should the buyer insist on?

• A. Quitclaim deed
• B. General warranty deed
• C. Deed of trust
• D. Bargain and sale deed

20. A grantor conveys a parcel to a buyer using a deed that carries no warranties and transfers only whatever interest the grantor happened to hold. Which type of deed was used?

• A. General warranty deed
• B. Quitclaim deed
• C. Special warranty deed
• D. Grant deed

21. An apartment renter pays rent on the first of each month with no fixed end date; the arrangement simply continues month after month until either party gives proper advance notice. Which leasehold estate is this?

• A. A tenancy at sufferance
• B. A periodic tenancy
• C. A life estate
• D. An estate for years

22. An owner's parcel borders a small non-navigable river, and the owner uses the water for irrigation. The legal rights this owner holds by virtue of owning land along the flowing watercourse are known as what?

• A. Littoral rights
• B. Severable mineral rights
• C. Appropriative rights
• D. Riparian rights

23. A lender fails to disclose the annual percentage rate and total finance charge to a borrower refinancing their principal residence. Which law and implementing regulation require this disclosure?

• A. RESPA, implemented by Regulation X
• B. The Fair Housing Act, implemented by HUD guidelines
• C. The Truth in Lending Act, implemented by Regulation Z
• D. The Statute of Frauds, implemented by state licensing law

24. A buyer is obtaining a conventional loan and plans to put down 10 percent of the purchase price. Based on typical conventional loan requirements, what will the lender most likely require?

• A. An FHA insurance premium
• B. A VA funding fee
• C. Private mortgage insurance
• D. No additional insurance, since 10 percent is sufficient

25. A borrower stops making payments, and the lender wants to demand immediate payment of the entire outstanding loan balance rather than waiting for each missed installment separately. Which clause in the loan documents allows this?

• A. The acceleration clause
• B. The alienation clause
• C. The defeasance clause
• D. The subordination clause

26. Which two disclosure documents does RESPA require to be provided to borrowers on federally related mortgage loans?

• A. The appraisal report and the title commitment
• B. The Loan Estimate and the Closing Disclosure
• C. The purchase agreement and the seller's disclosure
• D. The promissory note and the deed of trust

27. A loan officer refers a borrower to a title company in exchange for an undisclosed cash payment with no service actually rendered for that payment. Which federal law is most directly violated by this arrangement?

• A. Truth in Lending Act
• B. Real Estate Settlement Procedures Act
• C. Fair Housing Act
• D. Civil Rights Act of 1866

28. A borrower defaults on a loan in a state where the lender holds legal title to the property until the debt is fully paid. This state follows which theory of mortgage law?

• A. Lien theory
• B. Title theory
• C. Escrow theory
• D. Equity theory

29. In a mortgage transaction, which document is the borrower's personal promise to repay the debt?

• A. The mortgage
• B. The promissory note
• C. The deed of trust
• D. The title insurance policy

30. A homeowner refinances the mortgage on their principal residence with a new lender. Under the Truth in Lending Act, what right does the homeowner have regarding this transaction?

• A. A thirty-day right to shop for a better rate
• B. A three-day right of rescission
• C. An unlimited right to cancel before closing
• D. No cancellation rights once documents are signed

31. A borrower is quoted a loan of $250,000 with a charge of 2 discount points to reduce the interest rate. How much will the borrower pay in discount points at closing?

• A. $500
• B. $2,500
• C. $5,000
• D. $25,000

32. A veteran who qualifies for VA financing wants to purchase a home with the smallest possible upfront cash outlay for a down payment. Which loan type is designed to allow this?

• A. Conventional loan
• B. FHA loan
• C. VA loan
• D. Jumbo loan

33. A bank's internal map marks certain neighborhoods, selected because of the racial composition of their residents, as areas where the bank will not make home loans regardless of individual applicants' qualifications. What is this practice, and is it lawful?

• A. Redlining, an illegal lending practice under federal fair housing and fair lending laws
• B. Blockbusting, which is unlawful only when done by real estate licensees
• C. Steering, a lawful marketing technique for lenders
• D. Permissible portfolio risk management, lawful if applied consistently

34. A buyer purchases a home for $300,000, making a $60,000 down payment and financing the rest with a mortgage loan. What is the loan-to-value ratio of this financing?

• A. 20 percent
• B. 80 percent
• C. 75 percent
• D. 85 percent

35. A landowner's existing recorded loan is in first position. To let a construction lender finance a new building on the site, the existing lender signs an agreement voluntarily allowing the new construction loan to move ahead of it in priority. What is this agreement called?

• A. A subordination agreement
• B. An estoppel certificate
• C. A satisfaction of mortgage
• D. An assumption agreement

36. A borrower's home loan provides that the interest rate will change periodically, computed each adjustment period by adding a fixed percentage set in the note to a published market indicator. In adjustable-rate loan terminology, what are these two components?

• A. The index (the market indicator) and the margin (the lender's fixed add-on)
• B. The origination fee and the annual percentage rate
• C. The principal and the equity
• D. The ceiling and the floor

37. A mortgage applicant is quoted both a loan origination fee and optional discount points. She asks her broker to explain the difference between the two charges. Which explanation is accurate?

• A. The origination fee lowers the interest rate, while points cover processing costs
• B. Points are paid by the seller by law, while origination fees are paid by the buyer
• C. Both charges are refundable deposits returned at closing
• D. The origination fee compensates the lender for processing and making the loan, while discount points are prepaid interest paid to reduce the interest rate

38. After closing hundreds of home loans, a lender bundles and sells the loans to a large investor so that the lender can replenish its funds and originate new mortgages. In which market did this sale take place?

• A. The secondary mortgage market
• B. The municipal bond market
• C. The commercial paper market
• D. The primary mortgage market

39. Three years into a fixed-rate home loan, a borrower inherits money and pays the entire remaining balance ahead of schedule. The lender responds by charging an extra fee authorized by the loan documents for early retirement of the debt. Which provision permits this charge?

• A. A prepayment penalty clause
• B. The acceleration clause
• C. The defeasance clause
• D. A partial release clause

40. A private lender makes a consumer loan at an interest rate that exceeds the maximum rate the state permits lenders to charge for that kind of loan. What is this practice called?

• A. Usury
• B. Rate escalation
• C. Discounting
• D. Arbitrage

41. In a financing arrangement, a home buyer conveys bare legal title to a neutral third party as security for the lender, with the borrower keeping possession and full use of the home, and the third party empowered to sell the property if the borrower defaults. Who are the three parties, and who holds the bare title?

• A. Trustor (borrower), beneficiary (lender), and trustee — the trustee holds bare legal title
• B. Vendor, vendee, and escrowee — the vendee holds title
• C. Optionor, optionee, and broker — the broker holds title
• D. Mortgagor, mortgagee, and appraiser — the mortgagee holds title

42. A borrower's mortgage has a current balance of $200,000 at an annual interest rate of 6 percent. Interest is paid monthly on the outstanding balance. How much of this month's payment goes to interest?

• A. $12,000
• B. $2,000
• C. $600
• D. $1,000

43. An investor purchases a home by taking title "subject to" the seller's existing mortgage rather than formally assuming it. The investor later stops making payments and the lender forecloses, leaving a shortfall. Who bears personal liability for the unpaid debt?

• A. The lender, which accepted the risk of transfer
• B. The original seller-borrower, who remains personally liable on the note
• C. Neither party, because the foreclosure extinguished all liability
• D. The investor alone, because the investor took over the payments

44. An agreement is formed for a purpose that the law prohibits. What is the general effect of an illegal purpose on the enforceability of the contract?

• A. It makes the contract enforceable only against the buyer
• B. It renders the contract generally unenforceable
• C. It has no effect on enforceability
• D. It doubles the damages available to each party

45. A party makes an offer and the other party responds with different terms rather than accepting the original terms as stated. In general contract principles, how is this response best characterized?

• A. A binding acceptance regardless of the changed terms
• B. A counteroffer that rejects the original offer
• C. An automatic extension of the original offer's deadline
• D. A ratification of the original offer

46. A licensing candidate is asked about the general purpose of a 'statute of frauds' concept in contract law. Which statement best captures its general purpose?

• A. To require that certain types of contracts be in writing to be enforceable
• B. To criminalize all oral agreements
• C. To eliminate the need for consideration
• D. To make every contract automatically renewable

47. After a valid contract is formed, both parties fully perform every obligation they owe. In contract terms, the contract is then said to be:

• A. Voided for lack of capacity
• B. Rescinded for fraud
• C. Breached
• D. Discharged by performance

48. An examinee is asked which element must be present for a contract to be legally enforceable. The instructor emphasizes that this is one of the foundational requirements. Which of the following is a required element of a valid contract?

• A. Mutual assent between the parties
• B. A notarized signature on every page
• C. A witness present at signing
• D. Payment made in full before formation

49. Two parties dispute whether a valid contract exists because one claims there was never a true 'meeting of the minds.' What does the phrase 'meeting of the minds' most directly refer to?

• A. That a judge has pre-approved the agreement
• B. That the parties are related to one another
• C. That the parties mutually understand and agree to the essential terms
• D. That both parties are physically present in the same room

50. During a review session, a student asks what 'consideration' means in the context of contract law. Which statement best describes consideration?

• A. The physical location where the contract is signed
• B. Something of value exchanged between the parties
• C. The emotional motive of one party
• D. A government fee paid to register the agreement

51. A person who has not yet reached the age of legal majority signs an agreement. Under general contract principles, how is a contract entered into by a minor typically treated?

• A. Automatically void from the moment of signing in all cases
• B. Fully binding and non-cancelable like an adult's contract
• C. Generally voidable at the option of the minor
• D. Converted into a criminal matter

52. One party fails to perform its obligations under a valid contract without a legal excuse. This failure to perform is best described by which term?

• A. Ratification
• B. Novation
• C. Breach of contract
• D. Consideration

53. A contract is signed only because one party threatened the other with harm unless they signed. Which contract-law concept most directly describes this situation?

• A. Duress
• B. Consideration
• C. Assignment
• D. Performance

54. A tenant's lease provides that if the owner ever decides to sell the building, the tenant must first be given the chance to buy it by matching the terms of any bona fide offer the owner is prepared to accept. The tenant cannot force a sale at any time. What right does the tenant hold?

• A. A right of first refusal
• B. An option to purchase at a fixed price
• C. An equitable lien on the building
• D. A reversionary interest in the property

55. While showing a house with a history of repeated basement flooding known to him, the seller's licensee assures a buyer that the basement "has never taken on water." The buyer purchases in reliance and floods follow the first spring rain. How is the licensee's statement best characterized?

• A. Fraudulent misrepresentation of a material fact, exposing the licensee to liability
• B. Permissible salesmanship because the seller authorized it
• C. A ministerial act with no legal consequence
• D. Puffing, a lawful statement of opinion

56. A buyer submits a signed written offer for a condominium but includes no earnest money deposit whatsoever. The seller signs and accepts. Later, the seller's attorney argues the contract is invalid because no deposit accompanied the offer. Is the attorney correct?

• A. Yes — but the defect is cured if a deposit is paid before closing
• B. Yes — a real estate contract without a deposit lacks consideration
• C. No — because contracts require consideration only when a broker is involved
• D. No — earnest money is not required for validity, because the parties' mutual promises supply the consideration

57. A seller owns two adjacent lots. During negotiations the seller intends to sell the smaller lot, while the buyer believes the deal covers the larger one; the sloppy contract description could refer to either. When the confusion surfaces, what is the likely status of this agreement?

• A. Enforceable at the seller's election only
• B. Unenforceable, because mutual mistake about the subject matter prevented a true meeting of the minds
• C. Fully enforceable against the buyer as written
• D. Cured automatically once the deed is recorded

58. With the lender's written agreement, a home buyer formally takes over the seller's existing loan, and the lender fully releases the original borrower from any further liability, substituting the buyer as the sole obligor. This substitution of parties is called:

• A. Novation
• B. Reformation
• C. Assignment
• D. Subrogation

59. A purchase agreement states that if the buyer defaults, the seller may keep the earnest money as the seller's sole remedy, and both parties agreed to that amount when they signed. This contractual remedy is known as:

• A. Specific performance
• B. Liquidated damages
• C. Punitive damages
• D. An injunction against resale

60. An elderly, isolated homeowner depends entirely on a live-in caretaker. The caretaker persistently pressures her, exploiting the dependency, until she signs a contract selling the home to the caretaker's cousin at a fraction of its value. On what ground can this contract most likely be set aside?

• A. The statute of frauds
• B. Mutual mistake about the property's value
• C. Impossibility of performance
• D. Undue influence exercised over the seller

61. A buyer delivers a written offer to a seller stating it will remain open for five days. On day two, before the seller has accepted or rejected, the buyer dies in an accident. On day four, the seller signs the offer. Is there a contract?

• A. Yes, because the offer stated it would stay open for five days
• B. Yes, because acceptance occurred within the stated period
• C. No — the offeror's death before acceptance terminated the offer by operation of law
• D. Yes, but only the buyer's estate can enforce it

62. In a signed real estate purchase agreement, the seller promises to convey title at closing and the buyer promises to pay the purchase price. Because each party has exchanged a promise for a promise, this contract is classified as:

• A. Unilateral
• B. Bilateral
• C. Voidable
• D. Implied

63. For a negotiated fee, a landowner gives a developer the exclusive right to purchase a parcel at a fixed price at any time during the next six months. The developer has not promised to buy. Which statement best describes this arrangement?

• A. It is unenforceable because the developer gave no consideration
• B. It is an option contract: the owner must sell if the developer elects to buy, but the developer is not obligated to purchase
• C. It is a bilateral contract binding both parties to close
• D. It is a right of first refusal triggered only by a third-party offer

64. Before closing, a buyer and seller both conclude the transaction no longer suits them. They sign an agreement canceling the purchase contract, and the earnest money is returned so each side stands where it stood before the contract existed. This unwinding is called:

• A. Assignment of the contract
• B. Mutual rescission
• C. Forfeiture of the deposit
• D. Unilateral breach

65. A seller entered into an oral agreement to sell a house, and later refuses to close, claiming the agreement cannot be enforced because it was never put in writing. How should this contract be classified?

• A. Void, because it lacked a required element
• B. Voidable, because either party may disaffirm it
• C. Unenforceable, because it is otherwise valid but the Statute of Frauds requires land-sale contracts to be in writing
• D. Fully enforceable, because oral agreements bind real estate sales

66. A seller receives a buyer's offer and responds by signing it but changing the closing date and lowering the requested repair credit. What is the legal effect of the seller's response?

• A. It is a valid acceptance, since the seller signed the document
• B. It is a counteroffer that rejects and extinguishes the buyer's original offer
• C. It is unenforceable because acceptance must be verbal
• D. It has no legal effect until recorded

67. A broker deposits earnest money from a purchase contract directly into the brokerage's general operating account alongside commission income. Which fiduciary duty has been violated?

• A. Loyalty, because the broker favored their own interests
• B. Accounting, because client funds must be kept in a separate trust or escrow account and never commingled
• C. Obedience, because the seller did not authorize a deposit
• D. Disclosure, because the buyer was not told where funds were held

68. A buyer working directly with the listing agent (without representation) discovers after closing that the agent knew of a hidden foundation crack but said nothing. What is the agent's liability exposure based on the duties owed to customers?

• A. None, because agents owe customers no duties at all
• B. None, because only fiduciary duties apply to customers
• C. Liability, because agents must disclose known material latent defects to customers even without owing them fiduciary duties
• D. Liability, but only because of the accounting duty

69. A listing agent learns that the seller would accept a price well below the listed price. After the listing expires, a former customer of the agent asks what the seller would have accepted. Which fiduciary duty prevents the agent from disclosing this?

• A. Obedience, because the seller never instructed disclosure
• B. Accounting, because the information relates to trust funds
• C. Confidentiality, because it survives termination and forbids revealing information that would harm the principal's bargaining position
• D. Reasonable care, because the agent must protect their own reputation

70. A real estate broker manages a rental property under a property management agreement. Under agency law, what type of agent is the property manager, and what duties does this create toward the owner?

• A. A special agent, owing only the duty of confidentiality
• B. A general agent, owing fiduciary duties including obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care
• C. A customer, owing only honesty and fair dealing
• D. A sub-agent, owing duties solely to the tenant

71. A buyer's agent and seller's agent are actually the same licensee representing both parties in one transaction. Under what condition is this arrangement permitted?

• A. It is never permitted under any circumstances
• B. Only with the informed written consent of both parties
• C. Only if the buyer waives all fiduciary duties orally
• D. Only if the broker charges no commission

72. A buyer and seller entered into a purchase agreement for a home, but the buyer's loan application is later denied and the financing contingency was not satisfied. What is the effect of an unsatisfied contingency on the parties' obligations?

• A. The contract becomes void immediately regardless of the contingency terms
• B. The buyer's performance obligation does not arise, since contingencies must be satisfied before a party is obligated to perform
• C. The seller may sue for specific performance regardless of the contingency
• D. The buyer forfeits the earnest money automatically with no recourse

73. A seller signed a contract to sell a parcel of land but later refuses to convey title. The buyer wants the actual property, not money damages. What remedy is most appropriate, and why?

• A. Liquidated damages, because earnest money covers any breach
• B. Rescission, because land disputes are always voidable
• C. Specific performance, because land is deemed unique and compels conveyance
• D. Reformation, because the deed lacked a legal description

74. A buyer submits a written offer to purchase a home. Before the seller communicates acceptance, the buyer's financial situation changes and the buyer wants out. Can the buyer withdraw the offer?

• A. No, once submitted in writing an offer is irrevocable
• B. Yes, an offer may be revoked any time before acceptance is communicated
• C. No, only the seller's agent can withdraw an offer
• D. Yes, but only if the seller has not yet reviewed it

75. An Illinois licensee runs an online ad for a listed home that shows attractive photos, the price, and the licensee's personal cell number — but never mentions any brokerage. Why is this advertisement improper?

• A. It is a blind ad, because advertising by a licensee must identify the sponsoring brokerage
• B. The price of a listing may never appear in an advertisement
• C. Personal phone numbers may not appear in any real estate ad
• D. Advertising residential property online is prohibited for licensees

76. A newly licensed Illinois broker wants to begin practicing immediately — taking listings and writing offers on her own, with no affiliation with any brokerage. May she lawfully practice this way?

• A. Yes, if she carries her own errors-and-omissions insurance
• B. No — a broker must be sponsored by a sponsoring broker, who is responsible for supervising the licensee's activities
• C. No, she must first complete a probationary year with the state
• D. Yes, any licensed broker may practice independently at once

77. A homeowner in Illinois decides to sell her own house herself, placing a yard sign, showing the home, and negotiating directly with buyers. She holds no real estate license. Is she violating the licensing law?

• A. Yes, because anyone negotiating a real estate sale must be licensed
• B. Yes, unless she first registers the sale with the state
• C. No, because an owner acting on her own behalf regarding her own property is exempt from licensure
• D. No, but only if she hires an attorney to conduct every showing

78. A licensee working with a young family repeatedly shows them homes only in neighborhoods where most residents share the family's ethnicity, quietly skipping equally suitable listings elsewhere, believing they will be "more comfortable." What has the licensee done?

• A. Engaged in redlining by limiting the family's loan options
• B. Engaged in steering, an illegal practice of channeling buyers toward or away from areas based on protected characteristics
• C. Engaged in blockbusting to induce panic selling
• D. Provided lawful customized service based on client preferences

79. An Illinois broker sponsored by a brokerage firm completes a sale, and the grateful seller wants to hand the broker a bonus check made out to the broker personally. How must any compensation for this licensed activity be paid?

• A. Directly to the broker, since the broker performed the work
• B. Only through the broker's sponsoring broker, who may then compensate the sponsored licensee
• C. Into the transaction's escrow account for later division
• D. To the broker and sponsoring broker jointly in equal shares

80. A sponsoring broker in Illinois receives a buyer's earnest money check with an accepted offer. Under the license law's handling requirements, into what kind of account must these funds be placed?

• A. Any interest-bearing account chosen by the listing licensee
• B. The brokerage's general business operating account, for accurate bookkeeping
• C. A special escrow account maintained for money belonging to others, kept separate from the firm's own funds
• D. The sponsoring broker's personal savings account until closing

81. A seller tells his Illinois listing licensee that the furnace is failing but instructs the licensee to conceal it. A prospective buyer directly asks the licensee about the condition of the heating system. What must the licensee do?

• A. Refuse to answer any questions from buyers about the property's condition
• B. Answer falsely but note the truth in the transaction file
• C. Follow the seller's instruction, because obedience to the client always controls
• D. Decline to follow the instruction and refrain from misrepresenting the defect, because a licensee may not knowingly conceal or misstate material facts

82. The owner of a twelve-unit apartment building, which qualifies for no exemption, refuses to rent an available unit to an otherwise qualified couple solely because they have two young children. Which fair housing violation has occurred?

• A. A violation only of local ordinance, not federal law
• B. Discrimination based on marital status under federal law
• C. Discrimination based on familial status under the federal Fair Housing Act
• D. None, because owners may set occupancy preferences freely

83. A lender making a federally related mortgage loan needs an opinion of a home's value. The listing broker offers to supply his comparative market analysis in place of any other valuation. Why is the broker's CMA insufficient for the lender's purpose?

• A. Because valuations for federally related loan transactions must be performed by a state licensed or certified appraiser, while a CMA is only a pricing tool
• B. Because a CMA becomes an appraisal once a lender reads it
• C. Because CMAs may only be prepared by attorneys
• D. Because brokers are barred from ever expressing opinions of value

84. An audit reveals that an Illinois sponsoring broker repeatedly moved earnest money out of the escrow account to cover the brokerage's payroll shortfalls, replacing it before closings. What exposure does the sponsoring broker face?

• A. Only a civil suit by the affected buyers
• B. Professional discipline by the state regulator, which may include suspension or revocation of the license, in addition to civil liability
• C. Automatic transfer of the escrow account to the local association of brokers
• D. None, because the funds were always replaced before anyone was harmed

85. Hoping to generate listings, a licensee canvasses a neighborhood telling homeowners that members of a particular racial group are moving in and that property values will soon collapse, urging owners to sell quickly through him. Which illegal practice is this?

• A. Steering
• B. Lawful farming of a geographic area
• C. Redlining
• D. Blockbusting, also known as panic peddling

86. A seller instructs her Illinois listing licensee not to show the home to prospective buyers of a particular national origin. The licensee values the client relationship and does not want to lose the listing. What must the licensee do?

• A. Comply, because the duty of obedience requires following the client's instructions
• B. Comply, but keep written records showing the instruction came from the seller
• C. Show the home to all buyers but quietly discourage the disfavored group from making offers
• D. Refuse to follow the instruction, because obedience extends only to lawful instructions and this one violates fair housing law

87. A seller tells a broker, "Get me $200,000 for the house, and anything you sell it for above that is yours to keep as your fee." What is the fundamental problem with this compensation arrangement?

• A. It is unobjectionable so long as the seller receives the target amount
• B. It is enforceable only if the excess is shared with the buyer
• C. It creates a net listing, in which the broker's personal profit motive conflicts with the fiduciary duty to obtain the best price for the seller
• D. It fails because commissions must always be a fixed percentage of price

88. A buyer's designated agent negotiates a purchase for her client, and at closing the agent's compensation is paid out of the commission the seller agreed to pay the listing brokerage. The buyer worries this payment arrangement makes the agent represent the seller. Is the buyer correct?

• A. Yes — the agent becomes a dual agent the moment seller-side funds are used
• B. Yes — whoever pays the commission is automatically the principal
• C. No — the source of compensation does not determine the agency relationship, which is set by agreement and disclosure
• D. No — but only because compensation from a seller is illegal and must be refunded

89. A listing licensee persuades a seller that her home is worth far less than its true market value, then arranges for his own brother to buy it without revealing the relationship. Months later the brother resells at a large profit that he splits with the licensee. Which duties did the licensee breach?

• A. None, because the seller voluntarily accepted the price
• B. Only the duty of confidentiality toward the brother
• C. Only the duty of reasonable care in pricing
• D. Loyalty and disclosure — this is undisclosed self-dealing, putting the agent's secret personal interest ahead of the client's

90. A licensee never signs any agreement with a prospective buyer but spends weeks advising her on negotiating strategy, telling her what to offer, and drafting offers tailored to her interests. The buyer reasonably believes the licensee is her advocate. What risk has the licensee created?

• A. The conduct converted the licensee into a transaction coordinator with no duties to anyone
• B. None, because agency can arise only from a signed writing
• C. An implied agency may have been created by conduct, carrying fiduciary duties the licensee may already be breaching
• D. The buyer automatically became the licensee's subagent

91. A seller's closing is delayed, and the seller demands to know exactly where the buyer's earnest money is being held, what has been received, and what disbursements have occurred. Which fiduciary duty obligates the listing brokerage to provide this information and to safeguard those funds?

• A. The duty of confidentiality
• B. The duty of self-dealing
• C. The duty of accounting
• D. The duty of obedience

92. A licensee representing the seller unlocks the door for an unrepresented buyer, hands over the printed listing sheet, and answers factual questions about the school district. The buyer later claims the licensee became the buyer's agent through these actions. How should these services be characterized?

• A. As a breach of the licensee's duty to the seller
• B. As ministerial acts, which are informational services that do not create an agency relationship
• C. As dual agency requiring immediate written consent
• D. As an implied buyer agency created by conduct

93. A seller lists her home under an agreement providing that the listing brokerage earns the commission no matter who procures the buyer during the term — even if the seller finds the buyer entirely on her own. Which type of listing did she sign?

• A. An exclusive-agency listing
• B. An exclusive-right-to-sell listing
• C. A net listing
• D. An open listing

94. Midway through a listing term, the seller — an individual owner — dies unexpectedly. No buyer has been found. What happens to the listing brokerage's agency relationship with the seller?

• A. It terminates by operation of law upon the principal's death
• B. It remains in force until the stated expiration date regardless of the death
• C. It converts to a buyer-agency relationship
• D. It continues automatically with the seller's heirs as the new principals

95. A cooperating licensee from another brokerage brings buyers to a listed home while acting, with the seller's consent, as a subagent of the seller. The buyers assume this friendly licensee is "their agent." What is the true structure of representation?

• A. The cooperating licensee represents both parties equally as a matter of law
• B. No one in the transaction represents the seller
• C. The cooperating licensee represents the buyers because he works with them daily
• D. The cooperating licensee owes fiduciary duties to the seller and only honesty and fair dealing to the buyers

96. Broker X introduces a buyer to a property, conducts two showings, and begins negotiations that continue without interruption. Days before agreement, the buyer quietly writes the offer through Broker Y, hoping for a discount. Both brokers claim the commission. On what basis will this dispute be decided?

• A. The brokers must always split the commission equally
• B. Procuring cause — which broker began and carried forward the unbroken chain of events that produced the sale
• C. The buyer decides which broker is paid
• D. Whichever broker holds the older license

97. A seller signs a listing agreement authorizing a brokerage to market one specific house and find a ready, willing, and able buyer, with no authority beyond that transaction. In agency terms, what kind of agent is the brokerage?

• A. A universal agent empowered to handle all of the seller's affairs
• B. A general agent managing the seller's ongoing business
• C. A special agent authorized for a single, limited transaction
• D. A gratuitous agent, because listing services are free to sellers

98. A buyer tells her agent that she is purchasing a house specifically to rent it out for income. The agent, without checking, assures her rentals are permitted; in fact, a recorded restriction prohibits leasing in the subdivision, which a routine review would have revealed. Which duty did the agent breach?

• A. The duty of reasonable care and diligence, by failing to verify information critical to the client's known purpose
• B. The duty of accounting
• C. No duty, because agents are never responsible for researching restrictions
• D. The duty of confidentiality

99. A seller gives nonexclusive authorization to several different brokerages to market his property, promising to pay only the brokerage that actually produces the buyer, and reserving the right to sell it himself and pay no one. Which listing arrangement is this?

• A. A designated-agency listing
• B. A multiple listing service placement
• C. An exclusive-right-to-sell listing
• D. An open listing

100. Two licensees sponsored by the same Illinois brokerage are involved in one transaction: the sponsoring broker appoints one to represent the seller and a different one to represent the buyer, each owing full duties to their own client. What is this arrangement called?

• A. Illegal undisclosed dual agency
• B. Subagency between the two licensees
• C. Designated agency, the standard Illinois approach when one brokerage serves both sides
• D. A transactional brokerage with no client duties