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Tables of Contents for Illinois Real Estate
Chapter/Section Title
Page #
Page Count
Preface
xvii
 
Basic Real Estate Concepts
2
14
General Characteristics of Real Estate
3
3
Terminology and Classes of Property
3
1
Physical Characteristics
4
1
Economic Characteristics
4
2
General Concepts of Land Use and Investment
6
2
Physical Factors Affecting Land Use
6
1
Economic Factors Affecting Land Use
6
1
Highest and Best Use
6
1
Land Use Restrictions
7
1
Investment Objectives
7
1
The Real Estate Business
8
3
National Association of Relators®
8
1
National Association of Real Estate Brokers
9
1
Association of Real Estate License Law Officials
9
1
Real Estate Licensees
10
1
The Fundamentals of a Real Estate Transaction
10
1
The Real Estate Market
11
1
Important Points
12
1
Review Questions
12
4
Property Ownership and Interests
16
30
The Concept of Property
17
6
Bundle of Rights
17
1
Real Property
18
2
Personal Property
20
1
Land, Minerals, Fruits of the Soil
20
1
Fixtures
21
1
Trade Fixtures
22
1
Uniform Commercial Code (UCC)
22
1
Land, Tenements, and Hereditaments
22
1
Estates in Real Property
23
1
Definition of Estate
23
1
Groups of Estates in Land
23
1
Freehold Estates
23
5
Fee Simple Estates
23
2
Life Estates
25
3
Nonfreehold Estates (Leasehold Estates)
28
1
Ownership of Real Property
29
4
Ownership in Severalty
29
1
Concurrent Ownership
29
4
Combination Forms of Ownership
33
3
Condominiums
33
1
Planned Unit Developments (PUDs)
34
1
Cooperatives
34
2
Timesharing
36
1
Real Property Ownership by Business Organizations
36
5
Sole Proprietorship
37
1
Partnership
37
1
Corporation
38
1
Limited Liability Company
39
1
Syndication
39
1
Joint Venture
40
1
Trust
40
1
Important Points
41
2
Review Questions
43
3
Encumbrances and Government Restrictions
46
18
Easements
47
4
Easements in Gross
47
1
Easements Appurtenant
48
3
License
51
1
Liens
51
7
Priority of Liens
51
1
Specific Liens
52
5
General Liens
57
1
Restrictive Covenants
58
1
Encroachments
58
1
Government Restrictions on Real Property
59
1
Power of Eminent Domain
59
1
Police Power
59
1
Power of Taxation
60
1
Power of Escheat
60
1
Important Points
60
1
Review Questions
61
3
Brokerage and Agency
64
20
Classification of Agency Relationships
65
1
Common Law Agency
66
3
Creation of Agency
66
1
Fiduciary Relationship
66
1
Seller-Broker Relationship Under Common Law
67
1
Buyer-Broker Relationship Under Common Law
68
1
Buyer Agency Under Common Law
68
1
Dual Agency Under Common Law
68
1
Accidental Agency Under Common Law
69
1
Termination of Agency
69
1
Agency in Illinois-Designated Agency
69
8
Agency Relationships-Article 15
70
4
Escrow Accounts
74
1
Brokerage
74
3
Antitrust Violations
77
1
Important Points
77
1
Review Questions
78
6
Real Estate Contracts
84
34
Basic Contract Law
85
3
Terms and Classifications
85
3
Essential Elements of Contracts
88
5
Offer and Acceptance
89
1
Consideration
90
1
Legal Capacity of the Parties
90
1
Reality of Consent
91
1
Legality of Object
92
1
Possibility to Complete
92
1
Statute of Frauds
93
1
Illinois Residential Real Property Disclosure Act
93
1
Discharge of Contracts
94
2
Agreement of the Parties
94
1
Complete Performance
95
1
Impossibility of Performance
95
1
Operation of Law
95
1
Illinois Uniform Vendor and Purchaser Risk Act
95
1
Assignment of Contract Rights
96
1
Interpretation of Contracts
96
1
Contract Remedies
97
1
Specific Performance
97
1
Rescission
97
1
Compensatory Damages
97
1
Liquidated Damages
98
1
Auction Sales
98
1
Listing Contracts and Practices
99
6
Definition and Purpose
99
1
Commission Entitlement
99
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