SAMPLE PRACTICE in Illinois - Dearborn EDITION MODERN REAL ESTATE PRACTICE in Illinois MODERN REAL...

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Transcript of SAMPLE PRACTICE in Illinois - Dearborn EDITION MODERN REAL ESTATE PRACTICE in Illinois MODERN REAL...

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    Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle, withKaren Stefano, Consulting Editor, and Chris Read, Contributing Editor

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  • Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle, with Karen Stefano, Consulting Editor, and Chris Read, Contributing Editor

    REAL ESTATEModern

    Practice in IllinoisEIGHTH EDITION

    MREP_in_IL_8E.indb 1 4/28/2014 12:14:00 PM

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  • This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

    President: Dr. Andrew TemteChief Learning Officer: Dr. Tim SmabyExecutive Director, Real Estate Education: Melissa Kleeman-MoyDevelopment Editor: Christopher Kugler

    MODERN REAL ESTATE PRACTICE IN ILLINOIS EIGHTH EDITION2014 Kaplan, Inc.Published by DF Institute, Inc., d/b/a Dearborn Real Estate Education332 Front St. S., Suite 501La Crosse, WI 54601

    All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.

    Printed in the United States of America

    ISBN: 978-1-4277-4832-4 / 1-4277-4832-2PPN: 1510-7008

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  • iii

    Introduction ixAcknowledgments x

    C H A P T E R 1

    Introduction to the Real Estate Business 1Key Terms 1A Very Big Business 2Real Estate: A Business with Many Specialties 2Professional Organizations 4The Real Estate Market 5Summary 8Chapter 1 Quiz 9

    C H A P T E R 2

    Real Property and the Law 11Key Terms 11Land, Real Estate, and Real Property 12Ownership of Real Property 14Real Property and Personal Property 15Characteristics of Real Estate 17Laws Affecting Real Estate 18Summary 19Chapter 2 Quiz 21

    C H A P T E R 3

    Concepts of Home Ownership 25Key Terms 25Home Ownership 26Housing Affordability 27Homeowners Insurance 30Federal Flood Insurance Program 31Summary 32Chapter 3 Quiz 33

    C H A P T E R 4

    Real Estate Agency 37Key Terms 37Introduction to Real Estate Agency 38Law of Agency 38Types of Agency Relationships 52Customer-Level Services 61Summary 62Chapter 4 Quiz 64

    Contents

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  • iv Contents

    C H A P T E R 5

    Real Estate Brokerage 67Key Terms 67Real Estate Brokerage 68Antitrust Laws 84Other Consumer Protection Measures 85Summary 88Chapter 5 Quiz 89

    C H A P T E R 6

    Brokerage Agreements 93Key Terms 93Brokerage Agreements 94Types of Listing Agreements 94The Listing Process 97The Listing Agreement 100Buyer Agency Agreements 108Qualifying Buyer Services 114The Buying Process 114Termination of Broker Employment Agreements 115Summary 117Chapter 6 Quiz 119

    C H A P T E R 7

    Interests in Real Estate 123Key Terms 123Limitations on the Rights of Ownership 124Governmental Powers 124Estates in Land 126Encumbrances 131Nature and Water: Rights and Restrictions 136Summary 138Chapter 7 Quiz 141

    C H A P T E R 8

    Forms of Real Estate Ownership 145Key Terms 145Forms of Real Estate Ownership 146Ownership in Severalty 146Co-Ownership 146Trusts 152Ownership of Real Estate by Business Organizations 154Condominiums, Cooperatives, Town Houses, and Time-Shares 156Summary 161Chapter 8 Quiz 163

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  • vContents

    C H A P T E R 9

    Legal Descriptions 167Key Terms 167Describing Land 168Methods of Describing Real Estate 168Preparing a Survey 177Measuring Elevations 178Summary 179Chapter 9 Quiz 181

    C H A P T E R 10

    Real Estate Taxes and Other Liens 185Key Terms 185Liens 186Real Estate Tax Liens 188Other Liens on Real Property 194Summary 198Chapter 10 Quiz 201

    C H A P T E R 11

    Real Estate Contracts 203Key Terms 203Contract Law 204Discharge of Contracts 209Contracts Used in the Real Estate Business 211Summary 232Chapter 11 Quiz 234

    C H A P T E R 12

    Transfer of Title 237Key Terms 237Title 238Voluntary Alienation 238Involuntary Alienation 246Transfer of a Deceased Persons Property 247Summary 249Chapter 12 Quiz 251

    C H A P T E R 13

    Title Records 255Key Terms 255Public Records 256Proof of Ownership 260Summary 262Chapter 13 Quiz 264

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  • vi Contents

    C H A P T E R 14

    Illinois Real Estate License Law 267Key Terms 267Introduction 268Administration of the Real Estate License Act of 2000 268Obtaining and Keeping a Real Estate License 270License Categories and Requirements (225 ILCS 454/5) 273The Licensing Examination 276The Real Estate License 277License Fees 280Continuing Education 280Your Real Estate Business and the Act 282Disciplinary Provisions and Loss of License 289The Real Estate Recovery Fund 295Summary 297Chapter 14 Quiz 298

    C H A P T E R 15

    Real Estate Financing: Principles 301Key Terms 301Introduction 302Mortgage Law 302Security and Debt 303Promissory Notes 303Mortgage Document or Deed of Trust 306Provisions of Land Contracts and Other Owner Financing 311Foreclosure 311Summary 315Chapter 15 Quiz 317

    C H A P T E R 16

    Real Estate Financing: Practice 319Key Terms 319Introduction 320The Real Estate Financing Market 320Financing Techniques 324Loan Programs 328Other Financing Techniques 331Financing Legislation 334Summary 336Chapter 16 Quiz 338

    C H A P T E R 17

    Leases 341Key Terms 341Leases 342Leasing Real Estate 342Leasehold Estates 342Lease Agreements 345Basic Types of Leases 351Other Lease Arrangements 352

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  • viiContents

    Discharge of Leases 353Fair Housing and Civil Rights Laws 355Lead-Based Paint 355Regulation of the Rental Industry 356Summary 357Chapter 17 Quiz 359

    C H A P T E R 18

    Property Management 363Key Terms 363The Property Manager 364The Management Plan and Agreement 365Property Managers Responsibilities 367Risk Management 372The Management Profession 374Summary 375Chapter 18 Quiz 376

    C H A P T E R 19

    Real Estate Appraisal 379Key Terms 379Real Estate Appraisal 380Appraising 380Value 382The Three Approaches to Value 384The Appraisal Process 392Summary 400Chapter 19 Quiz 402

    C H A P T E R 20

    Land-Use Controls and Property Development 405Key Terms 405Land-Use Controls 406The Comprehensive Plan 406Zoning 407Building Codes and Certificates of Occupancy 411Subdivision 411Private Land-Use Controls 413Regulation of Land Sales 414Summary 415Chapter 20 Quiz 418

    C H A P T E R 21

    Fair Housing and Ethical Practices 421Key Terms 421Introduction 422Equal Opportunity in Housing 422Fair Housing Act 423Fair Housing Practices 428Implications for Real Estate Licensees 432

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  • viii Contents

    Professional Ethics 432Summary 433Chapter 21 Quiz 435

    C H A P T E R 22

    Environmental Issues and the Real Estate Transaction 439Key Terms 439Environmental Issues 440Hazardous Substances 440Groundwater Protection 450Underground Storage Tanks 452Waste Disposal Sites 453Brownfields 454Environmental Protection 454Liability of Real Estate Licensees 456Environmental Site Assessments 457Summary 457Chapter 22 Quiz 459

    C H A P T E R 23

    Closing the Real Estate Transaction 461Key Terms 461Closing the Real Estate Transaction 462Preclosing Procedures 462Conducting the Closing 466Real Estate Settlement Procedures Act (RESPA) 471Preparation of Closing Statements 478Prorations 481Sample Closing Statement 486Summary 491Chapter 23 Quiz 492

    C H A P T E R 24

    Real Estate Mathematics 495Key Terms 495Introduction 496Fractions, Decimals, and Percentages 496Area 497Finance Problems 499Summary 500Chapter 24 Quiz 501

    Practice Illinois Real Estate Licensing Exams 503Glossary 553Answer Key 575Index 589

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  • ix

    Introduction

    Whether you are preparing for the Illinois real estate licensing examination, ful-filling a college or university requirement, looking for specific guidance about buying a home or investment property, or simply expanding your understanding of this fascinating field, you can rely on Modern Real Estate Practice in Illinois for accurate and comprehensive information in a format that is easy to use.

    SPECIAL FEATURES

    Illinois-Specific Content Illinois-specific laws and topics appear throughout the text for classroom and study emphasis. Where appropriate, chapter quizzes also include Illinois-specific questions. Also included are two sample licensing examinations and an Illinois-specific exam.

    Key Terms Key terms appear at the beginning of each chapter. This feature not only lets you know what important vocabulary words you should look for as you read but also helps you to study and review.

    Margin Notes Margin notes direct your attention to important vocabulary terms, concepts, and study tips. They help you move more easily through the text and locate issues for review, and they serve as memory prompts for more efficient and effective studying.

    Summaries Chapter summaries provide you with a quick review of the most essential content covered in each chapter.

    Real Estate Mathematics Chapter 24 covers real estate mathematics, com-p