Free Illinois Real Estate Practice Exam

Q1.A developer purchases a large tract of land and later discovers that a portion of it contains hazardous waste contamination from a previous industrial owner. The developer had no knowledge of the contamination at the time of purchase and conducted a Phase I Environmental Site Assessment prior to closing. Under CERCLA, which defense would most likely protect the developer from cleanup liability?

• A.Innocent landowner defense, because the developer conducted all appropriate inquiry prior to acquisition and had no knowledge of the contamination
• B.Third-party defense, because the contamination was caused solely by a previous owner with whom the developer had a contractual relationship
• C.Act of God defense, because the hazardous substances migrated naturally through the soil without the developer's involvement
• D.Bona fide prospective purchaser defense, because the developer took title after the contamination was already listed on the EPA's National Priorities List

Q2.A property is being purchased for $425,000. The buyer obtains an 80% LTV conventional loan. The lender charges 2 discount points and a 1% origination fee. Under the Truth in Lending Act (TILA/Regulation Z), which of the following correctly represents the total prepaid finance charges the buyer will pay at closing related to these fees?

• A.$12,750
• B.$10,200
• C.$8,500
• D.$15,300

Q3.Under RESPA Section 10, a lender establishes an escrow account for a borrower's property taxes and hazard insurance. At settlement, the lender collects an initial escrow deposit. What is the maximum cushion the lender may hold in that escrow account at any point during the escrow cycle?

• A.One-sixth of the total annual escrow disbursements
• B.One-twelfth of the total annual escrow disbursements
• C.One-third of the total annual escrow disbursements
• D.There is no federally mandated limit on escrow cushions under RESPA

Q4.A property manager receives a rental application from a family with three children. The manager tells them the building is 'adults preferred' and suggests they look elsewhere. Under the federal Fair Housing Act, this statement most likely constitutes illegal discrimination based on which protected class?

• A.National origin
• B.Familial status
• C.Religion
• D.Disability

Q5.A property sold for $350,000 and generates annual net operating income of $28,000. What is the capitalization rate?

• A.6.5%
• B.8.0%
• C.7.2%
• D.8.5%

Q6.A property manager discovers environmental contamination on a rental property that may require CERCLA (Superfund) involvement. What is the manager's primary federal obligation regarding current tenants?

• A.Immediately terminate all leases without notice to protect tenants
• B.Continue normal operations until EPA formally designates the site
• C.Report the contamination to EPA and potentially face liability as a current operator of the facility
• D.Transfer ownership to avoid CERCLA liability before EPA investigation

Q7.A commercial lender evaluating a broker's personal loan application requests three years of Schedule C tax returns showing the broker's net self-employment income. The broker's income has declined 18% year-over-year due to a slow market. The lender denies the loan and provides a written adverse action notice citing 'insufficient income.' Two weeks later, the broker learns that a similarly qualified non-minority applicant with a comparable income decline was approved by the same lender under a manual underwriting exception. No such exception was offered to the broker, who is a member of a racial minority group. Under ECOA and its implementing Regulation B, which of the following is the most legally accurate analysis?

• A.The lender's failure to apply the manual underwriting exception consistently across racial groups may constitute disparate treatment discrimination under ECOA, and the broker's receipt of a written adverse action notice with stated reasons is a necessary but insufficient defense for the lender if discriminatory intent or effect can be demonstrated.
• B.ECOA does not apply to this transaction because the broker is seeking a commercial loan for business purposes, and Regulation B's protections extend only to consumer credit transactions involving personal, family, or household purposes.
• C.The adverse action notice fully satisfies all of the lender's obligations under ECOA and Regulation B, and no further liability can attach once the written reasons for denial are provided to the applicant.
• D.Because the lender used an objective income threshold applied to tax returns, the denial is categorically protected from ECOA challenge under the business necessity defense, which preempts disparate treatment claims when facially neutral underwriting criteria are employed.

Q8.A property manager is collecting rental applications and uses a credit-scoring model to screen tenants. An applicant is denied tenancy based on a low credit score. Under the Equal Credit Opportunity Act (ECOA), the property manager is required to:

• A.Provide the applicant with a written notice of adverse action stating the reasons for denial
• B.Offer the applicant an alternative unit at a lower rent
• C.Report the denial to the local housing authority within 30 days
• D.Refund the application fee in full within 10 business days

Q9.A broker who manages a 200-unit apartment complex collects security deposits totaling $180,000 and first month's rent of $220,000. The broker commingles all funds in a single operating account used to pay maintenance vendors. During a state audit, the auditor also notes that monthly reconciliations have not been performed. Beyond recordkeeping violations, which federal consumer protection concern is MOST directly implicated by the broker's handling of these funds?

• A.RESPA Section 8, because the broker is receiving unearned fees from settlement service providers by using tenant funds to pay vendors who may also refer mortgage business.
• B.ECOA, because commingling tenant funds with operating funds may impair the broker's ability to provide accurate adverse action notices to applicants whose deposits are returned late.
• C.The broker's conduct implicates trust account obligations under general fiduciary principles and applicable state licensing law, and the commingling of security deposits may also trigger state consumer protection statutes governing security deposit segregation, but no primary federal statute directly governs residential security deposit trust accounts.
• D.CERCLA, because using tenant security deposits to pay environmental remediation vendors without proper accounting creates strict liability for the broker as an operator of the property.

Q10.Which of the following is an example of proper harassment documentation?

• A.'He was clearly harassing her — it was obvious to everyone present.'
• B.'There seemed to be an inappropriate interaction at the open house.'
• C.'I believe a fair housing violation may have occurred based on what I observed.'
• D.'He told her she had a great smile and asked if she was single while standing close enough that she stepped back.'

Q11.A seller instructs her Illinois-licensed sponsoring broker to market her home under a net listing arrangement, whereby the broker's compensation will be any amount above $350,000 that the property sells for. How should the sponsoring broker respond under Illinois law?

• A.Accept the arrangement only if the broker discloses in writing to the seller that a net listing is being used.
• B.Accept the arrangement because net listings are a recognized and permissible compensation structure under Illinois law.
• C.Decline the arrangement, because net listings are prohibited under the Illinois Real Estate License Act of 2000 and constitute grounds for discipline.
• D.Accept the arrangement only if the brokerage's written office policy expressly authorizes net listings.

Q12.According to the Illinois Real Estate License Act of 2000, how many hours of pre-license education are required for a salesperson license?

• A.30 hours
• B.45 hours
• C.60 hours
• D.75 hours

Q13.When managing residential rental properties, which federal law requires property managers to provide tenants with disclosure about known lead-based paint hazards in properties built before 1978?

• A.Fair Housing Act
• B.Truth in Lending Act
• C.Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
• D.Residential Lead-Based Paint Hazard Reduction Act

Q14.A married couple applies for a mortgage loan. Under the Equal Credit Opportunity Act (ECOA), which of the following actions by the lender would be prohibited?

• A.Requesting information about the applicants' employment history
• B.Requiring both spouses to sign the loan application
• C.Verifying the couple's current income and assets
• D.Asking about the wife's plans for having children

Q15.Priya contracts to sell her property to a buyer. Before closing, Priya changes her mind and refuses to convey. Which remedy allows the buyer to compel Priya to complete the sale?

• A.Specific performance — a court order compelling Priya to complete the conveyance
• B.Liquidated damages — the buyer collects a pre-set penalty amount
• C.Rescission — the buyer cancels the contract and receives damages
• D.Arbitration — the parties submit to a binding arbitration decision