1. When a mortgage loan with level period payments has been completely repaid by its maturity date, it is said to be
A. depreciated
B. capitalized
C. fully amortized Correct
D. refinanced
Explanation
Fully amortized (C) is correct because it describes a loan repaid in full by its maturity through regular payments covering principal and interest. Depreciated (A) relates to asset value loss, not loan repayment. Capitalized (B) refers to adding costs to an asset’s value, not loan repayment. Refinanced (D) means replacing an existing loan with a new one, not completing repayment.
2. The clause in a mortgage that allows the lender to call the entire balance due and payable in advance of the fixed payment date is
A. an acceleration clause Correct
B. an escalation clause
C. a pay-off clause
D. a satisfaction clause
Explanation
An acceleration clause (A) is correct because it allows the lender to demand full repayment if certain conditions are violated. An escalation clause (B) adjusts payments or prices based on specific conditions, not full balance demands. A pay-off clause (C) is not a standard term in mortgages. A satisfaction clause (D) relates to loan fulfillment documentation, not early repayment demands.
3. In preparing a seller's net proceeds estimate, which of the following would be considered as a cost to the seller?
A. anticipated property tax increase
B. commission paid to the broker Correct
C. mortgage application fee
D. mortgage title insurance
Explanation
Commission paid to the broker (B) is correct because it is a direct cost deducted from the seller’s proceeds in a real estate transaction. Anticipated property tax increase (A) is a future expense, not a current cost. Mortgage application fee (C) and mortgage title insurance (D) are typically buyer’s costs, not seller’s.
4. In Illinois, can a licensee ever legally act on behalf of a lessor and lessee in a transaction?
A. Yes, if the licensee has the approval of the sponsoring broker
B. Yes, if the licensee has the informed written consent of all parties involved in the transaction Correct
C. No, because Illinois is a designated agency state
D. No, because the Illinois Real Estate License Law prohibits such an arrangement
Explanation
Informed written consent of all parties (B) is correct because Illinois allows dual agency with written consent from both lessor and lessee, ensuring transparency. Approval of the sponsoring broker (A) alone is insufficient. Illinois being a designated agency state (C) doesn’t prohibit dual agency with consent. The License Law (D) allows dual agency with proper consent, not prohibits it.
5. In Illinois, a licensee is subject to disciplinary action for FAILING to
A. have all papers notarized
B. pay Illinois state income tax
C. maintain a separate escrow account for each sale Correct
D. have the escrow account audited by an accountant
Explanation
Maintaining a separate escrow account for each sale (C) is correct because Illinois law requires licensees to keep client funds in separate escrow accounts to avoid commingling. Notarizing all papers (A) isn’t a universal requirement. Paying state income tax (B) is a personal obligation, not a licensing issue. Auditing escrow accounts (D) isn’t mandated for each sale.