- Official section
- Illinois IV.D: Property Disclosure
- Broker weight
- Part of 25% of the Illinois state portion
- Expected scored items
- The current PSI broker outline assigns 10 of 40 state items to Disclosures
Illinois disclosures topic guide
Residential property disclosure and material defects
The Illinois seller report is a timeline, knowledge, and role problem. Confirm that the property and transfer are covered, get the seller's actual-knowledge report to the buyer before contract signing, update it before closing when necessary, and keep the broker's separate duty from disappearing behind the form.
Last updated: August 1, 2026
What does current Illinois authority require?
Short answer: For a covered transfer of one-to-four-unit residential property, a cooperative, a condominium, or qualifying manufactured real property, the covered seller completes every item in the statutory report and ensures the prospective buyer receives it before contract signing. The seller discloses actually known material defects without a special investigation and must supplement known errors, inaccuracies, or omissions before closing. The report is not an inspection or warranty, as-is language does not erase disclosure, and the licensee has separate actual-knowledge duties.
The PSI Illinois broker outline effective June 24, 2026 tests the Residential Real Property Disclosure Act and material defects. This guide reflects the Act, including Public Acts 102-765 and 103-427, plus Section 15-25 of the Real Estate License Act through August 1, 2026. It is exam preparation, not advice about a buyer's right to terminate a particular contract.
Where is this tested on the Illinois outline?
- Topic
- Covered residential real property
- What to know
- One dwelling unit, two units, three units, four units, residential cooperative, condominium unit, limited common element, exclusive use, integral part, manufactured home, real-property conversion, mixed use, five or more units, and statutory definition
- Best exam move
- Classify the property before reaching the report, and do not expand the one-to-four-unit rule to a five-unit building.
- Topic
- Covered seller
- What to know
- Owner, legal interest, equitable interest, Illinois land-trust beneficiary, other trust beneficiary, testate beneficiary, intestate beneficiary, transfer-on-death beneficiary, contract purchaser, ground lessee, occupancy, management responsibility, and exempt-transfer party
- Best exam move
- Use the current definition, including the limited beneficiary exclusion for one who never occupied and never managed the property.
- Topic
- Covered transfers
- What to know
- Sale, exchange, installment land sale contract, assignment of beneficial interest, lease with option to purchase, ground lease, assignment of ground lease, transfer for value, prospective buyer, offer, negotiation, and statutory contract
- Best exam move
- Recognize nondeed transactions that the Act expressly includes.
- Topic
- Section 15 exemptions
- What to know
- Court order, probate order, dissolution transfer, bankruptcy trustee, eminent domain, specific performance, deed in lieu, foreclosure sale, fiduciary administration, co-owner transfer, decedent transfer, spouse, lineal family, relocation entity, government, never-occupied new construction, and existing-property rehabilitation
- Best exam move
- Match the facts to an exact exemption and remember that rehabilitating existing housing is not the new-construction exemption.
- Topic
- Report completion
- What to know
- All items, property address, seller name, date, actual knowledge, yes, no, not applicable, explanation, occupation within 12 months, flood insurance, current condition, corrected problem, seller signature, buyer acknowledgment, and legal obligation
- Best exam move
- The seller supplies the answers and explanations; the broker should not become the signer or invent knowledge.
- Topic
- Form condition categories
- What to know
- Flooding, floodplain, foundation, basement, roof, ceiling, chimney, walls, windows, doors, floors, electrical, plumbing, well, drinking water, HVAC, fireplace, septic, sewer, radon, asbestos, lead, earth stability, termites, underground fuel tank, boundary dispute, violation notice, and methamphetamine
- Best exam move
- Read the exact item and connect a yes or not-applicable response to the required explanation rather than guessing from memory.
- Topic
- Actual knowledge and no special inquiry
- What to know
- Aware, actual notice, actual knowledge, no specific investigation, no specific inquiry, existing engineer report, contractor statement, public agency information, observation, prior occurrence, repair history, concealment, and false answer
- Best exam move
- Do not impute an inspector's hypothetical discovery to the seller, but do not ignore information the seller actually received.
- Topic
- Material-defect standard
- What to know
- Condition, substantial adverse effect, property value, significantly impair, future occupant, health, safety, reasonable belief, corrected condition, active defect, recurring problem, cosmetic issue, evidence, and buyer decision
- Best exam move
- Apply the form's exact value-or-health-and-safety test, including the reasonable-correction qualification.
- Topic
- Precontract delivery
- What to know
- Before signing contract, completed report, prospective buyer, personal delivery, facsimile, email, electronic delivery, first-class mail, alternative delivery service, effective on receipt, one buyer, authorized representative, acknowledgment, and verifiable proof
- Best exam move
- Place receipt before contract signing because mailing and receipt are not the same event.
- Topic
- Written supplement
- What to know
- Before closing, becomes aware, error, inaccuracy, omission, prior report, prior supplement, new storm damage, changed condition, failed system, written supplemental disclosure, authorized delivery, receipt, repairability, seller response, and record
- Best exam move
- Update newly inaccurate information instead of relying on the date of the original form.
- Topic
- Buyer termination and damages
- What to know
- Late report, all parties signed, disclosed material defect, numbers 1 and 2 exception, five business days, receipt, written termination, earnest money, down payment, supplemental defect, repairable, not repairable, repair agreement, preconveyance right, actual damages, costs, attorney fees, and one-year action limit
- Best exam move
- Use the precise statutory trigger and deadline, not a blanket rule that every late form or defect automatically cancels the sale.
- Topic
- Separate licensee duty
- What to know
- Seller client, buyer customer, honesty, negligent false information, knowing false information, actually known, latent material adverse fact, physical condition, reasonably diligent inspection, timely disclosure, seller report, confidentiality, sponsoring broker, documentation, and withdrawal
- Best exam move
- Compare the broker's actual knowledge with the seller's form and refuse to repeat or assist a known false statement.
The DISCLOSE method for Illinois residential property questions
- Define the property. Confirm one to four units, a covered cooperative or condominium, or qualifying manufactured real property.
- Identify the seller and transfer. Apply the current seller definition, covered transfer types, and every Section 15 exemption.
- Set the timeline. Order report receipt, contract signing, inspection, new knowledge, supplement, repair response, closing, possession, occupancy, and recording.
- Check actual knowledge. Separate what the seller and licensee truly know from what a new investigation might discover.
- Locate the form item. Match the condition to the statutory question, answer, explanation, and material-defect definition.
- Observe delivery proof. Use an authorized method and remember that delivery is effective on receipt.
- Layer the roles. Keep seller, licensee, buyer, inspector, contractor, engineer, attorney, and environmental professional within their proper tasks.
- Evaluate the remedy precisely. Apply late-report, supplemental-defect, repair, written notice, conveyance, damage, and limitation rules only when their facts fit.
- Event
- Covered property and transfer
- Required response
- Confirm seller and no Section 15 exemption
- Exam limit
- Do this before assuming report applies
- Event
- Before contract signing
- Required response
- Buyer receives completed statutory report
- Exam limit
- Receipt, not merely sending, controls delivery
- Event
- Seller knows material defect
- Required response
- Answer accurately and explain as form requires
- Exam limit
- Actual knowledge; no special inquiry
- Event
- New error or omission before closing
- Required response
- Deliver written supplement
- Exam limit
- Use Section 50 delivery method
- Event
- Late report discloses material defect
- Required response
- Buyer may send written termination
- Exam limit
- Within five business days after receipt
- Event
- Supplement discloses repairable defect
- Required response
- Seller may agree in writing to repair
- Exam limit
- Five business days after supplement
- Event
- No report before conveyance
- Required response
- Buyer retains statutory termination right
- Exam limit
- Right ends with conveyance
- Event
- Knowing violation or known false answer
- Required response
- Actual damages and costs may follow
- Exam limit
- Court may award prevailing-party attorney fees
- Event
- Action under Act
- Required response
- File within statutory period
- Exam limit
- One year from earliest possession, occupancy, or recording
Which Illinois distinctions matter most?
- Terms
- Material defect vs. every imperfection
- Difference
- A material defect substantially harms value or significantly impairs future occupant health or safety, subject to the correction qualification. Ordinary wear or a minor preference issue may not meet that test.
- Question cue
- Statutory significance versus any physical flaw.
- Terms
- Actual knowledge vs. duty to inspect
- Difference
- The seller reports actual notice or knowledge and need not conduct a specific investigation solely for the form. A buyer's inspector conducts a different professional inquiry.
- Question cue
- Known information versus required search.
- Terms
- Disclosure report vs. inspection report
- Difference
- The seller's report communicates the seller's actual knowledge through a statutory form. An inspection report records a qualified professional's examination within that professional's scope.
- Question cue
- Owner knowledge versus technical evaluation.
- Terms
- Disclosure vs. warranty
- Difference
- Disclosure provides information. A warranty makes a promise governed by its terms. The statutory report expressly says it is not a warranty.
- Question cue
- Knowledge statement versus performance promise.
- Terms
- Timely report vs. late material-defect report
- Difference
- A timely report arrives before contract signing. A qualifying report received after all parties sign can activate the specific five-business-day termination rule when it discloses a material defect.
- Question cue
- Correct sequence versus statutory late-delivery remedy.
- Terms
- Original report vs. supplement
- Difference
- The original report states current actual knowledge when delivered. A written supplement corrects or updates an error, inaccuracy, or omission discovered before closing.
- Question cue
- Initial form versus preclosing correction.
- Terms
- Repairable vs. not repairable supplemental defect
- Difference
- A nonrepairable preclosing material defect can support the statutory supplemental-report termination path. A repairable one depends on whether the seller agrees in writing within five business days to repair it, unless the earlier actual-knowledge condition applies.
- Question cue
- Can it be fixed before closing, and did seller agree in time?
- Terms
- As-is allocation vs. concealment
- Difference
- An as-is agreement can leave disclosed repair risk with the buyer. It does not authorize a knowingly false report, concealment, fraud, or breach of the licensee's duty.
- Question cue
- Who bears repair cost versus whether truth must be told.
- Terms
- Seller duty vs. licensee duty
- Difference
- The covered seller completes and updates the statutory report. The licensee separately follows agency, honesty, and actually-known latent physical-fact requirements.
- Question cue
- Owner's form versus regulated professional conduct.
How does the Illinois rule apply?
Report sent, contract signed first
Scenario: The seller emails a completed report at 1:00 p.m. The buyer signs at 1:10 p.m., but the email reaches the buyer's inbox at 1:20 p.m. The report identifies recurring basement leakage.
- Section 50 makes delivery effective upon receipt, not transmission.
- The buyer received a report disclosing a material condition after contract signing, so the late-report remedy must be tested from the receipt time.
Answer: The report was late. If Section 40's conditions are satisfied, the buyer has five business days after receipt to deliver written termination and recover earnest money or down payments.
A seller already has the engineer's report
Scenario: A seller possesses an engineer's report identifying substantial foundation movement. The seller marks no because the Act does not require a new investigation.
- No special investigation is required, but the seller already has actual information.
- The no-investigation rule is not permission to disregard known evidence or make a knowingly false statement.
Answer: The seller must answer from actual knowledge and disclose the material defect. The existing report makes the no-investigation defense irrelevant.
A storm changes a correct report
Scenario: The buyer received an accurate report before signing. A hailstorm then opens a large roof leak ten days before closing, and the seller receives a contractor's written findings.
- The original form may have been truthful when delivered.
- The seller now knows a preclosing event has made the prior report incomplete or inaccurate.
Answer: The seller must deliver a written supplement. The parties then apply Section 40, the contract, insurance, and any written repair agreement to the new condition.
New construction means truly never occupied
Scenario: An investor extensively rehabilitates a 90-year-old house and markets it as like new. No one has lived there since rehabilitation.
- Section 15 exempts newly constructed residential real property that has never been occupied.
- The statute expressly says that rehabilitation of existing residential real property is not included in that exemption.
Answer: The rehabilitation label does not establish the new-construction exemption. The remaining seller, property, and transfer facts must be analyzed under the Act.
The broker knows more than the form says
Scenario: A listing broker attended a contractor meeting about a hidden septic failure. The seller later marks no material defect and orders the broker not to discuss it.
- The broker has actual knowledge of a latent material adverse physical fact that ordinary inspection may not reveal.
- A client's direction cannot require unlawful concealment, and physical-condition material information is not protected as confidential under the agency definition.
Answer: The broker should document and escalate the conflict, refuse to repeat the false answer, follow the license-law disclosure duty, and seek appropriate legal guidance or withdraw as required.
Where do candidates misread the Illinois rule?
- Trap
- Every residential building uses the Illinois report.
- Correction
- The definition generally reaches one to four units and specified other residential property, subject to seller, transfer, and exemption rules.
- Trap
- Mailing before contract signing is always timely.
- Correction
- Delivery is effective upon buyer receipt, so the report must be received before signing.
- Trap
- A seller must hire an inspector before marking the form.
- Correction
- The Act uses actual knowledge and imposes no special investigation solely to complete the report.
- Trap
- No special investigation means known reports may be ignored.
- Correction
- Existing information can establish actual knowledge, and knowingly false answers create liability.
- Trap
- Every yes answer automatically means the contract ends.
- Correction
- A buyer remedy depends on report timing, the disclosed condition, receipt, deadlines, supplement facts, repairability, and conveyance.
- Trap
- A report received after contract signing gives thirty days to terminate.
- Correction
- The qualifying late-material-defect rule uses five business days after receipt.
- Trap
- Once signed, the original report never changes.
- Correction
- A known preclosing error, inaccuracy, or omission requires a written supplement.
- Trap
- An as-is clause cancels the disclosure statute.
- Correction
- The statutory form itself permits an as-is negotiation while preserving disclosure and inspection distinctions.
- Trap
- Rehabilitated property is automatically exempt new construction.
- Correction
- The new-construction exemption expressly excludes rehabilitation of existing residential property.
- Trap
- The seller's form protects a broker who knows the answer is false.
- Correction
- The broker's actual-knowledge, honesty, and latent-physical-fact duties remain separate.
Can you apply the rule to a fresh scenario?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. When is delivery of the Illinois Residential Real Property Disclosure Report effective?
- When the seller begins drafting it
- When it is received by the prospective buyer
- Only when it is recorded
- Thirty days after mailing
Show answer and explanation
Answer: B
Section 50 makes delivery effective on receipt and permits verifiable acknowledgment in several forms.
2. What knowledge standard does the Illinois seller report use?
- Actual notice or actual knowledge without a specific investigation
- Every fact a perfect inspection could discover
- Only facts recorded by the county
- No knowledge standard
Show answer and explanation
Answer: A
Sections 25 and 35 use actual knowledge and do not require a special inquiry solely to complete the form.
3. A qualifying late report discloses a material defect after all parties signed. How long does the buyer have under Section 40(a) to terminate?
- Five business days after receipt
- One calendar year
- Until five years after closing
- No time because late delivery never matters
Show answer and explanation
Answer: A
Section 40(a) provides five business days after receipt when its late-report and material-defect conditions are met.
4. A seller learns before closing that a prior report omitted a newly known roof defect. What is required?
- Destroy the original report
- Deliver a written supplemental disclosure
- Wait until after recording
- Tell only the listing broker orally
Show answer and explanation
Answer: B
Section 30 requires a written supplement for a known preclosing error, inaccuracy, or omission in the prior report or supplement.
5. Which transfer is within a stated Section 15 exemption?
- An ordinary sale of an occupied single-family home
- Rehabilitation of an existing home marketed as new
- Never-occupied newly constructed residential real property
- Every sale by an investor
Show answer and explanation
Answer: C
Never-occupied new construction is exempt. Rehabilitation of existing property is expressly excluded from that exemption.
How should you review this Illinois topic?
- Session
- 1. Classify coverage
- Focus
- One to four units, condominium, cooperative, manufactured real property, seller definition, legal interest, equitable interest, beneficiary, covered transfer, and nine exemption groups
- Proof you are ready
- Classify twenty-five property and transfer scenarios as covered, exempt, or needing more facts.
- Session
- 2. Read the current form
- Focus
- All items, yes, no, not applicable, explanation, flooding, structure, systems, environmental conditions, pests, tank, boundary, violation, methamphetamine, signature, and acknowledgment
- Proof you are ready
- Group all 23 current condition questions into structural, system, environmental, title-use, and safety clusters.
- Session
- 3. Master knowledge and materiality
- Focus
- Actual notice, actual knowledge, no special investigation, existing report, repair belief, substantial value effect, health, safety, corrected condition, false answer, and concealment
- Proof you are ready
- Resolve twenty seller-knowledge scenarios without imposing a new-inspection duty.
- Session
- 4. Build the timeline
- Focus
- Receipt, contract signing, inspection, new event, supplement, five business days, repair agreement, closing, conveyance, possession, occupancy, recording, and one-year limit
- Proof you are ready
- Place every event and possible remedy on ten blank transaction timelines.
- Session
- 5. Separate the roles
- Focus
- Seller, listing broker, buyer agent, customer, inspector, engineer, contractor, attorney, environmental professional, report, supplement, inspection, warranty, and as-is clause
- Proof you are ready
- Assign each fact, document, or technical conclusion to the correct person.
- Session
- 6. Apply DISCLOSE
- Focus
- Property, seller, transfer, exemption, timeline, knowledge, item, materiality, receipt, supplement, broker duty, remedy, and record
- Proof you are ready
- Score at least 90% on a fresh Illinois property-disclosure set and explain every answer in DISCLOSE order.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
Practice the Illinois rule in context
From concept to decision
Drill this topic, then review the explanation
Pass Illinois gives you original national and Illinois questions, topic-by-topic study, clear explanations, timed practice, flashcards, progress tracking, and Math Coach. Start free, find the weak distinction, and focus the next session there.
Questions students ask about Residential Property Disclosure and Material Defects
Which Illinois homes require a residential property disclosure report?
The Act generally covers real property improved with one to four residential dwelling units, residential cooperative units, condominium units and their qualifying limited common elements, and manufactured homes that are treated as real property. The transfer and seller must also fall within the Act, and Section 15 exemptions must be checked.
When must an Illinois seller deliver the disclosure report?
A covered seller must complete all items and deliver the written report to the prospective buyer before the signing of a contract. Delivery is effective on receipt, so sending an email moments before signing is not enough if the buyer has not received it.
How does the Illinois report define a material defect?
The statutory form defines a material defect as a condition that would substantially adversely affect the residential property's value or significantly impair future occupants' health or safety, unless the seller reasonably believes the condition has been corrected.
Must an Illinois seller inspect before completing the report?
No special investigation or inquiry is required solely to complete the report. The seller answers from actual notice or actual knowledge. That rule does not permit a false answer, concealment of known information, or disregard of a report the seller already possesses.
What if an Illinois seller learns about a defect after delivering the report?
Before closing, a seller who becomes aware of an error, inaccuracy, or omission in a prior report or supplement must provide a written supplemental disclosure using an authorized delivery method. The buyer's termination right then depends on the specific conditions in Section 40.
Does a late Illinois disclosure report let the buyer cancel?
If the seller delivers the report after all parties sign the contract in violation of Section 20 and the report discloses a material defect as Section 40 describes, the buyer may terminate within five business days after receipt and recover earnest money or down payments. A late report with no qualifying disclosed material defect does not fit that particular rule.
Does an as-is sale eliminate the Illinois disclosure report?
No. The form expressly says the parties may negotiate an as-is sale subject to disclosed defects, while also stating that the report does not replace inspections or warranties. As-is language can allocate repair risk, but it does not erase an applicable report requirement or authorize fraud or concealment.
Is the seller's disclosure report a warranty or inspection?
No. The form states that its disclosures are not warranties and warns that a seller's lack of awareness does not guarantee that a problem does not exist. The buyer may seek an inspection by a qualified professional.
Does a broker have duties separate from the seller's report?
Yes. A seller's licensee must timely disclose to prospective-buyer customers actually known latent material adverse facts about physical condition that a reasonably diligent inspection would not reveal. The seller signs the statutory report, but the broker cannot use a false or incomplete report to erase the broker's own actual knowledge.
Are these official PSI Illinois broker exam questions?
No. They are original study questions aligned to the Illinois Disclosures outline effective June 24, 2026. The law was reviewed through August 1, 2026, and pending roof-age and energy-audit bills are not treated as current requirements.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- 765 ILCS 77, current Residential Real Property Disclosure Act
- 765 ILCS 77/5, current property, seller, buyer, and contract definitions
- 765 ILCS 77/10 and 15, covered transfers and seller exemptions
- 765 ILCS 77/20, report completion and precontract delivery
- 765 ILCS 77/25, actual knowledge and seller liability
- 765 ILCS 77/30, preclosing supplemental disclosure
- 765 ILCS 77/35, current statutory report and material-defect definition
- 765 ILCS 77/40, late-report and supplemental-defect remedies
- 765 ILCS 77/50, delivery methods and effective receipt
- 765 ILCS 77/55, termination, damages, costs, and attorney fees
- 765 ILCS 77/60, one-year action limit
- 225 ILCS 454/15-25, licensee duties to customers
- IDFPR 6-hour real estate core curriculum
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.