Chapter 8 Test
A listing agent has knowledge of a "pending foreclosure" of a property and does not disclose this information. The agent is guilty of:
A "pending foreclosure" is a material fact that must be disclosed. If a broker fails to disclose this, and they are aware of it is considered willful omission. Omission is where a broker fails to say anything. Misrepresentation is where a broker states something in writing or verbally that is not accurate. Willful vs. negligent comes down to intent. It is not a material fact that the seller is only behind in mortgage payments.
A provisional broker is representing a buyer that becomes interested in a home that is listed "For Sale by Owner" that is on the Do Not Call Registry. The broker may do all of the following, EXCEPT:
A broker cannot SOLICIT the listing when a seller is on the Do Not Call Registry unless the seller invited the broker to call, there is a past business relationship with the firm within the past 18-months or there is a personal relationship between the seller and broker. The key to the statement above is "Solicit". The buyer's agent can ask the seller if they will offer compensation to a buyers agent. Prior to viewing the property, the agent should explain WWREA. If the seller refuses to pay compensation, the buyer's agent should timely disclose to the buyer that they will need to pay commission.
Sam Sleazy tells broker Hank Honor that he wants to list his property with him, but that Hank should not disclose problems with the septic tank to potential buyers. Since Hank owes obedience to his seller, Hank should
A broker must comply with their client's lawful instructions. A client requesting an agent to omit material facts would not be considered a lawful instruction. The agent must explain to the client that they cannot withhold material facts and if the seller insists, must refuse the listing.
Francine has listed her next door neighbor Jim's house for sale. Although Jim does not disclose it on the Residential Property Disclosure Form, Francine knows that his basement floods during spring rains. Jim has re-painted and replaced carpet, so does not see the need to disclose "ancient history". Francine agrees to withhold that information. Francine is guilty of:
A broker must disclose material facts that they know or reasonably should have known. In this instance Francine is aware that the basement floods. Purposefully withholding the information is willful omission. Negligent omission would occur if Francine was not aware however a reasonably prudent agent would have discovered it (from visible water lines from past flooding). Willful misrepresentation is purposefully lying - the key points being intent and making a false statement such as informing the buyer that the property has never flooded. Negligent misrepresentation is making a mistake - which is not intentional; however, a false statement was made.
Broker Ron Thompson listed and sold Mr. Simpson's property. Thompson did not disclose to Mr. Simpson that there was a potential zoning change in the works that would allow the property to be used as a convenience store. This new use would substantially increase the value of Mr. Simpson's property. Which of the following is true?
A broker must disclose material facts to all parties to the transaction. If Thompson was aware of the change then this is an example of willful omission. If Thompson was not aware of the change and it is widely publicized, then this is an example of negligent omission. Willful vs. negligent comes down to intent. Misrepresentation vs omission will depend if something is said orally or in writing.
A provisional broker receives a call from a prospective buyer on a property that he has listed. The buyer and provisional broker meet at the property. The provisional broker realizes that they left the Working with Real Estate Agents Brochure at the office. The provisional broker orally explained the brochure and the buyer consented to representation and authorized dual agency. Is the provisional broker's actions lawful?
A broker must explain the Working with Real Estate Agent's Brochure at first substantial contact. If it is not reasonable to deliver a copy of the form in person, or if in this instance the broker does not have a copy available, they must still explain the brochure and then have 3 calendar days to send a copy to the prospective client / customer. A client that has not signed the form may still consent to oral buyer's agency and authorize dual/designated agency.
As agent of the seller, a real estate broker is usually authorized to do all of the following EXCEPT:
A broker represents a seller as a special agent. A special agent can gather information and advise his or her client (unless practicing dual agency), however cannot sign on behalf of their principal / client, even with the seller's verbal permission. A broker must present all offers and let the seller decide how to proceed.
A buyer enters into an exclusive buyer agency agreement with XYZ Realtors without authorizing dual or designated agency. The buyer has not been able to locate a property listed with other brokerage firms, however discovers a property that XYZ Realtors has listed. Can XYZ Realtors show the property to the buyer?
A buyer or seller can subsequently agree to dual agency representation even though they initially did not agree. If the buyer agency agreement is in writing, then the subsequent authorization must be in writing. If the buyer agency agreement is oral, then the subsequent authorization may be oral.
All listing contracts must contain all of the following EXCEPT
A listing agreement must be in writing, have a definite end date, contain the prescribed nondiscrimination language and disclosure of the broker's license number. The agreement must be signed by all owners of the property in the broker has the authority to sign on behalf of the firm (acting as a general agent for the firm - and will become a special agent to the seller once the listing agreement is fully signed)
A seller and broker signed a listing agreement. The written contract stated that upon expiration, if neither party notifies the other of their intent to terminate the agency, the contract will renew itself for the same period. This listing agreement
A listing agreement must provide for definite end date. The only agreement that allows for an automatic renewal is a property management agreement. A listing agreement must contain a list price, signatures of all owners to the property, legal description and anti-discrimination policy.
Broker Horning listed a property under a valid written exclusive right to sell listing agreement. At the closing the owner refused to pay the broker's fee. Which of the following can Horning do?
A listing broker earns commission when they procure a ready willing and able buyer, at the price and terms agreed to by the seller - or when the property goes under contract. Commission is paid at closing by the seller. When the seller refuses, they have breached the contract and the broker is entitled to sue them in court.
A broker tells a prospective buyer that the owner of his listing is having financial problems and must sell. This is
A material fact is loosely defined as something that would impact a buyer's decision to buy or a seller's decision to sell. Certain items are always material facts - a party not being able to perform, meth lab, leaking polybutylene pipes, or a defect that the broker is aware of. The fact that a seller is having financial problems is not a material fact unless it is possible that they will not be able to close. The listing broker must keep that information confidential (conceal it) , unless pre-foreclosure notice has been received which makes it a material fact.
A non-provisional broker adds language to her listing agreement which allows either party to terminate the contract prior to the receipt of an offer. Is the non-provisional broker in violation of North Carolina License Law or Commission Rules?
A provisional or non-provisional broker is permitted to add language or draft language in a listing agreement or buyer's agency agreement since they are a party to the contract. The no drafting rule applies to the Offer to Purchase and Contract - where the broker is not buyer or selling the property personally. A broker that is an attorney may draft language in a purchase contract, even if they are not a party to the contract.
Frank LaCoeur retains the privilege of selling his own house under a listing agreement with Effie Berouka and three other brokerages. Broker Nora Williamson finds a buyer for the house. No compensation is paid to either agent. The listing agreement LaCoeur and Berouks signed is:
A seller is not obligated to pay compensation to the listing agent (Effie Berouka) as she was not the procuring cause in the transaction. The sellers not obligated to pay Nora Williamson as the problem does not say that she also had an agreement with the seller. In an open listing multiple brokers compete against the seller, however only the agents that have signed an open listing agreement are entitled to compensation if they find the buyer.
Which of the following would create an agency relationship between a brokerage and a seller?
Agency is formed by agreement between the client and the firm. A listing agreement must be in writing from inception - provide for a definite end date, contain non-discriminatory language and disclosure of the broker's license number. A broker should prepare a CMA to present to the seller during the listing process, however it does not create agency. The Working with Real Estate Agents Brochure must be presented a first substantial contact, which explains the various forms of agency, however does not create an agency relationship. A buyer agency agreement may be oral so long as it is non-exclusive and open ended, and must be reduced to writing prior to presentation of an offer.
A broker who is entitled to collect a commission when the sellers sell their own property
An Exclusive Right to Sell listing agreement entitles the broker to receive compensation no matter how the property is sold, optioned, exchanged, conveyed or transferred. The seller would not be obligated to pay commission if the listing contract was open (non-exclusive) or an exclusive agency listing, where the seller is competing against the agent(s).
A brokerage has hired an unlicensed employee to assist with properties that are listed for sale and for rent. The unlicensed employee would be able to perform all of the following, EXCEPT:
An unlicensed assistant can perform may action under property management, like showing property and filling out pre-printed lease forms. They cannot show property to prospective buyers as this action requires a license. The licensed broker is responsible for supervision of an unlicensed assistant and could face disciplinary action from the Commission if license laws or rules are violated.
The doctrine of "caveat emptor" still applies to some extent to the relationship between
Caveat emptor, meaning let the buyer beware, applies to the seller and the buyer. The agent or agents have a duty to disclose material facts - disclosing what they know or reasonably should have known.
Designated Agency can be practiced within the same firm in all of the following situations EXCEPT:
Even when designated agency is practiced by the firm and authorized by both the buyer and seller, it cannot be practiced by the broker in charge and a provisional broker within the office. All other combinations of provisional broker and non-provisional broker will be permitted to practice designated agency unless they have personal or confidential information about the other party. The BIC will appoint the brokers (PB or Non-PB) that will act as designated agents.
A provisional broker enters into a listing agreement with a seller for 6 months. When does the broker earn compensation?
In order to earn compensation a listing broker must find a ready, willing and able buyer at the price and terms agreed to by the seller. When a seller enters into a contract, even if it is less than the list price, the broker earns compensation. It is correct that compensation is paid at closing, however the compensation is earned earlier. The listing agent and buyer's agent are not entitled to compensation when a buyer terminates the contract during the due diligence period.
A provisional broker is on a listing appointment and is giving her listing presentation. The seller asks the amount of compensation the broker is expecting to be paid. The provisional broker states that her firm policy is a 6% commission fee. The seller asks her to reduce the commission to 5%. The provisional broker should:
It is a violation of the Sherman Antitrust Act to collude with other brokers and set commission rates that all competitors will charge - price fixing. It is not a violation for a brokerage to set a policy for the amount of commission they will charge to their clients, or a commission range. A brokerage can refuse to negotiation a lower commission. A provisional broker should seek permission from his/her BIC before reducing the amount of commission to be charged to a client. The amount of commission must be in the listing agreement prior to the client signing for it to be valid.
A house which is owned by Bob is listed for sale with National Realty and placed in the MLS. Jill, a newcomer to the area, goes to Jack, a provisional broker with World Realty, for assistance in buying a home. World Realty does not practice buyer agency. Jill submits an offer to purchase the home through Jack and the offer is accepted by Bob. Who does Jack represent in the transaction?
Jack cannot offer to represent Jill as the firm does not practice buyer agency. If a firm does not practice dual agency they can only exclusively represent a buyer or a seller. Jack can act as a subagent of the seller, write up an offer, however his allegiance is to the seller, Bob.
An agency relationship can be terminated by all of the following, EXCEPT:
Listing agreements and buyer agency agreements are between the client and the firm, with an agent appointed as primarily responsible for fulfilling the firm's duties. The brokerage would appoint another broker to represent the buyer or the seller in the event that a provisional broker died.
All of the following will terminate an exclusive buyer agency agreement, EXCEPT:
Listing and buyer agency agreements are owned by the firm, so they will not terminate if a provisional broker or salesperson leaves the firm. The firm will appoint another affiliated broker to manage the buyer agency agreement. A written buyer agency agreement must have a definite end date and will automatically expire on the end date. In addition death of the buyer or when the buyer purchases a property will terminate the buyer agency agreement.
A broker is listing a property for sale that has a bonus room. The room has been finished and is directly accessible, however is heated with a portable electric heater. May the bonus room be included in the listing as living area?
Living area must be heated, finished and directly accessible. There are no requirements that the space be cooled. It must be heated by conventional means, not by a portable unit.
Broker Smith has a listing on a house in North Carolina which contains a provision that the house is to be sold in an "as is" condition. Smith learns of a major hidden defect in the property and, when showing a prospective purchaser, should
North Carolina is a caveat emptor state, which means let the buyer beware. The seller has very limited items that they are required to disclose to a buyer - lead-based paint, synthetic stucco (EIFS), leaking polybutylene, flood hazard, meth lab contamination and the Mineral Oil and Gas Disclosure. The duty to disclose falls upon the agent - that is responsible to disclose what they know or reasonably should have known about the property. A broker is responsible for disclosing patent defects. A broker is not responsible for disclosing latent defects (hidden), unless they are aware of the issue.
A prospective purchaser asks the showing broker, a subagent of the seller, whether the seller would accept $5,000 less than the asking price. The broker thinks that the seller would accept $7,000 less than the asking price. How should the broker respond?
The buyer is not represented in the transaction as the broker is acting as a subagent. Both the listing broker and the subagent must promote the seller's interest. Neither of the agents can weaken the seller's bargaining position by recommending a lower offer. The broker must keep the seller's information confidential and not disclose it.
. Sharon is a buyer looking for a home. She knows Tim, a buyers' agent, but is not ready to sign any agreement with him. She is pretty sure she'll want to work with him exclusively, but wants to look at a few houses first. Which statement BEST describes her situation?
The buyers agency agreement may be oral up until the point that the buyer wants to make the first offer. Then it must be reduced to writing. In oral buyers agency agreement must be nonexclusive - the client can see other people and open ended - no end date. If the buyer refuses to sign a written buyers agency agreement, the agent can no longer represent them. If they presented an offer to the seller, acting as a subagent, they have a duty to disclose any personal or confidential information learned about the buyer.
Which of the following would NOT be considered a material fact that must be disclosed to potential buyers?
The fact that a someone died in the home - murder, suicide or otherwise - is not a material fact. The remainder are material facts that an agent would need to disclose to all parties in the transaction. It is not a material fact if someone has died in the home, that a registered sex offender lives nearby or that a seller is behind on the mortgage when foreclosure notice has not been received.
Bob, a Buyer's Agent, just met Gary and Sue Smith who want to buy a home. Bob wants them to work exclusively with him for at least 3 months. When MUST the Smiths sign an Exclusive Buyer Agency Agreement?
The key word is exclusively. If a broker wants and exclusive agreement, that agreement must be in writing. Oral buyers agency must be nonexclusive, open ended and reduced to writing prior to writing an offer. A written buyer agency agreement must have a definite end date, contain the prescribed anti-discrimination language and disclose the brokers license number.
A listing broker should
The listing agent cannot complete the seller's property disclosure statement. It must be completed by the seller. The Residential Property Owner and Association Disclosure Statement (RPOADS) is used for the seller to make representations about the property or to select no representation. The listing agent can advise the seller about their responsibility and the consequences. A broker would not disclose material facts to the buyer on RPOADS. The broker can disclose material facts on the MLS listing or in the agent only comments section. RPOADS is not required in all real estate transactions, only residential resale when it is not a foreclosure or transfer among related parties.
In co-brokered residential real estate sales transactions where the selling agent is a subagent, which agent owes his primary loyalty to the buyer?
The seller's agent (listing agent) represents the seller. The selling agent is acting as subagent - which means that they represent the seller as well. The buyer is not represented.
When selling another brokerage's listing, the selling broker may be: I. An agent of the buyer II. A sub-agent of the seller through the listing broker
Typically, the selling broker represents the buyer, however the selling broker may act as subagent of the seller.
A buyer decides not to sign an Exclusive Buyer Agency Agreement with a firm, but still wants to see property without representation. The agent must:
When a broker does not represent the buyer, they can act as a seller's subagent or agent of the seller. A broker must represent at least 1 party in the transaction. The broker has a duty to discover and disclose material facts to all parties in the transaction. When a broker represents the seller they are not permitted to prepare a comparative market analysis and can only recommend the listing price if an unrepresented buyer asks how much they should offer.
An owner requests a broker to list a property for sale at $170,000. Upon inspection, the broker believes the property is worth $180,000. The broker should
When a broker represents a client they must put the client's interest above all others. The broker has a duty to prepare a comparative market analysis and provide this to his/her client so that they can make an informed decision on what to list the property for. A broker owes a client OLD CAR - obedience, loyalty, disclosure, confidentiality, accounting and reasonable skill, care and diligence.
What form of agency exists under the a standard real estate listing contract between the broker and the client?
When a broker represents a seller under a listing agreement, a buyer under a buyer agency agreement or a tenant under a tenant agency agreement they act as a special agent. Brokers are permitted to gather information and present it back to their client. They have no ability to sign on the client's behalf or make decisions. General agency arises between a broker and owner in a property management agreement or when a broker affiliates with a brokerage. Universal agency is accomplished by signing a power of attorney or acting as attorney in fact.
Connie Cautious wishes to buy a property listed with Delta Realty. Company policy allows dual agency but Connie insists upon exclusive buyer's representation. She still wants to purchase the property. Delta Realty
When a brokerage represents both the buyer and seller in a transaction dual agency arises. The brokerage cannot act as an exclusive agent to the buyer when the already represent the seller. If the buyer only wants exclusive buyer representation, then they should refer the buyer to another firm.
Suzy, a licensee with All Stars Realty, is the on-site agent at Babbling Brook subdivision. She held a busy open house on Sunday with 25 visitors attending. The following day a potential buyer comes to the sales center without an agent and wants to be shown all currently available listings. What, if anything, must Suzy give them?
When a brokers holding open house there is no obligation to disclose the Working with Real Estate Agents Brochure unless the conversation shifts from facts about the property to personal / confidential information. When a buyer is requesting an individual showing, this is considered first substantial contact and therefore the broker must disclose the Working with Real Estate Agents Brochure and determine the type of agency that will be practiced.
Under which of the following situations would a broker not have to disclose the Working with Real Estate Agents Brochure?
When a property is being auctioned off, it is impractical for a broker to disclose the Working with Real Estate Agents Brochure (WWREA). WWREA is not required in residential lease transactions, however a broker can still choose to provide it to a prospective tenant. WWREA is required in residential and commercial purchase transactions. Since a tenant wants to purchase a property (buyer), the broker must disclose WWREA at first substantial contact.
A property is listed with a single broker firm, with the seller agreeing to both dual and designated agency. Per the terms of the standard NCAR Exclusive Right to Sell Listing Agreement and North Carolina law, the listing contract will be terminated in all of the following instances, EXCEPT:
When a property is listed by an independent broker (one broker or firm) and either the seller or the agent dies, the agreement will terminate. If the property is destroyed by fire the listing agreement will terminate, unless the property is under contract and the buyer purchases the property and will receive the insurance proceeds relating to its repair / replacement. If a seller refuses to sell to minorities or any protected class, the listing agent must remind the seller that they cannot discriminate. If the seller still seeks to discriminate the listing agent must terminate the listing agreement and will be entitled to compensation. While the standard NCAR listing agreement and OPC state the seller will provide a general warranty deed, the seller can cross out and write in special warranty deed. This would not be a violation of license law as the change was made by the seller and not the agent.
Ann Agent is working with Bob Buyer and knows that Bob is willing to pay the asking price of a property listed with her firm. She must keep this confidential if
When an agent is aware of personal / confidential information that could weaken a client's bargaining position they are obligated to keep it private (conceal the info), unless it rises to the level of material fact. A broker that is representing the seller exclusively or as a designated agent, and becomes aware of the fact that the buyer would pay more, they have an obligation to disclose it to their client. When an agency agreement terminates, the broker is no longer obligated to keep the clients information confidential if they are involved in a transaction where they represent the seller.
Bob Broker is BIC of XYZ Realty and has listed Mr. Smith's property. Sue is a provisional licensee with XYZ Realty and has been representing a buyer who now wants to buy Mr. Smith's property. XYZ offers all forms of agency allowable in North Carolina. Which of the following best describes Sue?
When both the buyer and seller are represented by the same brokerage firm, dual agency arises. The next question would be - does the firm practice dual/designated agency and have the buyer and seller agreed to both. There are two things that will prevent designated agency even when both the buyer and seller have agreed - PB and BIC and already possessing personal / confidential information. A provisional broker and the broker in charge cannot act as designated agents - they can act as dual agents.
Herb Smith listed his house with Sam Shepherd, a provisional broker with ABC Realty. ABC offers all types of agency allowed in North Carolina. Sam also represents Barb Buyer. Barb now wants to see Herb's house. Can Sam represent both parties in the transaction?
When one a broker represents both the buyer and the seller in a transaction, the only option is dual agency. The broker is not permitted to advocate for one party over the other and cannot disclose personal / confidential information about the buyer to the seller or the seller to the buyer, unless it rises to the level of material fact.
Carlos has a listing at 112 Maple Way. The seller has agreed to dual and/or designated. A potential buyer, Tom, calls Carlos from the sign in the yard. Since Tom does not have an agent, Carlos asks if he would like representation. Tom wants to delay signing an agency agreement as long as possible and agrees to oral buyer's agency. Carlos asks Tom if he is pre-qualified and other financial questions which Tom answers truthfully. Which statement BEST describes Carlos' agency position in this transaction?
When one broker of the firm represents both the buyer and the seller, the only option for the agent is dual agency. When the firm represents both the buyer and the seller in a transaction dual agency arises. The question then becomes can the firm designate agents or not. A provisional broker and a broker in charge can never be designated agents. A firm cannot practice designated agency if they are aware of personal or confidential information about the other party at the point that they would designate. Single or exclusive agency would mean that the firm represents only one party.
A listing which specifies that the broker's commission will be the excess of the selling price over a specific amount desired by the seller is a (an)
While a net listing is not favored, it is not illegal. The broker will only be compensated if the sales price exceeds the amount desired by the seller. The seller agrees to pay the broker the excess sales proceeds over the amount agreed to in the listing contract.