CA legal aspects of Real Estate: Chapter 7

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Agents know that an exclusive-right-to-sell or exclusive-right-to-buy agreement provides what?

Better control over the transaction

What is the first course of action for the parties to resolve a dispute arising in regards to the compensation terms of the agreement?

The parties agree to mediate any dispute regarding compensation BEFORE arbitration or court action.

List the three specific tasks a broker is authorized to perform in order to achieve the duties outlined in the contract.

•Order reports and disclosures •Advertise and market the property, including using an MLS Share information with a licensee regarding offers on the property, including the offer price

How many days after an associate enters into an agreement with a seller does the broker have the option to cancel the listing agreement?

5 days

What type of contract will a new real estate licensee likely first experience?

An employment contract with his or her sponsoring broker

Describe an open listing.

An open listing is a non-exclusive listing that allows a seller to engage a number of different brokers to sell the property. The broker who brings the buyer gets the commission. If the owner sells the property, no commission is owed to any broker.

What are the parties agreeing to by initialing Paragraph 11B(2)?

Any dispute not resolved by mediation will be resolved by binding arbitration.

As outlined in the provision discussing the buyer's obligations, what is the buyer expected to do in regards to finding and purchasing a property?

Buyer agrees to consider and view properties in a timely manner and to act in good faith in the acquisition of a property.

What are the typical conditions for terminating an independent contractor agreement?

Either party can terminate the agreement at any time with or without cause.

If the sale of the property is prevented by someone other than the seller, when is compensation due to the broker?

It is only due if and when the seller collects damages from a suit or settlement.

What does a provision discussing employee benefits typically state in an independent contractor agreement?

No benefits such as health insurance, retirement, sick days, paid-time off, etc. are provided to the agent.

The buyer's agent should mention the potential for the buyer to consult with whom?

Other expert advisors such as attorney, CPA, etc.

According to the agreement, what is the definition of "buyer"?

Section 3F defines a buyer as any person or entity who acts on buyer's behalf to purchase property.

Although it's usually easier for brokers to hire licensees as independent contractors rather than employees, what is the trade-off?

The amount of control brokers have over their licensees

What does it indicate if section C(2) of the Agency Relationship provision is checked?

The buyer does not consent to the possibility of a dual agency relationship between broker and buyer. By checking this section, only a single agency relationship is possible between the parties.

Define procuring cause agent.

The procuring cause agent is the agent who ultimately caused the buyer to purchase the home.

What provision of an independent contractor agreement allows an agent to enter into agency agreements on behalf of the broker?

The provision that addresses the agent's authority

What is an important thing to remember about the enforceability of listing agreements?

They must be in writing to be enforceable

Describe the Other Potential Buyers section of Paragraph 2.

This section discusses the possibility of the broker having other potential buyers who may be in competition for similar homes as the buyer.

What is the major difference between an exclusive right to sell listing and an exclusive agency listing?

With exclusive right to sell, the broker has the exclusive right to market the property and receive a commission regardless of who procures the buyer. With exclusive agency, the owner retains the right to find a buyer and sell the property and owe the exclusive broker no commission.

How must the listing price be written on the Exclusive Right to Sell Agreement?

in both numeric and written form

Which specific issues are discussed in the Compensation provision?

•Amount of compensation due •When compensation is due, both during and after the agreement period •Compensation being shared with others When compensation is NOT due to the broker

List three items regarding the scope of the broker's duty that the buyer acknowledges when signing the agreement. (Additional correct answers on page 54.)

•Broker does not decide the price buyer should pay or seller will accept •Broker does not guarantee the condition of a property Broker is not responsible for identify boundary lines or other items affecting title

List three common misconceptions concerning buyer agency. (Additional correct answers on page 43.)

•Buyer agency must be created by written agreement to be lawful. •Buyer agency is too complicated for the average buyer or seller to understand. •Buyer agency is not recognized by lenders.

What does a seller acknowledge if the seller chooses to opt out of using a MLS?

•Exposure to the property will be limited, which could affect the number of showings and/or offers on the property.

How does a net listing create a conflict of interest for a broker?

•It violates the broker's fiduciary responsibility of putting the client's interests above his or her own.

List three activities the buyer authorizes the broker to do during the term of the agreement. (Additional correct answers on page 51.)

•Locate properties, present offers, and assist the buyer in negotiating such offers •Provide guidance to buyer through the transaction process •Obtain credit report on buyer

What does the Ownership, Title and Authority provision state?

•Seller warrants to having ownership of the property, that no other person has title to the property, and the seller has the authority to execute this agreement.

List three characteristics of licensees who are independent contractors? (Additional correct answers on page 4.)

•The agent controls his or her schedule, hours, and workload •The broker cannot control HOW the agent performs his or her real estate duties. The broker does NOT withhold any money from the agent's paycheck.

What is the main difference between the two CAR buyer representation agreements?

•The exclusivity of the broker-buyer relationship

What is the main difference between the two CAR Independent Contractor Agreements?

•The main difference between the two CAR Independent Contractor Agreements is how disputes between the parties regarding terms of the agreement will be resolved.

What are the conditions of the IRS safe harbor test?

•The person must be a qualified (properly licensed) real estate agent. •Compensation paid to the real estate agent for services performed must be based on production, not hours work. •A written agreement must exist between the independent contractor and the broker stating that the contractor will not be treated as an employee for income tax purposes.

The three conditions of the safe harbor test are

•The person must be a qualified (properly licensed) real estate agent. •Compensation paid to the real estate agent for services performed must be based on production, not hours work. •A written agreement must exist between the independent contractor and the broker. This agreement must outline the services to be performed by the contractor and must explicitly state that the contractor will not be treated as an employee for Federal tax purposes.

Section 3508 of the IRS code

•allows real estate agents to be classified as independent contractors under a supervising broker. In order to qualify as an independent contractor, the IRS requires what's called the safe harbor test to establish that a person is truly acting as an independent contractor and not an employee.


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