GENERAL PRINCIPLES OF AGENCY

A salesperson representing a buyer is told that the buyer plans to operate a dog-grooming business out of any house he buys. The salesperson does not tell the buyer to verify local zoning ordinances to determine in which parts of town such a business can be conducted. Which duty does the salesperson violate?

The answer is care. Salespersons must use their skills and knowledge to protect the client's interests in purchasing. In this case, the salesperson should have told the buyer to verify local zoning ordinances that might prohibit a buyer conducting a business from a home. All salespersons and brokers owe this duty and the disclosure of material facts to the consumer. An agent would owe obedience and loyalty to the principal.

A buyer's agent would NOT recommend that the buyer seek expert advice if the buyer asked, A) "Would you recommend a radon test?" B) "How should I take title to the property?" C) "How long has the property been on the market?" D) "Does this crack in the foundation mean there is structural damage?"

The answer is "How long has the property been on the market?" This is not a question that would require the buyer to seek expert advice.

A broker may act as a dual agent and represent both the seller and the buyer in the same transaction if

The answer is both the seller and the buyer give their informed consent, usually in writing. When a broker represents both the seller and the buyer in the same transaction, the broker is practicing dual agency. State laws, where dual agency is allowed, require both parties to give written consent of dual agency. Informing only one party of the dual agency does not meet the requirements for practicing dual agency.

A listing contract must be signed by

The answer is both the seller and the listing broker. All parties identified in the listing contract must sign it, including all individuals who have a legal interest in the party. Because the contract is between the seller and the listing broker, the listing broker or the broker's designated representative must sign the contract.

A buyer in a fast-selling market has written a number of offers in hopes of getting at least two accepted. The buyer then plans to terminate those that the buyer does not want during the inspection period. The buyer can buy only one property, and the broker representing him as an agent knows this and is helping with the process. In this case, the

The answer is buyer and broker are acting in bad faith. The broker and buyer in presenting offers they have no intention of closing are acting in bad faith.

The principal to whom an agent gives professional opinions and counsel is

a client. The client is the principal to whom the agent owes fiduciary duties. The customer is the third party or nonrepresented consumer for whom some level of service is provided and who is entitled to fairness and honesty. A subagent is the agent of a person already acting as an agent for the client.

A listing contract is BEST described as

a personal service contract. A listing is a personal employment contract between brokers and their clients setting forth the broker's responsibilities in finding for the seller a ready, willing, and able buyer. A property management contract establishes the responsibilities of a broker in managing a principal's property. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each.

A contract that secures a brokerage firm to assist a buyer in finding a suitable property to buy is

buyer representation contract. A buyer representation contract is an employment contract in which the broker is employed as the buyer's agent in finding a suitable property. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time.

In response to the question by a buyer of how much to offer, the best response of the listing agent is,

The answer is "I am not sure but I think a full price offer should be accepted." The listing agent is obligated to keep confidential what the seller may accept. However, the seller should be willing to accept a full-price offer that meets the terms of the listing contract.

All listing agreements must contain

The answer is a definite contract termination date. Failing to specify a definite termination date in a listing can be grounds for suspension or revocation of a license. Broker protection clauses, MLS clauses, and automatic extensions of the contract are not required.

A broker helps a buyer and a seller with paperwork but does not have fiduciary obligations to either party. The broker's activity in this situation is that of

The answer is a transaction broker. In some states, a broker may be an agent of neither party to a transaction but help both the buyer and the seller with necessary paperwork and formalities in a transaction. The broker acts as a transaction broker or facilitator but not as an agent of either party.

A buyer entered into a buyer agency agreement that gave him the right to purchase property on his own and not pay the buyer's agent. This BEST describes

The answer is an exclusive agency buyer agency contract. Exclusive buyer or seller agency contracts allow the buyer find a property and buy it without owing the buyer's agent a commission. A seller under these agreements is allowed to sell the property on her own without paying a commission.

In order for a listing contract to be enforceable, MOST states require that the contract be

The answer is in writing. While, in some states, oral listings are legal, a listing contract must be in writing in order for either party to be able to enforce the provisions of the contract. Many licensees use form contracts drafted by a real estate association or real estate commission. Many states do not require all licensees to use the same contract form.

The principal in a real estate transaction is

The answer is the client of the brokerage. The principal in a real estate transaction is the individual who hires the brokerage and delegates to the firm the responsibility of representing the principal's interest in the transaction. The customer is the third party or nonrepresented consumer in the transaction. A facilitator is a middleman between a buyer and a seller who assists one or both parties without fiduciary obligations to either. A subagent is an agent of the agent. Salespersons and broker associates who work for a brokerage are considered agents of the principal broker and subagents of the principal.

A brokerage firm has an exclusive right-to-sell listing and represents the owner in the sale of the owner's property. Which of these events will terminate that agency relationship?

The answer is the owner declares personal bankruptcy. The bankruptcy of a principal in an agency relationship terminates the agency contract because title to the property transfers to a court-appointed receiver. The agency relationship remains in effect with any of the other events.

A property owner individually signed a 90-day listing contract with a brokerage. The owner was killed in an accident before the listing expired. Now the listing is

The answer is terminated automatically because of the death of the principal. A listing contract may be terminated if either party dies or becomes incapacitated. Neither the dead owner's intention nor the 90-day listing period keeps the listing in effect.

The principal to whom a real estate broker provides professional opinions and counsel is

The answer is a client. The person with whom a broker has a service contract to provide professional opinions and advice is a client. A customer is another party to a real estate contract with whom a broker has no contract. A subagent is an agent of a person who is already acting as an agent for a client. The term fiduciary describes the relationship owed by an attorney or a broker to a client.

A seller has sold property to a neighbor without the services of a real estate broker. However, the seller still owes the broker a commission because the seller signed

The answer is an exclusive right-to-sell listing. In an exclusive right-to-sell listing, a commission will be owed to a broker regardless of which party sells the house. In exclusive agency and open listings, the seller retains the right to sell without obligation to the broker. An option listing permits the broker to retain an option to purchase the property for the broker's own account.

A broker who is the agent of the buyer should do which of these? A) Disclose to the seller the maximum price the buyer is willing to pay B) Disclose to the seller that the buyer is a minority person C) Present to the seller only offers that are acceptable D) Advise the buyer if the listing price of the seller's house is unrealistic

The answer is advise the buyer if the listing price of the seller's house is unrealistic. Agents have the fiduciary duty of reasonable care to their client. Reasonable care requires that an agent for the buyer disclose to the buyer if the property is overpriced. Fair housing laws prohibit discrimination based on race or national origin and prohibit real estate professionals from disclosing to the seller that the buyer is a minority person. The duty of confidentiality requires that the agent not disclose the maximum price the buyer is willing to pay. The agent is required to present to the seller all offers from the buyer, even if the agent believes the seller will not accept the offer.

A buyer signed a listing contract and agreed to pay the buyer's brokerage firm when the buyer purchased any property. The buyer signed

The answer is an exclusive buyer agency contract. The buyer signed an exclusive buyer agency contract, which states that whenever the buyer purchases the property described in the contract, the buyer's brokerage firm will be paid. An exclusive agency and open listing would let the buyer purchase properties the broker had not shown them, and the buyer would not be obligated to pay the brokerage firm.

A listing taken by a real estate salesperson is an employment contract between the seller and

The answer is the brokerage firm. The parties to a listing contract are the seller and the broker. The brokerage firm and the principal broker represent the seller in listing and selling the property. The salesperson does so in the name and under the supervision of the brokerage firm and the principal broker.

A listing contract in which payment of the commission is contingent on the broker's being able to produce a buyer before the property is sold by the owner or another broker is called

The answer is an open listing. In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An exclusive agency listing provides that the brokerage firm and the co-op broker will be paid unless the seller sells the property on his own.

Whether or not state law requires the time when an agent must disclose his firm's agency alternatives, good business practice requires that an agent make a disclosure about agency

The answer is before any confidential information is disclosed about an individual's motivation or financial situation. Many states have mandatory agency disclosure laws. Whatever the law requires, agents should disclose their firm's agency alternatives and any agency relationship by which the agent is bound before any confidential information is provided about an individual's motivation or financial situation.

The buyer's salesperson states upon entering a home, "This home is the best home on the block, has the nicest floor plan and the best schools in the area." The salesperson maybe guilty of

The answer is misrepresenting the schools and puffing about the location and the floor plan. Puffing is making statements anyone knows may not be true, which the "best home on the block with the nicest floor plan" fit. Saying the property also has the best schools is misrepresentation because the statement was not qualified (schools with highest scores, best athletic department, etc.).

A seller has listed a property under an exclusive agency listing with a broker. If the seller sells the property personally during the term of the listing to someone who learns about the property through the seller, the seller will owe the broker

The answer is no commission. In an exclusive agency listing, if the property is sold by the seller, the brokerage will receive no commission. Only the exclusive right-to-sell listing earns the listing broker any commission if someone else sells the property during the term of the agreement.

A broker lists a property for sale at $100,000 with a 5% commission. He later obtains an oral offer from a prospective buyer to purchase the property. The seller indicates to the broker that the offer would be acceptable if it were submitted in writing. Before it can be put in writing, the buyer backs out and revokes the oral offer. In this situation, the broker would be entitled to

The answer is no commission. The broker only earns a commission by procuring a ready, willing, and able buyer who purchases the property on the seller's terms. There is no standard rate of commission for a locality because commission rates are determined by individual agreements between a broker and a client.

After signing a listing contract with a homeowner, the owner tells the listing agent that because his home is in such good condition, he does not want the home sold to any buyers with small children. The agent takes the listing and obeys the owner's instructions by not showing the home to any buyers with small children. He discourages other agents from showing the home to families by telling them the home is not suitable for a family. Are the agent's actions legal?

The answer is no, because refusing to show a property to buyers with families violates fair housing laws. Federal and state fair housing laws prohibit discrimination against families in the marketing and selling of residential homes. Some residential properties are exempted if they meet specific requirements for senior housing. The agent's duty of obedience does not require agents to obey unlawful or unethical instructions from their client.

Shortly before closing on her home, a seller learns that her listing broker is related to the buyer. The listing broker has not disclosed that relationship to the seller. If the seller later refuses to pay the listing broker his commission, will the broker likely prevail in a lawsuit to recover the commission?

The answer is no, because the broker has violated his fiduciary duties to the seller. The broker has violated the duty of disclosure to his client because the relationship may be relevant to the seller's decision to accept the buyer's offer. The broker may also have established an undisclosed dual agency in bringing a relative into the transaction. The broker's actions do not automatically provide the seller with a reason to terminate the listing contract.

Before the buyer signs a buyer agency contract, a real estate professional must do all of these EXCEPT A) inform the buyer of the charges or compensation for services. B) describe specific services to be provided. C) obtain financial information from the buyer. D) explain the forms of agency available.

The answer is obtain financial information from the buyer. Once the buyer representation contract is signed, not before, the real estate professional should obtain detailed financial information from the buyer. State regulations require that real estate professionals inform the buyer of all types of agency available, the broker's compensation requirements, and the services that the broker will provide under the agreement.

The law of agency is a common-law concept. As common law, it is

The answer is part of a body of law established by tradition and court decisions. The law of agency is law from judgments and decrees as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers.

A real estate broker was responsible for a chain of events that resulted in the sale of one of his client's properties. The broker's efforts are called

The answer is procuring cause. The procuring cause in a real estate transaction is the effort and work that brings about the result stated in a brokerage agreement. A broker who starts a chain of events that results in a sale and does so without abandoning the transaction may be considered the procuring cause of sale. Pro forma is a term meaning "for form only," in other words, not official. A private offering is the offering of a real estate security that is not required to be registered with any state or federal agency because it is not a public offering. The word "proffer" means the same as "offer," although a "proffered offer" is a term used to describe an informal, oral offer made before the start of any formal negotiations.

As an agent for the seller, a real estate broker can A) advise a prospective buyer as to the best manner of taking title to the property. B) guarantee a prospective buyer that the seller will accept an offer at the price and terms offered. C) solicit an offer to purchase the property from a prospective buyer. D) change the terms of the listing contract on behalf of the seller.

The answer is solicit an offer to purchase the property from a prospective buyer. An agent representing the seller has a fiduciary responsibility to exercise skill and care to market the property to secure a buyer. The agent is a special agent for the seller, and as such is not authorized to make a decision for the seller or to change the listing contract. The agent cannot guarantee that the seller will accept an offer and must present the offer to the seller. The agent must not provide advice to the prospective buyer because doing so might create an agency relationship with the buyer.

The relationship between a broker and a seller is generally what type of agency?

The answer is special agency. A special (or limited) agent is authorized to represent the principal in a specific act or business transaction, under detailed instructions from the principal. The relationship between a brokerage and a seller is usually a special agency, as is the agency between a brokerage and a buyer client. A general agent may represent the principal in a broad range of matters. A property manager is typically a general agent for the owner. A universal agent is a person empowered to do anything the principal could do personally, as is authorized in a power of attorney. An implied agency is usually created unintentionally or accidentally by the actions of the parties.

In a real estate transaction, the term fiduciary typically refers to

The answer is the agent's relationship to the principal. An agent's relationship to a principal involves care, obedience, accounting, loyalty, and disclosure—a fiduciary relationship. Principals do not owe fiduciary obligations to agents. Persons with legal power to act for another are created by a power of attorney; most real estate brokers do not have such powers.

A broker has an exclusive right-to-sell listing on a building. The owner is out of town when the broker gets an offer from a buyer to purchase the building. The buyer must have an answer from the seller before the seller is scheduled to return to the city. Under these circumstances,

The answer is the broker must obtain the signature of the seller to effect a contract. A real estate broker is usually a special agent who when representing the seller is limited to finding a ready, willing, and able buyer for the property. As a special agent, the broker may not bind the principal to any contract. The broker may collect a commission only upon completion of the transaction. A buyer may write an offer requiring a response before the seller returns and is not obligated to keep the offer open past the time period the buyer states in the offer.

A buyer signs a buyer agency contract with a broker agreeing to pay commission to the buyer broker but with the expectation that the seller will actually pay the commission. However, the buyer learns that the seller has not agreed to a sharing of the commission with the buyer agent. The buyer refuses to pay any commission to the broker. In this case,

The answer is the buyer has breached the agency contract with the broker and will be held liable for the broker's commission. If the buyer is unwilling to pay the buyer's broker a commission according to the terms of the buyer agency contract, the broker may sue the buyer to recover the broker's commission. The buyer is liable for the commission according to the terms of the contract.

All of these are typically found in a listing contract EXCEPT A) the price the seller is asking for the property. B) the responsibilities of the broker and the seller. C) the commission rate to be paid to the listing broker. D) the date the broker will schedule an open house.

The answer is the date the broker will schedule an open house. All listing and buyer representation contracts tend to require similar information: type of listing agreement, broker's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, et cetera. They are not required to provide the dates of open houses.

Which of these events will terminate the agency relationship between the brokerage and the seller?

The answer is the owner dies. The common law of agency holds that the death of either the broker or the seller ends the agency relationship created by the listing. The market value of the property does not affect the agency relationship, and the broker may assign other agents to help sell listed property. An owner abandoning property does not terminate an agency relationship but could result in termination if the property is taken over by a third party, such as a lending institution in the event of the owner's bankruptcy or a foreclosure proceeding.

Which of these does NOT create an agency relationship? A) A listing contract B) A buyer agency contract C) The payment of money or commissions D) A property management contract

The answer is the payment of money or commissions. The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract create an agency relationship between the broker and the principal to the contract.

Which of these BEST defines the common law of agency? A) The principles that govern one's conduct in business B) The rules and regulations of the state licensing agency C) The rules of law that apply to the responsibilities and obligations of a person who acts for another D) The selling of another's property by an authorized agency

The answer is the rules of law that apply to the responsibilities and obligations of a person who acts for another. The common law of agency is formed by the judgments and decrees of courts regarding the responsibilities of a person who acts for another. Many states have enacted specific agency statutes to replace the common law of agency. A code of ethics encompasses the principles that govern one's conduct in business. Regulations of the state licensing agency may include specific mandates and responsibilities related to agency.

The listing contract on a residential property states that it expires on June 30. Which event would NOT terminate the listing? A) The listing contract is not renewed prior to June 30. B) The salesperson who signed the listing dies on March 15. C) The house is destroyed by fire on June 1. D) The owner dies on April 29.

The answer is the salesperson who signed the listing dies on March 15. The salesperson is not a party to the contract, so his death would not terminate the contract. A listing contract is terminated if one of the parties to the agreement dies, if the property is destroyed by a force outside the seller's control, or if the listing contract's term expires.

The multiple listing service (MLS) clause in a listing contract provides that

The answer is the seller grants permission for the broker to make the listing available through an MLS. The multiple listing service clause grants authority for brokers to share the listing with other brokers through an MLS. Brokers enter the listing into the MLS within a time period stated in their contract with the MLS. The sellers do not enter the information with the MLS. Brokers negotiate their own commission rate with the sellers, and buyer brokers may represent buyers for properties listed in an MLS.

A real estate broker lists a home as agent for the seller. Later that same day, a buyer comes into the office and asks for general information about homes for sale in the area. Based on these facts, which statement is TRUE? A) If the buyer later asks for buyer representation by the firm, he cannot have it because the firm is an agent of the seller only. B) The brokerage firm owes fiduciary duties to both seller and buyer. C) The seller is the broker's client; the buyer is a consumer. D) Both seller and buyer have no relationship with the brokerage except as consumers.

The answer is the seller is the broker's client; the buyer is a consumer. The listing contract creates the agency relationship and obligations between the seller and the broker. A prospective purchaser who asks for general information is not represented by the broker but is a consumer. Consumers are not owed fiduciary duties but may later contract with the broker for buyer representation.

The final decision on a property's listing price should be made by

The answer is the seller. The seller must determine the listing price of the seller's property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or a salesperson may use a comparative market analysis (CMA) to help the seller determine a reasonable listing price.

A principal broker authorizes one agent in her firm to represent the seller and another to represent the buyer in the same real estate transaction. Each agent is

a designated agent. A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has a fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In a single agent, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally.

Which of these would be considered dual agency? A) A broker representing more than one seller B) Two brokerage companies cooperating with each other C) A broker acting for both the landlord and the tenant in the same transaction D) A broker listing and then selling the same property

The answer is a broker acting for both the landlord and the tenant in the same transaction. In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the tenant or buyer and either the agent or subagent of the landlord or seller. Brokerage companies cooperate with each other through multiple listing services and other agreements. Brokerage companies represent many sellers through different listing agreements in which the broker agrees to represent the sellers in selling their properties.

MOST states require that listing and buyer representation contracts contain

The answer is a definite contract termination date. If brokers fail to specify a specific listing contract termination date in a listing, they may be subject to suspension or revocation of their real estate license in many states. In some states, automatic extension clauses that extend a listing past its expiration date are illegal. A listing may contain a broker protection clause providing that, within a specified period of time, a property owner will pay the listing broker a commission if the owner transfers the property to someone the broker originally introduced to the seller. Many listing and buyer representation contracts do contain a multiple listing clause permitting the broker to share the listing with other brokers through the MLS, but states do not usually require such a clause. These same requirements hold true for buyer representation contracts.

The relationship of agents to their principal is that of

The answer is a fiduciary. The principal is the party to whom the agent gives advice and counsel. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties. A trustee holds property for another as a fiduciary, but an agent does not hold the principal's property. A subagent, though working in the principal's interest, is an agent of the brokerage firm/principal broker who is already acting as agent for the principal. An attorney-in-fact is a competent third-party authorized by the principal to act in the principal's place through a written and recorded power of attorney.

A property manager is hired to manage a property while the owner is overseas for two years. The property manager is

The answer is a general agent. A general agent may represent a principal in a broad range of matters related to a particular business or activity. A property manager is usually considered a general agent. A special agent may represent a principal in one specific act or business transaction under detailed instructions, such as when an agent represents a seller under a listing agreement. A universal agent is a person empowered through a general power of attorney to do anything the principal could do personally. The power of attorney makes the agent an attorney-in-fact.

A property manager is typically

The answer is a general agent. A general agent represents a principal in a broad range of matters related to a particular business or activity. A broker has a property management contract with a property owner and may bind the owner to contracts or agreements related to management of the property. A universal agent is a person empowered to do anything the principal could do personally, authorized by a general power of attorney. A special agent may represent the principal in a specific transaction only and has no power to bind the principal; a real estate broker is typically a special agent. A designated agent is an individual licensee authorized by a broker to represent one party in a transaction in which the other party is also represented by the broker.

A contract that secures the employment of a brokerage firm to find a ready, willing, and able buyer for a seller is

The answer is a listing contract. A listing contract is a personal service contract securing the employment of a brokerage firm to find a ready, willing, and able buyer for a seller. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time.

The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is

The answer is a multiple listing clause. Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property.

All of these documents would create an agency relationship EXCEPT a.a sales contract b. a property management contract. c.a listing contract. d. a buyer agency contract.

The answer is a sales contract. A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal.

A listing broker is typically

The answer is a special agent. A real estate broker is usually a special agent, an agent authorized to represent the principal (the seller) in one specific business transaction, with no power to bind the principal. The listing broker's authority is limited to finding a ready, willing, and able buyer for the property. A general agent represents the principal in a broad range of matters related to a particular business and has a limited power to bind the principal. A property manager is usually a general agent. A universal agent is a person empowered to fully bind the principal as authorized by a general power of attorney. A designated agent is an individual licensee authorized by a broker to represent one party in a transaction in which the other party is also represented by the broker.

A broker helps a buyer and a seller with paperwork but does not represent either party as an agent. This arrangement is

The answer is a transaction brokerage. When a broker does not represent either party in a transaction and acts as a facilitator or nonagent, the arrangement is known as transaction brokerage and is legal in some states. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. Designated agency exists when a broker acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent.

A listing agent loses the seller's house keys. The agent has breached her fiduciary duty of

The answer is accounting. The fiduciary duty of accounting requires real estate professionals to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. The duty of loyalty means that the agent must place the client's interests above all others, including the agent's own self-interest.

A new salesperson lists a unit in a condominium building for sale. In this transaction, the salesperson

The answer is acts on behalf of the brokerage firm. Salespersons or associate brokers act as agents of their brokers. Only the broker has a direct agency relationship with the owners of the unit but not with the condominium association. Under the terms of most listing agreements, the broker and, in turn, the salesperson are entitled to a share of the commission, even if the broker or the salesperson does not personally find a buyer for the unit.

A seller has told the listing agent that the agent must only represent the seller in the sale of the property. In this case, the first guide for the agent is to obey

The answer is all lawful instructions of the owner. A real estate broker hired by a seller must obey all lawful instructions of the owner. A state's agency statute may modify aspects of the common law of agency, in which case the broker must comply with the agency statute. A selling broker is not required to engage in dual agency. Caveat emptor is a warning to purchasers, not to brokers.

A real estate broker hired by an owner to sell a parcel of real estate must comply with

The answer is all lawful instructions of the owner. Under the law of agency, a broker serving as agent for an owner must obey all lawful instructions of the owner. Unless the broker also represents a buyer in the same transaction, the broker is not subject to the requirements of dual agency. Caveat emptor, meaning "let the buyer beware," applies in some states but is not a responsibility of a broker representing a seller. If a state agency statute exists, it must be followed by the broker.

An individual who is authorized and who consents to represent the interests of another person above their own interests is

The answer is an agent. An individual authorized by a principal (client) to represent the interests of that person is an agent; the fiduciary obligations require the agent to put the interests of the principal above the agents. In real estate, a firm's principal broker is the agent. The principal is the individual who hires the brokerage firm to represent the individual's interests and act as an agent. The client is the principal. The customer is a third party or nonrepresented consumer, who is entitled to fairness and honesty from the agent of the principal.

All of these events terminate an agency relationship EXCEPT A) destruction of the property. B) an appraisal with a value less than the selling price. C) completion of the purpose of the agency. D) bankruptcy of the principal.

The answer is an appraisal with a value less than the selling price. If an appraisal reveals a market value less than the stated selling price in a contract, the parties will have to renegotiate their contract if both parties are still interested in the sale. The appraisal does not affect any agency relationship. Completion of the agency's purpose, destruction of the property, and bankruptcy of the principal terminate an agency relationship.

A buyer has signed a contract with a broker to compensate the broker even if the buyer purchases the property from a relative. This is called

The answer is an exclusive buyer agency contract. An exclusive buyer agency contract binds the buyer to compensate the agent whenever the buyer purchases a property of the type described in the contract, even if the buyer finds the property independently. An exclusive agency buyer agency limits the broker's right to a commission; the broker is entitled to payment only if the broker locates the property the buyer purchases. An open buyer agency contract permits the buyer to enter into similar agreements with an unlimited number of brokers, with commission limited to the broker who locates/procures the property the buyer purchases.

A couple enters a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the property. Without having the couple sign a written buyer agency contract, the salesperson drives the couple to the house, and even recommends that before they buy the house, they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created

The answer is an implied agency relationship with the buyers. The salesperson has unintentionally created an agency relationship with the buyers. There is no formal oral or written agency contract with the buyers. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as that authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.

In a dual agency situation, a broker may represent both the seller and the buyer if

The answer is both parties give their informed consent, usually in writing, to the dual agency. Dual agency, in states that allow it, requires informed written consent from both parties. The broker must have written consent from both parties; consent from only one party will not permit dual agency. The dual agency relationship does not determine payment of commissions and does not require attorney representation by either party.

An agent for a brokerage firm has six listings. Another agent for the same firm represents a buyer who wants to purchase one of the six listings. The firm's broker appoints the listing agent as an agent for the seller, while appointing the other agent to represent the buyer in the same transaction. The broker has both the seller and the buyer sign a statement acknowledging that arrangement. The arrangement that results is

The answer is designated agency. The brokerage firm represents both parties to the transaction as a dual agent, and the broker designates two salespersons from the company to represent opposite sides in the same transaction. Implied agency occurs when an agency relationship is accidental. In single agency, a broker represents only one party to a transaction. The broker in this case has disclosed the firm's dual agency and the designated agent to each party in the transaction.

A real estate broker's responsibility to keep the principal informed of all the facts that could affect a transaction is the duty of

The answer is disclosure. It is the real estate professional's duty to keep the consumer informed of all facts or information that could affect a transaction. The broker also owes the principal care and accounting. The broker must act with reasonable care while acting on behalf of the consumer.

A landowner subdivides her acreage and offers the lots for sale. A broker tells her that he can sell the lots. After the broker sells some of the lots, the landowner refuses to pay him a commission. The broker can

The answer is do nothing. An oral agreement does not constitute a valid agency contract entitling the broker to a commission. Unless the broker has been employed by the seller under a valid written agency contract, the broker is not entitled to a commission. The broker has no grounds for a lien or for a suit. Real estate licensing authorities do not regulate or arbitrate commission disputes between a broker and a prospective client.

A buyer and a seller are both represented by the same real estate brokerage firm acting as an agent in the same transaction. In this transaction, the firm is practicing

The answer is dual agency. When the firm represents both principals in the same transaction, the broker practices dual agency. Single agency exists when the broker represents only one party, the buyer or the seller. Implied agency is created accidentally by the actions of one of the parties. Universal agency empowers an agent to do anything the principal could do personally and would not apply in this instance.

A brokerage represents the owner in the sale of the owner's property, which has a salesperson acting as the listing agent. Which of these events will terminate that agency relationship?

The answer is during the listing, the owner of the property dies. When a property owner dies during a listing period, the agency relationship with a broker is terminated. The agency relationship remains in effect with any of the other events, including the death of a salesperson because the contract belongs to the firm not the salesperson.

A buyer's agent reveals to a listing agent that the buyer is moving into the area for a new job and must be in a new home as soon as possible. The buyer's agent

The answer is has violated her duty of confidentiality to the buyer. Confidentiality about the principal's personal affairs is an important element of an agent's fiduciary duties. Providing the information to the listing agent may weaken the bargaining power of the buyer. The buyer's agent is not allowed to share confidential information with anyone without explicit permission from the buyer.

Real estate professionals owe what duties to consumers they don't represent?

The answer is honesty, disclosure of material facts, and accounting of all funds. Real estate professionals owe unrepresented consumers DAH—disclosure of material facts, accounting of funds, and honesty.

Under an exclusive agency listing, the listing broker would be entitled to a commission EXCEPT A) if another co-op broker secures a qualified buyer for the property. B) if the seller sells the property himself to a relative moving from out of town. C) if the broker sells the property himself. D) if a salesperson from a cooperating brokerage secures a qualified buyer for the property.

The answer is if the seller sells the property himself to a relative moving from out of town. An exclusive agency listing authorizes the listing brokerage or the co-op broker to sell and receive a commission, but the seller retains the right to sell the property without obligation to the broker. A seller who sells the property himself to a relative is not required under an exclusive agency listing to pay the listing broker a commission. The seller is obligated to pay a commission to the listing broker when that broker, another broker, or a salesperson from a cooperating brokerage firm sells the property.

A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm's listings in the past month. One of the buyers makes an attractive offer on the woman's home without even seeing the property. The broker goes to the woman's house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker?

The answer is implied agency. The homeowner and the broker did not have an oral or written agency contract, but the broker's actions implied to prospective buyers that the broker was acting as the homeowner's agent. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.

A listing salesperson acting as the seller's agent is holding an open house. The state does not allow dual agency. A buyer starts a conversation about the property and tells the salesperson she is an investor looking for a number of properties. The salesperson states that the seller of the property will take less and that the salesperson can represent the buyer in the purchase of this property and others. In this case, the salesperson

The answer is is an undisclosed dual agent who acted in bad faith. The salesperson and the seller's agent should have disclosed her agency relationship, have not shared the seller's confidential information, and cannot represent the buyer in the purchase of the property because dual agency is not allowed in the state.

Which statement is TRUE of a listing contract? A) It automatically binds the owner, the broker, and the MLS to its agreed-on provisions. B) It is an employment contract for the professional services of the brokerage. C) It obligates the broker to work diligently for both the seller and the buyer. D) It obligates the seller to convey the property if the broker procures a ready, willing, and able buyer.

The answer is it is an employment contract for the professional services of the brokerage. The listing is the brokerage firm's contract of employment with the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer makes an offer that is the "mirror image" of the terms of the listing. However, in such an event, the seller may owe the brokerage a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy on the terms of the listing. The listing contract obligates the broker to work diligently only for the seller.

A listing broker knows that a known sex offender lives within a block of a home she has listed. The prospective buyers are a family with three small children. The broker

The answer is may have a responsibility under state law to inform the buyers of the offender's presence in the neighborhood. While federal law requires all states to release information about known convicted sex offenders to the public, many state laws require active notification to a buyer about a sex offender living in the area. Under fair housing laws, the broker and the seller may not discriminate in the sale of the house against a family with children

A salesperson representing a seller suggests to a buyer that the seller might accept less than the listing price. The salesperson in this situation

The answer is may have unintentionally created an undisclosed dual agency by suggesting that the buyer offer less than the listing price. The salesperson in giving advice to the buyer may lead the buyer to believe that the salesperson represents the buyer's interests and is acting as the buyer's advocate. The agent may have created an implied agency with the buyer and violated the duties of loyalty and confidentiality to the principal, the seller. The agent's fiduciary responsibilities to the seller continue even with his actions. Performing ministerial acts involves granting services that do not require any discretion or advice.

A broker tells a prospective buyer that a lake property has a spectacular view of the lake. In fact, the view from the property also includes several large trees that block the view of parts of the lake. In this case, the broker

The answer is merely puffing, which is legal as long as there is no misrepresentation. The broker is exaggerating the benefits of the property, in this case, the view of the lake. In this situation the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false.

A broker was told by her principal not to advertise her property in a certain newspaper, which was out of the area. The broker complied because he

The answer is must obey the lawful instructions of her principal. The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. The seller has a right to advertise in a newspaper of her choice, provided the advertisement does not violate fair housing laws.

A real estate broker acting as the agent of the seller

The answer is must promote and safeguard the seller's best interest. Real estate brokers must be loyal to their principal by promoting the principal's best interest. A broker acting as agent for a seller should present all offers on the property but may not accept an offer on behalf of the seller. Only the seller may accept an offer. The broker may not disclose any confidential information of the seller tied to price, term, or motivation without the seller's written permission.

The amount of commission that is paid to a salesperson is determined by

The answer is mutual agreement with salesperson's broker. All commissions must be paid through the broker, and the amount the salesperson receives is set by mutual agreement between these two parties. The local board and state law do not dictate the amount of commissions paid. A client must agree to the amount of commission paid to a broker but is not involved in the split of the commission between the broker and a salesperson.

Under the common laws of agency, in a typical agency relationship between broker and client, the broker's commission is determined by

The answer is negotiation in advance. A broker and a client negotiate and determine what commission schedule will apply to the transaction. Commissions are always negotiable. Each brokerage firm may determine its own commission guidelines and suggestions for its salespeople, but the actual commission is negotiated with the client. The Sherman Antitrust Act of 1980 makes it illegal for competing companies or real estate boards to set standard commission rates for brokerage firms.

A buyer makes an offer on a property and gives the listing agent a check for $1,000 for earnest money. The listing agent deposits the check into his personal account and, a week later, wrote the broker a check from his account to deposit into the broker's trust account. Has the agent fulfilled his fiduciary duty to the client?

The answer is no, because he has commingled funds. Under the fiduciary duty of accountability, the agent must account for funds received on behalf of the seller. His action violates not only his fiduciary duty but also most license laws, which require that earnest money deposits be deposited immediately (or within a specific time limit) into the brokerage firm's trust account. Depositing the money into the agent's own checking account is commingling, and it is illegal.

A listing salesperson schedules an open house with the sellers. Before the open house, she advises the sellers to place valuable jewelry that is visible in the bedroom into a safe or another secure place. The sellers ignore the salesperson's advice. The morning after the open house, the sellers call the salesperson to inform her that some of their jewelry is missing from the bedroom. Will the salesperson likely be held accountable for the missing jewelry?

The answer is no, because the salesperson advised the sellers to remove or hide all valuables before the open house. The salesperson has a duty to account for any money or possessions given to her by her clients and to exercise care in her actions on their behalf. Because she advised them to remove the jewelry, she has fulfilled her duty to them. In most cases, sellers will not be present during an open house. It is not reasonable and may not be lawful for the salesperson to search visitors leaving the open house

The listing contract on a residential property states that it expires on May 2. Which event would NOT terminate the listing? A) The owner dies on April 29. B) The contract is not renewed before May 2. C) The house is destroyed by fire on April 25. D) On April 15, the owner tells the listing broker that the owner is dissatisfied with the broker's marketing efforts.

The answer is on April 15, the owner tells the listing broker that the owner is dissatisfied with the broker's marketing efforts. A mere complaint to the broker by the principal does not end the listing, whereas expiration of the listing with no renewal, death of the owner, or destruction of the property would end the listing.

A seller listed his residence with a broker with a contract that agreed to pay the broker a 5% commission. Within several weeks, the broker brought an offer at full listing price and the terms of the listing from buyers ready, willing, and able to pay cash for the property. However, the seller rejected the buyers' offer. In this situation, the seller

The answer is owes a commission to the broker. The listing contract is a binding agreement on both the seller and the broker. While the seller may refuse to sell the home to the buyer, he owes a commission to the broker, according to the listing contract. The seller is not liable to the buyers because the seller has not signed any agreement with the buyers.

When showing a property, an agent exaggerates the property's benefits. This practice is

The answer is puffing, which is legal as long as there is no misrepresentation. The broker is exaggerating the benefits of the property. In this situation, the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. A ministerial act is a routine act performed for a customer that does not involve judgment, discretion, or advice.

A buyer's broker whose commission is shared via the MLS with the commission paid by the seller to the listing broker in a real estate purchase

The answer is remains the agent of the buyer. The source of compensation for a broker is not the factor that determines agency relationship. A buyer's broker whose commission is shared with the listing broker remains the agent of the buyer. A buyer's agent may be compensated by either the buyer or the seller.

A broker is hired as a buyer's agent. The buyer confides that he filed for bankruptcy two years ago. The buyer would like to find a seller who is willing to carry the loan. In this situation, a correct statement about the broker's responsibility regarding disclosure of the bankruptcy when presenting the offer to purchase is that the broker is

The answer is required to disclose the bankruptcy because it is a material fact—information important to the seller's evaluation of the offer. The broker is obligated to disclose any material fact—something that might make the parties to the transaction change their mind, regardless of the agency or nonagency relationship the broker has with the seller. The ECOA is a federal law prohibiting discrimination in the granting of credit and does not regulate disclosures required by in a real estate transaction.

A buyer's agent duty of care to a buyer includes all of these EXCEPT A) evaluating neighborhood and property conditions. B) helping the buyer to locate a suitable property. C) helping the buyer to evaluate a seller's counteroffer. D) sharing with a listing agent that the buyer is willing to pay more for the property.

The answer is sharing with a listing agent that the buyer is willing to pay more for the property. Sharing with a seller how much a buyer is willing to pay for a property violates the buyer's agent's duty of care and confidentiality to the buyer-client. All of the other activities are examples of a buyer's agent exercising the duty of care for the buyer.

According to its state's laws, a brokerage firm is allowed to have an agency relationship with only one party in the same transaction. This relationship is known as

The answer is single agency. In single agency, the agent represents only one party in any single transaction. Designated agency exists when a brokerage acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. In an exclusive buyer agency relationship, the agent represents the buyer and is entitled to a commission, regardless of whether or not the agent actually locates the property purchased by the buyer.

The type of agency that exists when a broker represents the seller or the buyer, but not both, in a transaction is

The answer is single agency. When a broker is representing only the seller or the buyer in a transaction, the agency is single agency. Dual agency exists when an agent represents two principals in the same transaction. Designated agency is created when an agent is appointed by a broker to act for a specific principal or client when the brokerage firm represents both parties in the same transaction. A transaction broker does not have the fiduciary obligations to either party in a transaction.

The typical relationship between a listing broker and a seller represents what type of agency?

The answer is special. The broker serves the client—either a buyer or a seller—usually by performing the specific brokerage acts spelled out in the employment contract (listing or buyer brokerage agreement). Specific assignments create a special agency. In a general agency relationship, the agent is authorized by a principal to perform any and all acts associated with a particular job or business. Implied agency arises out of the words or conduct of the parties. A universal agent is a person empowered to do anything that a principal could do personally and is a general agent.

A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do?

The answer is submit both offers at the same time. An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespersons from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received.

Last month a broker took a listing on a property. She now learns that her client has been declared incompetent by the court. Her listing now is

The answer is terminated. A listing contract may be terminated if either party dies or becomes incapacitated. Once terminated, the contract is not binding, and there is no basis for a commission to the broker.

An agency relationship in which a broker represents both the seller and the buyer in the same transaction would require all of following EXCEPT a. both the seller and the buyer are required to allow the broker to share price, terms, and motivations with the other party. b. commissions are to be collected according to the provisions of agreements with both parties. c. the broker will not disclose confidential information about one party to the other party. d. the principals agree in writing that the broker is representing both sides of the transaction.

The answer is that both the seller and the buyer must agree in writing that the broker may share confidential information with the other party. Real estate licensing laws may permit dual agency only if the buyer and the seller are informed and give written consent to the broker's representation of both in the same transaction. The broker may not provide confidential information regarding price, terms, or motivations from one party to the other party in the transaction without written authorization; neither party is required to provide this authorization. Commissions are determined by the listing and buyer representation contracts with both parties or by agreement by both parties upon acceptance of the sales contract.

The broker protection clause in a real estate listing contract provides

The answer is that the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner. The listing contract must also state the circumstances under which the broker will be paid. Nothing in the listing contract prohibits a seller from taking action through the courts or a real estate commission if the broker does not perform according to the terms of the listing contract.

It is the duty of an agent to disclose to the principal every material step taken in the transaction of the principal's business. This duty exists because

The answer is the agent has fiduciary obligations to the principal. One of the duties of a fiduciary is that of disclosure, keeping the principal informed of all facts or information related to the transaction. The duty exists because of the law of agency, not because of the terms of any contract. An agent's commission is established under a contract between the agent's broker and the principal and is based on the successful completion of a transaction.

By executing an agency listing contract with a seller, a real estate brokerage firm becomes

The answer is the agent of the seller. An agency listing contract is an employment agreement whereby a brokerage agrees to represent the seller as the seller's agent in the sale of the seller's property. The brokerage firm or one of the firm's licensees may be a procuring cause if either produces a willing, ready, and able buyer. The brokerage firm is obligated to open a special trust account only when receiving escrow funds from a prospective buyer. The brokerage firm is responsible for sharing the commission only with a salesperson or associate broker working for the brokerage firm.

Which statement is TRUE of a real estate broker acting as the agent of the seller? A) The broker can agree to a change in price without the seller's approval. B) The broker has a fiduciary obligation of loyalty to the seller. C) The broker can disclose confidential information about the seller to a buyer if the buyer is also represented by the broker. D) The broker can accept a commission from the buyer without the seller's approval.

The answer is the broker has a fiduciary obligation of loyalty to the seller. Loyalty to the client-seller requires confidentiality—not revealing confidential information; it involves obedience—not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.

Two salespeople working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make an informed decision about the first offer. Which of these statements is TRUE? A) After the first offer was received, the broker should have told the salespeople that no additional offers would be accepted until the seller decided on the offer. B) The broker's actions are permissible provided the commission is split between the two salespeople. C) The broker was smart to protect the seller from getting into a negotiating battle over two offers. D) The broker has no authority to withhold any offers from the seller.

The answer is the broker has no authority to withhold any offers from the seller. It is the broker's duty to keep the principal informed of all facts or information that could affect a transaction. A broker for the seller has a duty to disclose all offers. A commission split does not affect the broker's responsibilities to submit all offers to the seller.

A seller has listed her home with a broker for $190,000. The listing broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation,

The answer is the broker has violated his fiduciary relationship with the seller. The agent has a fiduciary responsibility to respect the confidentiality of his client. Agents may not reveal confidential items such as the principal's willingness to accept less than the list price or the seller's anxiousness to sell unless the principal has authorized the disclosure. In this case, the broker's actions might be considered illegal under some state laws and by a court of law. Under the common law of agency, a broker is not authorized to encourage an offer lower than the listing price without specific instructions from the seller, even if to do so would obtain a quicker offer on the property.

BEST explains the meaning of this sentence: To enforce a commission for brokerage services, a broker must be employed as the agent of the client?

The answer is the broker must have a written contract to provide brokerage services for the client. A broker's contract of employment by a client is the brokerage services agreement (a listing or buyer representation contract) signed by the parties. A valid expressed written listing is one of the usual requirements in a suit for a brokerage commission; it is proof of employment.

A listing taken by a real estate salesperson is technically an employment contract between the seller and

The answer is the brokerage firm. Only a principal or an employing broker for the brokerage firm may enter into brokerage agreements. The broker's salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the subagent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it.

Designated agency will MOST likely occur under what circumstance? A) The buyer and the seller in the same transaction are both represented by the same brokerage firm. B) The seller and the buyer are represented by different brokerage firms. C) The buyer is a client of the firm and the seller is the customer of the firm. D) Both the buyer and the seller are customers of the firm.

The answer is the buyer and the seller in the same transaction are both represented by the same brokerage firm. Designated agency occurs when one brokerage firm practices dual agency in representing both the seller and the buyer in the same transaction. Both parties are clients of the firm. In many states, designated agency is a process that permits the firm's broker to appoint one agent to represent the seller, and another agent from the same firm to represent the buyer. Each of the agents is a designated agency for her respective client, the seller or the buyer, and may not share confidential information about the party they represent.

Which statement is TRUE of a listing contract? A) A seller must transfer the property if the brokerage firm produces a ready, willing, and able buyer. B) The contract is an employment contract for the professional services of a brokerage firm. C) The contract usually includes an automatic extension clause upon expiration of its term. D) It obligates the brokerage firm to work diligently for both the seller and the buyer.

The answer is the contract is an employment contract for the professional services of a brokerage firm. The listing contract obligates the brokerage firm to work only for the seller. The seller may negotiate terms through the brokerage with a ready, willing, and able buyer, and refuse to sell to a buyer who is not willing to come to terms with the seller. A contract usually specifies a definite termination date and may not include an automatic extension of the term.

All of these reasons are valid bases for terminating a listing or buyer's contract EXCEPT A) the sale of the property. B) destruction of the premises. C) agreement of the parties. D) the death of the salesperson.

The answer is the death of the salesperson. Because the listing and buyer's contract is a contract with the broker, and not with the salesperson, the death of the salesperson does not terminate the listing. The broker may assign another salesperson to the listing. The sale of the property, an agreement by the seller and the broker, and the destruction of the property are all valid bases for terminating a listing contract.

A salesperson lists a residence. The owner confides to the salesperson that a lower price would be acceptable. The salesperson tells a prospective buyer that the seller will accept up to $5,000 less than the asking price for the property. Based on these facts, which statement is TRUE? A) The salesperson has not violated any agency responsibilities to the seller. B) The relationship between the salesperson and the seller ends automatically if the purchaser submits an offer. C) The disclosure is improper—and possibly illegal—regardless of the salesperson's motive. D) The salesperson should have disclosed this information, regardless of its accuracy.

The answer is the disclosure is improper—and possibly illegal—regardless of the salesperson's motives. Such action is an example of the salespersons failure to obey the seller and maintain confidentiality—both breaches of fiduciary duties. The salesperson may not disclose such information without the seller's written permission. Such an action does not terminate the agency relationship upon the submission of an offer.

A listing contract will usually include all of these EXCEPT A) the broker's authority and responsibilities. B) unusual deed conditions or restrictions. C) termination and default provisions. D) the multiple listing service (MLS) standard commission rate.

The answer is the multiple listing service (MLS) standard commission rate. A listing contract will include the broker's commission. Commission rates are determined by the individual listing broker, not by an MLS. A listing contract will usually state the broker's responsibilities, reasons for termination or default of the contract, and any unusual deed conditions or restrictions.

A real estate broker learns that her neighbor wishes to sell his house. The broker knows the property well and is able to persuade a buyer to make an offer for the property. The broker then asks the neighbor if she can present the offer, and the neighbor agrees. At this point, which statement is TRUE? A) The broker may not be considered the procuring cause without a written contract. B) The neighbor is obligated to pay the broker a commission for producing an offer to purchase. C) The neighbor is not obligated to pay the broker a commission. D) The buyer is obligated to pay the broker for locating the property.

The answer is the neighbor is not obligated to pay the broker a commission. The broker procured a buyer for the property on the basis of an oral agreement with her neighbor, the seller. State real estate commissions generally require a commission agreement to be in writing and signed by both parties, the broker and the client. The broker in this case has no written contract for her services with either the seller or the buyer and is not entitled to a commission from either, even if she is the procuring cause of the sale.

A real estate broker lists her neighbor's home for $212,000. Later that same day a buyer to the community comes into her office and asks for information on houses for sale in the $180,000‒$225,000 price range. The broker offers to represent the buyer as a buyer's agent, but the newcomer refuses representation by her company at this time. Based on these facts, which of these statements is TRUE?

The answer is the neighbor is the broker's client, and the buyer is her customer. The listing contract with the neighbor establishes an agency relationship with the neighbor, who becomes the client of the broker. Without representation, the buyer remains a customer of the broker, a nonrepresented consumer who is entitled to fairness and honesty. The broker owes fiduciary duties only to the neighbor, her client. The broker may offer buyer representation to the buyer at a later date if the broker's company policy permits dual agency in a situation in which the buyer may want to purchase one of the company's own listings.

A listing agent brings an offer from his separated spouse to his seller. The agent and his spouse, though separated, still own the property. The agent does not tell the seller, his client, that the buyer is his spouse, because she has retained her maiden name throughout the marriage. The agent's action

The answer is violates his duty of disclosing material facts to the seller. The agent has a fiduciary duty to keep the seller, his client, informed of all facts that could affect the transaction. The agent's relationship with the buyer and interest in the property may affect his ability to properly represent his seller's interest in his eagerness to have the property sold. The agent does not have an express agency contract with the buyer at this point. He may accidentally create an implied agency by acting in the buyer's interest. The action does not in itself terminate the contract with the seller.

The type of listing contract that provides the LEAST protection for the listing broker is

The answer is the open listing. In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A broker entering into an open listing should negotiate terms in writing that specify a commission due the broker if the broker is the procuring cause of a sale. An exclusive agency listing authorizes a broker to act as sole agent of the seller, but the seller may sell the property without the broker and without paying the broker a commission. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states.

A salesperson who works for ABC Realty was the buyer's agent for a property that was listed by XYZ Realty. The seller agreed to pay the commission. From whom will the salesperson receive her commission check?

The answer is the principal broker of ABC Realty. The salesperson may receive the commission check only from her broker. While the seller may pay the commission to the principal broker of XYZ, the listing broker, the salesperson may receive her share of the commission only from that part of the commission provided to her broker by the listing broker.

Which of these BEST defines the law of agency?

The answer is the rules of law that apply to the responsibilities of a person who acts as agent for another. The law of agency determines how an agent is authorized to act on behalf of another and the responsibilities of that agent. The selling of another's property by a licensed brokerage is determined by a listing or brokerage agreement. Principles that govern one's conduct in business are often stated in a business code of ethics. Rules and regulations of a state's licensing agency state the requirements for real estate licensing for persons and firms.

A salesperson working with a commercial client for the first time follows the client's orders and drafts a contract for the purchase of a small strip center. Which of these is TRUE? A) The salesperson is legally practicing law because the client ordered him. B) The salesperson is in violation of truth-in-lending laws. C) The salesperson is illegally practicing law and is most likely not competent. D) Commercial brokers are allowed to draft contracts under the direction of clients.

The answer is the salesperson is illegally practicing law and is most likely not competent. Real estate professionals are not allowed to practice law and drafting contracts comes under that practice. This is not allowed even if the client directs or requests it or the sale is commercial.

A buyer agency contract states that the contract expires on April 30. Which event would NOT terminate the buyer agency contract? A) Death of the broker B) The salesperson leaving the brokerage firm C) Death of the buyer D) Mutual agreement to end the contract

The answer is the salesperson leaving the brokerage firm. The contract is with the buyer and the firm, not the salesperson. If the salesperson leaves, the principal broker may assign another salesperson to assist the buyer. The buyer and the principal broker may come to a mutual agreement to terminate the contract. The death of either party terminates the contract.

Unless some other written agreement has been made, the brokerage will usually receive the brokerage commission when

The answer is the transaction is closed. Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing.

All of these are true of an open listing and an exclusive agency listing EXCEPT a. under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. b. under each listing, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. c. each type of listing grants a commission to any brokerage who procures a buyer for the seller's property. d. the seller may offer an open listing to several brokers while an exclusive agency listing is given to one broker.

The answer is under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. Both open and exclusive agency listings allow the owner to sell without the assistance of the broker thus avoiding the seller from having to pay a commission. Each require the broker to be the procuring cause or in an exclusive agency tied to the procuring broker through the MLS agreements.

Good faith as applied to agency is BEST defined as A) using honest and sincere intentions. B) using professional skills to support all parties in a transaction. C) putting the interest of a principal above those of an agent. D) following all lawful instructions of a principal.

The answer is using honest and sincere intentions. All parties to a contract are to use their best good-faith effort to fulfill the contract. Putting a principal's interest above an agent's is loyalty. Following lawful instructions of a principal is obedience, and using professional skills is considered to be skill and care for all consumers, including a principal.

A listing agent does not disclose to his client that he has agreed to manage a duplex for the buyer once it has been sold. The agent's action

The answer is violates his duty of disclosing material facts to the seller. The agent has a fiduciary duty to keep the seller, his client, informed of all facts that could affect the transaction. The agent's future contract with the buyer may affect his ability to properly represent his seller's interest in his eagerness to have the property sold. Dual agency requires full disclosure of material facts. He may accidentally create an implied agency by acting in the buyer's interest. The action does not in itself terminate the contract with the seller.

Each of two brokerage companies claimed full commission for the sale of a property that was listed by both of the firms under an open listing agreement. The broker who is entitled to the commission is the one who

The answer is was the procuring cause of the sale. In an open listing, the seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. The broker who can prove that the sale resulted from that broker's efforts will be considered the procuring cause of the sale and be entitled to the commission.

A listing agent is frustrated that a property has been on the market for over two months, and the agent wants to sell the home quickly. The listing agent shares with a nonrepresented buyer that the home has been on the market for a long time and so the seller would welcome any offer on the home. The buyer makes an offer at a price lower than he had expected to offer. Has the agent violated any duties to the seller?

The answer is yes, the agent has violated his fiduciary duty by disclosing a fact that could benefit the buyer. The agent has duties of care and loyalty to the seller, and although he must disclose any material fact to a buyer, disclosing this information directly benefits the buyer. The license law does not prohibit or require disclosing information about how long a property has been on the market. The license laws of most states do require agents to disclose any material facts to clients and customers.

A buyer's agent knows that a property has been on the market for a time longer than normal for the neighborhood and type of house. Her buyer decides to write an offer above the listed price of the home because the buyer is in a hurry to find a home and move in. The buyer's agent does not mention to the buyer the length of time the home has been on the market. Has the buyer's agent violated any duties to the buyer?

The answer is yes, the agent should disclose the time on the market because that fact creates a more favorable opportunity for the buyer to offer a lower price. The buyer's agent has a duty to disclose any material information to the buyer. The extended time the home has been on the market provides the buyer with the possibility that the seller will accept an offer lower than the listed price for the home. The license law does not prohibit or require disclosing information about how long a property has been on the market. The license laws of most states do require agents to disclose any material facts to clients and customers.

Fiduciary means that there is

a legal relationship between parties that creates a position of trust and confidence. The term fiduciary refers to the relationship in which the agent (the real estate broker) is held in a position of special trust and confidence by the principal (the client). An agent owes the duties of honesty and good faith to the customer, the third party or nonrepresented consumer in the transaction. The payment of compensation in the form of a commission does not determine or define an agency relationship.

The type of listing contract that provides for payment of a commission to the broker even though the owner makes the sale without the broker's aid is called

an exclusive right-to-sell listing. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive agency listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An option listing permits the broker to retain an option to purchase the property for the broker's own account.

A seller agreed to list his home for $220,000, but the listing agent did not tell him that the fair market value of the home was $245,000. The listing agent purchased the property the next day. The agent has violated which of these duties to the seller?

loyalty. The fiduciary duty of loyalty means that the agent must place the client's interests above all others, including the agent's own self-interest. The duty of accounting requires agents to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction.

In an appointment with a seller, a salesperson presents a comparative market analysis (CMA) that provides a reasonable market value for the seller's property. The seller insists on pricing the property $15,000 higher than the salesperson's suggested price. Under these circumstances, the salesperson

may choose to refuse the listing. An unrealistic listing price may make it difficult for the broker to properly market the property within the time period of the listing. The salesperson is not required to accept the listing with the higher listing price or to hire an appraiser for a formal appraisal. The salesperson may not change the listing price in a listing contract without the explicit permission of the seller.