Laws of Agency -
Which of the following items is the listing agent NOT required to disclose?
To the buyer: that the seller is going through a divorce (agency duties) As agent or sub-agent, you have a duty of confidentiality to the principal. You must disclose a customer's financial information if you know about it and it could impact the transaction. You must also disclose the other items, except for the fact that a seller is going through a divorce--this could weaken the seller's bargaining position and violate your duty of confidentiality.
A general agency empowers the agent to
Transact the client's affairs in a certain business (law, definition, & nature of agency relationships) A general agent is authorized to perform any and all acts associated with a specific service. The other choices are either too broad or too narrow.
Which of the following actions would be a violation of anti-trust laws?
Two brokers agree to only market their services in specific areas of the community (commission and fees) When brokers agree to limit marketing efforts to a particular area, or agree to charge the same commission rates, that is classified as conspiracy. Such actions are a violation of antitrust laws.
All of the following are examples of dual agency except:
Two salespersons in a firm represent a different buyer and seller (law, definition, & nature of agency relationships) Escrow agents are dual agents because they hold money for the benefit of both parties in a transaction. Even if a dual agency is undisclosed, it is still a dual agency (though the contract may be rescinded). However, the situation where two salespersons represent a different buyer and seller for the same broker in a transaction is the definition of a designated agency.
All of the following circumstances will automatically terminate a listing broker's agency agreement, EXCEPT:
Unilateral action (law, definition, & nature of agency relationships) A listing is automatically terminated by law upon bankruptcy or death of either party (principal or agent), or by the destruction or disposition of the property (including condemnation). Acting unilaterally to terminate the listing would be the act of one party, not an operation of law.
Two brokers agree to charge the same commission rate on all property listed by their offices. Such an action:
Violates Anti-Trust laws (commission and fees) This is a violation of Anti-Trust laws. You should never discuss commission rates with your competitors.
Seller Corcoran is in very poor health and cannot work on his farm anymore. Corcoran's broker discloses this fact to prospective buyers. Has the broker done anything wrong?
Yes, because it is contrary to Corcoran's interest (agency duties) The broker is precluded from discussing Corcoran's health with prospective buyers without Corcoran's permission. Doing so is contrary to his client's best interests because it might weaken Corcoran's bargaining position. The seller's health is not a material fact related to the property, nor is it covered under Federal Fair Housing Laws.
Jill lists her property with Broker Joe. After much hard work, it looks as if the property will finally sell. However, Broker Joe files for bankruptcy before the property actually does sell. Jill becomes nervous and seeks to terminate the listing agreement. May Jill terminate the agreement without breaching the contract?
Yes, because she is legally justified (common types of agency agreements) If a party to a listing agreement files for bankruptcy, the other person may terminate the agreement without a breach. The listing agreement may also be terminated in the bankruptcy process by operation of law. Note that while a bankruptcy court may extinguish Joe's debt, it will not rescind his liability.
Broker John and Buyer Jenny enter into an exclusive buyer agreement. However, Jenny finds a suitable property on her own. After Jenny purchases the property, John demands his commission. Must Jenny pay John a commission?
Yes, so long as Jenny purchased property similar to the one described in the agreement (common types of agency agreements) The exclusive buyer agreement obligates the buyer to compensate the agent if the buyer purchases property similar to that which was described in the contract. Under an exclusive buyer agreement, the agent is compensated regardless of whether the buyer discovers the property on her own or through another agent. This is the counterpart to the exclusive right-to-sell listing. We do not know whether John took sufficient steps to find property for Jenny, but it is irrelevant that Jenny found the property on her own if the property is similar to the one described in the agreement.
When must a licensee disclose agency relationships?
when the licensee has substantive discussions about specific property (agency duties) In general, state laws require that agency be disclosed when the licensee has substantive discussions about a specific property.
Two brothers own separate real estate companies, but agree to divide their received commissions equally. Broker A pays for three-fourths of the advertising costs and finds the buyer. Broker B pays for one-fourth of the advertising costs. If the total commission on the sale is $4,500, how much does Broker B receive?
$2,250 (commission and fees) Since the brokers agree to divide the commission equally, each gets $2,250 despite their individual expenses. Do not be fooled into making this question more complicated than it is.
Broker Lynch has an exclusive listing to sell Jones' hardware store for a $4,500 commission. He took another exclusive listing to sell Brown's grocery store for a $5,000 commission. With the consent of Jones and Brown, Lynch arranges an exchange of these two stores. How much will Lynch make from this exchange?
$9,500 (commission and fees) In real estate brokerage, an exchange of two or more properties results in the sale of all properties involved, and commissions are paid as stated in the listing.
An owner entered into a valid listing agreement. During the agreement period, the seller sells the property himself. The seller is not legally required to pay a commission to any broker. What type of listing agreement did the seller have?
. An open listing B. An exclusive agency C. An exclusive right-to-sell listing D. Either A or B (common types of agency agreements) In an open listing, the only person that gets paid is the broker that sells the property. So, if the owner sells the property, no commission is due to anyone. In an exclusive agency, the owner reserves for himself the right to sell the property and NOT pay a commission to the listing broker. In an exclusive right-to-sell listing, the broker gets her commission regardless of who procures the sale (even if the seller finds her own buyer). Therefore, the seller could have either an open listing or an exclusive agency.
A broker accepts an exclusive right-to-sell listing. However, the property is later sold by another broker. How many brokers could be owed a commission by the principals in this transaction?
2 (law, definition, & nature of agency relationships) In a traditional exclusive right-to-sell transaction, the seller/client agrees to list the property with a single broker and also agrees to pay that broker his commission regardless of who sells the property. Therefore, we know from the question stem that at least one broker will receive a commission (because the property sold). However, if one of the brokers involved represents the buyer, there are now two brokers that COULD receive a commission--one representing the seller and one representing the buyer.
The relationship between a broker and client is most accurately described as
A fiduciary relationship (agency duties) A broker and client have an agency relationship, which carries fiduciary duties.
Which of the following persons would likely NOT be an agent?
A person working for a multiple listing service (law, definition, & nature of agency relationships) All of the examples would be agents, except an individual that works for a multiple listing service. That person is an employee of the MLS. However, do not be tricked into believing that just because one is "employed" by another that they must be an employee (and therefore not an agent). Agency creates an employment agreement, but this may or may not be an "employee" relationship as defined by the IRS.
Which of the following facts MUST a broker disclose to his seller?
A prospective purchaser (who asked the seller to hold a purchase money mortgage) has a history of bad credit
A special agency empowers the agent to perform
A specific act (law, definition, & nature of agency relationships) A special agency authorizes the agent to do one act and one act only. In the case of a broker/seller agency, the broker is empowered to do only one thing--to find a buyer for the property
What is the highest commission rate that a real estate broker may charge for marketing a farm property?
A. 10% B. 15% C. 25% D. None of the above (commission and fees) The amount of compensation (commission) can be any amount that was agreed upon by all parties to the listing agreement.
Which of the following actions would create an agency relationship?
A. A broker accepts the listing to sell a friend's home and agrees to a reduced commission B. An individual gives written authority for a broker to buy, sell, or exchange his real property for a one year period C. A duplex owner signs a listing agreement which authorizes a broker to market the property for one year D. All of the above
Which of the following situations is an example of dual agency?
A. A broker's undisclosed representation of both buyer and seller B. Two salespersons represent a different buyer and seller in the same transaction C. A salesperson represents both buyer and seller D. Both A and C (law, definition, & nature of agency relationships) It doesn't matter whether disclosure is made; a dual agency exists where the broker represents both the buyer and the seller. A salesperson who represents both parties in a transaction is an example of dual agent. In the situation, the parties should have an agreement with the salesperson's broker, but the salesperson might have instead created an implied agency by her words or actions. Nevertheless, two salespersons representing a different buyer and seller for the same broker is a designated agency.
A person engaged to act in place of another by contractual agreement is
A. A principal B. An agent C. An attorney-in-fact D. Either B or C
Under contract as a property manager, the broker is:
A. A special agent B. A fiduciary C. A general agent D. Both B and C A property management contract is an agency agreement between the property owner (principal) and the property manager (agent). Thus, the broker is a fiduciary in this situation. In addition, the relationship is usually a general agency--the broker is authorized to perform any and all acts associated with a specific service (property management).
Which of the following choices would terminate a buyer-broker agreement?
A. Abandonment B. Time C. Agreement D. All of the above
A buyer-broker agreement should address which of the following items?
A. Commission B. Time C. Obligations D. All of the above (common types of agency agreements) All of the listed items should be addressed in a buyer-broker agreement.
A broker obtains an open listing on a piece of property. In order to collect a commission on the sale, he must prove which of the following details?
A. He was licensed at the time of the sale B. He was engaged by the owner at the time of the sale C. He was the procuring cause of the sale D. All the above (common types of agency agreements) In order to receive a commission, the broker must be able to prove that he was licensed as a real estate agent, had a listing with the seller in question (was engaged by the owner), and was the procuring cause of the sale (his effort brought about the desired result). Under an OPEN listing, the only person that gets paid is the person that procured the buyer.
A listing will automatically terminate:
A. If the listing broker goes bankrupt B. On the date specified in the listing agreement C. If the seller dies prior to receiving an offer from a ready, willing, and able buyer D. All of the above A listing terminates if either the agent or the principal dies or goes bankrupt. Listings also terminate when they expire.
Buyer-broker agreements could be
A. Oral B. Executory C. Unassignable D. All of the above Buyer-broker agreements may consist of all the listed elements.
Broker Carson lists a home belonging to Brandon. Buyer John, insisting on anonymity, has Salesperson Joan make an offer using her own name as the prospective buyer. What should Carson do in this situation?
A. Submit the offer to Brandon B. Refuse to submit the offer to Brandon until the name of the undisclosed buyer is given C. Advise Brandon that an undisclosed buyer is involved if he suspects Joan is not the true offeror D. Both A and C
An owner lists a home with a broker for $72,000. Two days later, the broker brings in an offer for $70,000. At this time, which of the following statements is true?
A. The broker had found a buyer and has earned his commission B. A ready and willing buyer has been found and a commission is due C. A ready and willing buyer has been found, but no commission is due D. None of the above (commission and fees) In order to earn a commission, the broker must find a ready, willing, and able buyer ON THE TERMS OF THE SELLER. The offer was lower than the listed price; therefore, the offer was NOT on the terms of the seller. While the buyer appears to be ready and willing, there is no evidence that the buyer is financially able. Therefore, no commission is due and the best choice is four.
An owner is listing his rental property with a broker. Based on past experience, the owner thinks that females cause less damage. He therefore tells the broker that he only wants to rent to females. What should the broker do?
Advise the owner that this restriction is illegal
Jon is an agent for Betty the Buyer. This relationship could exist by virtue of
All of the above (law, definition, & nature of agency relationships) Agency may be created by express agreement, which may be oral or written. Agency may also be created by estoppel (requires judicial action) and ratification (sanction or validation of the broker's conduct).
Which type of listing agreement allows the seller to sell his property and NOT have to pay a commission, but assures the broker a commission if anyone else (other than the owner) sells the property?
An exclusive agency listing (common types of agency relationships) In an open listing, only the person who sells the property receives commission. In an exclusive right-to-sell listing, the broker gets commission regardless of who sells the property (even if it's the owner). Special listing is an invalid term.
A broker could act as a fiduciary in all of the following functions, EXCEPT
Appraising property (agency duties) A broker who was hired by another party (the principal) to lease, sell, or exchange property has an agency relationship. This agency relationship carries certain fiduciary duties. However, an appraisal is a formal estimate or opinion of value provided by an appraiser. Even if a broker is also a licensed appraiser, it would be a violation of the broker's fiduciary duties (conflict of interest) to appraise property that he is listing or selling. Therefore, the best answer is that the broker could not act as a fiduciary appraising property.
How many brokers can be given an open listing?
As many as the owner chooses Many brokers can have an open listing on a property, but only the broker that actually sells the property will be paid. For example, a developer that advertises "brokers welcome" is extending an invitation to any broker to show and sell one of his new homes. The developer must pay a commission to the broker that sells the home in an open listing.
By virtue of a signed listing agreement, the broker will generally have authority to do all of the following actions without the seller's consent, EXCEPT
Bind the seller to a full price offer (common types of agency agreements) Through the listing agreement, the seller employs the broker to produce a ready, willing, and able buyer in exchange for a commission. The broker may use the services of other brokers or his own salespersons in order to accomplish this act without the consent of the seller. However, as a general rule, the broker cannot accept or reject any offer (even if it's a full price offer). The decision to accept or reject an offer always remains with the client.
All of the following statements are true of buyer-broker agreements, except:
Buyer-broker agreement terms may be disclosed to customers (common types of agency agreements) The client in the buyer-broker agreement is the buyer. The customer for buyer-broker representative is the seller. You must not disclose the agreement terms to the customer (whichever party you are not representing
Susan has a listing agreement with Tom to sell his house and an adjoining lot. Susan sells Tom's house to Pete. Before closing, Susan also negotiates a valid option contract with Pete for Tom's adjoining lot, which is listed at $150,000. When will Susan earn her commission on the adjoining lot?
None of the above (commission and fees) Susan earns a commission if she produces a ready, willing, and able buyer to the agreed upon terms. Since Pete may choose not to exercise his option on the adjoining property, he does not meet that definition of a ready, willing, and able buyer. Therefore, Tom is not obligated to pay a commission for the adjacent lot at this point. If the option period expires and he still hasn't exercised the option, then Susan will not receive a commission for the lot. The sale of the home is additional information that has nothing to do with the option contract for the adjoining lot.
Randy buys a house, using a VA loan to finance the purchase. The listing broker and selling broker split the commission at a 75/25 ratio. If the Department of Veteran's Affairs learns about the arrangement between the brokers, what will they do?
Nothing (commission and fees) Brokers very often divide commissions on cooperative sales. This is perfectly legal and ethical. The VA has no authority to take disciplinary action against licensed real estate professionals.
A listing agreement will automatically terminate:
On the date specified in the listing agreement (common types of agency agreements) The only true statement is that a listing agreement will terminate on the date specified in the agreement. There are other causes that would terminate a listing, but they are not offered as answers. An owner abandoning his property is NOT grounds to terminate a listing--he may still enlist a broker to sell the abandoned property. However, if the broker abandoned the listing, the seller would be justified in terminating the listing.
If an owner gives a listing to more than one broker, it would most likely be which type of listing?
Open listing
Which of the following listings will permit an owner to sell his property without paying a commission to any broker?
Open listing B. Exclusive agency listing C. Exclusive right-to-sell listing D. Both A and B (common types of agency agreements) An open listing and an exclusive agency listing permit the seller to sell his own property without paying a commission to the listing broker. Meanwhile, an exclusive right-to-sell would require the owner to pay a commission, even if he sells it himself.
Under the usual listing agreement, a salesperson can
Place a "For Sale" sign on the property (common types of agency agreements) Under the usual listing agreement, the broker can place a "For Sale" sign on the property (and all advertising must be truthful, not misleading). The listing broker (agent) is accountable to the seller (principal) and the buyer for any monies received from either party. The salesperson cannot deposit earnest money in her own escrow account--it must be deposited in the broker's escrow account. Finally, all offers must be presented in a timely manner, but only the seller can decide whether to accept or reject those terms.
The relationship between a seller and a listing broker is that of a(n
Principal and agent (common types of agency agreements) Principal is another term for client. Only the broker has an agency relationship with the seller. The salesperson has an agency relationship with the broker and subagency with the seller
A seller contacted three brokers to suggest the list price for his property. Broker A said $78,000, Broker B said $79,000, and Broker C said $91,000. The seller listed with Broker C and the house ended up selling for $76,000. In this situation, Broker C might be guilty of violating which fiduciary duty?
Reasonable care (agency duties) Of the fiduciary duties listed, reasonable care is the best description. The agent must exercise care to properly advise and consider the best interests of his client. In doing this, he's expected to act with the same degree of competence that any other reasonable broker would in similar circumstances. Quoting a drastically different (and unrealistic) list price was not in the client's best interest.
A salesperson takes a 90 day exclusive right-to-sell listing on April 1st, but moves out of the area on May 15th. His license placed on inactive status on June 1st. This listing would:
Remain in effect The listing is with the broker, not the salesperson. Thus, it will remain valid regardless of the salesperson's residence or licensing status.
Ralph is an independent broker. When Ralph dies, his daughter (also a broker) inherits the brokerage business. If she intends to operate the firm and keep her father's listings, it is necessary that she:
Renegotiate Ralph's current listings (law, definition, & nature of agency relationships) All listings in Ralph's name terminate upon his death because a listing is a personal service contract. The fact that his daughter inherits the firm is irrelevant; she must still renegotiate the listings in her own name. While some state licensing laws allow a non-broker to conclude the affairs of a deceased broker (under specified conditions), the listings must still be renegotiated.
Puckett lives in Tennessee, but owns property in Virginia. She hires Samuels, a broker in Virginia, to sell that property for $75,000. Samuels knows that this property is worth considerably more since the zoning for the property was recently changed to commercial. Samuels buys the property himself and re-sells it two weeks later for $125,000. Which of the following statements is true?
Samuels can only purchase the property after informing Puckett of the zoning change As an agent of the principal (Puckett), Samuels has a fiduciary relationship to protect his principal's interest. Failure to inform Puckett of the zoning change is a breach of that relationship.
A broker executes a listing agreement with her client. The broker subsequently learns that the property is in foreclosure. Which of the following choices is the broker's best course of action?
Sell the property before the foreclosure is completed (agency duties) The broker owes fiduciary duties to her client, which include the duty to keep her client's financial position confidential. The broker cannot disclose the pending foreclosure without consent because it might weaken the seller's bargaining position. The broker also has a duty to disclose material information to prospective buyers. However, a pending foreclosure is not material if the broker finds a buyer in time--it does not impact the property in any physical way or diminish ownership rights for future owners. If the broker can't sell the property before the foreclosure goes through, the seller no longer has any property to sell. Meanwhile, there is no basis for the broker to rescind the listing agreement and the she risks violating a fiduciary duty in purchasing the property herself. Therefore, the best response is for the broker to sell the property before the foreclosure is complete. This satisfies her duty under the listing agreement.
In a real estate transaction, which of the following facts MUST an agent disclose to his principal?
That the buyer has had previous credit problems (agency duties) The only answer choice that must be disclosed is the buyer's credit problems. This is true because the buyer's credit problems could impact the sale (ability to qualify for a loan).
A broker represents a buyer. While showing a property to his client, the broker learns something that might influence the sale. Nevertheless, the broker may NOT disclose which of the following items to his client?
That the current owner has HIV (agency duties) The broker is the buyer's agent and owes fiduciary duties to his client. As such, he must keep the buyer reasonably informed about material information that can be legally disclosed. The seller's financial position is material to the buyer's negotiation with the seller, and may impact the offer amount. Restrictions on what the seller might accept are also material (ex. no VA financing). Generally, information or events that do not physically affect the property or future ownership rights (stigmatizing events) need not be disclosed. However, the broker is restricted by law and cannot disclose the seller's HIV status due to Fair Housing AND federal privacy laws.
A salesperson could be described as a "general" agent in his relationship with:
The broker (law, definition, & nature of agency relationships) A general agent is someone that may perform many different acts for his principal, so long as it is confined to a specific area of operation. A salesperson performs many different acts (confined to real estate transactions) for his principal (broker), like listing property, selling property, and managing property.
It would NOT be considered commingling of funds if:
The broker holds an earnest money check, as requested by the offeror, until acceptance by the offeree (agency duties) Holding a check at the request of the offeror (buyer) until acceptance by the offeree (seller) is a normal practice and is NOT commingling. Once the offer is accepted, the money must be immediately placed in the escrow account. The broker NEVER puts money that belongs to others in his personal or brokerage account.
Barry, a salesperson with XYZ Realty, lists a property. Helen, also a salesperson with XYZ, presents an offer from her client which is accepted. In this situation, which of the following statements would best describe the position of the XYZ Broker?
The broker is an agent for both the buyer and the seller (law, definition, & nature of agency relationships) The broker is agent of the seller by virtue of Barry's listing. The Broker is also the agent of the buyer by the fact that the buyer is Helen's CLIENT. Therefore, the broker is a dual agent. All agency agreements are with the broker, NOT the salespersons that procured the listing. The broker would violate a fiduciary duty if he/she failed to obtain consent from both the buyer and seller. However, there is insufficient information to determine whether such a failure occurred. Therefore, the best choice is that the broker is an agent for both.
If a broker has an exclusive right-to-sell listing, which of the following statements is INCORRECT?
The broker is legally obligated to sell the property
Casper is selling his house and wants the broadest possible exposure. Therefore, he gives an exclusive right-to-sell listing to Bert, an exclusive agency listing to Gail, and an open listing to Mark. Mark sells the property. Assuming that all of these listings are valid, which of the following statements is true?
Casper owes 3 commissions (common types of agency agreements) Bert's listing means that regardless of who sells the property, Bert will still get a commission. Gail's listing means that if anyone other than the owner sells the property, she will get a commission. Mark's listing means that if he sells the property, he gets a commission. Therefore, Casper is obligated to pay 3 full commissions.
A buyer-broker agreement may arise by all of the following means, except:
Custom (law, definition, & nature of agency relationships) An agency relationship with a buyer may be created by all of the methods identified, except by custom. While custom can be used to establish a relationship, it is generally a means to establish an agency relationship with the seller, not the buyer.
A listing agreement can be terminated by all of the following circumstances, EXCEPT:
Death of the salesperson
A broker shows one of her listings to a prospective buyer. The broker knows that the listed property borders a toxic waste dump, as identified by the EPA. The broker should:
Disclose the information because it is material (agency duties) This is a controversial issue, and therefore a difficult question. Traditionally, things outside the boundaries of a property aren't considered as "material information" that would require disclosure. However, the risks posed by toxic dumps are likely to physically impact the neighboring properties (odor, nuisance, migration of toxins, contamination of ground water, etc.), as well as the health of persons in close proximity. An increasing number of courts have ruled that a broker's failure to disclose the presence of a known (and close) toxic waste dump is a concealment of a material fact (therefore, a fraudulent act). As such, the best answer is that the broker should disclose the presence of the toxic waste dump because the information is material.
A seller lists her house with a broker for $189,500. The seller tells the broker that if necessary, she will accept $185,000. What may the broker do when showing the property to prospective buyers?
Disclose what the seller will accept, with the seller's permission (agency duties) To do any of the suggested actions violates the agency relationship, unless the broker was told to disclose only what the seller will accept. If the seller agrees, the broker could disclose the seller's willingness to accept a lower price. However, the facts in this situation do not indicate the seller's consent to such a disclosure.
In order for a dual agency to be legal, it must be
Disclosed in writing and agreed upon prior to negotiations (law, definition, & nature of agency relationships) In states that permit dual agency, it must be disclosed and agreed upon in writing by all parties prior to negotiations.
The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is:
Exclusive buyer agency agreement (common types of agency agreements) The exclusive buyer agency agreement is the counterpart to the exclusive right-to-sell listing agreement. Meanwhile, an exclusive agency buyer agency agreement is most similar to the exclusive agency listing agreement. An open buyer agreement is the counterpart to an open listing. Exclusive right-to-market is sometimes seen as a synonym for exclusive right-to-sell. However, that is still a listing and not a buyer-broker agreement.
A seller wants to list her home with a broker, but would like the option to sell it herself without paying a commission. Which type of listing should she AVOID signing?
Exclusive right-to-sell listing
A seller wants to list a property with a broker, but hopes to sell it herself in order to avoid a commission. Which listing agreement should the seller NOT sign?
Exclusive right-to-sell listing (common types of agency agreements) The seller should avoid signing the exclusive right-to-sell listing. For each of the other options, the seller could avoid paying a commission by selling the property herself.
What would NOT terminate an agency agreement by operation of the parties?
Expiration of time (law, definition, & nature of agency relationships) Expiration of time terminates an agency agreement by operation of law, not by action of the parties.
Mr. Gregory is selling his house and puts a "FOR SALE BY OWNER" sign in the yard. Salesperson Gary calls, identifies himself, and asks for the key to show the property. Mr. Gregory agrees. What would best describe the relationship between Mr. Gregory and Gary?
Gary's broker is the agent of Mr. Gregory for a reasonable time (law, definition, & nature of agency relationships) An agency agreement between Gary's BROKER (agent) and Mr. Gregory (principal) exists by implication. Gary did identify himself and the seller agreed to let him show the property. In absence of a specified period of time, the agency would continue for a "reasonable" time.
Tom lists his home with Salesman Gary, with the provision that the house not be shown if he is not at home. Tom leaves town on Monday for a two week business trip. On Tuesday, Jose and Maria (a minority couple) contact Gary to see Tom's house. Gary refuses to show the house. In this situation, which of the following statements is true?
Gary's refusal to show the property satisfies his fiduciary duty to Tom (agency duties) This is not a violation. The only way this would constitute a Fair Housing violation is if Gary were to instead show the property to a non-minority party while Tom is out of town (which would also violate his fiduciary duty to Tom)
If a broker employs a property manager, the relationship is likely to be
General agency (law, definition, & nature of agency relationships) A property manager is a textbook example of general agency (i.e., a person empowered to do a number of things for the principal).
Seller Chaney rejects three offers, all of which were $2,500 below the list price. Broker Rudy receives a fourth offer which is also $2,500 below the list price. What should Rudy do?
Give Chaney another offer that she is sure to reject (agency duties) Rudy is the agent of the seller (principal), so she must act in the seller's best interest in order to get the property sold. Rudy must present the offer immediately, even if Chaney has previously rejected offers of the same amount. The broker must submit all offers, but it is ALWAYS the seller's decision on whether to accept.
What should a salesperson do with the earnest money deposit she receives from a buyer?
Give it to her broker (agency duties) Earnest money deposits (which are usually tendered by check) should be given to the broker as soon as the buyer's offer is accepted by the seller. Remember that it is the broker, not the salesperson, that must have an escrow account and the salesperson must give any earnest money deposit to her broker.
A real estate salesperson may legally accept extra commission on a difficult sale from:
Her broker (commission and fees) A licensed salesperson may accept compensation for an act of real estate brokerage from her employing broker (and NO ONE ELSE).
Salesperson Lynch found a home for a buyer, who agreed to pay a commission for this service. After closing, Lynch will receive his commission from:
His broker (commission and fees) A salesperson may ONLY receive commission from his or her employing broker.
An escrow account is maintained by a broker for the purpose of:
Impartial protection of both parties (deeds) The escrow agent is a neutral third party that owes fiduciary duties to both the buyer and seller. This promotes the impartial protection of both parties.
A seller agrees to split all commission between the brokerage firm and his unlicensed brother. This agreement is:
Impermissible, unless the brother is licensed Only real estate licensees (or people that are specifically exempt from licensing) may receive compensation for a real estate transaction. State regulations address this issue specifically, but as a general rule, payment to an unlicensed person is illegal.
A selling broker is showing a parcel of property and tells the prospective buyer: "In my expert opinion, this property is the best for you." This statement could be interpreted as:
Implied agency which might result in an undisclosed dual agency. Remember that a selling broker (cooperating broker) acts as a subagent of the listing broker. Therefore, unless proper consent was given, he should avoid letting the buyer think that he's working on anyone other than the seller's behalf.
A broker takes a listing and the owner later tells him that the roof leaks. Further, the owner states that she will not repair the roof, even if the house is sold at full price. The broker must:
Inform any prospective buyer of the condition of the roof (agency duties) Material disclosures need not be listed in the initial advertisement. However, even when included, advertising "as is" is not enough to satisfy disclosure requirements. Remember that material information must be specifically disclosed to a prospective buyer (beyond the mere statement that it's being sold "as is"
A salesperson receives an earnest money deposit check on Monday while working with Broker Allen. On Friday, the salesperson goes to work for Broker Bob. If the salesperson still has the earnest money deposit check on Friday, what should be done with it?
It should be immediately given to Broker Allen
Jan accepts Jenny's offer to purchase. Jenny's salesperson delivers the downpayment to Jan's salesperson. Jan's salesperson delivers the funds to her broker, who places the money into escrow. Jan's broker owes a fiduciary duty to:
Jan and Jenny
Sam Slick lists his home with Clueless Kelly, a broker. Two weeks later, Kelly learns that Sam has a reputation for dishonesty and a bad record with other brokers. Three weeks later, Kelly learns that Sam is speaking to other brokers behind her back. Kelly confronts Sam and terminates the listing. Which party breached the listing agreement?
Kelly, because she unilaterally terminated the agreement (law, definition, & nature of agency relationships) Sam has done nothing wrong by merely "speaking with" other brokers. While Kelly may think Sam is in breach, there is no evidence that this is true. If you terminate a contract unilaterally without evidence of an actual breach, you risk being the breaching party.
Which of the following acts does NOT constitute a violation of Federal Anti-Trust Laws?
Lenders charging usurious interest rates
The zoning commission has proposed a change that would dramatically impact the subject property in a broker's listing agreement. This information:
Must be promptly disclosed to all parties (agency duties) Disclosing this information is required because it is "material." The broker must disclose this material information to the seller and any prospective buyer.
In which type of listing is the commission least likely to be expressed in terms of a percentage?
Net (common types of agency agreements) In a net listing, the seller stipulates the price he wants to receive for a property, and agrees that the broker may keep any amount above this price as commission. In a true net listing, a commission is not specified. Note that net listings are illegal in most states.
Which of the following listing agreements is LEAST likely to specify a commission rate
Net listing (common types of agency agreements) A net listing will not show any commission rate. Instead, the seller specifies that she wants to net a certain amount of money from the sale. Anything over and above that amount is the broker's commission. Net listings are illegal in most states.
Who represents the buyer in the traditional real estate transaction?
No one (common types of agency agreements) Traditionally, no one represents the buyer. The listing broker represents the seller and the selling broker represents the seller as a sub-agent of the listing broker. Accordingly, the selling salesperson represents the seller as a sub-agent as well (through the selling broker, to the listing broker, to the seller). The buyer could be represented if he or she enters into a bona fide buyer-broker agreement.
Gwen lists her home with Broker Steve under a valid exclusive right-to-sell listing. Steve works diligently to find a buyer for Gwen. After two weeks of focused searching, Steve finally finds a buyer to make an offer. However, when Steve presents the offer to Gwen, he discovers that Gwen also worked with Broker Gerry and sold her home without informing Steve. Steve is furious and demands his commission. Is Steve's listing still active?
No, because Gerry sold the house (law, definition, & nature of agency relationships) Make sure you read the question carefully! It question does not ask whether Steve will get his commission; it asks whether the listing is still active. While Steve may have a good case for collecting his commission, the listing agreement terminated by operation of law when the subject of the contract (Gwen's home) was sold.
Seller Pruitt signed an exclusive right-to-sell listing with Broker Cook. The listing includes a 7% commission and a clause which states that this agreement is in effect until the house is sold. Is this legal?
No, because the term is potentially indefinite (common types of agency agreements) Exclusive listings must have a definite termination date. If the house does not sell, the agreement could exist forever.
Harry hires David to be his buyer-broker. However, a few days later, Harry spots a property for sale while driving home from work. He falls in love with the property and makes the purchase without David's assistance. Two days later, David demands a commission. Is Harry required to pay a commission to David?
No, so long as the agreement was not an exclusive buyer agreement
A real estate broker wishes to deposit an earnest money check in his business operating account in order to receive a higher interest rate on the purchaser's funds. Is he legally allowed to do this?
No, these funds must be placed in a separate escrow account (agency duties) A broker is prohibited from depositing earnest money in the broker's personal or business operating account; this is considered commingling. This money must be deposited in an escrow account by the broker.
A buyer requests that a salesperson take a listed property off the market until his wife sees it. May the broker comply?
No, this violates the agency agreement (agency duties) This is not a question of may he do it; he CANNOT do it. Only the SELLER can authorize that the property be taken off the market.
The law of agency can include relationships between principals, agents, and:
Third parties (law, definition, & nature of agency relationships) An agency relationship in real estate can involve principals, agents, and third persons. A third person COULD be a buyer, seller, or escrow agent/trustee. Therefore, "third parties" is the best answer to the question.
Smith dies and his real property is sold. What determines the amount of commission paid to the broker who handles the sale?
The listing agreement (common types of agency agreements) Commission is determined by the listing contract signed by the parties to the transaction (broker and seller). In this case, the seller would be the executor or administrator of the estate.
A salesperson lists a home, but the house burns down prior to receiving an offer. Which of the following statements is true for the situation?
The listing automatically terminates
A buyer's broker presents an offer on a property listed by another broker. Proper agency disclosures have been made. Prior to acceptance, the listing broker discovers a zoning change that will affect the value of the property. He tells the buyer and the offer is withdrawn. Which of the following statements is correct?
The listing broker has exercised due care and loyalty to his principal (agency duties) A listing broker has duty to disclose adverse material facts to the buyer. This zoning change is material because it will significantly impact the value of the property. Disclosure of material facts is not a violation loyalty or due care. The seller's agent is avoiding a violation of the law.
What is the agency relationship between cooperating brokers (listing broker and selling broker) who are members of the MLS
The listing broker is principal, and the selling broker is the agent of the listing broker (law, definition, & nature of agency relationships) Notice that the question asks for the agency relationship between the listing broker and the selling broker. It does NOT ask for the relationship of the selling broker to the seller. In this situation, note that the listing broker is the principal and the cooperating broker (selling broker) is the agent of the listing broker.
Phil is a salesman working for Broker Joan. Phil takes a listing on January 3rd. The listing is a 60-day exclusive right-to-sell agreement. On February 1st, Phil was killed in an automobile accident. What is the status of the listing?
The listing remains valid (law, definition, & nature of agency relationships) The listing is between the seller and the BROKER (Joan). Phil's death has no affect on the listing.
A listing agreement must contain all of the following pieces of information EXCEPT:
The proceeds due to the seller from the sale (common types of agency agreements) Of the choices presented, the only item NOT required in a listing agreement is the amount due to the seller from the sale. The amount due to the seller is unknown until the time of the final sales contract.
A listing may be revoked by
The seller (law, definition, and nature of agency relationships) A listing may be revoked by the client (seller), agent (broker), or by mutual consent of both. The salesperson cannot terminate the listing. The LISTING broker (not the selling broker) may revoke the listing. Watch the wording of these questions!
A property is listed at $68,000. A full price offer is made without contingencies. In this situation, which of the following statements is correct?
The seller may refuse to sell
Which of the following statements is true about an open listing?
The seller only pays the broker who produces a ready, willing, and able buyer (common types of agency agreements) In an open listing, a commission is only paid to the broker that sold the property. In addition, an owner may enter into an open listing agreement with any number of brokers. The correct answer is: The seller only pays the broker who produces a ready, willing, and able buyer
Brokers may only assist buyers if:
There is consent (common types of agency agreements) Brokers may assist buyers with or without a written agreement, formal representation, or an agency relationship. However, there must be some sort of consent (implicit or explicit).