RE Section 3 Chapter 2

Accounting

All money and property held by the licensee for the client must be protected and accounted for by the licensee.

Creation of Agency

By express agreement; By implied agreement; By ratification; and By estoppel.

A listing agreement may be terminated by: a. The seller b. The buyer's broker c. The salesperson that obtained the listing d. Death of the salesperson

a. The seller

General Agent

authorized to perform many different services within one general field.

If you are showing property you are listing and tell a prospective buyer that "...this property is the best for you," the relationship created could be interpreted as: Select one: a. Universal agency b. Special agency c. Implied agency d. General agency

c. Implied agency

Broker Jane is acting as a dual agent in a real estate transaction and decides to appoint salesperson Sara to represent the seller and salesperson Ben to represent the buyer. Ben and Sara both work in Jane's firm. Select one: a. Jane cannot legally do this. b. Ben and Sara are dual representatives. c. Ben and Sara must be independent contractors. d. Ben and Sara are designated representatives.

d. Ben and Sara are designated representatives.

Licensee Larry has held a real estate license for many years and has completed many residential transactions but never any commercial transactions. His neighbor owns a small strip mall and asks Licensee Larry to sell the property. Licensee Larry should be especially careful to consider which of the following duties to the client? Select one: a. Disclosure. b. Accounting. c. Confidentiality. d. Reasonable care and due diligence.

d. Reasonable care and due diligence.

Broker Macro was showing a tract of land with irregular boundaries. When asked about a boundary, Macro indicated that it ran from the edge of the stone wall to the creek. Macro knew this was not exactly correct. After the buyer contracted for the property, he was shown a survey which reflected the true boundary. Was Macro guilty of misrepresentation? Select one: a. No, verbal statements are not binding. b. No, the buyer was responsible for having the property surveyed. c. Yes, the broker was responsible for verifying the official records. d. Yes, because Macro knew his statement was not completely accurate.

d. Yes, because Macro knew his statement was not completely accurate.

caveat emptor

let the buyer beware

Subagent

the agent of an agent

Escrow Agent

the neutral third party who conducts the closing in real property sales

Duties of Clients to Agents

Availability Informed Compensation Indemnification

Dual Agency

Representing both parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in many states

Escrow Accounts

Every real estate firm that acts as an escrow agent in holding money for others must maintain a separate escrow account.

Commingling

Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).

Duties of an Agent

Loyalty Obedience Disclosure Confidentiality Reasonable care and due diligence Accounting

Fiduciary

Person who is placed in a position of trust to act for someone else's benefit. The licensee placed in this position must act in the best interests of the client and must do nothing to harm the client.

in-house sales.

This occurs when one salesperson that works for the firm is representing the seller and another salesperson with the same firm is representing the buyer.

Conversion

When money is applied to escrow, this means the misappropriation of entrusted funds. The most serious offense

A salesperson receives an earnest money deposit on Monday while working with broker Allan. On Friday, the salesperson goes to work for broker Bob. What should be done with the earnest money deposit? Select one: a. It stays with broker Allan b. It goes to broker Bob c. It should be given to the seller d. It is returned to the buyer

a. It stays with broker Allan

It would NOT be considered commingling of funds, if: Select one: a. The broker holds a deposit check at the request of the offeror until acceptance by the offeree. b. The broker holds a deposit check at the request of the offeror after acceptance by the offeree. c. The broker holds an earnest money deposit in his personal account until the offer is accepted or rejected. d. The broker holds an earnest money deposit in his brokerage operating account because the deal is going to be all cash.

a. The broker holds a deposit check at the request of the offeror until acceptance by the offeree.

Any of the following could cause a listing agreement to be terminated. Which of the following is NOT by operation of law? Select one: a. The seller discharges the broker. b. The property is destroyed by fire. c. The broker declares bankruptcy. d. The seller dies.

a. The seller discharges the broker.

Real estate licensees are required to disclose pertinent information relative to property they list. Which of the following are you NOT required to disclose? Select one: a. The seller is having financial problems and must sell the property to avoid bankruptcy. b. The state plans to build a new highway near the property. c. The property is subject to seasonal flooding. d. The interior of the house is badly in need of painting .

a. The seller is having financial problems and must sell the property to avoid bankruptcy.

If a broker accepts a promissory note or post-dated check as a deposit on an offer, that information must be disclosed to the seller. Select one: a. True b. False

a. True

A client is obligated to her agent for... Select one: a. indemnification against loss not caused by the agent. b. reimbursement. c. performance. d. all of the above.

a. indemnification against loss not caused by the agent.

Which of the following choices would be the most accurate definition of the term "agency relationship" in real estate practice? Select one: a. A contract whereby a seller hires an agent to represent the seller in the sale of a property. b. A contract whereby a buyer or seller hires an agent to represent the buyer or seller in a real estate transaction. c. A contract which is effectively a power-of-attorney. d. A contract whereby a client hires an agent to represent the client in a real estate transaction of some kind.

b. A contract whereby a buyer or seller hires an agent to represent the buyer or seller in a real estate transaction.

A salesperson can set up escrow accounts for each of his or her clients, in the name of the client and the salesperson. a. True b. False

b. False

If a seller has delivered a deed into escrow, but dies before the closing of the sale, the deed is not considered to have been delivered, and the sale need not be consummated. Select one: a. True b. False

b. False

A seller contacted 3 brokers and asked each to suggest the listing price for his property. Broker A said $78,000. Broker B said $79,000. Broker C said $91,000. The seller listed with Broker C and the house later sold for $76,000. Broker C is guilty of violating which of his or her agency responsibilities? a. Loyalty. b. Reasonable care. c. Disclosure. d. Accountability

b. Reasonable care.

Licensee Laurie makes a listing presentation to Seller Steve. Steve agrees to give Laurie a listing and agrees to pay her a commission upon sale, but refuses to sign any written contract. How was this agency relationship created? Select one: a. There is no agency relationship since it is not in writing b. This is an expressed agency c. This is an implied agency d. This is agency by ratification

b. This is an expressed agency

Which of the following would NOT be an agent? Select one: a. A real estate salesperson handling only referrals. b. A property manager employed by the owner. c. A person working for a multiple listing service. d. A person holding a power of attorney.

c. A person working for a multiple listing service.

A broker can do which of the following? Select one: a. Accept, as binding, a promissory note given as an earnest money deposit. b. Accept, on behalf of the seller, an offer OVER the listed price of the property. c. Buy and sell property in his own name. d. Represent both buyer and seller, with the permission of the buyer.

c. Buy and sell property in his own name. A broker may NOT accept any terms or conditions contained in the offer. The broker's job is to find a ready, willing and able buyer. Any and all terms of the offer MUST be accepted by the seller. The one exception to this would be if the seller gives the broker a power of attorney to consummate the deal. If a broker is going to represent both buyer and seller, he would need the approval of BOTH parties.

Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist? Select one: a. Mr. Gregory is Gary's client. b. Gary is Mr. Gregory's agent. c. Gary's broker is the agent of Mr. Gregory for a reasonable time. d. No agency relationship exists.

c. Gary's broker is the agent of Mr. Gregory for a reasonable time.

If a listing broker tells a prospective buyer, "...go ahead and make that offer, I'm sure the seller will accept it...", the broker may have created an agency relationship which would be described as: Select one: a. General agency b. Express agency c. Implied agency d. Unilateral agency

c. Implied agency

What is the purpose of earnest money being part of a real estate contract? Select one: a. Without it, there would be no consideration. b. It allows the seller to personally hold the earnest money until closing. c. It shows the seller that the buyer is serious about following through with the contract. d. It guarantees the buyer will close

c. It shows the seller that the buyer is serious about following through with the contract.

Seller Corcoran is in very poor health and cannot work his farm. Should a broker, who has a listing on the farm, disclose this fact to prospective buyers? a. Yes, it is a material fact about the farm which Moore must disclose. b. Yes, it may help to get at least a low offer and help sell the farm. c. No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property. d. No, it would be a violation of Federal Fair Housing Laws.

c. No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property.

Who is an intermediary between a buyer and a seller? Select one: a. Lender. b. Mortgage broker. c. Real estate broker. d. FDIC.

c. Real estate broker.

Agency Relationship

created when one person (the client) delegates to another (the agent) the right to act on his behalf in a business transaction.

An agent's authority can arise from: a. Ratification. b. Custom. c. Implication. d. All of these choices.

d. All of these choices.

All of the following will automatically terminate a listing by operation of law, EXCEPT: Select one: a. Bankruptcy of the client. b. Destruction of the property. c. Condemnation of the property. d. Client's decision.

d. Client's decision.

Dave and Pat want to purchase the home that is occupied by their grandparents. They want to take title in such a way that will result in the least amount of income tax liability for them. How should a real estate salesperson or broker advise them? Select one: a. Advise them to take title as tenant-in-common with their grandparents. b. Advise them to acquire title as joint tenants with each other. c. Advise them to take title as tenants-in-common but each with an equal interest. d. Refer Dave and Pat to an attorney or tax advisor.

d. Refer Dave and Pat to an attorney or tax advisor.

A salesperson lists a home. The house burns down prior to receiving an offer. Which of the following is true in this situation? Select one: a. The vacant lot is still listed. b. The broker can sue the seller for the commission based on the listed price. c. All advertising must be revised to accurately describe the property. d. The listing automatically terminates.

d. The listing automatically terminates.

Termination of Agency

death or incapacity of either party; destruction or condemnation of the property; expiration of the agency; mutual agreement; renunciation by the agent/licensee (possible lawsuits); revocation by the principal/client (possible lawsuits);

Universal Agent

given the legal power to transact matters of all types on behalf of the principal. An unlimited power of attorney would be an example of this type of agency.

Doctrine of Relation Back

means that the title passes when the deed is delivered into escrow. The death of the grantor does not terminate the escrow.

Special Agent

one authorized by the principal to execute specific acts: the broker is this type of agent with limited authority.

Indemnification

the client should compensate the licensee if actions of the client cause financial harm to the licensee