Unit 25

The RECAD disclosure form is NOT required in commercial transactions.

The answer is false. This is a common misunderstanding. The RECAD disclosure form is not required in certain situations when a licensee is engaged in transactions with any corporation, nonprofit corporation, professional corporation, professional association, limited liability company, partnership (including any partnership created under the Uniform Partnership Act), real estate investment trust, business trust, charitable trust, family trust, or any government entity. While such entities are most often involved in commercial transactions, if an individual or group of individuals (not amounting to a partnership) purchases commercial property, the RECAD disclosure form is required.

A broker in Alabama is permitted to assist the parties in a real estate transaction without representing either party.

TRUE

A protection clause in the listing agreement protects the sellers from unscrupulous buyers who try to avoid paying a commission.

FALSE

Explaining the broker's company policy on agency creates the agency relationship with the consumer.

FALSE

It is a good business practice for a broker to take a listing that allows the broker to receive any amount of money over a certain net price to the seller.

FALSE

Once a buyer brokerage agency agreement is terminated, the broker no longer owes any duties to the buyer.

FALSE

Signing the Real Estate Consumer Agency Disclosure (RECAD) form obligates the consumer to pay compensation to the broker.

FALSE

Brokerage agreements may not be assigned, sold, or otherwise transferred to another broker without the express written consent of all the parties to the original agreement.

TRUE

It is illegal to place a sign on any property offering it for sale without the owner's consent.

TRUE

To have a valid listing agreement, all parties to a listing must sign.

TRUE

Interfering with a contractual relationship is called A) conveyance. B) res ipsa loquitur. C) alienation. D) lis pendens.

The answer is alienation. Legally binding listing agreements must be respected by outside parties. Alienating those involved in contractual relationships is illegal. This word can be remembered by referencing the old cause of action in divorce cases involving infidelity—"alienation of affection." Ironically, "alienation" is also a legal expression for transfer of real estate. Both cases involve a transfer—a transfer of real estate or an attempted transfer of allegiance.

Listing agreements in Alabama must be in writing if the licensee establishes an agency relationship with the seller and must include all of the following EXCEPT

The answer is an automatic renewal clause. In Alabama, listing agreements must have a definite expiration date and cannot have an automatic renewal clause. Recall that this law does not apply to buyer agency agreements.

Another name for the client in a real estate agency relationship is

The answer is principal. The agent owes fiduciary obligations to the principal. Because of this, the agent is sometimes called a fiduciary, but the client is the principal.

Which of the following is an example of a ministerial act?

The answer is responding to general questions about a specific property's price and location. Ministerial acts are services for a consumer that are informative in nature and do not rise to the level of specific assistance. The agent gains confidential information during the process of determining a price range and reasons for the geographic location of the property. The agent who represents the buyer may argue on behalf of the buyer and assist the buyer during the stages of making a counteroffer.

When following disclosure rules, real estate agents should ensure that

The answer is written disclosure is made before the consumer enters into any written agreement. Initially, disclosures may be oral, but written disclosure must be made before the consumer enters into any written agreement.

specifies a net sale price to be recieved by the owner, with the excess over that price to be recived by thebrokers as commission

net listing

agreed-upoon fees legally paid between brokers

referall fees

inducing any party to a contract to break the contract in order to substitute a new contract, motivated by the personal gain of the licensee

solicitaion

taking listing clients from one broker when leacing to work for a second broker

transfering listings

A management agreement is to a property manager as

The answer is a listing agreement is to a broker. A listing agreement is an employment contract between a principal (seller) and a broker just as a management agreement is an employment contract between a property owner and property manager.

Which of the following is TRUE when real estate licensees follow agency disclosure rules? A) Specific assistance can be performed anytime before agency disclosure has taken place. B) Agency disclosures do not include agreements for broker compensation. C) Agency disclosures create an obligation on the part of the buyer or the seller. D) Agency disclosures are never used to validate that the broker's form of agency has been discussed with the consumer. Explanation

The answer is agency disclosures do not include agreements for broker compensation. The broker's compensation is determined by a brokerage agreement, not by an agency disclosure.

At what point should a real estate licensee discuss potential conflicts of interest when listing a property for sale? A) Before the seller executing a purchase offer B) Before showing the property to a client of the same company C) Before presenting a purchase offer to the seller D) Before signing the listing agreement

The answer is before signing the listing agreement. Real estate licensees should discuss the possible conflicts of interest and limited consensual dual agency before the seller signs the listing agreement. The seller might not want to enter into a listing agreement with the expectation of aggressive representation from the agent, only to see the agent's responsibilities later diluted through limited consensual dual agency. The seller might prefer to list with a company with a lower likelihood of potential conflicts of interest.

In Alabama, what type of relationship obligates the agent to answer questions truthfully and transmit offers and counteroffers but to provide no advice or agency services?

The answer is dual agency. The limited consensual dual agent cannot be the advocate or adviser of either party because of the built-in conflict of interest.

Which of the following is TRUE about a broker and a property owner in Alabama who enter into an exclusive right-to-sell listing agreement to sell the owner's property? A) Alabama law assumes the listing agreement is an exclusive right-to-sell listing unless it states otherwise. B) The owner reserves the right to sell the property during the listing period without paying the broker a commission. C) It gives the broker the exclusive right to market the seller's property during the term of the listing period. D) The broker is due a commission only if the broker sells the property.

The answer is it gives the broker the exclusive right to market the seller's property during the term of the listing period. With an exclusive right-to-sell listing, the listing broker is due a commission if property is sold under listed terms during the listing period regardless of who sells the property, including the owner. If it is an exclusive-agency listing, the owner of the property promises to compensate a

Do agency disclosure agreements include any provisions to pay compensation to a licensee?

The answer is no, because the obligation to pay compensation does not determine an agency agreement. Agency disclosure agreements do not include any provisions to pay compensation because the obligation to pay compensation is a contractual issue, not an issue involving the creation of agency.

A licensee agrees to sell a neighbor's home in return for a 6% commission. The licensee makes all the proper disclosures and writes up a listing agreement but leaves it with the neighbor so the neighbor's spouse can also sign it after returning from a business trip. The licensee forgets to follow up and never obtains a written listing agreement. At closing, the neighbor refuses to authorize payment of a commission, citing the lack of a written listing agreement. Is the licensee entitled to the commission? A) Yes, because it was the procuring cause of the contract and sale. B) Yes, because the parties had an implied contract for agency services. C) No, because the parties had no contract for agency services. D) No, because the qualifying broker was the procuring cause of the contract and sale.

The answer is no, because the parties had no contract for agency services. There are no implied agency relationships in real estate brokerage, although they might be allowed and recognized in other situations. Issues regarding procuring cause and whether money is due the licensee or the broker are irrelevant if there was no written and signed listing agreement.

A salesperson works for a brokerage and obtains listing agreements from her mother, brother, and daughter, none of whom have met the qualifying broker. The salesperson becomes dissatisfied with the support services offered by the brokerage and moves her license to another brokerage. Can the salesperson ask her relatives to terminate their listing agreements with the first brokerage and move them to the second brokerage?

The answer is no. Listing contracts belong to the qualifying broker, not the salesperson. No matter what relationship the salesperson has with the sellers, if the salesperson solicits those sellers to terminate their contracts, she is interfering with a contractual relationship.

Transaction brokers may NOT A) show properties. B) provide information on financing. C) hold earnest money in the firm's trust account. D) offer negotiation assistance.

The answer is offer negotiation assistance. Transaction brokers may not offer advice regarding price or terms and may only transmit offers and counteroffers without comment. Any real estate licensee may hold earnest money in the firm's trust account, in accordance with buyer and seller instructions as agreed in the purchase contract.

An agent has a reputation for being difficult, confrontational, noncommunicative, and prone to exaggeration in describing property features on the MLS. You are working with a buyer, and one of that agent's listings seems to fit your buyer's requirements, but three other properties listed by other agents also seem ideal. You should A) disclose to the buyer that you are not presenting listings by unscrupulous agents. B) present only the three listings by other agents. C) present the three listings first, and then, only if the buyer does not make an offer on any of them, present the difficult agent's listing. D) present all four listings but disclose personal knowledge of issues with the first agent that might impede negotiations and an orderly and timely closing.

The answer is present all four listings but disclose personal knowledge of issues with the first agent that might impede negotiations and an orderly and timely closing. An agent who refuses to disclose certain properties, or certain buyers because of the other agent involved, is not fulfilling the required ethical obligations to the client. On the other hand, if specific cautionary information is known to the agent—as opposed to mere gossip, no matter how reliable it seems—then that specific information should be shared with the buyer so it can be factored into the decision-making process. Even if the buyer is a customer and not a client, the agent owes it the duty of honesty. The duty of honesty includes revealing all properties that meet the buyer's stated needs. This issue actually arises most often when listing agents show buyers only their own listings and no other eligible properties, in order to avoid commission splits. That practice is unethical.

A property owner who wishes to lease real property but does not want to deal directly with tenants or the property would enter into what type of agreement with a qualifying broker/company? A) Property management agreement B) Listing agreement C) Buyer broker agreement D) Dual agency agreement

The answer is property management agreement. The owner hires a real estate broker to "manage" the property (i.e., locate tenants, handle repairs, collect rents, etc.).

Which is TRUE regarding listing agreements in Alabama?

The answer is the listing agreement must include a definite expiration date. Agents are required to give a legible copy of any agreement to all parties to the agreement as soon as reasonably practical after it has been signed by all parties. Recall that while good business practices would encourage written agreements in all circumstances, listing agreements for a broker to act as a transaction broker need not be in writing to be enforceable.

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of the following statements is TRUE?

The answer is the seller and the buyer must be informed of the situation and agree to the broker representing both of them. Limited consensual dual agency is permitted with the informed written consent of both parties.

Which is TRUE regarding compensation from the seller in a listing agreement?

The answer is the seller may authorize the broker to share compensation with other licensed brokers. In the listing agreement, the seller may authorize the broker to share compensation with other licensed brokers, and if the broker is a participant in a multiple listing service, this sharing of compensation may be published. Compensation for the broker may be a percentage of the sales price or a specific fee for services rendered.

Which statement concerning brokerage agreements in Alabama is TRUE? A) They may be assigned without permission when a brokerage firm is purchased by another brokerage firm. B) They may be sold without written consent. C) They may not be assigned or sold without written permission. D) They may be assigned without any written permission.

The answer is they may not be assigned or sold without written permission. Brokerage agreements cannot be assigned or sold without the express written consent of all the parties to the original agreement.

Required by brokers to assist clients or customers in reaching their objectives of selling or buying RE

Broker cooperation

A real estate licensee may represent both a seller and a buyer in the same real estate transaction.

TRUE

Which is FALSE regarding real estate license requirements when managing property? A) Alabama license law requires anyone managing a building to have a property management license. B) A manager of an apartment building or complex is exempt from real estate license requirements. C) An onsite manager of a condominium building or complex must be licensed. D) Anyone who manages a single-family rental home for a fee must be licensed as a qualifying broker.

The answer is Alabama license law requires anyone managing a building to have a property management license. Alabama law does not provide for a separate property management license.

Which of the following actions is illegal regarding solicitation of another broker's listing? A) A broker answers questions about services a broker provides when the consumer initiates the call. B) A consumer who is under contract with one broker contacts a second broker to discuss a like brokerage agreement with the second broker. C) A broker induces a seller under contract with another broker to break the contract for the purpose of substituting a new contract with the second broker. D) A broker contacts a seller/client of another broker and enters into a buyer agency agreement with that seller even if the seller has listed her home for sale with the other broker.

The answer is a broker induces a seller under contract with another broker to break the contract for the purpose of substituting a new contract with the second broker. Licensees are not allowed to solicit either listing or buyer brokerage agreements when a like agreement exists with another broker.

Which of the following actions is legal regarding the solicitation of listings? A) A second broker may contact a seller/client of another broker and enter into a buyer agency agreement with that seller even if the seller has listed the home for sale with the other broker. B) Licensees are allowed to solicit either listing or buyer brokerage agreements when a like agreement exists with another broker. C) A broker is allowed to induce any party to a contract to break the contract for the purpose of substituting a new contract. D) A consumer who is under contract with one broker may contact a second broker to discuss a like brokerage agreement with the second broker.

The answer is a second broker may contact a seller/client of another broker and enter into a buyer agency agreement with that seller even if the seller has listed the home for sale with the other broker. It is not illegal for a broker to contact a client of another broker for the purpose of entering into an agreement to provide a type of real estate service unrelated to the type of service currently being provided by the other broker.

Which of the following BEST demonstrates a listing agent's duty of obedience to a seller? A) Negotiating offers B) Developing a marketing plan C) Creating a comparative market analysis (CMA) to establish a realistic asking price D) As directed, not allowing showings on Tuesdays

The answer is as directed, not allowing showings on Tuesdays. Under the duty of obedience, a licensee must fulfill all lawful instructions within the scope of the agency agreement. Under the duty of care and skill, the licensee prepares a CMA and develops a marketing plan.

Which situation falls under the category of specific assistance?

The answer is asking a buyer financial questions. Asking a buyer financial questions deals with confidentiality and, therefore, falls under the category of specific assistance.

A consumer has a six-month listing contract with broker A. Five months into the contract, the consumer becomes disenchanted and calls broker B about taking over the listing when the first contract expires. What can B do?

The answer is broker B may discuss the situation fully with the consumer and sign a listing contract that will become effective immediately upon expiration of the first contract. From time to time, a consumer who is under contract with one broker may contact a second broker and want to discuss a like brokerage agreement with the second broker. The second broker may talk with the consumer who initiates the call; however, any agreement entered into cannot become effective until the first agreement expires.

Which term BEST describes the service of bringing together buyers and sellers and landlords and tenants to complete a real estate transaction?

The answer is brokerage. In Alabama, a real estate broker is licensed to act as an intermediary between parties involved in buying, selling, exchanging, renting, or leasing real estate.

A married couple own property together. Only one spouse signs the listing agreement. Can the licensee represent both in the sale of the property? A) Yes, because one owner's signature is enough to list a property. B) Yes, because the spouses are legally the same person in such situations. C) No. D) No, unless one spouse verbally agrees and the other spouse actually signs.

The answer is no. The listing agreement must include the signatures of all concerned parties, which includes all persons with an ownership interest in the property. While listing agreements for a broker to act as a transaction broker need not be in writing to be enforceable, this is a technicality that should be avoided in practice. Remember, too, that the question says, "Can the licensee represent them..." Because of the use of the word "represent," we know the question does not contemplate a transaction brokerage.

Parties who must sign a listing agreement include all of the following EXCEPT A) everyone who has an ownership interest. B) both spouses if the property is occupied as the home of a married couple. C) the broker or her agent (affiliated salesperson or associate broker). D) only the listing broker if the property is not occupied as a home.

The answer is only the listing broker if the property is not occupied as a home. To have a valid listing agreement, everyone who has an ownership interest should sign the listing agreement. The broker or her agent (affiliated salesperson or associate broker) should also sign. In Alabama, if the property is occupied as the home of a married couple, both spouses must sign the listing. For property not occupied as a home, only the owner(s) of record must sign the listing.

In Alabama, real estate agents cannot bind their principals to a contract. This is an example of

The answer is special agency. Property managers are examples of general agents, with the ability to make binding contracts for their principals. Real estate agents are only special agents, with the ability to represent their principal in real estate activities but no ability to make binding commitments.

What are the consequences for a real estate licensee who did not discuss any form of agency representation with the buyer until after the closing? A) Invalidates the transfer of property B) Subjects the licensee to disciplinary action by the Alabama Real Estate Commission C) Invalidates the sales contract D) Return of all commission fees by the licensee

The answer is subjects the licensee to disciplinary action by the Alabama Real Estate Commission. Failure to discuss agency in writing before the consumers enter into a transaction is a violation of licensing law and subjects the licensee to discipline; however, failure to make the disclosure does not affect any sales contract that may later be executed.

In Alabama, licensees practice agency according to

The answer is the Real Estate Consumer Agency Disclosure Act (RECAD). The Real Estate Consumer Agency Disclosure Act, better known as RECAD, became law on October 1, 1996. Under this act, the duties of licensees, as spelled out, supersede any duties of a licensee to a party to a real estate transaction that are based on common law principles of agency to the extent that the common law duties are inconsistent with the duties of licensees as specified.

A licensee employed by a real estate firm decides to terminate his employment and transfer his license to a different real estate firm. What happens to the licensee's six active listings after the transfer?

The answer is the active listings remain the property of the old real estate firm. Upon the termination of employment, licensees are not allowed to take or use any brokerage agreements because they are the property of the broker.

Which of the following is TRUE about a buyer brokerage agreement in Alabama?

The answer is the agreement is terminated at expiration of the term or at fulfillment of the purpose. Ignoring default on the part of one party or other, the buyer brokerage agreement is terminated at expiration of the term or at fulfillment of the purpose.

Which is TRUE regarding compensation from the buyer in a buyer brokerage agreement? A) The broker's fee may only be a specific fee for services rendered. B) The multiple listing service may restrict the buyer's rights of negotiating the commission with the broker. C) The agreement may direct the broker to seek the commission from the sales proceeds at the closing. D) Compensation is negotiable between the seller and the broker.

The answer is the agreement may direct the broker to seek the commission from the sales proceeds at the closing. By law, multiple listing regulation, and the code of ethics, no one should attempt to restrict the buyer's rights of negotiating the commission or fee with the buyer's broker.

A qualifying broker hires a real estate agent as an independent contractor. The written agreement between them specifically states that the agent is not the employee of the broker but acts independently at all times and under all circumstances. Which statement is FALSE? A) The broker is not responsible if the agent is guilty of negligence in a real estate transaction, and the injured party must collect from the agent or from the agent's E&O insurance. B) The agent must keep the broker fully informed of all its activities. C) The agent must advise the broker or any problems in a real estate transaction that might impact the broker's responsibilities. D) The broker must supervise the agent.

The answer is the broker is not responsible if the agent is guilty of negligence in a real estate transaction, and the injured party must collect from the agent or from the agent's E&O insurance. The independent contractor relationship merely affects things such as workers compensation insurance, IRS withholding taxes, and broker liability for the agent's injuries to third parties, such as an automobile accident with a third party while showing properties to a buyer. If the agent is an employee, the broker might be liable for the automobile accident. As an independent contractor, the broker is probably not liable.

Which of the following is TRUE about net listings? A) This type of listing is legal in Alabama. B) This type of listing is always an exclusive-agency listing. C) The broker's commission is the amount the property sells that exceeds the amount to be received by the owner. D) The broker's commission is based on a percentage of the selling price.

The answer is the broker's commission is the amount the property sells for that exceeds the amount to be received by the owner. A net listing is an agreement that specifies a net sale price to be received by the owner, with the excess going to the broker as commission. Alabama law prohibits net listings.

A property does not sell during the first listing period, and the owner changes brokers and reduces the price. One month later the property goes under contract to someone who was shown the property three months earlier by the first broker. What is the risk?

The answer is the owner might owe two commissions, one to each broker. Sometimes, a consumer will become disenchanted with a broker. At the expiration of the listing period, the consumer will then change companies and employ a different broker. Depending on the circumstances, a consumer might be liable for paying two commissions on a single sale because of a protection clause in the first listing agreement. While not required under Alabama law, it is good practice for a replacement broker to make written inquiry of the earlier broker regarding the existence of a protection clause and the identity of prospects who might be covered under the protection clause.

Which is TRUE about protection clauses included in many listing agreements and buyer representative agreements? A) To be enforceable, agreements should include the protection clause as part of the original agreement and should set a definite protection period. B) Protection clauses protect the seller from unscrupulous buyers who take the broker's generated leads and then buy the property after the listing agreement expires. C) Protection clauses may be included in either the listing or the buyer brokerage agreement but must end at the expiration of the agreement. D) The use of protection clauses in a brokerage agreement is specifically addressed in Alabama real estate license law.

The answer is to be enforceable, agreements should include the protection clause as part of the original agreement and should set a definite protection period. Currently, the use of protection clauses in a brokerage agreement is not specifically addressed in Alabama law. A protection clause protects the broker from unscrupulous sellers or buyers who take the broker's generated leads to avoid paying a commission to the broker. A protection clause extends beyond the expiration of the agreement.