Unit 8 - Review Questions Real Estate Brokerage

Real estate trade associations offer professional training to members, who must follow a code of ethics.

The answer is true. Real estate trade associations have a long history of advancing the real estate profession, particularly by establishing a code of ethics to which members must comply.

In real estate, a sales associate is always A) a combination office manager, marketer, and organizer with a fundamental understanding of the real estate industry, who may or may not be licensed. B) an independent contractor. C) an employee of a licensed broker. D) a licensee who performs real estate activities on behalf of a broker.

The answer is a licensee who performs real estate activities on behalf of a broker. While the sales associate may be treated as an independent contractor for income tax purposes, the sales associate must still work directly under the broker.

If present at the time the transaction closes, a broker is considered to be the procuring cause of a sale.

The answer is false. A broker is considered the procuring cause of a sale if the broker started an uninterrupted chain of events that resulted in the sale.

A real estate sales associate is licensed to buy, sell, exchange, or lease real property for others, and to charge a fee for those services.

The answer is false. A real estate broker is licensed to buy, sell, exchange, or lease real property for others and to charge a fee for those services.

Only a few states regulate the activities of real estate licensees.

The answer is false. All 50 states, the District of Columbia, and all Canadian provinces license and regulate the activities of real estate professionals.

The practice of illegally setting standard prices for products or services is called a tie-in agreement.

The answer is false. Price-fixing is the practice of competitors setting prices for products or services. A tie-in agreement is an agreement to sell one product only if the buyer also purchases another product.

A broker who owns a realty agency does not permit his sales associates to agree to more than a 5% commission in any transaction. After reading a newspaper article about this realty agency's policies, the broker of another realty agency decides to also adopt the 5% maximum. Based on these facts, which of these statements is TRUE? A) Although the first realty agency's policy is legal, the second realty agency's adoption of the same maximum commission may constitute an antitrust violation if both brokers are in the same real estate market. B) Both brokers engaged in illegal price-fixing. C) The first realty agency's policy is price-fixing and violates the antitrust law. D) Neither broker has committed an antitrust violation.

The answer is neither broker has committed an antitrust violation. Brokers must independently determine commission rates or fees for their own firms. Because the second agency's broker learned about the first agency's policies from a public source, the newspaper, and did not discuss the policy with the first agency, neither broker has committed an antitrust violation.

All of these are requirements for independent contractor status used by the Internal Revenue Service EXCEPT A) a substantial portion of the individual's income is based on sales production rather than hours worked. B) specific hours stated in a written agreement. C) a current real estate license. D) a written agreement that specifies that the individual will not be treated as an employee for tax purposes.

The answer is specific hours stated in a written agreement. The real estate broker may require an employee to follow rules, such as working a certain number of hours, but the broker may not do so if treating the affiliated sales associate as an independent contractor.

A real estate broker had a listing agreement with a seller that specified a 6% commission. The broker showed the home to a prospective buyer. The next day, the buyer called the seller directly and offered to buy the house for 5% less than the asking price. The seller agreed to the price and informed the broker in writing that no further brokerage services would be required. The sale went to closing six weeks later. Based on these facts, which of these statements is TRUE? A) The broker is entitled to a partial commission, and the buyer is obligated to pay it. B) While the broker was the procuring cause of the sale, the seller properly canceled the contract; without a valid employment agreement in force at the time of closing, the broker is not entitled to a commission. C) Under the facts stated, the broker is not the procuring cause of this sale but is still entitled to a commission. D) The broker was the procuring cause of the sale and is entitled to the full 6% commission.

The answer is the broker was the procuring cause of the sale and is entitled to the full 6% commission. Because the broker introduced a ready, willing, and able buyer to the seller prior to the seller's cancellation of the listing agreement, the broker is entitled to the commission.

Why have real estate license laws been put into effect? A) To protect the public and establish standards of professionalism B) To prevent licensees from engaging in profit-making activities C) To protect licensees from lawsuits D) To establish maximum levels of competency and a moral marketplace

The answer is to protect the public and establish standards of professionalism. Real estate license laws protect the public by ensuring a standard of competence and professionalism in the real estate industry.

A real estate sales associate is an individual who is licensed to perform real estate activities on behalf of a licensed broker.

The answer is true. A real estate sales associate is any person licensed to perform real estate activities on behalf of a licensed real estate broker; the broker is fully responsible for the actions performed in the course of the real estate business performed on behalf of the broker.

Price-fixing, group boycotting, and allocation of markets are three examples of antitrust violations.

The answer is true. Antitrust laws prohibit monopolies and any contracts, combinations, and conspiracies that unreasonably restrain trade, such as price-fixing, group boycotting, allocation of customers or markets, and tie-in agreements.

The amount of a broker's compensation is always negotiable.

The answer is true. Because the real estate industry is subject to antitrust laws, the amount of a broker's compensation is always negotiable and may not be set or determined by a multiple listing association or any professional organization.

The Internal Revenue Service has established criteria for determining whether a sales associate is classified as an employee or a nonemployee for income tax purposes.

The answer is true. The Internal Revenue Service (IRS) has established three requirements needed to establish a nonemployee status for tax purposes: (1) the individual must have a current real estate license, (2) the individual must have a written contract with the broker specifying that the individual will not be treated as an employee for federal tax purposes, and (3) a substantial portion of the individual's income as a real estate professional must be based on sales production and not on the number of hours worked.

Real estate license laws set up a disciplinary system to enforce the acceptable standards of conduct and practice for licensees.

The answer is true. The real estate license laws not only set standards for conduct and practice, but they also enforce those standards.