Broker Contract Law

All of the following could render a contract voidable except: a. one party to the contract was legally insane at the time of the signing b. the contract was for an illegal purpose c. one party was intoxicated at the time of the signing d. both a and b

D If one party to the contract was intoxicated, the contract is VOIDABLE. If one party is legally insane or the contract was for illegal purpose, the contract is VOID

A general agency empowers the agent to: a. transact matters of all types for the client b. transact the client's affairs on a certain business c. perform only certain acts for the client d. performa any legal act for a client

B A general agent is authorized to perform any and all acts associated with a certain business. The other choices are too broad or two narrow

According to the 1988 Fair Housing Law, which of the following is not considered to be handicapped? a. a person addicted to alcohol b. a person addicted to a controlled substance c. both a and b d. a person who, by their actions, is believed to be insane

B Persons addicted to narcotics are not handicapped under the Federal Fair Housing Law. However, alcoholics and the mentally ill are protected

The legal relationship between a broker and seller is generally: a. special agency b. general agency c. universal agency d. none of the above

A As a general rule a listing agreement between the seller and agent is a special or specific agency. The agent is authorized to do one act and one act only (sell property). A listing agreement could, depending on the wording, create something other than a special agency

An award made from the Transaction Recovery Fund will result in: A. automatic suspension of the licensee's license B. a fine not to exceed $50,000 C. automatic revocation of the licensee's license D. a fine and up to 6 months in prison

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: A (virginia real estate transaction recovery fund) Upon payment of a claim, the Real Estate Board REVOKES the license of the licensee named in the complaint. The law is silent as to the maximum amount of fine a licensee might receive for improper or dishonest conduct, but the Board cannot order a prison sentence.

All of the following are examples of dual agency except: a. broker representing buyer and seller with consent of both b. escrow agents c. broker represents both buyer and seller without consent of either d. two salespeople represent a different buyer and seller for the same broker

D Escrow agents are dual agents because they hold money for the benefit of both buyers and sellers. If a dual agency is undisclosed, it is still a dual agency, although the contract may be rescinded. However the situation where two salespersons represent a different buyer and seller for the same broker is the definition of a designated agency

The relationship which generally exists between a salesperson and a seller is a: a. universal agency b. special agency c. general agency d. none of the above

D Only the broker has an agency relationship with the seller. The salesperson has an agency relationship with the broker.

Mr Gregory has a home for sale a "For Sale by Owner" sign in front. Salesperson Gary calls, identifies himself and asks for a key to show the property. Mr. Gregory agrees. Which describes Mr. Gregory and Gary's relationship if any? a. Mr. Gregory is Gary's principal b. Gary is Mr. Gregory's agent C. Gary's broker is the agent for Mr. Gregory for a reasonable time d. no agency relationship exists

C An agency relationship 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 time, the agency would continue for a reasonable time

The law of agency can include relationships between principals, agents and: a. sellers b. buyers c. third parties d. no one

C 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

Susan and Sally enter into a buyer/broker agreement. However Sally subsequently falls on hard times. Susan gets nervous and terminates the contract. Is Susan in breach? a. yes, if Sally is the Broker b. no, so long as Sally takes no action c. no if Sally filed for bankruptcy d. yes, if both parties agreed

C It makes no difference if Sally was the client or the broker, or whether Susan takes action (a breach is a breach even if it is not penalized). However, where a party dies, suffers from insanity, or enters bankruptcy, the contract may be terminated without penalty

What is the agency relationship between cooperating brokers (listing broker and selling broker) who are members of the MLS? a. co-brokers b. the cooperating broker could be a sub agent to the seller c. the listing broker is the principal and the cooperating broker (selling broker) is the "agent" of the listing broker d. none of the above

C Notice the question asks for the agency relationship between the the listing broker and the selling broker. It does not ask for the relationship between the selling broker and the seller. In this situation, the listing broker is the principal and the cooperating broker (selling broker) is an agent of the listing broker

Which would terminate an agency by operation of law? a. mutual agreement b. unilateral recession c. bankruptcy by the seller d. abandonment by the broker

C Of the listed choices, bankruptcy is the only method to terminate by operation of law. The others describe termination by act of the parties

The clause in a lease that allows rent to increase is a/an: a. acceleration clause b. percentage clause c. escalator clause d. contingency clause

C Only an escalator clause specifies that rent will increase at periodic times by predetermined amounts

Under the statute of frauds, a verbal contract on the sale of real property is: a. void b. voidable c. unenforceable d. both a and c

C The statute of frauds does not determine whether verbal contracts are illegal, void or voidable but it does require that contracts for real property to be in writing or they are unenforceable

Earnest money deposits may be placed in interest bearing accounts provided that the: A. contract specifies the beneficiary of any interest earned B. account earns a minimum of 5% interest C. account is properly titled as escrow D. interest is divided between the cooperating brokers

>> CORRECT ANSWER IS: A >> YOUR ANSWER IS: C (escrow accounts) The law does not require that escrow accounts bear interest. However, if the account does bear interest the broker must disclose exactly how the interest will be distributed.

Which of the following statements is true when a claim is paid from the Transaction Recovery Fund? A. the licensee named in the claim must post a bond if the licensee continues to practice real estate brokerage B. the claimant assigns to the Board, his or her rights to the extent of the amount of money paid by the Fund C. all claims submitted in connection with the fraudulent actions of one licensee in a single transaction may not exceed $20,000 D. all of the above

>> CORRECT ANSWER IS: B >> YOUR ANSWER IS: C (virginia real estate transaction recovery fund) Once a claim is paid, the claimant subrogates his rights to the Board to allow them to try to collect from the licensee. You may file a claim for as much as you want, but $20,000 is the most one person can collect.

If the Board has authorized a payment from the Transaction Recovery Fund, what effect does it have on the licensee against whom the complaint was filed? A. the licensee has 4 years to repay the Fund B. the licensee's license will be automatically revoked C. the licensee's license will be automatically suspended D. the licensee may continue to sell real estate, if a court has adjudicated him or her bankrupt

>> CORRECT ANSWER IS: B >> YOUR ANSWER IS: C (virginia real estate transaction recovery fund) Once a payment is made from the Fund, the licensee's license is revoked without benefit of a hearing.

An independent broker, in an attempt to obtain listings, authorizes the licensees affiliated with her company to offer an incentive to any person that will list their property with her firm. Which of the following statements is correct? A. the broker has violated Board regulations which preclude paying valuable consideration to an unlicensed person B. the broker must limit this incentive program to 30 days C. such actions could be viewed as creative selling that do not violate Virginia License Law or the regulations of the Board D. the brokers actions violate Anti-trust laws

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: A (disciplinary procedures & sanctions) This is creative marketing. Remember you may pay valuable consideration to the principals to a contract with proper disclosure.

Ben and Barry enter into a valid sales contract. The sales contract specifies that the trash compactor will be in working order. Ben signs a disclaimer/waiver form regarding his property condition. In that form, Ben states that he is selling "as is," stating no opinion on the condition of specified systems. When Barry takes possession of the house, the trash compactor is not operational. Does Barry have a cause of action against Ben? A. no because Ben sold the home "as is" B. yes because Ben's disclosure was defective C. yes because Ben is in breach D. no because Barry took possession

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: B (disclaimers) Ben's disclosure was permissible--one can disclaim knowledge of the condition of specified systems and sell "as is." However, the disclaimer must not contradict the sales contract. In this case, it appears as if Ben is in breach of the sales contract because he promised to deliver the premises with a working trash compactor and failed to do so. Therefore, Ben's disclaimer contradicts the sales contract, and Ben has a cause of action against Barry.

The Board may take disciplinary action against a licensee: A. if a written complaint contains prima facie evidence that a violation of regulations or law have occurred B. if the licensee admits guilt C. after conducting a hearing D. either 2 or 3

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: D (disciplinary procedures & sanctions) Of the choices, the best is that the Board may take disciplinary action after a hearing. However, the Board may take some action in relation to the transaction recovery fund without a hearing.

A broker lists a property. A buyer submits a written offer and the seller accepts it. On the day of scheduled for closing, the seller refuses to sign any of the papers. The broker is entitled to: a. a full commission because the fully performed b. one-half of the agreed upon commission c. out of pocket expenses only d. nothing until or unless the sale closes

A

While previewing a house, the salesperson notices water stains behind the draperies. the owner, when asked, denied there were any water problems. If the salesperson shows the property and fails to mention the water stains, the salesman is guilty of: a. fraud b. misrepresentation c. nothing, because his fiduciary responsibility is to the owner d. puffery

A (material facts) As evidence of leakage or flooding, water stains are material facts that must be disclosed, if known by the salesperson. Because the salesperson knew of the stains and failed to disclose them, his conduct is fraudulent

A listing may be revoked by: a. the seller b. the selling broker c. the salesman who obtained the listing d. the death of the salesman

A A listing may be revoked by the client (seller) agent(broker), or by mutual consent. The salesman cannot terminate the listing. The listing broker not the selling broker may revoke the listing

Which of the following is true of a contract under novation? a. a new contract replaces and old one b. the old contract is valid c. a new party is assigned the rights and obligation of an old party d. both a and b

A The old contract is not void, but is extinguished (ceased to be)

A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. It was obvious the owner had filled in and painted over the crack although the owner advised the sales agent that the seepage problem had been corrected. If the salesperson shows the property without advising potential buyers of the seepage problem, the salesperson would be guilty of: a. fraud b. misrepresentation c. puffery d. nothing

A This is fraud because it is intentional concealment. The licensee is obligated to disclose known material facts about property

The buyer broker agreement is the most similar to the exclusive right to sell contract is: a. exclusive buyer agreement b. exclusive agency agreement c. open buyer agreement d. exclusive right to sell

A the exclusive buyer agreement is the counterpart to the exclusive right to sell agreement

Two brokers agree that they will charge the same commission rates for all property listed by their offices. Such action: a. is common practice b. violates anti-trust laws c. violates both RESPA and Regulation Z d. violates Fair Housing Laws

B

Which of the following is the best definition of a unilateral contract? a. lease b. option c. contract for sale d. listing agreement

B A listing agreement could either be unilateral or bilateral. The best example given here is the option. The seller is obligated to keep the offer open, but the buyer is not required to exercise the option

Which of the following is not essential to a valid sales contract? a. competent parties b. termination date c. consideration d. all of the above are essential

B A termination date is not essential, but it could be included in a sales contract

Which of the following will not terminate an agency by operation of law? a. destruction of the property b. discharge of the broker by the principal c. death of the principal d. death of the broker

B Discharge of the broker (revocation by the principal) is termination by act of the parties, not by operation of law

Jill lists her property with broker Jan. However before the property sells, Jan declares bankruptcy. Jill terminates the agreement. Can she do this without causing a breach of the contract? a. no, only Jan may terminate the contract without breaching it b. yes, because she is justified legally c. no, unless Jan is in breach of the terms d. yes, provided that Jan cannot perform

B If a party to a listing agreement filed for bankruptcy, the other may terminate the agreement without breaching it

Liquidated damages from breach of contract are usually available to the: a. buyer, in the event of the sellers default b. seller, in the event of the buyers default c. broker, in the event of the buyers default d. either the buyer or seller where the other defaults

B Liquidated damages are pre-negotiates damages that are due if a party breaches a contract. In real estate contracts it is common for the buyer to offer an ernest money deposit along with is offer on the property. Generally if the seller defaults and the buyer decides to rescind the contract, the buyer is entitled to his deposit back

How can a broker best demonstrate his compliance with Fair Housing Laws? a. obtain the Equal Oppoirtunity Poster b. document all transactions with customers and clients c. show all porspective buyser all listred properties d. all of the above

B Of the answers given, documenting all transactions with all customers and clients is the best way to demonstrate comliance with Fair Housing Laws. You must do more that obtain the equal ooprtunity posters, you must display them. The law does not require you to show all properties to all buyers.

Two brokers agree that they will charge the same commission rates for all property listed by their offices. Such action: a. is common place b. in violation of anti-trust laws c. is prohibited by RESPA d. both B and C

B The action of the brokers is in direct violation of anti-trust laws. RESPA regulates closing procedures not commissions

All of the following are true of buyer broker agreements except: a. buyer broker agreements cannot be assigned b. buyer broker agreement terms may be disclosed to customers c. buyer broker agreements may be created orally d. the salesperson is not a party to the agreement

B The client in the buyer broker agreement is the buyer. The buyer broker representative's customer is the seller. You may not disclose the agreement to the customer (party you are not representing)

Under a contract for sale, the seller is most likely to be the: a. offeror b. vendor c. grantee d. vendee

B The vendee is known is the buyer and the vendor is the seller

Helen listed her property for $145,000. Jim made an offer for $135,000. Helen made a counteroffer for $140,000. Which is correct? a. Helen's counteroffer is a partial acceptance of Jim's original offer b. Jim is the offeree in his original offer c. Helen is the offeree in her original offer d. In the original offer, Helen is the offeree

D There is no such thing as partial acceptance-an offer is either accepted, rejected, or it expires. Helen's listing is not an offer, only an invitation to others to make offers. Therefore the original offer was made by Jim (offeror) and the only true statement is that Helen was the offeree in the original offer

Under which type of contract would the seller withhold legal title to the property, until the terms of the contract have been fulfilled? a. contract for sale b. option c. installment sales contract d. any of the above

D With a contract for sale, the seller holds title until closing when the buyer presents money in exchange for legal title. With an option, the seller holds title until the option is exercised. With an installment contract, the seller holds title until the buyer pays the agreed upon purchase price in full

Gwen lists her house with broker Steve under a valid exclusive right to sell listing. Steve work diligently to find a buyer for Gwen. After two weeks, steve finds a buyer who makes an offer. However when Steve presents the offer to Gwen he discovers that Gwen worked with Gerry, another broker who sold her house without informing Steve. Steve is furious and demands his commission. Is Steve's listing still active?

No, because the house is sold. Gwen has a good case for collecting his commission, the listing agreement terminated by operation of law when the subject of the contract (the home) sold.

Which of the following would constitute a violation of fair housing laws? a. advertising property to be rented only to single persons b. refusing to show property to a financially unqualified buyer c. refusing to sel to a person because of his or her national oragin d. providing special loan programs for minorities

c You can advertise for single persons only, but if the single person turns out to have a child you cannot exclude them solely on that basis without violating fair housing laws. Being financially unable to pay for your housing is not protected

Jon and Jacob are parties in a valid agency agreement. One day Jon decides he no longer wants to work with Jacob. can Jon terminate the contract? a. yes, if Jon is the client b. no because Jon has an acceptable reason c. yes, regardless of whether Jon is the client d. no, Jon must perform

C Courts will not enslave someone to perform by ordering specific performance. While Jon may be in breach (there is insufficient data to determine), he or Jacob can terminate the contract at any time for any reason, although his actions may cost him a damage award to Jacob

Which of the following would not be a latent defect that the seller must disclose to the buyer a. termite damage b. non-functioning furnace c. seasonal flooding d. cracked foundation

B The broker must disclose all material facts about about the physical condition of the property that are known to the broker. All listed items are latent defects (hidden or not readily discoverable by inspection) except the broken furnace, which is more easily discoverable

A listing agreement will automatically terminate: a. if the selling agent changes brokers b. on the date specified on the listing agreement c. if the owner abandons the property d. all of the above

B The only true statement is that a listing agreement will terminate on the date specified in the agreement. There are other reasons why a listing would terminate but they are not offered as answers. That the owner abandoned the building is not a reason to terminate a listing, he may still enlist a broker to attempt to sell his abandoned property. However if the BROKER abandoned the listing, the seller would be justified in terminating the listing

One's rights in a mortgage or lease may be transferred to another through a/an: a. novation b. assignment c. deed of trust d. either b or c

B The transfer of a contractual obligation or right from one person to another is an assignment. The substitution of one party for an other is a novation. a novation, unlike an assignment, results in a new contract with a different party and the same terms. A deed of trust is a real estate financing agreement, wherein a neutral third person (trustee) holds title until the loan is paid in full

A property management contract could exist between the property manger and: a. his or her employees b. the property owner c. the tenants d. both a and b

B There is no contract between the property manager and the tenants. Any contract between the property manage and his employees would be an employment contract, not a property management contract

A broker received an earnest money deposit to support a valid contract. If the contract is breached and does not close, the broker is required to hold the escrow funds until: A. the buyer requests the deposit be returned B. the broker receives notice of the breach of contract from an attorney C. all principals to the contract agree to the intended distribution D. the non-defaulting party threatens legal action

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: B (escrow accounts) In the event of a breach, the broker must hold the funds until either the parties agree on how they should be disbursed or a court so orders.

If a developer advertises a Time-Share, and offers a prize to any person who will visit and inspect the property, which of the following is true relative to the advertisement? A. the Time-share being offered must be fully described B. the prize offered must be described in detail C. the ad must disclose the date the prize will be awarded D. the ad shall include the date that the offer expires

>> CORRECT ANSWER IS: D >> YOUR ANSWER IS: D (time share advertising) The description of the property offered and the gifts or prizes are very general and non-specific, However, the date of the offer expiration must be included in the ad.

In Fair Housing discrimination cases, the burden of proof is on the complaintant. The complainant must be able to prove: a. the discrimination occured b. that the act of discrimination was not provoked by the complaintant c. only that the accused party intended to discriminate d. actual damages resulted from the acts of the accused

A A complainant only must prove the prohibited discrimination by the respondant occured

Which of the following could cause an otherwise valid contract to be void and invalid? a. misrepresentation by one of the parties b. intoxication c. mutual, unintentional, and material mistake in fact d. all of the above

A A party's misrepresentation could cause an otherwise valid contract to be void and invalid (unenforceable), depending on the nature and circumstances of the misrepresentations. Intoxication and mutual, unintentional and material mistakes of fact cannot render a contract VOID but could render a contract voidable

If the property owner tells the broker that his property is structurally sound but later the broker discovers that there are termites on the property, the broker must: a. inform the seller and all prospective buyers b. contact a pest control company c. encourage the seller to remedy the situation d. all of the above

A all material facts known by a licensee must be disclosed to all parties in a transaction. Termite damage is a material fact however the licensee has no obligation to contact a pest control company or encourage the seller to fix problems (but the can do this

Broker A shows a house with a faulty roof. when he finds out about the roof, he should tell the buyer/customer? a. yes, it is an agency responsibility b. yes, it is a material fact c. only if he is a dual agent d. only if he has the seller's permission

B (material fact) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker

Agency relationships include all of the following duties except: a. obedience b. notice c. confidentiality d. accountability

B Fiduciary duties include obedience, confidentiality, accountability, loyalty, and reasonable care and due diligence. "Notice" is vague and therefore the best answer compared to the others

Which of the following is required for a contract to be valid? a. a writing b. property description c. consideration d. all of the above

C The essential elements of a contract are offer/acceptance, consideration, and lack of defenses. The question does not specify a real estate contract which would require a writing and property description in addition to the other essentials

Which of the following will provide instruction for the distribution and proration of escrow and impound funds? a. a deed b. a mortgage c. the sales contract d. the listing

C The settlement agent will examine various documents to ascertain how to distribute funds. Of the choices, the sales contract will come closest to containing all pertinent information about disbursements

A selling broker is showing a parcel of land and tells the prospective buyer, "In my expert opinion, this property is best for you." This statement could be interpreted as: a. universal agency b. special agency c. implied agency d. general agency

C This could create an implied agency, which might result in an undisclosed dual agency

Broker Sam lists a house and sells it 2 months into the listing period. After closing Sam tries to collect his commission but the seller refuses and correctly asserts that he is not legally obligated to pay. What type of listing did Sam have? a. exclusive agency listing b. open listing c. net listing d. exclusive right to sell listing

C With a net listing (which is illegal in most states) the seller specifies the new amount he must receive and the broker gets anything over and above that amount. If the seller did not get his specified net, then the broker would not be entitled to a commission even though he sold the property. In all other forms, the commission would be due if the broker sold the property

When a salesperson transfers from one broker to another, it is the salesperson's responsibility to: A. pay a license transfer fee of $15.00 B. return his or her license to the Board C. apply for inactive status until the new broker has had new business cards printed D. none of the above

The charge to transfer from one broker to another is $35. The former broker will return the license, therefore none of the above are true

An owner lists a house with a broker for $72,000. Two days later the broker brings an offer for $70,000. At this time, which of the following statements is true? a. the broker has found a buyer and earned his commission b. a ready, willing, and able buyer has been found and a commission is due c. a ready willing and able buyer has been found but no commission is due d. none of the above

D 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. while the buyer is ready and willing, there is no evidence that the buyer is financially able, therefore no commission is due.

A Broker obtains an open listing on a piece of property. In order to collect a commission on the sale of the property, the broker must prove: a. He was licensed at the time of the sale b. He had been engaged by the owner at the time of the sale c. He was procuring cause of the sale d. all of the above

D In order to receive a commission, the broker must be able to prove he was licensed as a real estate agent, he had a listing with the seller in question (engaged by the owner) and he was procuring cause of the sale.

Sal the salesman works for Betty the broker. Betty enters into a listing agreement with Cheryl the seller. Which of the following best describes these relationships? a. subagency b. general agency c. special agency d. both a and c

D In order to work for Betty as a salesman, Sal must be a subagent of Betty. Sal could also be a subagent of Cheryl but the facts are not clear. Betty is an agent of Cheryl. Betty's agency is most likely a special agency relationship (the typical brokerage relationship). No on is likely to have a general agency on these facts

To be legally binding on all parties, a contract for sale must include: a. the signature of the spouse, if the seller is married b. an ernest money deposit c. a method to calculate the licensee's commission d. legally competent parties

D Of the listed choices, only competent parties are required for a binding sales contract. Attorneys usually require a spouses signature if the seller is married, but that is not necessary element. Neither is an ernest money deposit although it is frequently included as a condition

Jones gives a real estate licensee a power of attorney. The licensee would be best described as a/an: a. agent b. broker c. principal d. attorney-in -fact

D One who receives power of attorney is called an attorney in fact. Whether he could be Jones' agent, the question does not specify (requires an agency agreement) Neither does the question specify whether the licensee is a broker, or whether the licensee is a principal (salesperson)

If a blind person with a seeing eye dog wants to rent an apartment in a building that has a "no pets" rule, the landlord may: a. refuse to rent on the basis of the "no pet" rule b. require the dog to live outside the apartment c. charge additional security deposit becaus eof the dog d. require the tenant, upon termination of the lease, to pay for any damage caused by the dog

D Refusing to reasonalbly accomodate this tenant's handicap would violate fair Housing Laws. The requirement that the tenant pay for any damages would apply to any tenant and is not a violation

a listing broker is showing property located near a toxic waste dump. The broker does not tell a prospective buyer about the dump by withholding this information, the broker is negligent in his responsibility relative to : a. obedience b. loyalty c. accountability d. none of the above

D This is material information the must be disclosed. However the listed fiduciary duties are owed by the agent to the client not the customer. therefore none of the answers best answer the question

A private homeowner, selling his property, refuses to enter into a contract because the offerers are a black couple. Has the homeowner violated the law, if so which one? a. yes, the 1968 federal Fair Housing Act, Title VII b. yes, the Civil rights Act of 1968 c. no, the owner is exempt from the law because he is selling his own property d. yes, the Civil Rights Act of 1866

D The 1968 Fair Housing Act grants homeowners an exemption, but no one is exempt from the 1866 Civil Rights Act supported by the 14th Amendment to the Constitution. Action for this type of violation is file in the Federal Courts, not with HUD

Upon listing a property a broker discovers water problems in the basement. The broker should inform: a. the seller only if the broker is a seller's agent b. the buyer only if he is a buyer's agent c. both the buyer and the seller regardless of who the broker represents d. no one

C

A salesperson represents the a. buyer b. seller c. either a or b d. the broker

D

An owner entered into a valid listing agreement. during the period of the agreement, the seller sells the property himself. The seller is not legally required to pay a commission to any broker. What type of listing did the seller have? a. open b. exclusive agency c. exclusive right to sell d. either a or b

D

When a contract is breached, the injured party may a. not sue for money damages b. not sue for specific damages c. rescind the contract bilaterally d. rescind the contract unilaterally

D A breach justifies rescission by the non-defaulting party. However parties must use care to ensure there really is a breach or the rescission will be itself a breach

All of the following would automatically terminate the agency authorization of the listing broker except: a. bankruptcy of the principal b. destruction of the property c. condemnation of the property d. unilateral action

D A listing is terminated by law (automatically) by bankruptcy or death of each party (principal or agent) or destruction or disposition of the property (including condemnation) Acting unilaterally to terminate the listing would be an act of one party and not an operation of law

Which of the following could be valid consideration in a valid contract? a. a mortgage note with interest b. a promise to install a cabinet c. cash payment d. any of the above

D A promise to perform is consideration. consideration does not have to be money, but it can be anything of value. A mortgage note is a promise to perform

A graduated lease is defined as one: a. that includes an option to purchase b. in which all expenses are paid by the lessor c. in which the rent is fixed at intervals d. whereby rent increases with each new tenant

C A graduated lease can be compared to an adjustable rate mortgage. The rent will increase of decrease based on some future factor. However, after it is adjusted it is fixed until the next interval

An agency agreement may arise with a buyer by all of the following except: a. express agreement b. ostensible agreement c. custom d. all of the above are valid

C Agency relationships with a buyer may be created by all of the methods identified except custom. While custom is a method of establishing agency relationship, it is generally assumed the agent works for the seller

A net lease affords the lessee: a. the right to depreciate the building b. a deduction for intrest payments on the loan c. a pro rata share of building expenses d. the right to assign the lease

C Depreciation is available only to those who own the property. In a net lease, the tenant does not own the building. Similarly, interest payments accompany mortgages, which are deductible only by the landlord. A net lease may or may not permit assignment. However in a net lease, the tenant agrees to pay a pro rata share of building expenses in addition to any rental payment

Dixie is selling her own home FSBO. On Sunday a full price offer is made by an Asian couple. Dixie refuses the offer. On Monday, Dixie accepts an offer $4000 below the asking price from a Caucasian family. Dixie could be in violation of which of the following? a. Fair Housing Law of 1968 b. state license laws if dixie is not licensed c. Civil Rights Act of 1866 d. none of the above

C Dixie could only be in violation of the 1866 Civil rights Act and not current Fair Housing Laws. Strange as it may seem, the Fair Housing Law exempts owner sales so long as the owner does not use discriminatory advertising. However no one is exempt from the 1866 Civil Rights act. Finally, most states permit an owner to sell his property without a license

Who is required to comply with Fair Housing LAws? a. only real estate professionals b. real estate professionals and lenders c. real estate professionals, lenders, and insurance companies d. everyone unless specifically exempted by law

D Fair Housing Laws apply to all people.

If a religious organization operates a hotel as a means of raising money to support the organization, which of the following statements is true? a. they are exempt from the 1968 Fair Housing Laws b. they may limit rentals to members of the organization c. they are exempt from the "religion" portion of the Fair Housing Act d. they must make rooms available to all persons

D Religious groups can be exempt and exclude others, but not when they are operating a commercial establishment such as a hotel

Brokers may assist buyers only if: a. there is a written agreement b. there is a formal representation c. there is an agency relationship d. there is consent

Brokers may assist buyers with or without a written agreement, formal representation or and agency relationship. However, there must be some sort of consent, implicit or explicit

Henry enters an exclusive right to sell listing agreement with Bob the broker. The parties agree on a 5% commission. Bob presents an offer to Henry he accepts. At closing, Henry discovers that the customary commission is 3%. Feeling he was taken advantage of, Henry refuses to pay Bob any more than a 3% commission. Is the listing still effective?

No, because Bob produced a ready, willing, and able buyer. Agency relationships terminate upon completion of the employment objective. In tis case, the employment objective is to sell the house which Bob did. The commission dispute is after the fact

When there is a meeting of the minds, which of the following had been accomplished? a. offer and acceptance b. all contract elements c. settlement d. acknowledgement and delivery

a The term "meeting of the minds" means there has been an offer and acceptance of the terms and conditions of the contract. The other things express things that follow offer and acceptance

John is trying to rent one bedroom in his house. a latin American applies and is told by the owner "I will only rent to Caucasians." What law has John violated if any? a. 1968 Fair Housing Law b. Civil Rights Act 1866 c. Civil Rights Act of 1964 d. none of the above

a While owners/sellers anr exempt from the 1968 Fair Housing Law, they may not make, print, or publish disccriminatory statements indicating any preference or limitation

The vendee is: a. the buyer or one who offers to buy b. the seller or one who offers to sell c. one who lend or offers to lend money d. one who borrows or offers to borrow money

A A vendee is one who buys or offers to buy real estate (buyer). The vendor is the one who offers to sell or sells real estate.

A three year insurance policy was purchased on October 20, 1990 at a cost of $360. The property is sold and settlement is held on June 20, 1991. If the insurance is pro-rated at the time of settlement, how much credit will be given to the buyer? A. $0 B. $200 C. $160 D. $360

>> CORRECT ANSWER IS: A >> YOUR ANSWER IS: A (calculations for transactions) This is not a math problem, it is a reading problem. when insurance is pro-rated, it is always a credit to the seller (since the seller paid for the policy) and a DEBIT or charge to the buyer.

The right of a landlord to reenter or regain possession of the premises upon expiration of a lease is known as: A. redemption B. reversion C. remainder D. recovery

>> CORRECT ANSWER IS: B >> YOUR ANSWER IS: B (types of ownership) When the landlord leased the property, he gave up his right of possession. Upon termination of the lease agreement, the right of possession REVERTS to the landlord.

Which of the following would NOT be subject to RESPA? A. a VA loan B. an assumption C. a conventional loan obtained from a federal savings and loan used to purchase a single family residence D. a mortgage purchased by FNMA

>> CORRECT ANSWER IS: B >> YOUR ANSWER IS: D (financing/credit laws) The Real Estate Settlement Procedures Act (RESPA) prescribes certain settlement procedures which must be followed when real property is purchased with a federally related loan. All answer choices would be considered federally related except an assumption of an existing loan.

Which of the following is the BEST example of a unilateral contract? A. lease B. option C. real estate contract for sale D. listing agreement

>> CORRECT ANSWER IS: B >> YOUR ANSWER IS: D (general knowledge of contract law) A listing agreement could be either unilateral or bilateral. The best example given here is the option. The seller is obligated to keep the offer open, but the buyer is not required to exercise the option.

Outdated bathroom fixtures are an example of: A. physical obsolescence--curable B. physical obsolescence--incurable C. functional obsolescence--curable D. functional obsolescence--incurable

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: A (methods of estimating value) Outdated fixtures are a form of functional obsolescence, which is curable.

What method would an appraiser most likely use to estimate the value of an office building? A. abstraction B. cost C. income capitalization D. market data

>> CORRECT ANSWER IS: C >> YOUR ANSWER IS: B (methods of estimating value) An office building, like other income producing properties, are valued primarily by determining the return on investment to the investor/owner. Such property would therefore be appraised by the income approach. The cost approached is used for special use property (like churches, schools). The market data approach is generally used for residential property.

Regulations designed to control density and over-crowding are examples of A. buffer zoning B. a master plan C. spot zoning D. bulk zoning

>> CORRECT ANSWER IS: D >> YOUR ANSWER IS: B (public controls based in police power) Bulk zoning is used to control building density by imposing restrictions on setback lines, building height, and the percentage of open areas.

A lease that contains no mention of a period of occupancy is most likely to be: A. invalid B. a month-to-month lease C. covered by the statute of frauds D. a tenancy at sufferance

>> CORRECT ANSWER IS: D >> YOUR ANSWER IS: B (types of ownership) A lease may be valid without a specified duration. A month to month lease does specify a period of occupancy--at least one month. Only if the lease is for one year or more does it fall under the statute of frauds. Finally, a tenancy at sufferance exists where someone remains in possession of the rental property after their lease expires, against the wishes of the landlord. Therefore, a tenancy at sufferance specifies no period of occupancy.

A mortgage which includes both real and personal property is a: A. blanket mortgage B. open mortgage C. chattel mortgage D. package mortgage

>> CORRECT ANSWER IS: D >> YOUR ANSWER IS: D (mortgages/deeds of trust) A package mortgage includes both real and personal property. Most people have package mortgages on their homes.

A broker executes a listing agreement with her client. The broker subsequently learns the property is in foreclosure. Which of the following is the broker's best course of action? a. sell the property before foreclosure is completed b. advise all prospective buyers of the pending foreclosure c. rescind the listing d. buy the property quickly

A An agent owes fiduciary duties to her client. the broker's fiduciary responsibilities include the duty to keep her client's financial position confidential. As such, the broker must not disclose the pending foreclosure without the client's consent because such information would weaken the seller's position. The pending foreclosure is not material information to prospective buyers and does not impact the property in any physical way or diminish ownership rights for the future-unless the property goes to foreclosure in which case the seller has no property to sell

If an optionee does not exercise his option during the option period, which of the following most likely to be true? a.the optionor must return the optionee's consideration b. the optionor has a reasonable chance to win specific performance c. the optionor may keep the optionee's consideration as liquidated damages d. the optionor may keep the optionee's consideration

A An option contract is like any other contract. it requires consideration, an offer, an acceptance, and a lack of any defenses. The purpose of valid consideration is to support the option contract and not to provide liquidated damages. Failing to exercise the option alone is not a breach of contract. the optionee is paying the optionor for the right to exercise the option, whether or not he chooses to do so. Therefore, the best answer is that the consideration need not be returned

A person has the capacity to contract if he: a. is mentally competent b. has given his or her consent c. has agreed to the terms of the contract d. in not subject to coercion

A Consent, agreement, and coercion do not establish whether one has the legal capacity (ability) to contract with another. Mental competence, on the other hand, is relevant to whether one has the capacity to contract

A seller tells a broker she wants him to sell her house. This agreement is: a. express b. implied c. not valid unless in writing d. void

A Express conduct, oral or written, creates an agency relationship by express agreement

If there is a breach of a valid contract for the sale of real property, which of the following remedies is available to the party who is not in breach? A. rescission b. specific performance and monetary damages c. punitive damages d. both a and b

A If a party is in material breach of a contract, rescission is a remedy available to the non-breaching party. Other remedies are specific performance OR monetary damages, but not both

a developer has been succesful in the renovation of apartment projects. The developer has an excellent credit history, but has been denied a loan to renovate a project in a crime ridden area of town. This is an example of a. permissable business judgement b. redlining c. blockbusting d. steering

A On the facts, this is permissable, however if the loan is denied because the area was occupied by members of a protected class, then it would be discriminatory (redlining). On the facts, it would apear that the decision to deny the loan was based on crime, which does ot trigger the Fair Housing Act (criminals are not a protected class)

If a seller learns, after he has entered into a valid contract with a buyer, that his broker was representing the buyer, the seller has a right to: a. cancel the contract, without obligation to either buyer or broker b. cancel the contract, but only with written permission from the buyer c. cancel the contract, but with liability to the broker for any expense d. the contract is valid and must be executed as agreed

A Representing both buyer and seller, without prior knowledge and approval is a breach of the listing agreement. The seller may cancel the contract without obligation or could accept the contract but refuse to pay the broker because the broker's actions would amount to misrepresentation

If a buyer defaults on a valid sales contract the seller may have which of the following performance remedies? a. specific performance b. monetary damages c. liquidated damages d. both a and b

A Specific performance, monetary damages and liquidated damages are all potential remedies for breach of a sales contract. However the question asks to identify performance remedies. Specific performance is the only performance related remedy identified. Specific performance requires the breaching party to perform as he agreed

Bill, a broker with XYZ Realty sells a property listed by Gene, an independent broker. In this transaction, what is the relationship between Bill and Gene? a. Bill is the agent, Gene is the principal b. Bill is the trustee, Gene is the trustor c. Bill is the subagent, Gene is the agent d. either a or b could be correct

A The status of the relationship between Gene and Bill not between Gene, Bill and the seller. Gene is Broker Bill's principal and Broker Bill is his agent. Regarding the relationship between the two brokers and the seller, Gene is the agent of the seller and Bill is the subagent. bill is not a subagent of Gene

If a person has contracted for the opportunity to purchase property at a specified price within a specified time, the person has: a. first right of refusal b. an option c. a contract d. both a and b

B A person who has contracted for the opportunity to buy property within a specific period of time has an option contract.

A unilateral contract arises: a. when the offeror signs the contract b. upon completion of the requested act c. when the offeree signs the contract d. after a reasonable amount of time

B A unilateral contract is a promise by one party only, like a broker who promises a prize to any salesman that obtains 15 listings in one month. If and when a salesman acquires 15 listings for the month is the broker required to fulfill his promise. Therefore, the contract arises upon the completion of the requested act.

Which of the following statements, if proven false and made by a broker, is least likely to be puffery? a. this is the most beautiful house in the world b. you can double your money on the property in less than two years c. this is the best deal we've had in years d. this property is close to everything

B Any time a broker suggests or guarantees the return on investment, he has crossed the line from puffery to misrepresentation or possibly fraud. Puffery is a matter of opinion

A property listed at $185,000. Four offers are presented. Which offer Best describes and offer made by a ready willing and able buyer? a. an offer for $175,000 all cash b. a full price offer, from a financially qualified buyer, subject only to financing at current interest rates c. an offer at full price contingent on the buyer selling his residence d. both b and c

B By definition a ready willing and able buyer must be on the terms of the seller. The other choices did not meet the terms of the seller.

The relationship most likely to exist between a licensee and the seller is a: a. universal agency b. special agency c. restricted agency d. none of the above

B Do not assume a licensee is a salesperson. It also includes broker. The relationship between the broker licensee and the seller would be that of a special agency since it is the type of agency created by the usual listing agreement.

A seller contacted three 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 could be guilty of violating which of the fiduciary duties? a. loyalty b. reasonable care c. disclosure d. none of the above

B Of the fiduciary duties listed, reasonable care best describes this situation. the agent must exercise care of property advise and consider the best interests of her customer

A lease is a : a. tenement b. assignment c. contract d. mortgage

C

Which of the following is most likely to render a contract void? a. fraud in the inducement b. mutual mistake c. illegal purpose d. all of the above

C A contract must be for legal purpose or it is void. If the contract was entered into and there was fraud in the inducement or mutual mistake, the contract would be voidable not void. Fraud in the inducement exists where a party is induced to sign a contract because of the fraudulent statements of facts of the other party

A seller hires a broker to sell her property for $75,000. The broker knows the property is worth considerably more as zoning has changed to commercial. the broker buys the property and resells it himself two weeks later for $125,000. which of the following is true? a. the broker cannot work for someone out of state unless he has a license in that state b. this may be unethical, but the agent got the asking price and therefore the seller suffered no loss c. the broker can buy the property only after informing the seller of the zoning change d. the broker cannot buy the property under any circumstances

C As an agent of the principal, the broker has a fiduciary relationship to protect his principal's interest. Failure to inform is a breach of that relationship

Barnwell lists property with broker Bob. Ben, who works for Bob, shows the property and receives and offer and ernest money from Billy. Two days before Ben can act, Barnwell cancels the listing agreement. What should Ben do with the ernest money deposit he received with the offer to purchase? a. return it to Billy b. give it to Barnwell c. give it to Bob d. split it between Bob and Billy

C Ben must give all ernest money he receives to his broker (Bob) for deposit into escrow. Bob should return the deposit to Billy not Barnwell because there was an offer but there has been no acceptance (Ben had not acted) therefore there is no contract between buyer and seller

Dan and Daisy enter into a buyer/broker agreement. Dan believes that Daisy is in breach. May Dan terminate the contract? a. yes, but Dan waives his right to specific performance b. no unless there is a mutual agreement between Dan and Daisy c. yes, but Dan risks causing a breach himself d. no, so long as Daisy is willing and able to perform

C Dan has no right to specific performance because this is a personal service contract. One may terminate a contract without mutual consent regardless of whether the other party is willing and able to perform. However, any time you terminate a contract, you risk a breach- it could turn out that Daisy was not in breach in which case Dan's termination would cause a breach

An appurtenant easement may be terminated by: A. merger of the dominant and servient estates B. condemnation of the servient estate through eminent domain C. abandonment by the servient estate D. all of the above

CORRECT ANSWER IS: A >> YOUR ANSWER IS: D (encumbrances) An appurtenant easement could be terminated by merging both estates under one owner, where the owner of the dominant estate releases the easement on the servient estate or when the owner of the dominant estate does not use the easement for a period of time (determined by statute) with an intent to abandon. If the servient estate is acquired by a government through the right of eminent domain, the easement remains. Abandonment by the servient estate will not terminate an appurtenant easement--abandonment must be by the dominant estate.

A 19-year old inherits property from his grandfather and immediately enters into a contract to sell it. Can he later refuse to sell the property? a. yes, because contracts with minors are void b. yes, because contracts with minors are voidable c. yes, because the contract is unenforceable d. no, the contract is valid and binding on all parties

D A 19 year old is a legal adult with the capacity to contract. Therefore, the contract is valid and binding

Under the statute of frauds, an oral listing is: a. void b. voidable c. unenforceable d. valid

D A listing is an agency agreement for a broker to perform a service. The listing is not a contract for the sale of land or the transfer of an interest in land (lease) Therefore a listing need not be written under the statute of frauds

A broker, under contract as a property manager is a.. a special agent b. a fiduciary c. a general agent d. both b and c

D A property management contract is an agency agreement between the property owner (principal) and the broker property manager (agent) and thus the broker is a fiduciary. Also, the relationship is generally that of general agency-the broker is authorized to perform any and all acts associated with a specific service

Billy the buyer and Bobby the broker enter into a buyer broker agreement. Billy grows increasingly suspicious of Bobby's abilities. After two weeks without seeing a satisfying property, Billy revokes the agreement. All of the following could be true except: a. Billy was justified because Bobby was in breach b. Billy was in breach c. Billy owe Bobby for damages d. Bobby can sue for specific performance

D All of the scenarios can be true under various circumstances, except that Bobby cannot require Billy to perform. Specific performance is never a remedy for personal service contracts

Jon purchases an option contract from Joan on Joan's house. On the last day of the option period Jon finds another house and declines to exercise his right. Jon then requests Joan return his purchase amount. Must Joan comply? a. yes, because Jon failed to exercise his right b. no unless Jon and Joan so agreed in the option contract c. yes because otherwise Joan would be unjustly enriched d. no unless the contract is otherwise invalid

D If the contract is valid, Joan cannot return Jon's consideration. Consideration is a necessary element of contract formation. Without consideration there is no contract and no option, even if Jon and Joan agreed differently in the contract

When does a broker earn commission? a. when a listing is taken b. when the purchaser signs the title insurance policy c. when closing takes place d. when the offer to purchase has been signed and accepted by the seller

D The broker earns a commission when the broker brings a ready willing and able buyer to perform on a seller's terms. The broker is paid when the deal closes and the title is transferred

A property owner, after death of his wife, lists his property with a broker. Two days later he sells the property himself but is not obligated to pay the broker a commission. What type of listing agreement did he most likely sign? a. multiple b. exclusive authorization to sell c. exclusive right to sell d. general

D The widower probably signed a general (also called an open) listing which specifies that the listing agent must sell the property for the owner to pay a commission. Exclusive authorization to sell and exclusive right to sell are the same and the broker gets paid regardless of who sells the property. An exclusive agency would also allow the owner to sell and not pay a commission but that is not one of the choices