Section 3 - chapter 2 quiz

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

a. It stays with broker Allan - The salesperson should give the earnest money deposit to broker Allan since the salesperson was an agent of Allan at the time the deposit was received. The fact that the salesperson goes to work for another broker has no bearing on the deal.

A broker and salesperson owe all EXCEPT which of the following to the purchaser/customer? Select one: a. Negotiation of the lowest possible price b. Honesty c. Fairness d. Disclosure of defects in the property

a. Negotiation of the lowest possible price - A buyer who is treated as a customer is owed honesty, fairness and disclosure of all material defects in the property. A purchaser/customer is not owed a duty to obtain the lowest possible price from the agent.

Broker Betty has a listing on Seller Sara's house. Broker Betty puts the listing on the local MLS -- agreeing to share the commission with any other member broker who finds a buyer for the house. Up through the 1970s if another broker found the buyer, that broker would be considered a(n): Select one: a. Subagent. b. General Agent. c. Universal agent. d. Special agent.

a. Subagent - Prior to the late 1980s and sometimes into the 1990s cooperating brokers were always acting as subagents of the listing broker.

Which of the following would be included in the duties of an agent to a customer? Select one: a. To disclose material adverse facts about the property. b. To maintain the confidentiality of information provided to the agent. c. Both to disclose material adverse facts about the property and to maintain the confidentiality of information provided to the agent. d. Neither to disclose material adverse facts about the property nor to maintain the confidentiality of information provided to the agent.

a. To disclose material adverse facts about the property. - Agents owe customers only the duties of fairness and honesty. Fairness would include the obligation to disclose material adverse facts about the property.

When a broker accepts a listing he or she has created an agency relationship. Which of the following is not an agency responsibility? Select one: a. To obey all the instructions of the seller. b. To use care in filling out contract forms. c. To be accountable for documents and funds. d. To be loyal to the seller.

a. To obey all the instructions of the seller. - The broker or any other agent is under no obligation to obey ALL instructions of the principal. Only those instructions which are legal need be obeyed.

Under Common Law Agency, the listing agent should disclose material facts to the seller AND buyer. Which of the following would NOT be a material fact? Select one: a. Worn carpeting. b. Seasonal flooding in the basement. c. A foundation crack covered with paneling. d. A faulty heating system.

a. Worn carpeting. - Material facts about the property means just that...Worn carpets are probably not "material" and are readily discoverable by the buyer. The other answer choices would be.

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

a. indemnification against loss not caused by the agent

The instrument authorizing one person to act for another person is: Select one: a. An attorney in fact. b. A power of attorney. c. An estoppel certificate. d. A certificate of no defense.

b. A power of attorney.

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

b. False

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

b. False - The statement is false. The escrow account must be in the name of the brokerage firm.

Property owner Kilmer, who is living overseas, lists his property with Broker Huff. Later the land is rezoned for a higher use, increasing its value. Huff buys the property herself and sells it six months later. Which of the following is true? Select one: a. As long as Huff informs Kilmer of her intent to buy the property before she does so, her action is above reproach. b. Huff can buy the property only after informing Kilmer of the zoning change and the effect that it has on the property. c. Huff cannot legally act for someone who is overseas. d. When Huff resells the property in six months, she has a legal obligation to inform Kilmer.

b. Huff can buy the property only after informing Kilmer of the zoning change and the effect that it has on the property. - The rezoning of the property is a material fact and the agent of the seller, the broker has the obligation to inform the seller of the zoning change and what effect it will have on the property value.

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

b. This is an expressed agency - Oral listing are a type of expressed agency. It is far better to have it in writing since oral listings are not enforceable.

A listing broker has an agency relationship with his client (the seller). The broker also has a moral and statutory obligation to all prospective customers (buyers). One way to describe the relationship with the buyer would be: Select one: a. To obey the letter of the law. b. To do what is right. c. To do those things that are required. d. To do anything that is asked.

b. To do what is right. - This relationship is best described as doing what is right. Doing anything that is asked could conflict with his client's interests and could also be illegal. To do ONLY things that are required and to obey the letter of the law leaves the broker open to possible suit.

When a real estate broker is retained to perform one specific act for a client, it is known as: Select one: a. general warranty. b. special agency. c. general agency. d. special warranty.

b. special agency.

If a deed is delivered in escrow, it is given to: Select one: a. The buyer's attorney. b. The seller's attorney. c. A neutral third party. d. The mortgagee.

c. A neutral third party. - The trustee (holder of escrow) is a neutral third party to the contract.

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

c. A person working for a multiple listing service. - An agency relationship is created when one person (the client) delegates to another (the agent) the right to act on his behalf in a business transaction. All of these choices would be agents except an individual working for a multiple listing service. That person is an employee of MLS.

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

c. It shows the seller that the buyer is serious about following through with the contract. - The purpose of the earnest money deposit is to show that the buyer is serious about purchasing the property, which is why it is also called a good faith deposit.

The loan contingency contained in an offer to purchase will contain all of the following EXCEPT: Select one: a. The loan amount. b. The rate of interest. c. The name of the financial institution. d. The date of the commitment.

c. The name of the financial institution. - The loan contingency in an offer states...."we will buy the house at the price specified and will pay for it by obtaining a loan for $........, at ....% interest with monthly payments of $......" and the offer is dated. The one thing not required and often not even known at the time of the offer is where the money will come from (the lending institution).

Funds in the escrow account may be dispersed for any of the following reasons EXCEPT when: Select one: a. All principals to the transaction agree in writing to the disposition. b. A court orders disbursement of the funds. c. The seller demands forfeiture of the earnest money deposit. d. The transaction is consummated.

c. The seller demands forfeiture of the earnest money deposit. - A seller may not dictate the disposition of funds in the broker's escrow account. Disbursement is made through agreement of the parties, court order, or when the transaction is complete.

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

d. A contract whereby a client hires an agent to represent the client in a real estate transaction of some kind. - The choice about the power-of-attorney is false. There is a measure of truth in all of the other choices, but the best answer is that the client hires an agent to represent the client in a real estate transaction of some kind because it is the broadest statement of the remaining choices. Not all agency relationships are with buyers or sellers -- property managers are also agents of their clients.

An agency relationship can be terminated in which of the following ways? Select one: a. Death of the client. b. Renunciation by the agent. c. Revocation by the client. d. Any of these choices.

d. Any of these choices.

When will escrow be used? Select one: a. When property is purchased and secured by a deed of trust. b. In an exchange of property. c. With contract for sale. d. Any of these choices.

d. Any of these choices. - Escrow is the holding of money, documents, etc., by a third party until the conditions of a contract have been executed by the principal parties. Escrow is commonly used in most real estate transactions including the closing of mortgage loans and property exchanges.

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

d. Client's decision. - A listing (agency agreement) is terminated by law (automatically) by bankruptcy or death of either party (client or agent) or destruction or disposition of the property (including condemnation). A decision by the client to terminate the listing would be an act of one of the parties, rather than by law.

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

d. Reasonable care and due diligence. - Since Licensee Larry has no experience in commercial transactions, he should give special consideration to whether or not he can provide reasonable skill and due diligence. He should either decline the listing or partner with someone who can help him.

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

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