Section 3: Chapter 3

Sophie, a licensed salesperson, works for a broker who is representing a buyer. Sophie finds a house for the buyer and the transaction closes. Sophie will receive her commission from which of the following? Select one: a. The broker that holds her license. b. The broker that listed the house that Sophie sold. c. The settlement attorney handling the closing. d. The buyer, per his or her agreement with Sophie.

A. The important thing you MUST remember is that a salesperson or an associate broker may ONLY receive compensation from his or her employing broker or the broker that holds his or her license. The correct answer is: The broker that holds her license.

If a broker lists a property, she CANNOT be: a. A dual agent. b. A buyer's agent only. c. An agent for the seller only. d. An agent for both buyer and seller.

B. A buyer's agent only The broker COULD be an agent to both buyer and seller (if all agree) which is the same as dual agency. The agent could represent the seller only, but the agent who takes the listing cannot be a buyer's agent exclusively. The correct answer is: A buyer's agent only.

A property was listed for sale at $185,000. Four offers are presented. Which offer BEST describes an offer made by a ready, willing and able buyer? Select one: a. An offer for $175,000, all cash. b. A full price offer, from a financially qualified buyer, subject only to financing at current market rates. c. An offer at full price contingent upon the buyer (offeror) first selling his current residence. d. A full price offer contingent upon the seller "taking back" a second trust for $15,000.

B. By definition, ready, willing and able is ON THE TERMS OF THE SELLER. Of the given choices the BEST answer is the full price offer with the financing contingency, which is quite common. The correct answer is: A full price offer, from a financially qualified buyer, subject only to financing at current market rates.

A contract for the sale of land in which the buyer makes regular payments, takes possession, but does not receive title is known as a(n): Select one: a. Mortgage. b. Land contract. c. Lease. d. Option.

B. What is described could be either a land sales contract, an installment contract or a contract for deed. In each of these the buyer makes payments, takes possession but the seller retains legal title until all payments are made. The correct answer is: Land contract.

Which type of listing agreement gives the broker maximum protection? Select one: a. An open listing b. A net listing c. An exclusive right-to-sell d. An exclusive agency listing

C. An exclusive right-to-sell listing gives the broker the maximum protection because the broker gets paid the commission regardless of who finds the buyer. The correct answer is: An exclusive right-to-sell

An oral listing is: Select one: a. Void. b. Voidable. c. Illegal. d. Unenforceable.

D. An oral or verbal listing may be valid, but it is UNENFORCEABLE. The correct answer is: Unenforceable.

The amount of commission to be paid to the broker for selling a property is set by state law. Select one: a. True b. False

False: The statement is false. Real estate commissions are negotiable and not set by state law.

Casper is planning to sell his house and desires the broadest possible exposure. He gives Bert an exclusive right-to-sell listing, Gail an exclusive agency listing and Mark an open listing. Mark sells the house. Under these circumstances, which of the following statements is true? Select one: a. Mark must split his commission with Bert and Gail. b. Casper owes two commissions, one to Mark and one to Bert and Gail to be split between them. c. Casper owes 3 commissions. d. Mark is the only one who will receive a commission.

C. Bert's listing means that regardless of who sells the property, Bert will get a commission. Gail's listing means that if anyone, other than the owner, sells the property, she will get a commission. Mark's listing means that if he sells the property he gets a commission. Casper therefore, is obligated to pay 3 full commissions. The correct answer is: Casper owes 3 commissions.

The maximum fine is $16,000 for violations of the: Select one: a. CAN-SPAM Act. b. Do Not Call Registry. c. Both the CAN-SPAM Act and the Do Not Call Registry. d. Neither the CAN-SPAM Act nor the Do Not Call Registry.

C. Both the CAN-SPAM Act and the Do Not Call Registry can result in fines of up to $16,000. The correct answer is: Both the CAN-SPAM Act and the Do Not Call Registry.

An owner lists a home with a broker for $172,000. Two days later, the broker brings an offer for $170,000. At this time, which of the following statements is true? Select one: a. The broker has found a buyer and has earned his commission. b. A ready and willing buyer has been found and a commission is due. c. A ready and willing buyer has been found, but no commission is owed the broker at this time. d. None of these choices.

C. 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, therefore NOT on the terms of the seller. No commission is due unless and until the seller accepts the offer. The correct answer is: A ready and willing buyer has been found, but no commission is owed the broker at this time.

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 proves that he is not legally obligated to pay a commission. What type of listing did Sam most likely have? Select one: a. Exclusive agency listing. b. Open listing. c. Net listing. d. Exclusive right-to-sell listing.

C. Net Listing With a net listing (which is illegal in most states) the seller specifies the NET amount that he must receive and the broker gets anything over and above that amount. If the property sold and did not give the seller his specified net, then the broker would not be entitled to a commission even though he sold the property. In all of the other listings the commission would be due if the broker sold the property. The correct answer is: Net listing.

A seller signs a listing with the provision that any commission will be split between the brokerage firm handling the sale and the seller's unlicensed brother. Is this agreement legal? Select one: a. Yes, as long as the brother has contractual ability. b. Yes, if the brother assists in the negotiation. c. No, the brother must be a licensed real estate broker to receive a commission. d. No, the local board of Realtors must first approve this agreement.

C. Only real estate licensees or certain people, specifically exempt from licensing, may receive compensation for a real estate transaction. State regulations address this issue specifically but as a general rule, payment of a fee to an unlicensed person is illegal. The correct answer is: No, the brother must be a licensed real estate broker to receive a commission.

Which of the following is (are) true regarding the Multiple Listing Service? Select one: a. It can only accept residential listings. b. It can establish minimum and maximum commission rates. c. It can refuse to accept open listings. d. All of these choices.

C. The MLS is an advertising arm of the real estate industry and as such, the license law and regulations do not address their activities. Multiple Listing Services do take commercial listings. Most refuse to accept open listings because the terms of an open listing provide little protection for the listing brokers interest. If the MLS were to establish commission rates, it would be in violation of federal antitrust Laws. The correct answer is: It can refuse to accept open listings.

Smith died and his real property was sold. Which of the following determines the amount of commission paid to the broker handling the sale? Select one: a. The State Real Estate Board or Commission b. The local bar association c. The listing signed by the broker and the executor or administrator for the estate d. The State Association of Realtors

C. The commission is determined by the listing contract signed by the parties to the transaction (broker and seller). In this case, the seller is the executor or administrator of the estate. The correct answer is: The listing signed by the broker and the executor or administrator for the estate

The amount of commission or fee that a listing broker is to receive is determined by: Select one: a. The Multiple Listing Service. b. The National Association of Realtors. c. The seller and the broker. d. The Real Estate Board or Commission.

C. The fee charged for an act of real estate brokerage is negotiated between the client and the broker. The correct answer is: The seller and the broker.

A property is listed at $168,000. A full price offer is made without contingencies. Which of the following statements is the most complete correct answer? Select one: a. The seller must accept the offer. b. The seller is not obligated to sell the property. c. The seller may refuse to sell, but could be required to pay the broker a commission. d. The seller would be in violation of Fair Housing law.

C. The seller does have the right to refuse to sell, but it would appear that the offer met the terms of the listing and therefore the broker may be able to sue for the commission. The correct answer is: The seller may refuse to sell, but could be required to pay the broker a commission.

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

C. The settlement agent will look at various documents to determine how the funds are to be distributed. Of the answer choices given here, the sales contract will come the closest to containing most of the information needed. It is the BEST answer! The correct answer is: The sales contract.

When does title pass in an installment sales contract (land contract)? Select one: a. At closing. b. In one year. c. When the debt has been satisfied. d. When the contract is signed.

C. Title pass in an installment sales contract (land contract) when the debt has been satisfied (repaid). The correct answer is: When the debt has been satisfied.

Broker Fowler located a property for buyer Jackson. Jackson paid seller Allan a $1,000 fee for a 30 day option. Which of the following is true? Select one: a. Fowler earned his commission when the option was signed b. Part of Fowler's commission will come from the $1,000 c. Local custom will determine the commission d. Fowler will not earn a commission until Jackson becomes owner of the property

D. Fowler does not earn a commission until the property sells. An option is not a purchase contract, it allows the optionee (Jackson) to purchase the property from the optionor (Allan) within the specified time (30 days). The correct answer is: Fowler will not earn a commission until Jackson becomes owner of the property

When a seller and licensed salesperson agree to a listing, on terms acceptable to the broker, an agency relationship is established between: Select one: a. The seller agent and the seller. b. The listing salesperson and the seller. c. The listing broker and the buyer. d. The listing broker and the seller.

D. Legally, the listing is between the BROKER and the SELLER, not the seller and the sales agent, therefore the agency relationship is between the seller and the listing broker. The correct answer is: The listing broker and the seller.

In what type of listing would the listing broker be paid the commission if the listing broker or any other broker was the procuring cause, but not if the seller found the buyer personally? Select one: a. Net listing. b. Open listing. c. Exclusive right to sell listing. d. Exclusive agency listing.

D. The question describes an exclusive agency listing. The correct answer is: Exclusive agency listing.

What is the highest rate of commission that a broker may charge to market and sell a farm? Select one: a. 6%. b. 10%. c. 15%. d. None of these choices.

D. There is no maximum or minimum rate set for commissions. The commission rate is established by negotiation between the client and the broker. This rule applies to ALL property, not just farms. The correct answer is: None of these choices.

The best example of rescission of a contract would be: Select one: a. Mutual agreement of a landlord and a tenant to cancel a lease. b. An option which is not exercised by the optionee. c. A seller making a counter offer to a buyer's offer. d. A buyer accepting a counter offer made by a seller.

A. When landlord and tenant agree to cancel a lease (contract), the lease has no legal effect and the relationship of the parties returns to that which they had before signing the lease. The correct answer is: Mutual agreement of a landlord and a tenant to cancel a lease.

During the executory period of a valid contract for sale, the rights of buyer are best described as: Select one: a. Executed. b. Equitable. c. Executory. d. Equalization.

B. Between the time of the signing of a contract and the time of closing, the contract is in its executory state. During this period, the buyer has an equitable interest. The correct answer is: Equitable.

The broker generally receives a commission: Select one: a. From a customer. b. From a client. c. 5 business days after closing. d. When the sales contract is signed.

B. Commissions are generally received from clients, not customers. The correct answer is: From a client.

Only the seller may attempt to sell property listed under an open listing. Select one: a. True b. False

B. False The statement is false. The seller and broker named in the open listing may attempt to sell the property.

What type of contract is an exclusive right-to-sell listing agreement? Select one: a. Unilateral. b. Bilateral. c. Multilateral. d. Lis pendens.

B. Generally, open listings are considered to be unilateral. Exclusive listings are considered bilateral. The correct answer is: Bilateral.

The buyer in a contract for deed is known as the: Select one: a. vendor. b. vendee. c. obligor. d. obligee.

B. The buyer in a contract for deed (installment sales contract) is known as the vendee. The correct answer is: vendee.

Broker Bob takes an open listing on Seller Sara's house. Broker Bob would be entitled to a commission on the sale of the house: Select one: a. In all cases. b. Only if it was not the seller who found the buyer. c. Only if Broker Bob is the "procuring cause" of the sale. d. If the property sells during the term of the listing.

C. A broker gets paid on an open listing only if that broker was the procuring cause of the sale, meaning that the broker found the buyer. The correct answer is: Only if Broker Bob is the "procuring cause" of the sale.

Which of the following agency responsibilities most likely would be limited in dual agency representation? Select one: a. Fairness. b. Reasonable care. c. Disclosure. d. Accounting.

C. A dual agent may not disclose confidential information about either client, since he represents both clients. The correct answer is: Disclosure.

Broker Jones is considering lowering the price on an overpriced listing. Which of the following is the best answer? Select one: a. This is good business practice. b. Jones must have the owner's permission to lower the price. c. Jones, as the listing agent, has implied authority to do this. d. Jones is legally liable for misrepresenting the price to previous prospective buyers.

B. The listing price is set in the listing, a contractual agreement between Jones and the owner, and nothing in the agreement may be altered (including the price) unless the owner agrees to do so. Since this is an absolutely true statement it is the best answer. This may or may not be a good business practice..."overpriced" properties have sold. The correct answer is: Jones must have the owner's permission to lower the price.

A broker decides to lower the prices of her listings after the properties have been on the market for 120 days. She finds that more buyers are now calling on these listings. Which of the following is true about such a practice? a. She can do this only with the local Association of Realtors approval. b. She can do this only with the owner's approval. c. She can do this only after informing all previous buyers. d. This is an excellent marketing technique.

B. This may or may not be a very good marketing technique, but only the owner of a property can authorize the broker to lower the price on a listed. The correct answer is: She can do this only with the owner's approval.

Helen sells her house to Fred using a contract for deed. Which of the following statements is correct? Select one: a. Helen is the vendor and holds legal title. b. Fred is the vendor and holds equitable title. c. Helen is the vendee and holds equitable title. d. Fred is the vendee and holds legal title.

A. Helen (the seller) is the vendor and holds legal title. Fred (the buyer) is the vendee and holds equitable title The correct answer is: Helen is the vendor and holds legal title.

If a buyer defaults on a valid sales contract and the seller wants to enforce the terms of the contract, the seller would file suit for which of the following? Select one: a. Specific performance. b. Monetary damages. c. Liquidated damages. d. Quiet title.

A. If the seller wants to enforce the terms of the contract the seller would sue for specific performance. The correct answer is: Specific performance.

If an option to purchase real estate expires July 15th without the optionee exercising his option, what must the owner do to release the property from option? Select one: a. Nothing b. Obtain a release from the optionee c. File a lis pendens d. File a lien

A. Nothing Once the option expires, the option is no longer in place and nothing needs to be done to release the property from the option. The correct answer is: Nothing

When a buyer purchases property under an installment sales contract, the seller retains: Select one: a. Title to the property b. A remainder estate c. Possession d. A life estate

A. One disadvantage to a buyer under an installment contract is that the seller retains legal title. The correct answer is: Title to the property

A broker acts as an agent in all of the following functions EXCEPT: Select one: a. Leasing property. b. Selling property. c. Appraising property. d. Exchanging property.

C. A broker employed by another party (client) to lease, sell, or exchange property for them would hold a position of trust. An appraisal is an estimate or opinion of value given by an appraiser for a fee. Even though the broker may be a qualified appraiser, he should not appraise property if he is involved as the listing or selling broker due to the obvious conflict of interest. The correct answer is: Appraising property.

Under a contract for deed, the buyer: Select one: a. Receives an insurable interest b. Receives legal title c. Is not allowed possession of the property until the purchase price is paid d. Has a fee simple estate

A. Receives an insurable interest Feedback Under a contract for deed (also called land contract or installment contract), the buyer receives an equitable interest (which is insurable) and possession at settlement. The seller retains legal title to the property. The buyer could sell the property at any time, paying off any money owed the seller from the proceeds of sale (received from the new buyer). The correct answer is: Receives an insurable interest

If a broker brings the seller an offer meeting all the terms specified in the listing, the seller does not have to sell. Select one: a. True b. False

A. The statement is true, although the seller would be liable for the commission if the buyer met the "ready, willing and able" test. The correct answer is: True

Which of the following real estate related contracts is considered an employment contract or agreement? Select one: a. A listing agreement. b. An offer to purchase. c. An option. d. None of these choices.

A. A listing agreement is a contract where the seller hires or "employs" the broker to sell his property. The correct answer is: A listing agreement.