Chapter 2

A salesperson can set up escrow accounts for each of his or her clients, in the name of the client and the salesperson. True/False

False Escrow account must be in the name of the brokerage firm.

If a seller learns, after he has entered into a valid contract with a buyer, that the broker was representing the buyer, the seller has the right to: Select one: a. Cancel the contract, without obligation to either buyer or broker. b. Cancel the contract, with written permission of the buyer. c. Cancel the contract, but would be liable to the broker for any expense incurred by the broker. d. The seller has no rights, the contract is valid and must be executed as agreed.

a. Cancel the contract, without obligation to either buyer or broker.

A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. The owner had filled and painted over the crack and advised the sales agent that the seepage problem had been corrected, but it was obvious to the agent that the problem had not been corrected. If the salesperson shows the property without advising potential buyers of the problem, the salesperson would be guilty of: Select one: a. Fraud. b. Misrepresentation. c. Puffery. d. Nothing.

a. Fraud. Because it is intentional.

A broker is representing a buyer. When the broker is showing property, he may NOT disclose to his buyer: Select one: a. The current owner is infected with the HIV virus. b. Information the broker knows about the financial condition of the seller. c. Deed restrictions that might affect the buyer's intended use of the property. d. That the seller will not accept an offer based on VA financing.

a. The current owner is infected with the HIV virus.

If a broker accepts a promissory note or post-dated check as a deposit on an offer, that information must be disclosed to the seller. Select one: a. True b. False

a. True

A person that authorizes another to act for him or her is known as the: Select one: a. Agent. b. Client. c. Broker. d. Customer.

b. Client.

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

Landlord Lloyd hires Property Manager Paul to manage an apartment complex owned by Lloyd. Property Manager Paul would most likely be considered a(n): Select one: a. Subagent. b. General Agent. c. Universal agent. d. Special agent.

b. General Agent.

The avoidance of conflicts of interest would be a key part of which of the following duties of an agent to a client? Select one: a. Reasonable care and diligence. b. Loyalty. c. Disclosure. d. Confidentiality.

b. Loyalty.

The client in a listing agreement would be the: Select one: a. Salesperson taking the listing. b. Seller of the listed property. c. Listing broker. d. Buyer.

b. Seller of the listed property.

A broker listed a vacant lot zoned for residential use. Later, an adjacent lot was rezoned causing an increase in value. What should the broker do? Select one: a. Buy the listing, have it rezoned, then sell it for a profit. b. Tell the seller of the zoning change and advise the seller to consider application for rezoning the property. c. Continue to market the property as residential property, according to the terms of the listing. d. Offer to terminate the listing agreement.

b. Tell the seller of the zoning change and advise the seller to consider application for rezoning the property.

Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist? Select one: a. Mr. Gregory is Gary's client. b. Gary is Mr. Gregory's agent. c. Gary's broker is the agent of Mr. Gregory for a reasonable time. d. No agency relationship exists.

c. Gary's broker is the agent of Mr. Gregory for a reasonable time.

A real estate broker wishes to deposit an earnest money check in his business operating account until settlement, so the purchaser can earn a higher rate of interest on his funds. Can he legally do this? Select one: a. Yes, if the purchaser receives a comparison of available interest rates b. Yes, if the broker promises to insure such funds will be available at closing c. No, these funds must be placed in a separate escrow account d. No, the broker cannot guarantee a higher interest rate

c. No, these funds must be placed in a separate escrow account

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 broker has the buyer's earnest money deposit deposited in an escrow account. The amount of the deposit exceeds the amount of the broker's commission for the sale. The broker may remove his commission on this sale ONLY: Select one: a. When the buyer moves into the property. b. When the seller moves out of the property. c. When the closing is completed. d. Whenever the seller says it is ok to do so

c. When the closing is completed.

In agency representation, the employer is called the... Select one: a. seller. b. agent. c. client. d. broker.

c. client.

Brokers must hold their client's funds in a/an... Select one: a. office safe. b. savings account. c. trust or escrow account. d. special account managed by the Board of Realtors.

c. trust or escrow account.

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.

How can an agency relationship be created? Select one: a. Written document. b. Action of the parties. c. Words of the parties. 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.

Broker Jane is acting as a dual agent in a real estate transaction and decides to appoint salesperson Sara to represent the seller and salesperson Ben to represent the buyer. Ben and Sara both work in Jane's firm. Select one: a. Jane cannot legally do this. b. Ben and Sara are dual representatives. c. Ben and Sara must be independent contractors. d. Ben and Sara are designated representatives.

d. Ben and Sara are designated representatives.

Broker Johnson has listed the property of Cheever and sells it to Brevard for $175,000. Before closing, Johnson finds that the property has a serious structural defect. What should Johnson do? Select one: a. Tell Cheever. b. Tell Brevard. c. Keep it quiet as it might kill the sale. d. Tell both Cheever and Brevard.

d. Tell both Cheever and Brevard.

Which of the following MUST be disclosed by an agent to his client, in a real estate transaction? Select one: a. Minority groups are moving into the area b. The average commission recommended by the local real estate association c. The buyer intends to violate deed restrictions d. The buyer has had previous credit problems which may have an impact on loan qualifications

d. The buyer has had previous credit problems which may have an impact on loan qualifications

A salesperson lists a home. The house burns down prior to receiving an offer. Which of the following is true in this situation? Select one: a. The vacant lot is still listed. b. The broker can sue the seller for the commission based on the listed price. c. All advertising must be revised to accurately describe the property. d. The listing automatically terminates.

d. The listing automatically terminates.