Mississippi Real Estate Unit 8: Real Estate Brokerage

Assuming that the listing broker and selling broker split their commission from a transaction equally, what was the sales price of a rural property if the commission rate was 6.5% and the listing broker received $12,593.50? A) $256,200 B) $387,492 C) $193,746 D) $139,900

The answer is $387,492. The problem can be solved using these two steps: (1) Find the entire commission by doubling the listing broker's half: 2 × $12,593.50 = $25,187. (2) Find the sales price by dividing the entire commission by the brokerage rate: $25,187 ÷ 0.065 = $387,492.

On the sale of any property, a sales associate's compensation is based on the total commission paid to the broker. The sales associate receives 30% of the first $2,500, 40% of the next amount between $2,500 and $7,500, and 50% of any remaining amount exceeding $7,500. If a property sells for $234,500 and the broker's commission rate is 6.5%, what is the sales associate's total compensation? A) $6,621.25 B) $7,621.25 C) $6,871.25 D) $5,847.00

The answer is $6,621.25. Total commission to the firm: $234,500 × 6.5% = $15,242.50. The sales associate's commission is computed in three parts: (1) Use $2,500 of the $15,242.50 for a commission at 30% = $750. (2) Use another $5,000 of the $15,242.50 for commission at 40% = $2,000. So far, the sales associate has received commissions on $7,500: $2,500 + $5,000. The licensee now gets 50 percent commission on the $7,742.50 that is left: $15,242.50 - $7,500 = $7,742.50. (3) The commission on $7,742.50 at 50% = $3,871.25. Total of three parts of the sales associate's commission: $750 + $2,000 + $3,871.25 = $6,621.25.

A sales associate took a listing on a house that sold for $329,985. The commission rate was 5%. A sales associate employed by another broker found the buyer. The seller's broker received 60% of the commission on the sale; the buyer's broker received 40%. If the seller's broker kept 30% and paid the seller's sales associate the remainder, how much did the seller's sales associate earn on this sale? A) $6,929.68 B) $8,249.00 C) $4,346.85 D) $5,774.74

The answer is $6,929.68. Amount the listing sales associate's broker received: $329,985 × 5% × 60% = $9,899.55 Amount the listing broker kept: $9,899.55 × 30% = $2969.87 (rounded to the nearest cent). The sales associate's earnings: $9,899.55 - $2,969.87 = $6,929.68.

Even if a consumer has requested placement on the National Do Not Call Registry, a real estate professional may call the consumer up to how many months after the consumer's last purchase, delivery, or payment? A) 6 months B) 18 months C) 3 months D) 12 months

The answer is 18 months. Real estate professionals may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment, even if the consumer is listed on the National Do Not Call Registry. However, if the consumer specifically asks the company not to call, then the company must stop calling.

Practical applications of the articles of the REALTORS® Code of Ethics are known as A) Standards of Business. B) Standards of Practice. C) Covenants of Business. D) Covenants of Practice.

The answer is Standards of Practice. Practical applications of the articles of the REALTORS® Code of Ethics are known as Standards of Practice.

The federal law that makes contracts originated, negotiated, and executed over a combination of computer and cell phone enforceable is A) UETA. B) COPPA. C) Junk Fax Prevention Act. D) CAN-SPAM.

The answer is UETA. The law sets forth basic rules for entering an enforceable contract using electronic means. The primary purpose of UETA is to remove barriers in electronic commerce that would otherwise prevent enforceability of contracts.

All of the following are prohibited under the antitrust laws EXCEPT A) competing brokers allocating markets based on the value of homes. B) a broker setting a company commission schedule. C) competing property management companies agreeing to standardized management fees. D) real estate companies agreeing not to cooperate with a broker because of the fees that the broker charges.

The answer is a broker setting a company commission schedule. A broker may independently determine commission rates or fees for the firm only.

Under antitrust laws, which of the following activities is acceptable? A) A broker setting a company commission schedule B) Competing brokers allocating markets based on the value of homes C) Competing property management companies agreeing to standardized management fees D) Real estate companies agreeing not to cooperate with a broker because of the fees that the broker charges

The answer is a broker setting a company commission schedule. A broker may independently determine commission rates or fees for the firm only.

A REALTOR® is BEST described as an individual who is A) any real estate professional who assists buyers, sellers, landlords, or tenants in any real estate transaction. B) a real estate professional who acts as a point of contact between two or more people in negotiating the sale, purchase, or rental of property. C) a real estate licensee and a member of the National Association of REALTORS® (NAR). D) a member of the National Association of Real Estate Brokers who specializes in residential properties.

The answer is a member of the National Association ofREALTORS® (NAR). People are licensed by their respective states to be real estate brokers or salespersons (also called sales associates or associate licensees). A licensee who then joins the National Association of REALTORS® is called a REALTOR®.

When communicating with clients or consumers via email, all of these are examples of professional email etiquette EXCEPT A) responding to emails within one week. B) avoiding sending large attachments. C) providing useful information in the subject line. D) using spell check.

The answer is responding to emails within one week. Examples of email etiquette include using the subject line in a useful and helpful manner; avoiding spelling errors; responding promptly to all email messages; and being specific, to the point, and brief. Do not send unsolicited emails.

If a sales associate hints to prospective clients that the commission rate matches the "going rate," this action is A) recommended practice by the National Association of REALTORS® . B) a violation of antitrust laws. C) not a violation of antitrust laws. D) a common practice allowed in most states.

The answer is a violation of antitrust laws. The challenge for real estate brokers and sales associates is to avoid even the impression of price-fixing. Hinting to prospective clients that there is a "going rate" for commissions or a "normal" fee implies that rates are, in fact, standardized. The licensee must make it clear to clients that the rate stated is only what that brokerage charges.

Although state laws vary regarding internet advertising, which of these is a typical element of state policy or law? A) Email sent by a real estate professional needs to include the professional's name, phone number, and real estate license number. B) Ads must contain true, current information and avoid misleading the potential client or customer. C) On a website containing their ads, real estate professionals only need to identify themselves as a broker or sales associate on the site's home page. D) It is acceptable for only the sales associate's name (without the broker's name) to be shown in an ad.

The answer is ads must contain true, current information and avoid misleading the potential client or customer. A phone number and license number are not usually required in an email. Status as a broker or sales associate should be disclosed on every page of a website with ads. Both the sales associate's name and the broker's name should be shown in the ads.

Internet advertising regulations include which of the following stipulations? A) Sponsoring broker's name must be included in advertising. B) Real estate professional must disclose license status on each page of website that contains an advertisement. C) Advertising may not be misleading. D) All of these.

The answer is all of these. State laws vary regarding internet advertising. It is important for you to check your own state's laws before engaging in advertising and other marketing activities on the internet.

A real estate licensee has a written contract with a broker specifying that the licensee will not be treated as an employee. The licensee's entire income is from sales commissions rather than an hourly wage. Based on these facts, the licensee is considered A) an employee. B) a real estate assistant. C) an independent contractor. D) a subagent.

The answer is an independent contractor. The licensee meets the IRS's three requirements to be treated as a self-employed independent contractor: the individual (1) is a real estate licensee, (2) has an agreement with the broker that the licensee will not be treated as an employee for federal tax purposes, and (3) earns the majority of income from the firm in commissions, not wages.

The real estate industry, including all licensed real estate brokers and sales associates, is subject to A) fair competition laws. B) more regulations for smaller firms. C) antitrust laws. D) social security taxation.

The answer is antitrust laws. Even though individual real estate sales associates are subject to supervision by the employing real estate broker, both are subject to both federal and state antitrust laws.

Many organizations seek to ensure a high standard of conduct in their members by developing and requiring adherence to a A) code of ethics. B) fair play doctrine. C) bill of rights. D) constitution.

The answer is code of ethics. One way that an organization can work to ensure a high standard of conduct is by adopting and enforcing a code of ethics.

All of the following are required of a broker who is seeking to collect a commission for brokering the sale of a property EXCEPT A) having had a contract of employment—an agency representation agreement. B) having a valid real estate broker's license. C) having been the procuring cause in the transaction or having an exclusive-right-to-sell agreement. D) complying with a commission rate set by a trade organization.

The answer is complying with a commission rate set by a trade organization. Professional organizations may not set fees or commissions splits

Regulations of agencies that administer real estate license laws A) can be modified, if necessary, to insure compliance by large real estate firms. B) have the same force and effect as statutory law. C) are optional for licensees, though their adherence is always recommended. D) can only be changed by the legislature.

The answer is have the same force and effect as statutory law. Administrative regulations are created to enforce statutory law and must be complied with by all licensees. They are created by the licensing authority and can be changed by the licensing authority.

What is the main value of a multiple listing service (MLS) for sellers? A) It reduces cooperation among brokers. B) Real estate professionals do not have to work as hard to secure property listings. C) It exposes the property to a greater number of prospective buyers. D) It simplifies closing procedures.

The answer is it exposes the property to a greater number of prospective buyers. The MLS exposes the property to many different real estate professionals, encouraging cooperation among brokers and expediting sales.

National Association of Real Estate Brokers (NAREB) A) members are known as Realtists. B) is part of the National Association of REALTORS®. C) members are known as REALTORS®. D) no longer concerns itself with equal housing opportunity.

The answer is members are known as Realtists. Members of the National Association of Real Estate Brokers (NAREB) are known as Realtists.

A sales associate wants to be classified by the IRS as a qualified real estate agent—the equivalent of holding independent contractor status for tax purposes. The sales associate must meet all of the following requirements EXCEPT A) receive substantially all income from the brokerage based on production, not time worked. B) have a written agreement with the broker stating that the sales associate will not be treated as an employee for federal tax purposes. C) hold a current real estate license. D) perform all work unsupervised by the managing broker.

The answer is perform all work unsupervised by the managing broker. The IRS's three requirements to be treated as a qualified real estate agent, and thus self-employed, are that the real estate professional (1) is a real estate licensee, (2) has a written agreement with the broker indicating the licensee will not be treated as an employee by broker contributions to Social Security or the withholding of income taxes, and (3) earns a substantial portion of income from the firm in commissions, not wages. An independent contractor is not free from supervision by the managing broker.

Antitrust laws do NOT prohibit real estate A) sales associates within the same office agreeing on a standard commission rate. B) companies allocating markets based on the location of commercial buildings. C) brokers allocating markets based on the value of homes. D) companies agreeing on fees charged to sellers.

The answer is sales associates within the same office agreeing on a standard commission rate. Commission-setting agreements and allocation of markets on any basis between and among different companies violate antitrust laws. However, commission-setting within a company is not a violation.

The National Do Not Call Registry is managed by A) HUD. B) NAR. C) the Federal Trade Commission (FTC). D) Consumer Finance Protection Bureau (CFPB).

The answer is the Federal Trade Commission (FTC). The registry is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive.

The name for the current policy of the National Association of REALTORS® that allows all multiple listing service (MLS) members equal rights to display MLS data is A) the Internet Listing Display Policy. B) the Internet Data Exchange. C) the Open Listing Data Service. D) the virtual office website.

The answer is the Internet Data Exchange. NAR has adopted the Internet Data Exchange (IDX). The policy allows all MLS members to have equal rights to display MLS data, while also respecting the rights of the property owners and the brokers who represent them to market the property as they wish.

The organization which arose out of the early days of the civil rights movement as an association of racial minority real estate brokers in response to the conditions and abuses that eventually gave rise to fair housing laws is A) none of these. B) the National Association of REALTORS®. C) the National Association of Real Estate Brokers (NAREB). D) the National Organization of Real Estate Professionals.

The answer is the National Association of Real Estate Brokers (NAREB). NAREB arose out of the early days of the civil rights movement as an association of racial minority real estate brokers in response to the conditions and abuses that eventually gave rise to fair housing laws.

Sales associate A and sales associate B work for the same firm. They agree to divide their region into an eastern half and a western half; sales associate A will handle listings in the east, and sales associate B will handle listings in the west. Which statement is TRUE? A) The agreement constitutes illegal price-fixing. B) The agreement does not violate antitrust laws. C) The two sales associates are guilty of a group boycott with regard to other sales associates in their firm. D) The two sales associates have violated the Sherman Antitrust Act and are liable for treble damages.

The answer is the agreement does not violate antitrust laws. Because both sales associates are in the same firm, their agreement is not an intercompany agreement to allocate markets; it is merely fixing responsibility within one company and is quite proper and not subject to antitrust law.

A broker's policy requires a 7% commission on all listings; no lower commission rate is acceptable. Which statement is TRUE? A) The broker may legally set the minimum commission rate acceptable for the firm. B) The broker must present the uniform commission policy to the local professional association for approval. C) The sales associates associated with the brokerage will not be bound by the requirement and may negotiate any commission rate they choose. D) A homeowner may sue the broker for violating the antitrust law's prohibition against price-fixing.

The answer is the broker may legally set the minimum commission rate acceptable for the firm. Brokers have the right to set commissions within their own firm. This is not an antitrust violation. Sales associates who wish to continue with that broker can be required to comply.

A broker has established the following office policy: "All listings taken by any sales associate of this real estate brokerage must include compensation based on a 7% commission. No lower commission rate is acceptable." If the broker attempts to impose this uniform commission requirement, which statement is TRUE? A) The broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. B) The sales associates of the brokerage will not be bound by the requirement and may negotiate any commission rate they choose. C) A homeowner may sue the broker for violating the antitrust law's prohibition against price-fixing. D) The broker must present the uniform commission policy to the local professional association for approval.

The answer is the broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. Brokers have the right to set commissions within their own firm. This is not an antitrust violation. Sales associates who wish to continue with that broker can be required to comply.

Which statement BEST explains this sentence: "To recover a commission for brokerage services, a broker must be employed by a client"? A) The client must make an express or implied agreement to pay a commission to the broker. B) The broker must work in a real estate office. C) The broker must have a sales associate employed in the office. D) The broker must express an interest in representing the client.

The answer is the client must make an express or implied agreement to pay a commission to the broker. A broker's contract of employment by a client is the listing or buyer representation agreement signed by them both. A valid employment agreement is one of the usual requirements in a suit for a brokerage commission; it is proof of employment.

To be entitled to receive compensation from a real estate sales transaction, an individual must be all of the following EXCEPT A) unrelated to either the buyer or the seller. B) the procuring cause of the sale. C) a licensed real estate broker. D) employed by the buyer or the seller under a valid contract.

The answer is unrelated to either the buyer or the seller. All parties should be notified of the broker's relationship to either buyer or seller.

When acting as an employee rather than an independent contractor, a sales associate may be obligated to A) work set hours. B) personally pay all withholding taxes. C) accept a commission from another broker. D) list properties in the sales associate's own name.

The answer is work set hours. An employee not only accepts the actual duties assigned by the employer but also agrees to the manner in which the employer wants them performed.