Practical Applications- 4
The address on the broker's license Explanation A broker does their business from the address on the broker's license.
A broker may operate from: His or her office Any office The address on the broker's license His or her car
Only the relationships he or she chooses to offer Explanation A broker must offer only the relationships he or she chooses to offer.
A broker must offer: Only the relationships he or she chooses to offer All relationships approved by the Real Estate Commission Transaction broker Buyer's and seller's agency
Maintain an office policy on brokerage relationships Explanation Every office must maintain an office policy that is available for review.
A broker who does not have any employed licensees must: Maintain an office policy on brokerage relationships Work out of an office, not his or her home Keep records for 7 years Offer all brokerage relationships
All of the above Explanation A counter offer is a rejection of the initial offer. It becomes binding when signed by both parties.
A counter offer: Terminates the original offer Will result in a valid contract if accepted by the other party Must be signed by both parties All of the above
Pay himself a commission Explanation You need to disclose the company's name, address or phone number if you are advertising your own property as a FSBO.
A licensee selling his or her own home must do all of the following except: Pay himself a commission Disclose in the contract, or in a concurrent writing, that the licensee is a licensed real estate broker Include the company name if the licensee is advertising a FSBO Use state approved forms if you are listing through your broker
Whenever a listing is taken and an offer is presented Explanation An estimate of the seller's net proceeds is usually given at the time the listing is taken and with each new offer that is presented.
A licensee should disclose the total proceeds the seller will net from a sale. This estimate should be given: At the time the listing is taken When an offer is presented At time of closing Whenever a listing is taken and an offer is presented
148665 Explanation $174,900 X 15% = $26,235 $174,900 - $26,235 = $148,665
A purchaser desires to offer $174,900 for a home. The buyer will put a total of 15% down of which 1% will be put down as an earnest money deposit. How much will the new loan be for? 147143.5 146916 148665 147178.35
A negotiated commission on transactions completed Explanation Unless otherwise agreed a real estate licensee who is an independent contractor receives commissions on transactions negotiated and closed.
A real estate licensee who is an independent contractor receives: A regular salary Health insurance A negotiated commission on transactions completed Paid vacations
Brokerage Disclosure to Buyer Explanation Seller and Buyer Agency relationships must be in writing. In the absence of a written agreement the default non-agency relationship is a transaction broker. However, prior to performing a licensed activity such as eliciting or receiving confidential information, the Broker must at a minimum disclose this status using an approved disclosure form.
A transaction broker relationship may be created by: Lead-Based Paint Disclosure An oral disclosure is sufficient Approval of the employing broker Brokerage Disclosure to Buyer
Material facts about the property known to the broker Explanation All licensees have a statutory duty to disclose material facts about a property that are known by the broker.
As a transaction broker in an exclusive right to sell listing contract, the listing broker must disclose: The motivation of seller if requested by buyer Material facts about the property known to the broker Facts about the seller known by the broker All facts known by the broker about the transaction
What other properties have sold for and are listed for in that neighborhood Explanation Researching before making an offer can help determine what the home is worth and what to write the offer at.
Before making an offer, a licensee should research the market in the area of the desired property. This will help determine: How quickly the deal will close What terms the seller will accept How long it will take to sell the property What other properties have sold for and are listed for in that neighborhood
Attending first meeting with client Explanation E-31. Reasonable supervision. Pursuant to section 12-61-113(1)(o), C.R.S., and in addition to the requirements of Commission Rule E-30 "reasonable supervision" of licensees with two or more years of experience shall include, but not be limited to, compliance with the following: (a) Maintaining a written office policy describing the duties and responsibilities of licensees employed by the broker. A copy of the written policy shall: (1) be given to, read and signed by each licensee; (2) be available for inspection, upon request, by any authorized representative of the Commission. (b) Reviewing all executed contracts in order to maintain assurance of competent preparation. (c) Reviewing transaction files to ensure that required documents exist. (d) Nothing in this rule shall prohibit an employing broker from delegating supervisory authority to other experienced licensees. (1) Employed licensees who accept supervisory authority from an employing broker shall bear responsibility with the employing broker for ensuring compliance with the Commission statutes and rules by all supervised licensees. (2) Any such delegation of authority shall be in writing and signed by the employed licensee to whom such authority is delegated. A copy of such delegation shall be maintained by the employing broker for inspection, upon request, by any authorized Commission representative. (3) An employing broker shall not contract with any employed licensee so as to circumvent the requirement that the broker supervise employed licensees. More info on "High Level of Supervision: E-32. High-level of supervision. In addition to the requirements of Rule E-31 and pursuant to section 12-61-103 (6)(c)(I) C.R.S., an employing broker shall provide a "high level of supervision" for licensed persons with less than two years experience as follows: (a) Provide specific training in office policies and procedures; (b) Be reasonably available for consultation; (c) Provide assistance in preparing contracts; (d) Monitor transactions from contracting to closing; (e) Review documents in preparation for closing; (f) Ensure that the employing broker or an experienced licensee attends closings or is available for assistance. (g) Nothing in this rule shall prohibit an employing broker from delegating supervisory authority to other experienced licensees. (1) Employed licensees who accept supervisory authority from an employing broker shall bear responsibility with the employing broker for ensuring compliance with the Commission statutes and rules by all supervised licensees. (2) Any such delegation of authority shall be in writing and signed by the employed licensee to whom such authority is delegated. A copy of such delegation shall be maintained by the employing broker for inspection, upon request, by any authorized Commission representative.
Employing Broker "reasonable supervision" includes all of the following EXCEPT: reviewing all contracts Review transaction files Maintaining an office policy manual Attending first meeting with client
Supervision Explanation Every employing broker must provide supervision. It is the law!
Every employing broker (AKA sponsoring broker) must provide: Medical insurance A 401K plan Supervision Personal assistants
The buyer may cancel or sue for specific damages Explanation If the Seller defaults the options are with the Buyer,they can cancel, sue for specific performance, or damages, or both. From Contract to Buy and Sell Real Estate: If Seller is in Default: Buyer may elect to treat this Contract as canceled, in which case all Earnest Money received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this Contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both.
If a Seller is in default of the terms of the Contract to Buy & Sell: The buyer may cancel or sue for specific damages Buyer may sue to get the earnest money back Buyer may terminate by forfeiting the earnest money Buyer's remedy is determined by which box is checked
Note this fact on the form, along with the date and licensee's signature Explanation If a buyer will not sign any disclosure form, the licensee should note this fact on the form, along with the date and licensee's signature.
If a buyer will not sign any disclosure form, the licensee should: Not show any properties to the buyer until he or she does so Note this fact on the form, along with the date and licensee's signature Address the issue when the buyer is ready to make an offer Refuse to work with the buyer
The typing prevails Explanation Typing, or whatever form you use to fill in the contract blanks, prevails. This best shows intent of the parties.
If a printed form says one thing, but typing in a blank space says something contradictory: The contract is void for uncertainty The typing prevails The printed form prevails The contract is void because of the conflict
Every three years on the anniversary date of first being licensed, or any date mandated by the CREC Explanation All license renewals shall be for a full three-year period called the "anniversary date renewal period."
In Colorado, when must real estate licenses be renewed? Every three years with expiration on December 31 of the third year Every three years on the anniversary date of first being licensed, or any date mandated by the CREC Each year at the anniversary of licensing Every three years if the licensee passes the state examination
Seller Explanation The seller pays interest from the first day of the month until the day of closing (seller's loan balance times the interest rate divided by 365 to get the daily rate) on the loan the seller's paying off.
Interest in arrears is charged to the: Buyer Seller Broker Lender
Purchase E & O insurance every year Explanation E & O Insurance stands for Errors and Omissions Insurance
Licensees are required to: Take 32 hours of continuing education every three years Carry a license pocket card Display their license in a conspicuous place Purchase E & O insurance every year
Truth in Lending Act Explanation What is the right of rescission? The right of rescission is a consumer protection law found within the Truth in Lending Act Truth In Lending Act -- Regulation Z The Truth in Lending Act (TILA), Title I of the Consumer Credit Protection Act, is aimed at promoting the informed use of consumer credit by requiring disclosures about its terms and costs. In general, this regulation applies to each individual or business that offers or extends credit when the credit is offered or extended to consumers; the credit is subject to a finance charge or is payable by a written agreement in more than four installments; the credit is primarily for personal, family or household purposes; and the loan balance equals or exceeds $25,000.00 or is secured by an interest in real property or a dwelling.
Right of rescission is part of: Real Estate Settlement Procedures Act (RESPA) Truth in Lending Act Consumer Protection Act Fair Housing Act
Higher splits that typically include higher monthly office fees Explanation Higher splits typically include higher monthly office fees and when first starting out you need support and supervision to get your career moving.
Starting out you might prefer a lower split versus keeping 100% of your commission for: More training and support given to licensees on higher splits Lower splits that typically include higher monthly office fees Higher splits that typically include higher monthly office fees Less training and support that is given to licensees on lower splits
The proration of taxes for the final tax agreement Explanation The tax certificate is a breakdown of the current property tax liability for the property.
The Certificate of Taxes Due is used to calculate: The proration of taxes for the final tax agreement The amount of taxes due pursuant to the Real Property Transfer Declaration The amount of the transfer tax to be collected at closing Whether or not the sale will be subject to Colorado income tax withholding
The contract is void unless disclosure is signed by the seller, buyer and brokers prior to the parties signing the sales agreement Explanation It must be signed by buyer, seller and brokers prior to the contract being accepted. If not, the contract is VOID.
The Colorado Contract to Buy & sell includes a provision about lead based paint disclosure. According to this provision, if the building permit was issued prior to Jan 1, 1978: The broker is responsible to disclose the age of the property The contract is void unless disclosure is signed by the seller, buyer and brokers prior to the parties signing the sales agreement Disclosure is required only if the sellers are aware of lead based paint on the property The seller and brokers must make a disclosure prior to closing
Protect the owner from possible claims that two commissions are owed Explanation Only when an owner contacts and initiates the discussion may the licensee negotiate the terms upon which to take a future listing if the property is currently listed.
The Commission's intent in promulgating Rule E-13 (Sign Crossing Rule) was to: Allow two agents to collect a commission on the same property Assist brokers in obtaining more listings Protect the owner from possible claims that two commissions are owed Allow brokers to compete for existing listing contracts
No recourse because he didn't specify which one he wanted included in the purchase agreement Explanation You must clearly specify in the inclusions and exclusions of the purchase and sale contract what your buyer wants to be included. Just saying refrigerator is not enough - the seller did include a refrigerator, just not the one the buyer wanted. A savvy agent will include color, model and make of any appliance, in fact many even take pictures to document their choice.
The seller agreed to include the stove, refrigerator and microwave asked for in the purchase and sale contract. After taking possession, the buyer noticed that the refrigerator was smaller and a different color than the one he saw prior to closing. The seller had moved the refrigerator in the basement to the kitchen and took the refrigerator that was originally in the kitchen. The buyer has: No recourse because he didn't specify which one he wanted included in the purchase agreement Back out in the purchase of the home Make the seller buy him a new refrigerator Get the house for free
24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year Explanation The licensee must complete 24 hours of approved continuing education during the three year license period. Twelve of those hours must consist of taking 4 hour Annual Commission Update Course each year. CE requirements are listed in Commission Rule B-2 below: B-2. Methods of completing continuing education. Licensed brokers must satisfy the continuing education requirement before they apply to renew an active license, activate an inactive license or to reinstate an expired license to active status. Licensed brokers may satisfy the entire continuing education requirement through one of the following options: a) Complete the twelve hours required bysection 12-61-110.5 (1) (c), C.R.S., and required by this rule in annual 4-hour increments developed by the Commission, otherwise referred to as the "Annual Commission Update Course." Licensees who choose this option must complete an additional 12 hours of elective credit hours to meet the 24-hour total continuing education requirement during the license period in subject areas listed in section 12-61-110.5(3), C.R.S. Please note that a licensee may not take the same version of the Annual Commission Update Course more than once. If a licensed broker takes more than 12 hours of the Annual Commission Update Course during a license period, the licensee will receive elective credit hours for any additional hours. b) Completing the Commission-approved 24-hour "Broker Reactivation Course." This option is available to licensees under one of the following conditions: (1) Licensee is currently active and did not use the Broker Reactivation Course to satisfy the Rule B-2(a) requirements in the previous license year (2) Licensee is inactive or expired for up to thirty-six months prior to active status and unable to comply with the education requirements listed in Rule B-2(a). c) Pass the Colorado state portion of the licensing exam. d) Completing 72 total hours of pre-licensure education concerning the understanding and preparation of Colorado real estate contracts (48 hours) and real estate closings (24 hours). The courses and course providers are required to comply with the requirements as described at section 12-61-103(4)(a), C.R.S. Any inactive or expired licensees who cannot meet the education requirements listed in Section 4(a), (b), or (c) must comply with the education requirements found in Section 4(d) before activation or reinstatement of the license.
To renew an active Colorado real estate license, what continuing education is required of the licensee? 24 hours of continuing education and successful completion of the Colorado portion of the state licensing exam 8 hours of mandatory continuing education taken within the last three years 24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year 24 hours of additional education from any source
Use of Legal and Tax Counsel Explanation Brokers are required to recommend use of legal and tax counsel to their clients. This is accomplished through the following verbiage: From the Contract to Buy/Sell Real Estate; RECOMMENDATION OF LEGAL AND TAX COUNSEL. By signing this Contract, Buyer and Seller acknowledge that the respective broker has advised that this Contract has important legal consequences and has recommended the examination of title and consultation with legal and tax or other counsel before signing this Contract.
What is a mandatory recommendation in the Contract to Buy/Sell Real Estate? Use of a home inspector Use of Legal Counsel Use of a surveyor to verify property boundaries Use of Legal and Tax Counsel
A commission may not be collected Explanation Under the Licensee Buyout Addendum a licensee will not collect a commission.
When a licensee purchases a property utilizing a Licensee Buyout Addendum: A commission may be collected A commission may not be collected A commission may be collected with proper disclosure Nothing prohibits a licensee from collecting a commission
You should register your buyers with the builder Explanation When showing buyers new homes the broker should register the buyers with the builder. Failure to do so may result in the agent not receiving a commission.
When showing buyers new homes: The broker is not entitled to a commission because you do not complete a commission-approved purchase and sale contract You should register your buyers with the builder Do not show them new homes because builders are difficult to deal with Insist that the contract be drawn up by your attorney
Brokerage Relationships Offered to Public Explanation There are only three sections which are mandatory, whereas there are a number that are suggested. The mandatory ones are: written brokerage relationship policy, a policy to protect confidential information and designated brokerage relationships. The suggested ones are the long list below. More info: From the real estate manual: Office Policy Manuals Commission Rules E-29 through E-32 require brokers to demonstrate reasonable supervision over all licensees and non-licensed employees, including but not limited to secretaries, bookkeepers, and personal assistants of licensed employees. To comply with these supervision Rules, brokers who employ others are required to establish an office policy manual. This is in addition to the requirements for a written brokerage relationship policy (Rule E-39), a policy to protect confidential information (Rule E-39), and designation brokerage relationships (Rule E-38), whether performing sales or management activities. The following topical guidelines (as applicable) are suggested for office policy manuals. Sales Transactions • Parties responsible for delegated duties/agreements; • Preparation and review of contracts prior to closing; • Handling earnest money deposits, disputes, and releases; • Backup contracts; • Closing documents and closing instructions for the broker's agent; • Maintenance/custody of contract files; • Escrow records and written procedures for handling business operations; • Fair housing/affirmative action marketing; • Staff training - dissemination of information, staff meetings; • Use of personal assistants; • Guaranteed buyouts; • Investor purchases; • Non-qualifying assumptions and owner financing; • Licensee's purchase and sale of property; • Listing procedures and release of listings; • Rental occupancy before closing; • Computer system - data control, backup, and physical security; and • Internal audit and supervisory reviews of business operations. Management Activity • Operating policies and required disclosures; • Use of unlicensed on-site managers; • Administration of rentals and leasing activity; • Items under "Sales" above, where applicable; • Supervision of accounting services, records, and reporting to others; • Cash handling, collection of delinquent rents and deposits; • Ownership/management of rental properties by agents; • Administration and policies for in-house services; • Maintenance of records and business reports by any outside service; • Advances of funds on behalf of clients/customers; • Cancellation of agreements and termination of services; • Related services performed by affiliated entities; • Backup and disaster recovery plan for loss of business records; • Eviction and legal action; and • Return of security and advance deposits.
Which of the following is the ONLY section which must be in an office policy manual? Human Resource Benefits Commission Plan Backup Contracts Brokerage Relationships Offered to Public
A licensed brokerage with general liability insurance Reference This is a tough one. All active licenses must have this Errors & Omissions Insurance. A broker with an inactive license does not need this insurance because he/she is not practicing real estate. Companies and individuals buying or selling real estate for themselves do not need to be licensed agents and thus are not required to have this insurance. This leaves a licensed brokerage with General Liability insurance. All licensed real estate firms are required to have E & O insurance. The reason is there is a difference between a General Liability and Errors and Omission insurance. They cover different risk areas. E & O Insurance will not protect a company when their office sign falls on someone's head, nor will a G L policy protect the company when an agent is sued for an error when creating a purchase contract - that is E & O coverage. General Liabilityi nsurance covers a company for lawsuits for bodily injury or property damage. Errors and Omissions insurance covers a company from lawsuits related to financial loss due to problems with services provided.
Which of the following requires Errors and Omission insurance? A licensed brokerage with general liability insurance A Broker with an inactive license Partnership acting on its own to buy real estate Telephone company buying "rights of way"
Property of the tenant farmer Explanation Emblements are regarded as personal property even before harvest; thus a tenant has the right to take the annual crop resulting from his or her labor.
A growing crop, also known as emblements, is regarded as: Real property until harvested Leasehold property Property of the land Property of the tenant farmer
Broker A Explanation A real estate broker is required to keep records (for the Commission) for 4 years.
Broker A is a sole proprietor. He quits business and goes to work under Broker B. Whose responsibility is it to keep Broker A's previous records? Broker A Broker B Real Estate Commission None of the above
A definite date for termination Explanation All contracts must have a termination date.
Colorado Real Estate Commission Rule E-11 states that all agreements to provide services for which a license is required must have: A notary witness signature A definite date for termination An automatic six-month termination A commission approval signature
31 days Explanation Licensees have a 31-day grace period from the expiration date of their license to complete the renewal process. For example, a license which expires on 12/31/2017 will have a grace period extending until 01/31/2018 to complete the renewal process and pay the required fee. The division does recommend completing the renewal process as soon as possible to avoid last minute issues which may prevent your renewal.
The grace period to renew an expired license without penalty is: 31 days 61 days there is no grace period 45 days
