9. Practice of Real Estate question
The term "caveat emptor" literally translates as
"Let the buyer beware" QUESTION RATIONALE Caveat emptor refers to the fact the buyer must examine the goods or property, and that she buys at her own risk.
Sellers negotiate a listing with a broker stating that, if they find their own buyer, they can save the commission. However, if the broker, his agent, or any other brokerage firm finds the buyer, then the sellers will have to pay the broker's commission. What type of listing did the sellers and broker just negotiate?
1exclusive agency agreement QUESTION RATIONALE The exclusive agency agreement entitles the broker to a commission if anyone other than the seller finds a buyer. An exclusive right to sell listing entitles the broker to a commission if anyone--including the seller--finds a buyer. In the net listing (which is illegal or discouraged in many states), the seller sets a net amount she is willing to accept for the property, and the broker keeps any excess amount as commission. In an open (or non-exclusive) listing, a seller makes an open offer to all brokers to find a buyer and, thus, earn the commission.
A real estate agent assures a buyer that a home is free from any structural defects. As it turns out, the home has a very leaky basement. Which statement is TRUE?
Both the sales agent and the seller are liable for misrepresentation QUESTION RATIONALE The agent binds the principal. The real estate agent's representation of the principal/seller's property is binding upon the seller as well, so both would be liable.
Grace is the agent on the floor and receives a call from a potential buyer stating he is an executive of a company and would like to see high-end condos listed by her firm. Grace sets an appointment and shows him the condos. The next day, Grace receives another inquiry on the same condos. She detects an accent and presumes the caller is from West Virginia. When the caller requests viewing appointments, Grace informs him he will first have to be pre-qualified. Of what law is Grace in violation?
Civil Rights Act of 1866-discrimination based on ancestry is illegal QUESTION RATIONALE The federal Fair Housing Act does not include ancestry but the Civil Rights Act of 1866 does. Agents should ask the same qualifying questions to all home seekers.
A bank refuses to lend a married woman money because, even though she qualifies on her own, it wants her husband to co-sign the loan with her. The bank is guilty of violating the
Equal Credit Opportunity Act QUESTION RATIONALE If the bank's refusal to lend the money was because of sex, then this would be a violation of the Federal Fair Housing Act, which is part of the Civil Rights Act of 1968. While familial status and sex are protected under the Federal Fair Housing Act, marital status is protected only under the Equal Credit Opportunity Act. This question addresses discrimination based on marital status. RESPA is a federal law dealing with real estate closings that sets forth specific procedures and guidelines for disclosure of settlement costs.
If, in the sale or rental of a house, a sales agent discriminates against an individual because of religion, the agent may be charged with discrimination under which statute?
Federal Fair Housing Act QUESTION RATIONALE The Civil Rights Act of 1866 prohibits discrimination based on race, color, and ancestry only; it does not prohibit discrimination based on religion. The Federal Fair Housing Act specifically prohibits religious discrimination. The Sherman Antitrust Act does not apply to the sale of a home, but rather to market fixing or price fixing by brokers. The Equal Credit Opportunity Act applies to giving a loan or credit to individuals, and not to the sale of homes.
A broker or salesperson's refusal to cooperate with other brokers because of race is prohibited by the
Federal Fair Housing Law of 1968 QUESTION RATIONALE There is no such thing as the Civil Rights Act of 1844; it is the Civil Rights Act of 1866. The Federal Fair Housing Law of 1968 covers discrimination by sellers and salespersons or brokers, and discrimination based upon race, color, religion, sex, national origin, disability, and familial status. Executive order 1068 has to do with immigration. There is no Presidential Fair Housing Act of 1973.
John is charged with violation of the Civil Rights Act of 1866 because he discriminated against a woman while showing her a house. Which statement is TRUE?
John is not guilty of unlawful discrimination QUESTION RATIONALE The Civil Rights Act of 1866 does not cover gender discrimination; it prohibits discrimination based on race, color, and ancestry only.
What factor does not contribute to a "Buyers Market"?
Limited new construction QUESTION RATIONALE Limited new construction means fewer houses available and will contribute to a seller's market.
Marty, a real estate agent, has been trying to persuade his friend Bill to buy a house instead of renting. Marty suggests that Bill just move out as his landlord has a duty to mitigate the damages by trying to find another tenant. Bill moves out and purchases a property listed by Marty. Bill is sued, by his former landlord who wins a judgment for the unpaid portion of the lease. Whose fault is this?
Marty's QUESTION RATIONALE Marty cannot induce the breaking of a contract to induce a sale. The buyer client may have recourse against Marty's broker and Marty for inducement to break the contract. Bill will have to pay the judgment and may have cause against his broker for breaching their fiduciary duties.
When a buyer gave Salesperson Sue a check for $1,000 as an earnest money deposit in a transaction, she deposited it in her special trust account. Can her client earn interest on this deposit?
No, only brokers may have trust accounts QUESTION RATIONALE If a salesperson receives a deposit check from a prospective buyer, (unless the contract provides other instructions) the check must be given to the broker to be deposited in the broker's non-interest-bearing account. Salespeople may not have trust accounts.
A real estate licensee needs to have
a broad understanding of law and how it affects real estate QUESTION RATIONALE Competent attorneys are not always available. An agent does not need to have experience as a practicing attorney. Though an in-depth understanding of constitutional law might help, it is not a necessity. A real estate agent should have a broad understanding of the law and how it affects real estate, and should have enough experience to recognize a potential legal problem, and then refer that problem to a competent attorney.
When buyers ask for help understanding the various ways of taking ownership (title), the agent should
advise the buyers to ask their attorney` QUESTION RATIONALE The only correct answer is to advise the buyers to seek legal council. Describing methods of ownership is practicing law.
Which is NOT a protected class under the 1968 Fair Housing Act?
age QUESTION RATIONALE Race, religion, color, sex, national origin, disability, and familial status are all protected classes under the Fair Housing Act of 1968; age is not a protected class under this act.
A licensee is working with a buyer as a customer. The buyer has the agent write an offer. When must the agent give a copy of the offer to the buyer?
as soon as the buyer signs it QUESTION RATIONALE A buyer or seller is entitled by law to receive a copy of anything they are asked to sign or initial at the time of signing.
A sales agent solicits homeowners to list their properties by suggesting a wave of minorities is moving into the neighborhood. The salesperson is guilty of
blockbusting QUESTION RATIONALE Blockbusting is the illegal act of encouraging homeowners to sell their properties because minorities are moving into the neighborhood. Steering is the illegal practice of trying to influence a buyer's choice of housing using racial, religious, ethnic, etc., factors. Redlining is the illegal practice of denying loans in certain areas of a community because of race, color, etc. There is no such thing as panic buying; blockbusting is sometimes referred to as "panic selling" or "panic peddling."
Carol, a broker, doesn't want her husband to know she received a commission check for $35,000, so she put the money in her non-interest bearing broker's trust account that she maintains for her clients. Carol is guilty of
commingling QUESTION RATIONALE Mixing a broker's money with a client's is commingling. When an agent uses money that belongs to others it is called conversion.
An agent advertises a property for sale for $120,000. When any potential buyer arrives for a showing, the agent says the price has just been raised to $160,000. The agent is guilty of
false advertising QUESTION RATIONALE The agent is guilty of false advertising, normally called the "bait and switch" strategy. There is no violation of any Fair Housing principles or discrimination based on race, which became a protected class under the Civil Rights Act of 1866. Price fixing and market fixing are illegal under the Sherman Antitrust Act.
Potential buyers believe they have been discriminated against because of their race. Which option is available to the buyers under the Federal Fair Housing Act?
file a lawsuit within two years and file a complaint with the office of Equal Opportunity/HUD within one year QUESTION RATIONALE Under the Federal Fair Housing Act, victims have the right either to file a complaint with the office of Equal Housing Opportunity/HUD within one year of the incident, or to file a lawsuit within two years of the incident. The Federal Trade Commission handles complaints under the Sherman Antitrust Act.The FHA insures loans.
A real estate agent knows of a defect in a listed property but fails to tell the buyer. The agent is guilty of
fraud QUESTION RATIONALE Misrepresentation is negligence. So those two answers are the same. Fraud is an intentional lie or intentional misrepresentation.
The difference between fraud and misrepresentation is that
fraud is intentional misrepresentation, while misrepresentation may be unintentional QUESTION RATIONALE Fraud is defined as intentional misrepresentation of a material fact, while misrepresentation may be an inadvertent misstatement of fact. If fraud is proven, it can give rise to both compensatory and punitive damages.
Which could a real estate agent lawfully prepare?
none of these answers QUESTION RATIONALE A general warranty deed, land contract, and lease with option must each be prepared by an attorney-at-law. Legal instruments can be prepared only by the parties themselves or an attorney.
A sales agent reads in the local paper that a seller is offering property for sale by owner with a 3% fee to any broker who brings in a buyer. The agent asks to show the property to a buyer. Which type of listing has the seller offered?
open listing QUESTION RATIONALE An open listing is one where the seller is not represented by any agent or broker, but offers all brokers the chance to find a buyer without signing any listing agreement. The net listing has been declared illegal in many states. The exclusive right to sell is the listing the broker prefers, as it gives the broker the exclusive right to sell the property. The exclusive agency agreement will gain a broker a commission only if that broker's agency or any other agency, and not the seller, finds a buyer.
A seller signs a listing agreement with a broker. The broker designates a salesperson to service the listing. While promoting the new listing to the other salespeople at the office, the salesperson tells the group to bring in any offer--the seller is very motivated and is in a hurry to sell. The salesperson would be allowed to say this when the
seller instructs the listing broker QUESTION RATIONALE An agent's fiduciary duty of confidentiality should prevent her from indicating that the seller may take less than list price, unless the client instructs the listing broker to do so (in writing is the best evidence).
If a client's earnest money check, upon being deposited in the broker's trust account, is returned for insufficient funds, the broker should
tell the cooperating broker that the check bounced QUESTION RATIONALE Even though the broker's client may be able to provide funds to replace the bad check quickly, the broker should immediately inform the cooperating broker/seller. An unfunded bank draft is a material fact (not to mention possible fraud) concerning the adequacy of the agreed upon consideration in the contract.
A buyer looking at a rural property asks the salesperson if he should have a well and septic inspection. The agent advises him that he may lose the property to another buyer if he makes the contract contingent on an inspection. Which best describes the situation?
the agent was acting carelessly QUESTION RATIONALE A broker/agent is expected to use reasonable skill and care when representing a client. An agent should never discourage a buyer from an having inspection performed.
Salesperson Sue has just completed a purchase and sale agreement with Bob, her client, in order to make an offer on a house. The agreement includes a good faith deposit of $5,000 in the form of a check, which Bob has given to Sue. Absent any specific instructions in regard to Bob's check, Sue should
turn it over to her broker immediately QUESTION RATIONALE The payment of a good faith deposit is due when the contract is formed, though it is not delivered to the seller unless the parties have so agreed. Since Sue is a subagent (her broker is Bob's actual agent) she should give Bob's check to her broker to deposit in the brokerage's special trust account "as soon as possible," unless her broker has given her written authorization to make deposits directly into the account. A salesperson should never hold a client's funds or deposit clients' funds in a personal bank account.
By which system can real estate brokers share listings and commissions on listings sold jointly?
MLS QUESTION RATIONALE MIP stands for mortgage insurance premium. PMI is private mortgage insurance. APR is the annual percentage rate. MLS is the multiple listing service, which is a system that real estate brokers can use to share listings and commissions on listings sold jointly.
An advertisement in the local newspaper says that a property for rent is available only to senior citizens over the age of 55. A young couple with a child asks to see the property; they are denied access. Which law has been violated?
No violations have occurred QUESTION RATIONALE Even though family status is a protected class under the Federal Fair Housing Act, many courts have ruled there is an overriding state interest in providing housing for seniors, as long as at least 75% of the units in a complex are set aside for those 55 years old or older. The Sherman Antitrust Act applies to price fixing and market fixing. The Truth in Advertising Act applies to misrepresentation being made in advertising--there were no misrepresentations in this ad.
A listing agent notices the property she is listing needs some cosmetic attention. Rather than bother the seller with the chore of cleaning and making minor repairs, she advises the owner to list lower than market value to get a quick sale. The property is on the market for several months and now the listing agent is offering the seller a list price offer. The agent has the house cleaned and does some minor repairs. The agent sells the property at a profit of 25%. Has there been a violation?
Yes, the agent is self-dealing QUESTION RATIONALE A listing broker is obligated to advise the seller of the best marketing strategy. When advice is withheld for the purpose of making a deal or profit it is considered to be self-dealing or making a secret profit.
Real estate agent Marge listed a property that was occupied by a tenant. The seller instructed Marge to inform the tenant that he has two weeks to vacate because the owner wants to sell the property. Marge should
advise the seller to consult with his attorney for advice on how to get rid of the tenant QUESTION RATIONALE A real estate agent has no authority to evict tenants and cannot circumvent the law where this is concerned. If the seller wants to be rid of a tenant, he needs to consult with an attorney who can tell him how an eviction works.
Mark is a real estate agent with 20 years of experience in residential real estate. He gets a call from an old classmate who found him through a social Internet website. The classmate asks Mark to manage her 400-unit apartment building. Mark should
ask the owner to let him refer her to an expert QUESTION RATIONALE Managing real property is different than selling single-family residences. Since the real estate agent is a residential expert, he should refer the owner of the apartment building to a qualified property manager.
An illegal act that encourages homeowners to sell their property because minorities are moving into the neighborhood is called
blockbusting QUESTION RATIONALE Steering refers to directing certain minorities to neighborhoods based on the racial composition of the neighborhoods. Redlining refers to the discriminatory business practices of banks and insurance companies. Blockbusting is also known as "panic selling" or "panic peddling" (not "panic buying"), whereby sellers are encouraged to sell their properties because minorities are moving into the neighborhood.
During a listing interview, a seller demands the listing agent reduce the proposed commission by 1%. What is the best course of action for the agent?
call the broker and discuss the matter QUESTION RATIONALE An agent should not adjust commissions without the consent of the broker. Commissions may be fixed by company policy, but are not dictated by law or even local custom--they are negotiable between the company and the client.
Which is NOT an exemption under the Federal Fair Housing Act?
church selling its church grounds with the help of a broker QUESTION RATIONALE An exemption exists only if the property is for sale by owner. The sale of church property is exempt only if no broker is involved.
A broker must keep records of all funds received and disbursed from the broker's special trust account. Which does NOT need to be included in the record?
clients' Social Security numbers QUESTION RATIONALE A record of all trust funds must include (but is not limited to): 1. date funds were received, 2. party from whom funds are received and the purpose of the funds, 3. amount received, 4. date funds are deposited in special or trust bank account, 5. check number and date funds are disbursed, 6. party to whom funds are disbursed and purpose of disbursement, and 7. any other documents necessary to explain record entries and identify the current balance in the special or trust bank account. A client's Social Security number is not required information (but neither is it prohibited).
An earnest money deposit, if any is offered, is usually given to the broker at the time a sales contract is authorized by the offeror and presented to the offeree. Absent any contrary instructions in the sales contract, the broker has a legal responsibility to
deposit the check in the brokerage's special trust account QUESTION RATIONALE As an agent, the broker must comply with all lawful instructions of his client. Absent specific instructions, the broker or his authorized agent must place all earnest money deposits in the brokerage's special trust account as soon as possible after receipt.
Commingling refers to
depositing client funds in the broker's operating account QUESTION RATIONALE A broker is required by the law to have a special trust account for clients' funds. A broker may, nevertheless, maintain some of the broker's own funds in the special trust account, but only when they are clearly identified as the broker's funds and used only for the purpose of maintaining a minimum balance to keep the account open or to cover bank service charges. All salespeople in a brokerage must be REALTORS(R) if the broker is a REALTOR(R).
Eric is the leader of a sales team. He designates half of the team to represent sellers and the other half to represent buyers. Eric overhears a conversation in which a seller's agent gives confidential information to the buyer's agent. Eric should
disclose to the client that confidential information has been compromised QUESTION RATIONALE Even if an agent doesn't have a title (like office manager), the licensee is still considered a management level licensee. To be considered a management level licensee, one needs only to be in a supervisory position of another licensee affiliated with a broker. The team leader is obligated to disclose the situation to the seller.
An exception to the federal Fair Housing law is discrimination based on
economic considerations QUESTION RATIONALE Protected classes under Fair Housing are: race, color, creed, sex, national origin, familial status, and disability. Economic status is not a protected class.
Many states have imposed the Canons of Ethics and the Board of REALTORS(R) promulgated the Code of Ethics in order to
ensure professionalism in the practice of real estate QUESTION RATIONALE The Canons of Ethics and the Board of REALTORS'(R) Code of Ethics provide ethical guidelines to ensure professional standards of conduct in the real estate industry.
Goldberg lists his home with PDQ Realty, allowing them to put a sign in the yard, list it in MLS, and advertise it in the local newspaper. During the listing period, Goldberg sells the home to his brother and is NOT obligated to pay PDQ any commission. What type of listing did Goldberg have with PDQ?
exclusive agency listing QUESTION RATIONALE Under an exclusive agency agreement, the seller can still sell the property on his own and not owe a commission. In an exclusive agency listing, unlike an open listing, only the listing company can put a sign in the yard and advertise it.
Which type of listing is most desirable from the point of view of the broker?
exclusive right to sell listing QUESTION RATIONALE The exclusive right to sell is most desirable, because the seller relinquishes all rights to market and show the property to the broker. An exclusive agency listing will gain the broker a commission only if an agent, not the seller, finds the buyer. Under a net listing arrangement, the broker receives all monies over and above a certain net price fixed by the seller (many states have declared net listings illegal). In an open listing, the seller has not signed to any agency agreement with any broker, but makes an open offer to all brokers: The broker who finds a buyer will receive a commission.
Agent Sara goes to a listing appointment and convinces the seller to agree to a commission of 7%, as this is the broker's customary rate of commission. The seller asks Sara if she would offer 4% to the buyer's broker. Sara should
get the broker's permission QUESTION RATIONALE The listing agent must follow the lawful instructions of the broker's client; although the agent could also walk away and not take the listing. The Sherman Antitrust Act prohibits real estate agents from setting uniform commission rates.
The term "blockbusting" refers to
inducing homeowners to sell their properties by suggesting that minorities are moving into the neighborhood QUESTION RATIONALE Blockbusting is the illegal act of encouraging people to sell their properties because minorities are moving into the neighborhood. Steering deals with directing home buyers to a certain neighborhood because of race or religion. Redlining refers to denying someone a loan or insurance because of race, religion, etc. Redistricting boundary lines for voter jurisdictions is when a municipality establishes wards; A voter would vote in her assigned ward.
Robert ran a full page ad to feature all of his listings. In one ad, Robert describes the property as being perfect for empty nesters. Robert's ad
is potentially violating fair housing law QUESTION RATIONALE The ad could be perceived as a "no kids allowed" listing and would be a potential violation of the Fair Housing Act on the basis of familial status.
Seller Steve calls a real estate agent to list his home. Steve tells the agent that he wants $156,000 in his pocket at closing and the agent can have the rest for the commission. Which type of listing would this be?
net listing QUESTION RATIONALE Net listings are illegal in some states and frowned upon in others, as these situations are breeding grounds for fraud and unhappy clients and agents. In an exclusive right to sell agreement the listing broker is entitled to a commission when the house is sold. Exclusive agency is when the seller may find his own buyer, thus, no commission is owed to the broker. An open listing describes the situation where by the seller will pay a commission only to the procuring cause of the sale.
Which type of contract could a real estate agent lawfully create from scratch?
none of these answers QUESTION RATIONALE A real estate sales agent is allowed to fill in the blanks of a pre-printed real estate contract only, and is not allowed to originate or create from scratch any type of contract. A land contract is a legal contract/instrument and a lease would be a legal contract/instrument.
A sales agent is showing a married couple a one-bedroom apartment, but informs them that the unit is NOT available for them because it is reserved for singles only. Which statute has the agent violated?
none of these answers QUESTION RATIONALE Marital status is not protected by any of the fair housing statutes. Familial status, which involves discrimination against people with children, is protected. The Civil Rights Act of 1866 prohibits racial discrimination only.
Abby is showing a potential renter an apartment. The renter lets Abby know he is currently in drug rehabilitation therapy for cocaine addiction. Abby should
not discriminate against the renter, as he is in a protected class QUESTION RATIONALE A person undergoing drug rehabilitation therapy is considered a disabled person under the Federal Fair Housing Act and the Americans with Disability Act. By charging the renter more rent or refusing to rent the property to him, the agent would be guilty of discrimination.
When a buyer asks an agent what form of co-ownership he and his wife should take, the agent should
not make a recommendation QUESTION RATIONALE The sales agent should not make any recommendations, because she would be committing the unauthorized practice of law.
A broker reads in the local newspaper that a seller is advertising a property "for sale by owner," and is offering 3% to any broker. What type of listing is the seller offering?
open listing QUESTION RATIONALE The seller is making an open offer for any broker to find a buyer, but is not willing to sign exclusively with any one broker.
A seller who lives in a small town has posters made up advertising his house for sale. He posts them on many telephone poles around the neighborhood. As part of the poster, he advertises that he will pay 3% to any broker who brings him a buyer. This type of listing is a(n)
open listing QUESTION RATIONALE When a seller offers a commission to any broker who finds a buyer, this is known as an open listing. The seller does not sign exclusively with any one agency.
A real estate agent is authorized to prepare a
pre-printed real estate sales contract form provided by the local bar association QUESTION RATIONALE While an agent may fill in the blanks of a real estate sales contract, it must be on a pre-printed form approved by the bar association. A sales agent may not prepare a land contract, lease, deed, or any other document, even if it is on a pre-printed form available to an attorney through a legal publishing mart.
A real estate agent meets a prospective buyer at a fundraising event who signs a buyer-broker contract. The buyer/client asks the agent to show him a property with a list price of $250,000. The agent finds such a house and, through public records, the buyer discovers the house is going into foreclosure. The buyer instructs the agent to prepare an offer of $125,000 and ask the bank to agree to a short sale. The agent should
present the offer and attempt to get the bank to agree to a short sale QUESTION RATIONALE Under the terms of a buyer-broker contract, the agent has a duty to get the buyer the best price and best terms as possible.
In real estate matters, "open housing" means
prevention or elimination of discrimination in housing QUESTION RATIONALE "Open housing" is a term used to mean the prevention or elimination of discrimination in housing, or making housing open to all qualified individuals.
A salesperson presents a full-price offer from a financially qualified prospect who is black. Later, the salesperson's broker presents a lower offer to the same seller from a prospect who is white. The seller accepts neither contract but sells to a neighbor (through the same salesperson and broker) who decides to buy the house to prevent the prospect who is black from purchasing the property next door to him. Which party would NOT be subject to liability under the Federal Fair Housing Act of 1968?
prospect who is white QUESTION RATIONALE No person is allowed to be a party to a plan of discrimination. The neighbor, the salesperson, and the seller were all part and party to a plan of discrimination, and thus are subject to liability under the Federal Fair Housing Act of 1968. The prospect who is white simply submitted an offer and is not liable.
The Civil Rights Act of 1866 established which as a protected class?
race QUESTION RATIONALE The Civil Rights Act of 1866 prohibits discrimination based upon race, color, and ancestry. Sex and religion are part of the Federal Fair Housing Act. Only the Equal Credit Opportunity Act prohibits discrimination on the bases of age.
In the 1968 landmark U.S. Supreme Court case of Jones v. Alfred H. Mayer Co., it was ruled that
racial discrimination in the sale of any property is prohibited, without exceptions QUESTION RATIONALE The Jones v. Alfred H. Mayer Co. case interpreted the Civil Rights Act of 1866, not the Federal Fair Housing Act of 1968. The Supreme Court found that when it comes to racial discrimination in the rental/sale of housing and personal property, there are no exceptions or exemptions to the 1866 law, even though there were four exceptions in the 1968 Act.
Under the Federal Fair Housing Act of 1968, it is permissible to
refuse to give a loan to an individual because he has a poor credit history QUESTION RATIONALE advertising property for sale only to a special group; altering the terms of a loan for a member of a minority; or telling an individual that an apartment has been rented, when in fact it has not, are all expressly disallowed by the Federal Fair Housing Act. Refusing to give a loan to an individual because he has a poor credit history is not a violation; credit history is not a protected class under the Federal Fair Housing Act.
Kenny is the listing agent for a property and takes a weekend trip. When Kenny returns to office on Monday, he discovers three offers have been made for his listing. Two offers are from competing brokers and the third is an in-house offer. Kenny shows his seller the in-house offer and encourages the seller to accept. After the seller accepts, Kenny calls the other two agents and tells them the listing is now pending. Kenny
should present all offers before encouraging a seller to accept one QUESTION RATIONALE All offers must be presented to a seller, even on a pending listing.
A couple walks into a sale agent's office looking to buy a new home. The sales agent perceives the couple to be of a certain religious background; he shows them property only in areas of town with a high concentration of the same religion. The sales agent is guilty of
steering QUESTION RATIONALE Blockbusting, also known as panic peddling, is the illegal act in which owners are encouraged to sell their properties because minorities are moving into a neighborhood. Steering is the illegal practice of trying to influence a buyer's choice of housing based on race, religion, or other protected factors. Redlining is the illegal practice of denying loans in certain areas of a community based on race, color, etc. There is no such thing as "panic buying." However, blockbusting is sometimes referred to as "panic selling" or "panic peddling."
An individual comes into a brokerage office looking to buy a new home. A sales agent greets him at the front door. Because the individual seems to be of Asian descent, the agent automatically refers him to another agent in the office who is of Asian descent. This could be construed as
steering QUESTION RATIONALE Steering refers not only to channeling purchasers to certain neighborhoods because of their race, religion, etc., but also directing individuals to other agents because of race, religion, etc. Blockbusting, also known as "panic peddling" (not "panic buying"), is the illegal act in which owners are encouraged to sell their properties because minorities are moving into a neighborhood. Redlining is the illegal practice of denying loans in certain areas of a community based on race, religion, etc.
Broker Greg, who represents a seller under an exclusive listing agreement, receives two offers for the seller's property at the same time: One from an agent in his office, and one from the salesperson of a cooperating broker. What should the broker do?
submit both offers at the same time, allowing the seller to make a decision after looking at all the facts QUESTION RATIONALE There is no written rule about the order to present offers in most states. However, the seller has the right to know all the facts and look at all the offers before reaching a decision.
A potential buyer asks an agent whether a general warranty deed or a quitclaim deed is better. Which is the appropriate response from the agent?
the agent may not answer this question, as it involves the unauthorized practice of law QUESTION RATIONALE Although a general warranty deed is most beneficial to a buyer because it contains the most warranties on title, liens, etc. (a special warranty deed has limited warranties, and a quitclaim deed has no warranties), the agent should not remark on the legal ramifications of accepting a particular type of deed; that would be the unauthorized practice of law.
A sales agent is about to take a listing. The sellers indicate they do NOT wish to have the property shown to anyone of a certain racial background. The real estate agent complies with the sellers' request. Which statement is TRUE?
the broker is liable for the sales agent's misconduct, even though the broker did not know of the discriminatory acts QUESTION RATIONALE The broker has what is known as "ostensible" liability; the broker is always liable for any discrimination by agents, whether the broker knows about the discriminatory acts or not. In reality, the sales agent, the broker, and the seller could all be charged with discrimination and are all liable for the salesperson's actions.
Which is NOT an element in an action for fraud?
the defrauded and defrauding parties must have relied on a confidential relationship QUESTION RATIONALE There is no requirement that the two parties have relied on a confidential relationship. There is no confidential relationship between a buyer and a seller, but a buyer may maintain an action against the seller for fraud.
A real estate agent presents a full price cash offer with no contingencies during the initial listing period. The seller refuses to sign the contract, because he does not like the buyers. Which is correct?
the listing agency will most likely be due a commission QUESTION RATIONALE Although sellers are not obligated to accept any offer on their home, the contract with the broker will most likely obligate them to pay a commission, as the broker has done what she was hired to do.
A buyer sees a real estate sign in a yard and calls the phone number on the sign. The buyer speaks with an agent of the broker and they meet at the property so the buyer can take a look. Later that same day, the buyer runs into a cousin who has a license to practice real estate. The buyer gets her cousin to write and present the offer, which the seller accepts. Who was the procuring cause?
the listing broker's agent QUESTION RATIONALE Procuring cause by definition is the agent that started the uninterrupted chain of events that lead to a contract. The broker's agent who received the call was the agent who showed the property and was the agent that started the uninterrupted chain. A real estate agent should always find out how a prospective buyer originally saw a property if they are asked prepare the offer.
A property manager opened an interest bearing account in which to put rents and security deposits. Funds will also be paid out for contractors who perform building maintenance. Who gets the interest on the account?
the owner QUESTION RATIONALE Unlike a broker's non-interest bearing account used to deposit earnest money, a property management account can earn interest with the interest being paid to the owner.
A broker who engages in commercial or residential property management must have a special property management trust account to receive security deposits, rents, and other funds from tenants. This account may earn interest. Who is the beneficiary of the interest on the rental receipts?
the property owner(s) receive the interest QUESTION RATIONALE Brokers who manage property or properties for others must maintain (a) property management trust account(s). The interest is to be distributed to the parties to whom the monies belong. A security deposit does not particularly belong to the property owner; it belongs to the tenant and is being held only as security that no damage or breach will take place. Deposits of rents, security deposits, and other funds received from tenants are deposited in the property management trust accounts; disbursements may be made to pay the property's expenses. Interest earned on the rental receipts(s) must be disbursed to the property owner(s). Interest earned on the security deposits is dispersed to the tenants.
Jim agrees to list his cousin's property. Jim shows a buyer client several properties and the buyer client decides to make an offer on Jim's cousin's property. Jim declares dual agency-what else does he need to disclose?
the relation between the agent and seller QUESTION RATIONALE When a dual agent has a material relationship with one party and not the other, the material relation must be disclosed. Agents are required to disclose latent defects not patent ones. Redlining is when lenders discriminate, but is not something the agent would need to disclose.
Which law mandates how much a real estate broker can charge for a commission?
there are no such laws, as this would be a violation of the Sherman Antitrust Act QUESTION RATIONALE The Sherman Antitrust Act prohibits both price fixing and market fixing in the real estate industry. What a broker charges for a commission is purely negotiable between the broker and a seller.
A real estate agent owes a professional responsibility to the public to
treat all parties to a transaction honestly and fairly QUESTION RATIONALE The sales agent has only a personal responsibility to file income taxes, and no duty to record deeds. Disclosing a client's confidential information would violate the agent's fiduciary duties to the client. The agent must treat all parties to a transaction honestly and fairly.
Which is NOT grounds for revocation or suspension of a license?
violation of the Code of Ethics QUESTION RATIONALE The Code of Ethics is a set of voluntary rules of conduct promulgated by the National Association of REALTORS(R). The Federal Fair Housing Act and the Civil Rights Act of 1866 are both federal statutes, and the Canons of Ethics lists the ethics laws of individual states.
When is a broker/agent entitled to commission?
when a ready, willing, and able buyer is found on terms acceptable to the seller QUESTION RATIONALE A broker/agent is entitled to commission only after fulfilling the duty of finding a ready, willing, and able buyer on the seller's terms. A willing buyer is one who has signed a sales contract and is willing to buy the property. An able buyer is one who either has the funds to buy the property or has been approved for financing. A ready buyer is one who could close on the property immediately or on a set closing date. The broker/agent receives the commission at the closing, but is entitled to the commission when a ready, willing, and able buyer is found.
