Chapter 12

The broker traditionally has what kind of relationship to the principal? What are the six duties owed the principal?

A broker has a fiduciary relationship with the principal and owes the principal the six duties of confidentiality, obedience, accounting, loyalty, disclosure, skill, and care.

Errors and Omission Insurance

A type of insurance that indemnifies professionals if they make an error in their profession or if they omit something important from their analyses.

Exclusive Agency Listing

An agreement between a seller of property and a broker in which the seller agrees to pay a commission to the broker if anyone other than the owner finds a buyer, during the period of the agreement.

Listing Contract

An agreement between an owner of real estate and a real estate broker that obligates the broker to attempt to sell the property under specified conditions and terms. It obligates the property owner to pay a commission to the broker if the broker is successful in obtaining a ready, willing, and able buyer for the property on terms specified or on terms acceptable to the seller.

A down payment deposit from a potential buyer must be held in: The seller's bank account. The salesperson's own bank account. The broker's escrow trust account. Long-term government bonds. The broker's own bank account.

The broker's escrow trust account.

Buyer Agency Agreement

A contract for real estate brokerage services between a buyer and a real estate agent. The broker receives compensation for successfully locating a property for the buyer to purchase.

Special Agent

A person to whom a principal has granted authority to handle a specific business transaction or to perform a specific function. Real estate brokers and salespersons are special agents.

Dual Agency

A situation in which a person or firm has an agency and fiduciary relationship to both parties—seller and buyer—of a transaction.

Open Listing

Agreement between the seller of property and a broker that provides for the broker to receive a commission if he or she sells the property. No exclusive protection is provided to the broker.

Exclusive Right of Sale Listing

An agreement between a seller of property and a broker in which the broker is assured of receiving a commission if the broker or anyone else, including the owner, finds a buyer during the period of the agreement.

Salesperson License

Authority granted by a state to engage in the real estate brokerage business as an employee or agent of a real estate broker.

What might a broker do to mitigate the dual agency problem occurring within the firm due to the firm's being both a listing broker and a buyer broker?

Both the listing broker and buyer broker is for the broker to appoint designated agents.

Name three factors that might influence a customer's choice of brokerage firm.

Broker's reputation in the community, recommendations of friends, and familiarity with the broker.

List five real estate services that require licensing to be performed for others.

Buying, auctioning, renting, managing, and selling.

How are commission rates that real estate brokers charge determined? By agreement among local Realtors. By rule of the local Board of Realtors. By state real estate commissions. By agreement between broker and principal. By state law.

By agreement between broker and principal.

Real estate salespersons can lose their licenses for: Using aggressive sales techniques. Not showing buyers all available properties in an area. Commingling escrow (trust) money with personal funds. Not using modern sales methods. All of the above.

Commingling escrow (trust) money with personal funds.

What is the name of a very complicated agency relationship that arises when one firm represents both seller and buyer?

Dual agency.

The state real estate commission is responsible for: Setting fees for brokerage services. Marketing data on real estate transactions. Establishing education requirements for licensees. Overseeing the activities of mortgage lenders. Setting up multiple listing systems.

Establishing education requirements for licensees.

When is a broker entitled to a commission in an open listing? Exclusive agency listing? Exclusive right-of-sale listing?

In an open listing, the broker is entitled to a commission only if the broker procures a ready, willing, and able buyer. In an exclusive agency listing, the broker is entitled to a commission if any broker procures a buyer. In an exclusive right-of-sale listing, the broker is entitled to a commission if any broker or the seller procures a buyer.

Principal

In brokerage, the person giving authority to an agent; in finance, the amount borrowed and owed on a loan.

Designated Agents

In case a brokerage firm is agent for both a seller and a buyer, the firm sometimes designates one salesperson to serve the buyer and one to serve the seller. The two salespersons are presumed to maintain the privacy, and serve the interest of the party they represent.

Name the 1968 case in which the U.S. Supreme Court ruled that discrimination by race is absolutely prohibited in any form or at any level.

Jones v. Mayer.

All of the following are duties that a broker would have to the seller in a single agency listing contract, EXCEPT: Skill and care. Obedience. Loyalty. Knowledge. Disclosure.

Loyalty

One of the most effective ways that salespersons or brokers can distinguish themselves as a preferred agent in a particular specialization of real estate brokerage is to: Obtain a license to practice. Take related courses. Read related books. Engage in personal advertising. Obtain a related industry designation.

Obtain a related industry designation.

Universal Agent

One to whom a principal delegates the power to act in all matters that can be delegated in place of the principal.

Transaction Broker

One who facilitates a real estate transaction but who is not an agent of either buyer or seller. A transaction broker is required to deal honestly and fairly with both parties and to exercise skill, care, and diligence in carrying out his or her duties.

General Agent

One who is empowered to represent a principal, often a business firm, in its business relationships. A general agent can contract and bind the principal within the confines of the business or employment relationship.

Commission

Payment a real estate salesperson receives for services rendered, usually expressed as a percentage of the property sale price and not usually paid until the transaction is closed.

Name three conditions that represent the "price of success" in real estate brokerage.

Preparation, dedication to the welfare of customers, and hard work.

Name six areas in which an expert real estate broker has special knowledge.

Prices and terms of recent market transactions for similar properties. Marketing procedures that have been successful in the past.Page 307 Legal obligations of buyers and sellers. Similar properties, prices, and terms currently listed for sale. Needs of prospective buyers who seek out brokerage firms as sources of properties. Procedures that buyers and sellers should follow in consummating a transaction (e.g., how to obtain a title search, financing, insurance, utility services, and the like).

What must a broker do to be entitled to a commission under a listing contract?

Produces a ready, willing, and able buyer.

Real estate brokers are paid commissions primarily for: Having an inventory of properties. Having many contacts. Providing a service. Knowing how to close a transaction. Having specialized education.

Providing a service.

What are the seven factors on which discrimination is prohibited under the fair housing laws?

Race, color, religion, age, sex, familial status, and handicap.

Recovery Fund

Reserve of funds collected from real estate license fees to pay for losses to clients legally judged to have been caused by a licensed salesperson or broker. The existence of such funds varies from state to state.

Submarket

Segment or portion of a market in which all of the properties are considered to be close substitutes by a relatively homogeneous group of potential buyers; properties that provide similar utility or satisfaction.

Multiple Listing Service

Sharing of property sales listings by a number of real estate brokers with an agreement as to how costs and commissions are to be shared.

Traditionally, a real estate broker is what type of agent for his or her principal? General agent. Special agent. Limited agent. Designated agent. All of the above.

Special agent.

Licensing Laws

State laws that authorize persons who meet specified qualifications to engage in a business or profession.

Subagency

The agency role of a broker is extended to one or more additional brokers, who also become a fiduciary of the principal and are empowered to act on his or her behalf. The subagent shares any commission with the original broker. This agency chain can extend through multiple agents in the case of multiple-list services.

An agent's relationship to a principal is characterized by what phrase?

The agent must "stand in the shoes" of the principal.

Broker License

The authority granted by a state for one to own and operate a real estate brokerage business; the most complete type of real estate license.

According to most listing contracts, a broker has earned a commission when: A contract for sale is signed by the buyer. The transaction closes. The broker finds a buyer who is ready, willing, and able to buy on the terms specified in the listing contract. The seller signs a listing contract. The broker sends a bill for services rendered to the principal (usually the seller).

The broker finds a buyer who is ready, willing, and able to buy on the terms specified in the listing contract.

In traditional MLS property listings, the broker selling a listing traditionally was an agent of the seller, in spite of all appearances otherwise, by virtue of what kind of required agency relationship?

The broker selling a listing traditionally was an agent of the seller, in spite of all appearances, by virtue of a required agency relationship called subagency.

Without real estate brokers, real estate values would be lower. Explain this statement.

The buyer that values the property most would be less likely to find it.

Law of Agency

The legal rights, duties, and liabilities of principal, agent, and third parties as a result of the agency relationship between them.

There are three basic types of listing contracts, although only two— ____________ and _____________ —are used with much frequency

The open listing; the exclusive right of sale listing

Fiduciary Relationship

The special duties and obligations to a principal required of an agent, including complete loyalty, confidentiality, obedience, disclosure, accounting, care, skill, and due diligence.

Under what three circumstances do listing contracts terminate?

The specified period expires, the property is sold, or one of the parties abrogates the terms of the contract.

Brokerage firms are increasingly faced with an unintended internal dual agency problem because of the increase in what practice?

They are more likely to be representing both the buyer and the seller.

What is a cost of selling a property that tends to be overlooked by prospective "for-sale-by-owners"?

Time, inconvenience, and risks of handling the sale.

What type of broker represents neither buyer nor seller?

Transaction, facilitating, or intermediary broker.

Net Listing

Type of contract in which sellers specify the amount they will accept from the sale, with brokers keeping all proceeds in excess of that amount.

The subagency relationship that traditionally has characterized multiple listing services has tended to result in the widespread danger of: Monopoly. Deliberate dual agency. Unintended dual agency. Discrimination. Price wars.

Unintended dual agency.

What are the three basic types of agency relationships? Which of these refers to a broker's relationship to a principal?

Universal, general, and special. A broker is a special agent of the principal (buyer or seller).

What are five issues on which a seller should be clear before signing a listing agreement?

What advertising program will be used? Will the property be placed in the MLS? How long is the term of the listing? What progress reports will the broker provide? What personal property is being listed?

Two important functions of a commercial real estate broker are to provide the prospective buyer with _________, and to negotiate _________.

information; negotiate.