Contracts and Relationships with Buyers and Sellers
A listing agreement states that the broker will receive a 6% commission. The broker produces a buyer who purchases the home for $210,000. What is the net amount that the seller will receive from the sale?
$197,400 The answer is $197,400. To find the seller's net from the sale, subtract the amount of the broker's commission from the selling price of the home. First, calculate the amount of the commission: 6% (.06) × $210,000 (selling price) = $12,600. $210,000 - $12,600 = $197,400. Or take $210,000 × .94 = $197,500.
A broker sold a residence for $210,000 and received $10,500 as commission in accordance with the terms of the listing contract. What was the broker's commission rate?
5% The answer is 5%. To find the commission rate, divide the selling price by the actual amount of the commission: $210,000 ÷ $10,500 = 5% (.05).
A brokerage represents the owner in the sale of the owner's property. Which of the following events will terminate that agency relationship?
A fire destroys the owner's property. The answer is a fire destroys the property. The destruction or condemnation of a property during a listing period terminates the listing. The agency relationship remains in effect with any of the other events.
A buyer signs a contract under which he is given the right to purchase a property for $130,000 anytime in the next six months. The buyer pays the current owner $500 at the time that contract is signed. Which of the following BEST describes this agreement? A) A unilateral option contract binding the seller B) A bilateral contingency contract C) A bilateral executory sales contract D) An installment land contract binding both parties
A unilateral option contract binding the seller The answer is a unilateral option contract binding the seller. The buyer has the right to buy in the future but is not bound to buy, which creates an option contract.
A woman has assigned her apartment lease to her male cousin, and the landlord has agreed to the assignment. Who is liable for payment of the rent?
Both the woman and her cousin are liable to the landlord. The answer is both the woman and her cousin are liable to the landlord. The woman, the assignor, is liable to the landlord because of her contract with the landlord in the original lease. The cousin, the assignee, is liable to the landlord because of his possession of the premises.
Whose signature is necessary for a signed offer to purchase real estate to become a contract?
Buyer's and seller's The answer is buyer's and seller's. A signed offer already has the buyer's signature, but to be a ratified contract, both the buyer's and the seller's signatures are necessary.
A salesperson representing a buyer is told that the buyer plans to operate a dog-grooming business out of any house he buys. The salesperson does tell the buyer to verify local zoning ordinances to determine in which parts of town such a business can be conducted. Which duty does the salesperson violate?
Care The answer is care. Salespersons must use their skills and knowledge to protect the client's interests in purchasing. In this case the salesperson should have told the buyer to verify local zoning ordinances might prohibit a buyer conducting a business from a home. All salespersons and broker's owe this duty and the disclosure of material facts to the consumer. An agent would owe obedience and loyalty to the principal.
Upon notice that an offer has been accepted, what should the listing broker do with the earnest money deposit?
Deposit the earnest money into the brokerage or title company's trust account The answer is deposit the earnest money into the brokerage or title company's trust account. Upon acceptance of the offer, which creates an executory contract, the earnest money is deposited into the brokerage or a title company's trust account. The money may not be held by the buyer's broker or seller or until the contingencies are completed.
A brokerage represents the owner in the sale of the owner's property, which has a salesperson acting as the listing agent. Which of the following events will terminate that agency relationship?
During the listing, the owner of the property dies. The answer is during the listing, the owner of the property dies. When a property owner dies during a listing period, the agency relationship with a broker is terminated. The agency relationship remains in effect with any of the other events including the death of a salesperson since the contract belongs to the firm not the salesperson.
A buyer and a seller have entered into a binding contract for the sale of real estate. During this phase and until closing, the buyer has which type of title?
Equitable The answer is equitable. The buyer has equitable title, which recognizes that he has an interest but has not received legal title. Legal title will pass at closing when the seller gives the buyer the deed.
A listing salesperson schedules an open house with the sellers. Before the open house, she advises the sellers to place valuable jewelry that is visible in the bedroom into a safe or another secure place. The sellers ignore the salesperson's advice. The morning after the open house, the sellers call the salesperson to inform her that some of their jewelry is missing from the bedroom. Will the salesperson likely be held accountable for the missing jewelry?
No, because the salesperson advised the sellers to remove or hide all valuables before the open house. The answer is no, because the salesperson advised the sellers to remove or hide all valuables before the open house. The salesperson has a duty to account for any money or possessions given to her by her clients, and to exercise care in her actions on their behalf. Because she advised them to remove the jewelry, she has fulfilled her duty to them. In most cases, sellers will not be present during an open house. It is not reasonable and may not be lawful for the salesperson to search visitors leaving the open house.
Which of the following requires that real estate sales contracts be in writing?
Statute of frauds The answer is statute of frauds. The statute of frauds requires all transfers of interests in real estate be in writing, the exception is a lease of 12 months or less. The statute of limitations sets the amount of time law suits can be filed. Truth in Lending Act sets disclosure requirements for lender fees. Caveat emptor means buyer beware.
A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do?
Submit the higher offer first. The answer is submit both offers at the same time. An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespersons from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received.
Which statement is TRUE of a real estate broker acting as the agent of the seller?
The broker has a fiduciary obligation of loyalty to the seller. The answer is the broker has a fiduciary obligation of loyalty to the seller. Loyalty to the client-seller requires confidentiality—not revealing confidential information; it involves obedience—not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.
Designated agency will MOST likely occur under what circumstance? A) Both the buyer and the seller are customers of the firm. B) The seller and the buyer are represented by different brokerage firms. C) The buyer and the seller in the same transaction are both represented by the same brokerage firm. D) The buyer is a client of the firm and the seller is the customer of the firm.
The buyer and the seller in the same transaction are both represented by the same brokerage firm. The answer is the buyer and the seller in the same transaction are both represented by the same brokerage firm. Designated agency occurs when one brokerage firm practices dual agency in representing both the seller and the buyer in the same transaction. Both parties are clients of the firm. In many states, designated agency is a process that permits the firm's broker to appoint one agent to represent the seller, and another agent from the same firm to represent the buyer. Each of the agents is a designated agency for her respective client, the seller or the buyer and may not share confidential information about the party they represent.
The listing contract on a residential property states that it expires on June 30. Which event would NOT terminate the listing?
The house is destroyed by fire on June 1. The answer is the salesperson who signed the listing dies on March 15. The salesperson is not a party to the contract so his death would not terminate the contract. A listing contract is terminated if one of the parties to the agreement dies; if the property is destroyed by a force outside the seller's control; or if the listing contract's term expires.
A real estate broker learns that her neighbor wishes to sell his house. The broker knows the property well and is able to persuade a buyer to make an offer for the property. The broker then asks the neighbor if she can present the offer, and the neighbor agrees. At this point, which statement is TRUE?
The neighbor is not obligated to pay the broker a commission. The answer is the neighbor is not obligated to pay the broker a commission. The broker procured a buyer for the property on the basis of an oral agreement with her neighbor, the seller. State real estate commissions generally require a commission agreement to be in writing and signed by both parties, the broker and the client. The broker in this case has no written contract for her services with either the seller or the buyer and is not entitled to a commission from either even if she is the procuring cause of the sale.
A real estate broker lists her neighbor's home for $212,000. Later that same day a buyer to the community comes into her office and asks for information on houses for sale in the $180,000 - $225,000 price range. The broker offers to represent the buyer as a buyer's agent, but the newcomer refuses representation by her company at this time. Based on these facts, which of the following statements is TRUE?
The neighbor is the broker's client, and the buyer is her customer. The answer is the neighbor is the broker's client, and the buyer is her customer. The listing contract with the neighbor establishes an agency relationship with the neighbor, who becomes the client of the broker. Without representation, the buyer remains a customer of the broker, a non-represented consumer who is entitled to fairness and honesty. The broker owes fiduciary duties only to the neighbor, her client. The broker may offer buyer representation to the buyer at a later date if the broker's company policy permits dual agency in a situation in which the buyer may want to purchase one of the company's own listings.
A brokerage firm has an exclusive right-to-sell listing and represents the owner in the sale of the owner's property. Which of the following events will terminate that agency relationship?
The owner declares personal bankruptcy. The answer is the owner declares personal bankruptcy. The bankruptcy of a principal in an agency relationship terminates the agency contract, as title to the property transfers to a court-appointed receiver. The agency relationship remains in effect with any of the other events.
Which of the following events will terminate the agency relationship between the brokerage and seller?
The owner dies. The answer is the owner dies. The common law of agency holds that the death of either the broker or the seller ends the agency relationship created by the listing. The market value of the property does not affect the agency relationship, and the broker may assign other agents to help sell listed property. An owner abandoning property does not terminate an agency relationship but could result in termination if the property is taken over by a third party, such as a lending institution in the event of the owner's bankruptcy or a foreclosure proceeding.
A buyer agency contract states that the contract expires on April 30. Which event would NOT terminate the buyer agency contract?
The salesperson leaving the brokerage firm The answer is the salesperson leaving the brokerage firm. The contract is with the buyer and the firm not the salesperson. If the salesperson leaves the principal broker may assign another salesperson to assist the buyer. The buyer and the principal broker may come to a mutual agreement to terminate the contract. The death of either party terminates the contract.
A real estate broker lists a home as agent for the seller. Later that same day, a buyer comes into the office and asks for general information about homes for sale in the area. Based on these facts, which statement is TRUE?
The seller is the broker's client; the buyer is a consumer. The answer is the seller is the broker's client; the buyer is a consumer. The listing contract creates the agency relationship and obligations between the seller and the broker. A prospective purchaser who asks for general information is not represented by the broker but a consumer. Consumers are not owed fiduciary duties but may later contract with the broker for buyer representation.
Which of the following BEST defines the law of agency?
The selling of another's property by a properly licensed brokerage The answer is the rules of law that apply to the responsibilities of a person who acts as agent for another. The law of agency determines how an agent is authorized to act on behalf of another and the responsibilities of that agent. The selling of another's property by a licensed brokerage is determined by a listing or brokerage agreement. Principles that govern one's conduct in business are often stated in a business code of ethics. Rules and regulations of a state's licensing agency state the requirements for real estate licensing for persons and firms.
A person approaches an owner and says, "I'd like to buy your house." The owner says, "Sure," and they agree on a price and write it down on a piece of note paper and sign it. What kind of contract is this?
Valid The answer is valid. Anytime a buyer and seller agree in writing with notice and acceptance a valid contract is formed. If the offer is missing an essential element it is void and unenforceable. Duress, fraud, misrepresentation, and minors always make contracts voidable.
An agent forgot to get the buyer to sign the offer. What is the status of the offer?
Void The answer is void. The offer is missing an essential element and is void. Duress, fraud, misrepresentation, and minors always make contracts voidable. A contract that is binding and enforceable is valid.
A buyer's agent knows that a property has been on the market for a time longer than normal for the neighborhood and type of house. Her buyer decides to write an offer above the listed price of the home because the buyer is in a hurry to find a home and move in. The buyer's agent does not mention to the buyer the length of time the home has been on the market. Has the buyer's agent violated any duties to the buyer?
Yes, the agent should disclose the time on the market as that fact creates a more favorable opportunity for the buyer to offer a lower price. The answer is yes, the agent should disclose the time on the market as that fact creates a more favorable opportunity for the buyer to offer a lower price. The buyer's agent has a duty to disclose any material information to the buyer. The extended time the home has been on the market provides the buyer with the possibility that the seller's will accept an offer lower than the listed price for the home. The license law does not prohibit or require disclosing information about how long a property has been on the market. The license laws of most states do require agents to disclose any material facts to clients and customers.
A real estate agent acting as a single agent owes either fiduciary or statutory agency duties to any of the following EXCEPT A) a seller. B) a customer. C) a landlord. D) a buyer.
a customer. The answer is a customer. In single agency, the agent represents only one party in any single transaction. The agent owes fiduciary or statutory agency duties exclusively to one principal, who may be a seller, buyer, landlord, or tenant. The customer is the other party not represented by the agent in the transaction.
To insert additional terms into the offer, the real estate professional would use a(n)
addendum. The answer is addendum. The purpose of an addendum is to legally change any of the provisions of the offer or to insert new terms. Amendments modify executory contracts.
An individual who is authorized and who consents to represent the interests of another person above their own interests is a(n)
agent. The answer is agent. An individual authorized by a principal (client) to represent the interests of that person is an agent; the fiduciary obligations require the agent to put the interests of the principal above the agents. In real estate, a firm's principal broker is the agent. The principal is the individual who hires the brokerage firm to represent the individual's interests and act as an agent. The client is the principal. The customer is a third party or non-represented consumer who is entitled to fairness and honesty from the agent of the principal.
The amount of earnest money deposit is determined by
agreement between the parties The answer is agreement between the parties. The amount of earnest money deposit is determined by agreement of the parties. Under the terms of most listing agreements, a real estate broker is required to accept a "reasonable amount" as earnest money. Brokerage firms and license law may not set the amount of earnest money required. The amount is set by the seller and negotiated by the buyer.
A contract is said to be bilateral if
all parties to the contract exchange binding promises. The answer is all parties to the contract exchange binding promises. When all parties to a contract are bound by its provisions, the contract is said to be bilateral. A contract yet to be performed is executory. A contract that binds only one party to act is unilateral. A contingency can be in both bilateral and unilateral contracts.
A couple offers to purchase a house for $120,000, including its draperies, with the offer to expire on Saturday at noon. The sellers reply in writing on Thursday accepting the $120,000 offer but excluding the draperies. On Friday, while the buyers consider this counteroffer, the sellers decide to accept the original offer, draperies included, and state that in writing. At this point, the buyers
are not bound to buy. The answer is are not bound to buy. The sellers' counteroffer is regarded in law as a new offer. They have rejected or terminated the buyers' original offer by changing something in it and thereby releasing the buyers from the original offer. At this point, the sellers can keep both their draperies and their house, and the buyers are not bound by any agreement to buy the property.
Whether or not state law requires the time when an agent must disclose his firm's agency alternatives, good business practice requires that an agent make a disclosure about agency
before any confidential information is disclosed about an individual's motivation or financial situation. The answer is before any confidential information is disclosed about an individual's motivation or financial situation. Many states have mandatory agency disclosure laws. Whatever the law requires, agents should disclose her firm's agency alternatives and any agency relationship by which the agent is bound before any confidential information is provided about an individual's motivation or financial situation.
The MLS lists a number of personal property items the seller was willing to include in the sale including the commercial stove and refrigerator along with all other appliances. The buyer and seller have gone back and forth over a number of items including price and the appliances, which were included in the first offer. The final contract did not included any appliances, in this case the appliances
belong to the seller who may take them upon closing the property. The answer is belong to the seller who may take them upon closing the property. The final contract is what is used to determine what is to be conveyed, and since no mention of the appliances was made, they belong to the seller who may take them.
A legally enforceable contract in which two parties exchange promises to do something for each other is known as a(n)
bilateral contract. The answer is bilateral contract. A bilateral contract is one in which both parties make a promise to the other. A unilateral contract is a one-sided contract in which one party makes a promise to induce a second party to do something. A void contract lacks one or all of the essential elements of a contract. An option contract is a unilateral contract in which only one party makes a promise to perform, in this case to hold open the right for a buyer to purchase a property in the future.
In a dual agency situation, a broker may represent both the seller and the buyer if
both parties give their informed consent, usually in writing, to the dual agency. The answer is both parties give their informed consent, usually in writing, to the dual agency. Dual agency, in states that allow it, requires informed written consent from both parties. The broker must have written consent from both parties; consent from only one party will not permit dual agency. The dual agency relationship does not determine payment of commissions, and does not require attorney representation by either party.
A listing contract must be signed by
both the seller and the listing broker. The answer is both the seller and the listing broker. All parties identified in the listing contract must sign it, including all individuals who have a legal interest in the party. As the contract is between the seller and the listing broker, the listing broker or the broker's designated representative must sign the contract.
A buyer signs a buyer agency contract with a broker agreeing to pay commission to the buyer broker but with the expectation that the seller will actually pay the commission. However, the buyer learns that the seller has not agreed to a sharing of the commission with the buyer agent. The buyer refuses to pay any commission to the broker. In this case, the
buyer has breached the agency contract with the broker and will be held liable for the broker's commission. The answer is buyer has breached the agency contract with the broker and will be held liable for the broker's commission. If the buyer is unwilling to pay the buyer broker a commission according to the terms of the buyer agency contract, the broker may sue the buyer to recover the broker's commission. The buyer is liable for the commission according to the terms of the contract.
The broker receives an earnest money deposit with a written offer to purchase that includes a ten-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies the broker that she is withdrawing the offer and requests the return of her earnest money deposit. In this situation, the
buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. The answer is buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. The offeror (the buyer) may revoke the offer at any time before the offer is accepted, even if the person making the offer agreed to keep the offer open for a set period of time. At that point, the earnest money deposit should be refunded to the buyer.
The principal to whom a real estate broker provides professional opinions and counsel is a(n)
cclient. The answer is client. The person with whom a broker has a service contract to provide professional opinions and advise is a client. A customer is another party to a real estate contract with whom a broker has no contract. A subagent is an agent of a person who is already acting as an agent for a client. The term fiduciary describes the relationship owed by an attorney or broker to a client
The principal to whom an agent gives professional opinions and counsel is a
client The answer is client. The client is the principal to whom the agent owes fiduciary duties. The customer is the third party or non-represented consumer for whom some level of service is provided and who is entitled to fairness and honesty. A subagent is the agent of a person already acting as an agent for the client.
The mixing of trust funds with a broker's personal funds is
commingling. The answer is commingling. Commingling, or mixing of funds, is illegal regardless of the size of an office. Conversion occurs when brokers use escrow funds for their own use.
An agency relationship in which a broker represents both the seller and the buyer in the same transaction would require all of following EXCEPT A) both the seller and buyer are required to allow the broker to share price, terms, and motivations with the other party. B) the broker will not disclose confidential information about one party to the other party. C) the principals agree in writing that the broker is representing both sides of the transaction. D) commissions are to be collected according to the provisions of agreements with both parties.
commissions are to be collected according to the provisions of agreements with both parties. The answer is that both the seller and the buyer must agree in writing that the broker may share confidential information with the other party. Real estate licensing laws may permit dual agency only if the buyer and seller are informed and give written consent to the broker's representation of both in the same transaction. The broker may not provide confidential information regarding price, terms, or motivations from one party to the other party in the transaction without written authorization; neither party is required to provide this authorization. Commissions are determined by the listing and buyer representation contracts with both parties or by agreement by both parties upon acceptance of the sales contract.
The sales contract says the buyer will purchase only if an attorney approves the sale by the following Saturday. The attorney's approval is a
contingency. The answer is contingency. Contingency clauses allow a party to terminate the contract if the contract, financing, terms, or property are not acceptable. Typical contingencies are for financing and the property inspection.
All of the following are valid reasons for terminating a listing contract EXCEPT A) agreement of the parties. B) death of the salesperson. C) destruction of the premises. D) sale of the property.
death of the salesperson. The answer is death of the salesperson. A listing contract is a personal service contract between a brokerage and a seller, not between a salesperson and a seller. If the salesperson who secures the listing dies, the listing contract still exists between the brokerage and the seller. A listing contract may be terminated upon the sale or destruction of a property, or by agreement of the parties to the contract, or if the seller or brokerage/broker die.
A principal broker authorizes one agent in her firm to represent the seller and another to represent the buyer in the same real estate transaction. Each agent is a
designated agent. The answer is designated agent. A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has a fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In a single agent, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally.
A buyer has signed a contract with a broker to compensate the broker even if the buyer purchases the property from a relative. This is called a(n)
exclusive buyer agency contract. The answer is exclusive buyer agency contract. An exclusive buyer agency contract binds the buyer to compensate the agent whenever the buyer purchases a property of the type described in the contract, even if the buyer finds the property independently. An exclusive agency buyer agency limits the broker's right to a commission; the broker is entitled to payment only if the broker locates the property the buyer purchases. An open buyer agency contract permits the buyer to enter into similar agreements with an unlimited number of brokers, with commission limited to the broker who locates/procures the property the buyer purchases.
A seller has sold property to a neighbor without the services of a real estate broker. However, the seller still owes the broker a commission because the seller signed a(n)
exclusive right-to-sell listing. The answer is exclusive right-to-sell listing. In an exclusive right-to-sell listing, a commission will be owed to a broker regardless of which party sells the house. In exclusive agency and open listings, the seller retains the right to sell without obligation to the broker. An option listing permits the broker to retain an option to purchase the property for the broker's own account.
A contract that has been fully performed is
executed. The answer is executed. Prior to execution, the contract is executory. Once the parties have performed, it is called executed.
A contract that has NOT yet been fully performed is A) voidable. B) unenforceable. C) executory. D) executed.
executed. The answer is executory. The phase from offer to a closed and executed/closed contract is called the executory period. Voidable contracts are binding on one party and not the other. An unenforceable contract is also void due to lack of an essential element.
During the period of time after a real estate sales contract is signed, but before title actually passes, the status of the contract is
executory. The answer is executory. A contract is in executory status when its terms of agreement have not yet been carried out. When it has been carried out, it is said to be executed. A unilateral contract binds only one party to act. A voidable contract is one that is able to be voided because of duress, fraud, misrepresentation, or because one party to the contract is a minor.
The MOST typical contingency in a real estate contract is for A) the buyer to sell a current home. B) appraisal. C) inspections. D) financing.
financing. The answer is financing. Most buyers must use some form of financing and typically the contract is contingent on the buyer receiving the financing. Other common contingencies include sale of a property, inspections, and appraisals.
The electrical wiring in a house is defective. The broker who listed the house is aware of this and intentionally deceives a potential buyer about it. The buyer purchases the home and later suffers a financial loss due to the faulty wiring. This is an example of
fraud. The answer is fraud. Fraud is lying or covering up a known fact. Mistake of law or fact would be when a party does not have knowledge of a situation or material fact. Novations are new contracts.
A contract entered into without duress, menace, misrepresentation, or fraud means that it meets the legal requirement of the
full consent. The answer is full consent. Full consent means a contract was entered into without duress, menace, misrepresentation, or fraud.
Under an exclusive agency listing, the listing broker would be entitled to a commission EXCEPT A) if a salesperson from a cooperating brokerage secures a qualified buyer for the property. B) if the broker sells the property himself. C) if the seller sells the property himself to a relative moving from out-of-town. D) if another co-op broker secures a qualified buyer for the property.
if the seller sells the property himself to a relative moving from out-of-town. The answer is if the seller sells the property himself to a relative moving from out-of-town. An exclusive agency listing authorizes the listing brokerage or co-op broker to sell and receive a commission, but the seller retains the right to sell the property without obligation to the broker. A seller who sells the property himself to a relative is not required under an exclusive agency listing to pay the listing broker a commission. The seller is obligated to pay a commission to the listing broker when that broker, another broker, or a salesperson from a cooperating brokerage firm sells the property.
A couple enter a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the property. Without having the couple sign a written buyer agency contract, the salesperson drives the couple to the house, and even recommends that before they buy the house they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created a(n)
implied agency relationship with the buyers. The answer is implied agency relationship with the buyers. The salesperson has unintentionally created an agency relationship with the buyers. There is no formal oral or written agency contract with the buyers. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.
In regard to an offer and acceptance all the following are true EXCEPT A) an offer can be revoked at any time before acceptance. B) in real estate, an oral acceptance creates a binding contract. C) to offer means to put forward for acceptance or rejection. D) a counter offer reverses the legal positions of the offeror and offeree.
in real estate, an oral acceptance creates a binding contract. The answer is in real estate, an oral acceptance creates a binding contract. The oral acceptance of an offer does not create a binding contract. The offer must be signed followed with communication of acceptance to become a binding contract.
In order for a listing contract to be enforceable, MOST states require that the contract be A) an oral contract. B) a form contract used by all licensees. C) in writing. D) drafted by an attorney.
in writing The answer is in writing. While in some states oral listings are legal, a listing contract must be in writing in order for either party to be able to enforce the provisions of the contract. Many licensees use form contracts drafted by a real estate association or real estate commission. Many states do not require all licensees to use the same contract form.
Under the statute of frauds, all contracts for the sale of real estate must be
in writing to be enforceable. The answer is in writing to be enforceable. The statue of frauds requires all documents for the transfer of real estate be in writing; the exception is leases of 12 months or less.
A real estate broker was responsible for a chain of events that resulted in the sale of one of his client's properties. The broker's efforts are referred to as
in writing to be enforceable. The answer is procuring cause. The procuring cause in a real estate transaction is the effort and work that brings about the result stated in a brokerage agreement. A broker who starts a chain of events that results in a sale and does so without abandoning the transaction may be considered the procuring cause of sale. Pro forma is a term meaning "for form only," in other words, not official. A private offering is the offering of a real estate security that is not required to be registered with any state or federal agency because it is not a public offering. The word "proffer" means the same as "offer," although a "proffered offer" is a term used to describe an informal, oral offer made before the start of any formal negotiations.
A contract that conveys the right to quiet enjoyment and use of property but does NOT convey title is a
lease. The answer is lease. Lease contacts give a tenant the owner's right of possession in exchange for rent. A bill of sale, deed, and dedication are not contracts.
A sales contract or land contract would give the buyer a(n)
legal title. The answer is equitable title. The sales contract, land contract, or trust deed would give the buyer an equitable title. Legal title is transferred from the seller to the buyer via deed at closing of a sales contract and upon last payment to the seller from the buyer in a land contract.
A buyer under an executory contract has found numerous inspection issues the seller is unwilling to repair. The seller and the buyer agree to terminate the contract with all things of value returned to each party. This is known as
liquidated damages. The answer is mutual rescission. When both parties to a contract are returned to their original position, it is known as mutual rescission. Liquidated damages and specific performance are types of purchase contracts chosen for the remedy for default by one of the parties. Mutual performance is when both parties complete the contract.
A listing broker presents an offer to her client, a seller, with a selling price much lower than what the seller is asking for the property. The offer allows the seller 24 hours to accept. The broker recommends the seller counter the offer and leaves a blank counter with the seller. The seller emails the broker in the morning saying that based on the wishes of her children, who are not on the title, she has accepted the offer. It this case the offer
may be a voidable contract due to duress. The answer is may be a voidable contract due to duress. The seller would have to claim her children forced her to accept the buyer's offer under duress in order to terminate the contract or make it voidable. Void contracts lack one or all of the essential elements of a contract. A contract must be entered into freely and voluntarily by each party, without undue influence. Duress, undue influence, misrepresentation, fraud, or a minor party entering into a contract are all circumstances that may create a contract that is voidable by the injured party.
Earnest money
may become the seller's if the buyer defaults. The answer is may become the seller's if the buyer defaults. Earnest money is not consideration. Therefore, it is not an essential element of a contract or required; it is a show of good faith on the part of the buyer and liquidated damages for the seller, if the buyer defaults.
In an appointment with a seller, a salesperson presents a competitive market analysis (CMA) that provides a reasonable market value for the seller's property. The seller insists on pricing the property $15,000 higher than the salesperson's suggested price. Under these circumstances, the salesperson
may choose to refuse the listing. The answer is may choose to refuse the listing. An unrealistic listing price may make it difficult for the broker to properly market the property within the time period of the listing. The salesperson is not required to accept the listing with the higher listing price or to hire an appraiser for a formal appraisal. The salesperson may not change the listing price in a listing contract without the explicit permission of the seller.
The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is a(n)
multiple listing clause. The answer is multiple listing clause. Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property.
A real estate broker acting as the agent of the seller
must promote and safeguard the seller's best interest. The answer is must promote and safeguard the seller's best interest. Real estate brokers must be loyal to their principal by promoting the principal's best interest. A broker acting as agent for a seller should present all offers on the property but may not accept an offer on behalf of the seller. Only the seller may accept an offer. The broker may not disclose any confidential information of the seller tied to price, term, or motivation without the seller's written permission.
The amount of commission that is paid to a salesperson is determined by
mutual agreement with her broker. The answer is mutual agreement with her broker. All commissions must be paid through the broker, and the amount the salesperson receives is set by mutual agreement between these two parties. The local board and state law do not dictate the amount of commissions paid. A client must agree to the amount of commission paid to a broker but is not involved in the split of the commission between the broker and a salesperson.
Under the common laws of agency, in a typical agency relationship between broker and client, the broker's commission is determined by
negotiation in advance. The answer is negotiation in advance. A broker and client negotiate and determine what commission schedule will apply to the transaction. Commissions are always negotiable. Each brokerage firm may determine its own commission guidelines and suggestions for its salespeople, but the actual commission is negotiated with the client. The Sherman Antitrust Act of 1980 makes it illegal to competing companies or real estate boards to set standard commission rates for brokerage firms.
A new contract that transfers all rights and liabilities is a(n)
novation. The answer is novation. In a novation a new contract is used to replace the original contract. Subordination is used in recording to keep liens in place. An assignment is the transfer of contract duties but not liabilities. An option is a contract that exchanges a promise for performance.
One contract was substituted for another contract, and there was a release of liability from the original contract. The term that defines the release is
novation. The answer is novation. Novation is a new contract replacing the old with the full release of liability. The transfer of rights and duties, but not the liabilities from one person to another person, is an assignment. Alienation is the process of transferring ownership via a deed.
Before the buyer signs a buyer agency contract, a real estate professional must do all of the following EXCEPT A) explain the forms of agency available. B) inform the buyer of the charges or compensation for services. C) obtain financial information from the buyer. D) describe specific services to be provided.
obtain financial information from the buyer. The answer is obtain financial information from the buyer. Once the buyer representation contract is signed, not before, the real estate professional should obtain detailed financial information from the buyer. State regulations require that real estate professionals inform the buyer of all types of agency available, the broker's compensation requirements, and the services that the broker will provide under the agreement.
In an executory purchase contract, the buyer's interest is described as
ownership in equity. The answer is ownership in equity. Once an executory contract is created the buyers interest is called ownership in equity, the seller retains legal ownership until the deed is passed. Free and clear title is free from liens. A possessionary interest gives the hold the right to possess the property, which is not part of a purchase contract.
A listing contract is BEST described as a(n) A) property management contract. B) personal service contract. C) escrow contract. D) sales contract.
personal service contract The answer is personal service contract. A listing is a personal employment contract between brokers and their clients setting forth the broker's responsibilities in finding for the seller a ready, willing, and able buyer. A property management contract establishes the responsibilities of a broker in managing a principal's property. A sales contract is a contract between a buyer and seller for purchase of a property. An escrow contract is an agreement between a buyer, seller, and escrow holder (such as a broker) defining the responsibilities of each.
When showing a property, an agent exaggerates the property's benefits. This practice is
puffing, which is legal as long as there is no misrepresentation. The answer is puffing, which is legal as long as there is no misrepresentation. The broker is exaggerating the benefits of the property. In this situation the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. A ministerial act is a routine act performed for a customer that does not involve judgment, discretion, or advice.
A buyer makes an offer to purchase a certain property listed with a real estate professional and leaves an earnest money deposit to show good faith. The offer is accepted. The real estate professional should
put the deposit in a trust account, as provided by state law. The answer is put the deposit in an account, as provided by state law. Once an offer becomes an accepted contract the earnest money must be deposited in a trust account per rules of the state law.
A broker is hired as a buyer's agent. The buyer confides he filed for bankruptcy two years ago. The buyer would like to find a seller who is willing to carry the loan. In this situation, a correct statement about the broker's responsibility regarding disclosure of the bankruptcy when presenting the offer to purchase is that the broker is
required to disclose the bankruptcy because it is a material fact-information important to the seller's evaluation of the offer. The answer is required to disclose the bankruptcy because it is a material fact-information important to the seller's evaluation of the offer. The broker is obligated to disclose any material fact-something that might make a party to the transaction change their mind, regardless of the agency or non-agency relationship the broker has with the seller. The ECOA is a federal law prohibiting discrimination in the granting of credit and does not regulate disclosures required by in a real estate transaction.
The final decision on a property's listing price should be made by the
seller. The answer is seller. The seller must determine the listing price of the seller's property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or salesperson may use a competitive market analysis (CMA) to help the seller determine a reasonable listing price.
The type of agency that exists when a broker represents the seller or buyer in a transaction, but not both, is
single agency. The answer is single agency. When a broker is representing only the seller or buyer in a transaction, the agency is single agency. Dual agency exists when an agent represents two principals in the same transaction. Designated agency is created when an agent is appointed by a broker to act for a specific principal or client when the brokerage firm represents both parties in the same transaction. A transaction broker does not have the fiduciary obligations to either party in a transaction.
A buyer defaults on a purchase agreement, and the seller goes to court to force the buyer to buy. The seller's remedy is
specific performance. The answer is specific performance. An action in court to have the defaulting party perform on the contract is called a suit for specific performance.
If upon receipt of an offer to purchase his property the seller makes a counteroffer, the original offer is
terminated. The answer is terminated. When the original offer is rejected by the seller, it ceases to exist and is considered to be terminated. The buyer may accept or reject the seller's counteroffer, which is in effect a new offer.
A listing contract will usually include all of the following information EXCEPT A) unusual deed conditions or restrictions. B) termination and default provisions. C) the MLS standard commission rate. D) the broker's authority and responsibilities.
the MLS standard commission rate. The answer is the MLS standard commission rate. A listing contract will include the broker's commission. Commission rates are determined by the individual listing broker, not by an MLS. A listing contract will usually state the broker's responsibilities, reasons for termination or default of the contract, and any unusual deed conditions or restrictions.
A seller has listed her home with a broker for $190,000. The listing broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation
the broker has violated his fiduciary relationship with the seller. The answer is the broker has violated his fiduciary relationship with the seller. The agent has a fiduciary responsibility to respect the confidentiality of his client. Agents may not reveal confidential items such as the principal's willingness to accept less than the list price or the seller's anxiousness to sell unless the principal has authorized the disclosure. In this case, the broker's actions might be considered illegal under some state laws and by a court of law. Under the common law of agency a broker is not authorized to encourage an offer lower than the listing price without specific instructions from the seller, even if to do so would obtain a quicker offer on the property.
A seller may keep the buyer's earnest money as liquidated damages if
the buyer defaults and the purchase agreement stipulates liquidated damages as a remedy. The answer is the buyer defaults and the purchase agreement stipulates liquidated damages as a remedy. A liquidated damages purchase contract allows the seller to keep the earnest money if the buyer defaults. Typically the buyer will have specific performance remedies if the seller is in default.
All of the following are typically found in a listing contract EXCEPT A) the commission rate to be paid to the listing broker. B) the date the broker will schedule an open house. C) the responsibilities of the broker and seller. D) the price the seller is asking for the property.
the date the broker will schedule an open house. The answer is the date the broker will schedule an open house. All listing and buyer representation contracts tend to require similar information: type of listing agreement, broker's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, et cetera. They are not required to provide the dates of open houses.
A bilateral contract is one in which
the promise of one party is given in exchange for the promise of the other party. The answer is the promise of one party is given in exchange for the promise of the other party. In a bilateral contract, both parties agree to do something, and promises are exchanged. A unilateral contract is a one-sided agreement that does not obligate a second party.
The multiple listing service clause in a listing contract provides that
the seller grants permission for the broker to make the listing available through an MLS (multiple listing service). The answer is the seller grants permission for the broker to make the listing available through an MLS (multiple listing service). The multiple listing service clause grants authority for brokers to share the listing with other brokers through an MLS. Brokers enter the listing into the MLS within a time period stated in their contract with the MLS. The sellers do not enter the information with the MLS. Brokers negotiate their own commission rate with the sellers, and buyer brokers may represent buyers for properties listed in an MLS.
All of the following are true of an open listing and an exclusive-agency listing EXCEPT A) each type of listing grants a commission to any brokerage who procures a buyer for the seller's property. B) under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. C) under each listing, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. D) the seller may offer an open listing to several brokers while an exclusive-agency listing is given to one broker.
under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. The answer is under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. Both open and excusive-agency listings allow the owner to sell without the assistance of the broker thus avoiding the seller from having to pay a commission. Each require the broker to be the procuring cause or in an exclusive-agency tied to the procuring broker through the MLS agreements.
When neither party can sue the other to force performance, the real estate contract is said to be
unenforceable. The answer is unenforceable. When neither party can sue the other to force performance, the contract is said to be unenforceable. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void real estate contracts lack an essential element and are unenforceable.
A broker took a listing and later discovered that the client had been declared legally incompetent before signing the listing. The listing is now
void The answer is void. A contract made by a person who has been adjudicated incompetent is void because the judgment of sanity is a matter of public record. The contract is not valid or voidable as it is missing the essential element of competency or competent parties.
A contract for the sale of real estate that does not state the consideration and provides no basis on which the consideration could be determined is considered
void The answer is void. Consideration is an essential element of a real estate contract along with competent parties, meeting of the minds, lawful objective, and in writing. Without all the elements a contract is void and cannot be voidable, executory, or enforceable.
A contract entered into while someone is under duress is considered to be
voidable The answer is voidable. Duress, fraud, misrepresentation, and contracts entered into by minors create voidable contracts. Such contracts are neither valid nor enforceable. A void contract has no legal force and is not enforceable due to its lacking an essential element, such as one made for an illegal purpose. An executory contract is a valid contract that has been signed but not fully fulfilled.
A contract between two parties that legally binds one party to perform, but allows the other party to disaffirm it, is
voidable The answer is voidable. Voidable contracts have one side obligated but the other party able to rescind the contract if they wish. A contract with a minor is always voidable for example if an adult agrees to buy a property a minor owns the contract is voidable by the minor. Executed contracts are closed and completed. Void contracts lack an essential element and bilateral contracts exchange promises.
A minor entered into a contract to sell the house she had inherited to a buyer. This contract is MOST likely A) voidable by the buyer. B) valid. C) voidable by the minor. D) void.
voidable by the minor. The answer is voidable by the minor. Contracts with minors are always voidable. In this case, the contract is not voidable by the buyer since the buyer is the adult.
A contract that may be rescinded by one party due to duress, fraud, misrepresentation, or because one party is a minor, is also known as a(n)
voidable contract. The answer is voidable contract. A contract is voidable if only one party may enforce or rescind it against the other party. Valid contracts contain all the essential elements and are binding and enforceable. Void contracts lack an essential element and are not binding. Novation is a new contact replacing an old one.
A real estate contract with a minor is
voidable. The answer is voidable. Duress, fraud, misrepresentation, and minors always make contracts voidable. A promise exchanged for performance is a unilateral contract. A void contract lacks an essential element an illegal contract lacks a lawful purpose so is also void.
Each of two brokerage companies claimed full commission for the sale of a property that was listed by both of the firms under an open listing agreement. The broker who is entitled to the commission is the one who
was the procuring cause of the sale. The answer is was the procuring cause of the sale. In an open listing, the seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. The broker who can prove that the sale resulted from that broker's efforts will be considered the procuring cause of the sale and be entitled to the commission.
All of the following are essential elements of a contract EXCEPT A) Yes, because the salesperson should have checked every visitor leaving the open house for any stolen valuables. B) No, because the sellers should have watched over their valuables during the open house. C) No, because the salesperson advised the sellers to remove or hide all valuables before the open house. D) Yes, because the salesperson is accountable for the money or property of her clients.
words of conveyance. The answer is words of conveyance. The essential elements of a valid contract are the following: competent parties, mutual agreement, lawful objective, consideration, and in writing. Words of conveyance are required in deeds.