Laws of Agency: Real Estate Exam

Which of the following types of sales requires a disclosure that the sales commission is negotiable?

- 1 to 4 unit residential property (residential property containing no more than 4 units) - mobile home

listing agreement

- A written employment agreement between a property owner and a real estate broker authorizing the broker to find a buyer or a tenant for certain real property -Listing can take the form of open listings, net listings, exclusive-agency listings, or exclusive-right-to-sell listings. The most common form is the exclusive-right-to-sell listing.

Johnson, a real estate broker, listed a property. Suzie, a salesperson working for broker Sims, received an offer. Donna, a salesperson working for broker Johnson, got the offer accepted. Who earned the commission?

- As the listing broker, Johnson earned the commission under the terms of the listing agreement. A commission split may occur since the offer came in through another broker.

A Buyer is interested in a property. Buyer calls Broker to see if she has a listing on the property. Broker says no, but that the owner is a client. Broker calls the owner to secure a listing and to let the owner know that she has a buyer. The owner says the property is not for sale. Two weeks later, the owner sells the property to the buyer.

- Broker is not entitled to a commission for her efforts -In this case the buyer found the property on their own and wasn't a buyer of the broker. Without an existing buyer-agency relationship with the Broker, the Broker is NOT entitled to a commission as the broker did not establish procuring cause to the sale.

commission

- Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property -valuable personal property -assignment of note -buyer's personal check

recommendations made by the city planning commission are:

- binding rulings -Recommendations made by the Planning Commission are binding rulings mandated in the general plan.

if the broker decides to rebate part of the commission to the buyer he must

- notify the seller that the buyer will receive any part of the commission

lease where the rent is based on a percentage of the monthly or annual gross sales of the lessee is called a:

- percentage lease

When selling a business, the rate of commission is determined by:

- the agreement between the broker and owner. -Real estate commissions are always negotiable and are determined by the agreement between the broker and owner.

Which of the following is required for the existence of a valid escrow?

-A valid escrow cannot exist without a binding contract between buyer and seller and the conditional delivery of transfer documents to a third party.

What part or portion of the narrative report contains the estimate of value?

-The letter of transmittal identifies the property, purpose of the appraisal, methods used, and value estimate.

When negotiating a lease on behalf of a commercial real property landlord, the broker would usually calculate his commission as:

-a percent of the rent due for the entire lease period. - The broker's commission is normally calculated as a percent of the total amount of lease payments. This is negotiable, however and not a hard and fast rule of law.

A licensed real estate broker representing the seller becomes the gratuitous agent (no fee) of the buyer and accepts all of the fiduciary responsibilities as the buyer's agent when he/she:

-arranges financing for the buyer, including a purchase-money-loan. -If the agent representing the seller goes as far as setting up the buyer's financing, he/she becomes the buyer's agent and thus assumes all fiduciaryresponsibilities as the buyer's agent.

The most difficult step in applying the income approach in the appraisal of income property is:

-selecting a proper capitalization rate. -Capitalization rates are usually established by examining established rates on similar properties. Since few comparables are usually available, it can be difficult to establish an accurate rate.

single family dwelling

A dwelling which will be owned and occupied by a signatory to the mortgage or deed of trust secured by such dwelling within 90 days of the execution of the mortgage or deed of trust.

fee appraiser

A fee appraiser is a non-salaried professional who furnishes appraisal services for a fee.

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.

subagent

An agent of a person who is already acting as an agent for a principal. The original agent can delegate authority to a subagent where such delegation is either expressly authorized or customary in the trade.

Which of the following best identifies the three phases normally involved in a single-family dwelling?

Land acquisition, development, and construction

Without an existing buyer-agency relationship with the Broker, the Broker is

NOT entitled to a commission as the broker did not establish procuring cause to the sale.

what best describes a "dual agency?"

The agent acts concurrently for both the buyer and seller in a transaction with the full knowledge and consent of both parties.

unlawful form of dual agency called "divided agency?"

The agent acts concurrently for both the buyer and seller in a transaction without the knowledge and consent of both parties.

"Reproduction" cost is:

The cost to build an exact replica using the actual materials and design of the present building.

price fixing

The practice of conspiring to establish fixed fees or prices for services rendered or goods sold. -A broker casually mentioning, during a luncheon with several other brokers from other offices, that his office is planning to decrease the minimum office commission from 6% to 5%.

Who is more likely to earn commission?

Until the seller's acceptance is communicated to the buyer, there is no contract. Therefore, the one who communicates the seller's acceptance to the buyer is more likely to earn the commission.

A salesperson has has earned his/her commission when

acceptance of the offer is communicated to the buyer.

The Listing Agreement creates the

agency relationship between the seller and the listing agent.

In California, a real estate broker acting in the capacity of an independent contractor may

agree verbally or in writing to split a commission with another broker. Such a contract is enforceable in the California courts.

The form of agency relationship must be disclosed

as soon as practicable.

A licensed real estate broker who specializes in property management activities usually receives commissions:

based on a percentage of the gross rents collected. -A broker specializing in property management generally receives commissions based on a percentage of the gross rents collected, not those that would be anticipated over the term of the leases.

With regards to a fiduciary relationship, a Broker is to a Seller, as a:

beneficiary is to a trustee -The broker/seller relationship is similar to the beneficiary/trustee relationship as the trustee is holding the deed of trust for the benefit of the lender (beneficiary) and works on behalf of the beneficiary. The trustee has a fiduciary responsibility to the beneficiary.

In the case of a sale of property where the deceased died without leaving a will, the commission would be set by:

court order

The maximum commission a broker may charge for the sale of residential property is:

determined by the broker's contract with his principal. -There is currently no law which controls what amount may be charged by the broker.

n the correct order, list the chain of events necessary to comply with the agency disclosure law:

disclose, elect, confirm

An "in-house" sale is a form of

dual agency where a buyer is represented by the same brokerage firm that has the listing.

Agency by necessity is an agency created by an

emergency arising from a situation making it necessary or proper for the agent to act without receiving the sanction or authorization of the principal, in order to prevent harm to the principal. It arises when a duty is imposed on a person to act on behalf of another apart from contract and to prevent irreparable injury

The salesperson is most likely to get his/her commission when

escrow closes

Estoppel

is a legal doctrine which prevents a person from alleging something to be true or a fact which is contrary to a previous affirmation or allegation made by that same person.

Ostensible Authority

is that authority which a third person reasonably believes an agent possesses because of the acts or omissions of the principal -Seller "A" lets buyer "B" assume that Broker "C" was his agent.

Ratification

is the adoption or approval of an act performed on behalf of a person without previous authorization, such as the approval by a principal of an agent after the acts have been performed.

An agency disclosure agreement is required for property with

one to four dwelling units, any leasehold in this type of property exceeding one year's duration, and mobile homes, when offered for sale or sold through an agent.

When an appraiser uses the term "adjusted sales prices" when describing comparables, he/she is referring to:

sales price plus or minus adjustments for specific characteristics.

If you are a subagent of the listing broker, you are working for the:

seller

if there was already an existing buyer-agency relationship with the Broker

the Broker is entitled to full commission as she has established procuring cause.

A profit-and-loss statement would include all of the following EXCEPT:

value of inventory. - this appears on balance sheet

An agency relationship can be created by

written agreement or it may be implied by the acts of the principal and agent. It can also be created by oral agreement.