UNIT 10: SELLER RELATIONSHIPS AND COUNSELING UNIT QUIZ
Complete the following statement. A competitive market analysis is ___________ the equivalent of an appraisal. A. never B. sometimes C. usually D. always
A. Although a CMA is similar to an appraisal, it is never equal to an appraisal.
During a listing interview, a seller demands that the listing agent reduce the proposed commission by 1%. What is the best course of action for the agent? A. call the broker and discuss the matter B. explain that commissions are generally fixed in each locality C. go ahead and reduce the commission D. refuse the listing as commissions are not negotiable
A. 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.
The lead paint disclosure deals with homes built prior to A. 1978. B. 1982. C. 1992. D. 2001.
A. Federal law requires a disclosure concerning lead-paint in connection with the sale of residential properties built before 1978. A seller covered by this act must complete a series of steps before a buyer executes a binding purchase contract.
If interest rates are high and a seller wants to make a property more marketable, what is one strategy that the seller could use to make a property more attractive to a buyer? A. The seller could agree to pay the discount points to reduce the buyer's interest rate. B. The seller could give the buyer a certificate of eligibility for a VA-guaranteed loan. C. The seller could offer to refinance the existing mortgage. D. The seller could try to help the borrower get wraparound financing.
A. In most cases the seller pays points to reduce the interest rate to be paid by the buyer making the property more marketable. It's far easier to sell a property if the interest rate is affordable.
Karen is selling her house and contracts with Yvonne to be her broker. What fact is Yvonne prohibited by law from disclosing to a potential buyer or buyer's representative, even if asked directly? A. Karen's husband died of AIDS. B. Mold was discovered in the walls and floor of the basement. C. Someone in the house next door is a registered sex offender. D. There's an old chemical dump upstream that is now closed.
A. It is against the law to tell a potential buyer anything that would constitute unlawful discrimination as defined by fair housing laws. AIDS would be covered by this ultimatum.
Who is legally responsible for completing a form disclosing material facts about a property that's for sale? A. the seller only B. the seller's broker only C. both the seller and the seller's broker D. no one; the buyer must perform due diligence
A. Legally, the seller must disclose all material facts about the property in a seller disclosure form. The seller's broker would be acting ethically if he or she disclosed material facts about the property that did not appear on the seller disclosure form. And the broker would not be subject to discipline for having disclosed those materialfacts.
A broker should inform a prospective seller client that A. all listing contracts are written for one year. B. all properties are automatically included in the Multiple Listing Service. C. any advertising is negotiable. D. commission rates are set by the local board of REALTORS®.
A. This is a latent, or hidden, defect. If Bob knew about it but does not disclose it, he could be held liable and Henry might be able to recover damages. Either way, Henry would most likely be able to rescind the contract.
An agency agreement that allows the sellers to procure the buyer themselves best describes a(n) A. exclusive agency. B. FSBO. C. net listing. D. non-exclusive right to sell.
A. When the seller has the ability to bring the buyer, yet hires one broker to market the property, the listing agreement is an exclusive agency agreement.
What feature of a comp is considered in a sales comparison appraisal that is NOT generally considered in a competitive market analysis? A. age B. financing concessions C. lot size D. number of rooms
B. A CMA is primarily concerned with the observable differences between houses that would draw a buyer to one house over another.
A real estate broker acting as a seller's agent may A. advise the seller of the best manner of taking title to the new property they are purchasing. B. attempt to create or encourage an offer from any buyer. C. disclose to a buyer that the client will accept an offer at the listed price and terms. D. modify the listing contract on behalf of the seller if it is in the seller's best interest.
B. A broker acting as an agent of the seller is required to use his/her best effort to market the property and locate a ready, willing, and able purchaser that will meet the seller's terms and conditions.
A latent defect can be best described as a defect that A. has been present for some time. B. is not plainly observable. C. is unknown to the seller. D. the seller doesn't disclose.
B. An example of a latent defect would be a crack in a basement wall that is hidden behind paneling. Sellers have a duty to disclose latent defects to potential buyers as the buyers would not otherwise have any way of discovering them.
When working an open house as a designated seller's agent, a prospective buyer tells you that she would like you to represent her. You must get written consent from both buyer and seller before you can act as a A. designated buyer's agent. B. dual agent. C. implied agent. D. designated seller's agent.
B. Dual agency is only allowed with the informed written consent of all the parties to the transaction.
An owner lists her home with Mike of MNK Realty, a member of the local MLS. Mike knows of several potential buyers, so he holds the listing out of MLS until after the first open house, which is a week away. At the open house, one of his buyers makes an offer near full price; it is accepted and the transaction closes with no problems. Did Mike do the right thing? A. No, an open house cannot be held until the listing is submitted to MLS. B. No, he did what was in his best interest, not the client's. C. Yes, he did what was in the client's best interest. D. Yes, he obtained an acceptable offer and the transaction went smoothly.
B. Most MLS systems require that all listings must be submitted within a day or two. Regardless, Mike was looking out for his own best interests in an attempt to secure both sides of the commission. The home may have brought a higher offer if exposed to all buyers through the MLS.
The seller lists her house with New Age Realty. The next day, the seller goes to work and mentions listing her house. A co-worker expresses interest in the listing. What kind of listing would make the broker entitled to a commission if the co-worker makes an offer acceptable to the seller? A. exclusive agency B. exclusive right to sell C. open listing D. net listing
B. Only the exclusive right to sell listing agreement entitles a broker to a commission, no matter who brings the buyer.
Kent is single and sold his primary residence for $325,000. His adjusted basis (original cost) in the home is $150,000. He had selling expenses of $15,000. Kent meets all the conditions for the Section 121 exclusion. What is Kent's recognized gain? A. - $90,000 (loss) B. $0 C. $160,000 D. $175,000
B. Since the amount of the Section 121 exclusion ($250,000) is greater than the realized gain of $160,000, there is no recognized gain. However, the excess amount is lost and cannot be rolled over into future transactions.
A listing agent is showing a buyer a home. The buyer sees a large crack in a basement wall that is seeping water. The buyer buys the property and later sues the agent for non-disclosure of a property defect. A. The agent is liable for damages because he did not tell the buyer about the crack. B. The agent is not liable under the doctrine of "caveat emptor." C. The agent should have fixed the crack prior to showing the property. D. The agent should have instructed the sellers to hide the defect behind paneling or boxes.
B. The agent is under no duty to disclose a patent defect. A latent or hidden defect must be disclosed. The term "caveat emptor" refers to "let the buyer beware," and the buyers should be aware of things that they can readily see.
The amount of commission that a licensed salesperson is paid A. is determined by each state's real estate commission. B. is determined by negotiation between the licensed salesperson and the employing broker. C. is negotiated by the salesperson at the time of listing the property. D. may not exceed the standard rate set by the local board.
B. The amount that a broker will pay a salesperson is generally negotiated between the broker and the salesperson at the time the salesperson is hired. There is no standard fee set by any board or licensing authority.
When is a broker generally entitled to commission? A. at the closing table B. when the listing agreement is signed C. when a ready, willing, and able buyer is found on terms acceptable to the seller D. when a sales contract is signed
C. A broker is entitled to commission only after fulfilling the duty of finding a ready, willing, and able buyer on the seller's terms.
A large mirror that a buyer wants to remain with the property should A. be agreed upon verbally, with its price stated in the contract. B. be disregarded as having no consequence. C. be identified as a fixture in the sales contract. D. never be included in the sales contract.
C. A fixture is defined as a piece of personal property that stays with the real property. Even though the large mirror might be removable, if it is identified as a fixture and made part of the real estate contract, it will remain after the sale.
Which fact is NOT required to be disclosed in a real estate transaction? A. The broker represents both the buyer and the seller in the transaction. B. The county landfill is less than 1,000 yards from the property. C. The former owner was murdered in the kitchen of the home. D. The home's chimney was damaged by lightening and has not yet been repaired.
C. A previous crime in the home is not material and is not necessary to disclose. The other information should be disclosed.
Henry is buying Bob's farm. On the back of the property is an underground water culvert which was not apparent from a normal inspection of the land. What type of defect would this be considered, and is Bob required to disclose it? A. latent defect; must disclose B. latent defect; not required to disclose C. patent defect; must disclose D. patent defect; not required to disclose
C. All of these items are actually negotiable. The broker is obligated to tell the client that.
Carla is a seller's agent for Lane, whose home is listed for $450,000. After Carla submits an offer to Lane, she must A. allow him time to review it before submitting any other offers. B. evaluate the new offer to see if it's more favorable than the first before presenting it. C. present him with any additional offers immediately. D. tell other prospective buyers that the house is under contract.
C. Carla is obligated to submit all offers.
What is NOT negotiable in a listing agreement? A. the broker's cooperation with other brokers B. the commissions C. whether there is an end date D. the scope of activities permitted
C. Each one of these items is negotiable, and a licensee must inform the consumer of that fact.
Broker Brittney is using competitive market analysis to set her seller client Justin's expectations about the sale of his property. Her research shows that there are 20 current listings and only four listings have sold in the past 60 days. Based on this, Justin could expect that his house might be on the market for at least A. 180 days. B. 6 months. C. 10 months. D. 12 months.
C. Given the current market in Justin's area - four houses every two months - it would not be unreasonable to think that his house could be on the market for 10 months.
Jill buys a house from Jack. She assumed that the curtains would be included in the price, even though they were not listed in the agreement of sale. What is the best argument Jill could make to persuade a judge if this goes to court? A. "Jack mentioned that they went with the house." B. "My agent assured me they were included." C. "The curtains were custom-made for the odd-shaped window." D. "The curtains were in the ad that appeared in the paper."
C. Jill's best argument is that curtains were custom-made.
Seller Sam calls a real estate agent to list his home. Sam tells the agent that he wants $156,000 in his pocket at closing and the agent can have the rest for the commission. What type of listing would this be? A. exclusive agency B. exclusive right to sell C. net listing D. open listing
C. Net listings create a breeding ground for fraud and unhappy clients and agents.
Which property transfer is NOT EXEMPT from the requirements of the Illinois Radon Awareness Act? A. condominium units three stories or higher above ground B. foreclosed property C. new construction D. transfers between spouses
C. Sellers of newly constructed homes must comply with the provisions of the Act.
Who is obligated to complete a Residential Real Property Disclosure Report? A. Builder Bob, who is selling a newly built home B. Bob, who is selling a property he owns to his son C. Cathy, who is selling her condo D. Evan, who is selling his 10-unit apartment building
C. The disclosure is required for real property improved with not less than one nor more than four residential dwelling units, units in residential cooperatives or, condominium units. Exceptions include transfers to spouses or children, sales to or from government agencies, transfers of newly constructed homes that have never been lived in, and transfers through court order, as with an estate.
A CMA most resembles which formal appraisal approach? A. cost approach B. income approach C. sales comparison approach D. It has elements of all three.
C. The tasks and analysis that a real estate licensee performs to do a CMA are very similar to those an appraiser performs when doing an appraisal using the sales comparison approach.
James is selling his home. He needs to pay off a $96,000 first mortgage, a $12,000 second mortgage, and wants $10,000 cash for himself. If his closing costs are $1,900 and he needs to pay a 7% commission, how much must he sell the property for? A. $102,207.21 B. $119,900.54 C. $128,924.73 D. $129,900.32
C. There are two steps to this problem. First, add all of the expenses: $96,000 + $12,000 + $10,000 + $1,900 = $119,900. This is the base cost. Now, factor in the broker's commission fee. Sale price = 100%; Commission = 7%, thus net to James equals 93% (100% - 7% = 93%). Using the seller pricing/net to owner formula; Whole (Total/Gross Sale price) = Part (Net amount + Expenses) ÷ Percent (100% minus deductions), plug in the known variables. Whole = $119,900 ÷ 93% or 119,900 ÷ 0.93 = 138,924.73. The minimum offer James should accept is $128,924.73.
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. What type of "listing" might this be considered? A. exclusive agency B. exclusive right to sell C. open listing D. net listing
C. 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.
Buffy wants to buy Xander's house. She really likes the patio with the built-in grill. She puts in the contract that the built-in grill is included in the purchase of the property. Xander agrees to the contract. When Buffy moves in after the closing, she finds the grill gone. She sues Xander. The court rules in her favor. What would be the most compelling evidence used to determine the ruling? A. Removing the grill caused damage to the patio. B. The patio was less useful and appealing without the grill. C. There was a written agreement. D. Xander used concrete to attach the grill to the patio.
C. Written agreements are the most compelling evidence when a dispute arises about property. If there is no written agreement, then the purpose and intent of the annexer, the manner of the annexation, and the relationship between the two parties is considered.
You think a house should list for $225,000 but your clients insist that they need $249,000 to pay off their mortgage and get their next house. If you decide to take the listing anyway, which of these fiduciary duties requires you to list at $249,000? A. accountability B. disclosure C. obedience D. reasonable care
C. You can offer your advice, but you owe your client obedience to all legal instructions. You should list at $249,000.
Peter is selling his house and his agent gives him the Property Condition Disclosure Statement to complete. Which statement is true? A. The agent may assist Peter in completing the form. B. The agent must sign the form after walking through the property with Peter. C. Peter must hire a home inspector to help him complete the form. D. Peter should complete the form to the best of his knowledge.
D. If Peter doesn't have all the information needed to complete all parts of the form, he must indicate that his statements may be based on incomplete facts, but he must still complete and sign the form. The agent simply provides the form, but should not assist Peter or sign it.
Which of the following circumstances is NOT an exception to the two-year provision of Section 121 of the Taxpayer Relief Act of 1997? A. change in place of employment B. divorce C. health considerations D. marriage
D. Marriage is the only item listed that is not exempted. Divorce, as well as disaster, qualify as unforeseen circumstances.
Will and Gwen are getting a divorce and need to sell their house. Ursula is considering purchasing the home. Seller's agent Betty just finished a competitive market analysis on the home. Who is the most likely audience for her value estimation? A. Gwen's accountant B. Ursula C. Ursula's lender D. Will and Gwen
D. Seller's agent Betty's value estimation is really only for her clients, Will and Gwen. Other parties to this transaction might need a formal appraisal performed by a licensed appraiser.
Broker Stan, 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 Stan do? A. submit the higher offer first; if it is not acceptable, look at the other one B. submit the offer from his agent first, and let the seller decide on it before looking at the other offer C. submit the offer from the cooperating agent first, and let the seller decide on it before looking at the other offer D. submit both offers at the same time, allowing the seller to make a decision after looking at all the facts
D. There is no written rule about the order to present offers, but the broker is obligated to submit all offers. The seller has the right to know all the facts and look at all the offers before reaching a decision.
When is the Residential Real Property Disclosure Report usually completed? A. when an appraiser provides an estimate of the property's value B. when a buyer submits an offer to purchase C. when a mortgage lender evaluates the property to secure a loan D. when the property is listed for sale
D. This form is customarily completed at the time of listing the property for sale, and is referenced in the agreement of sale.
You're working at an open house as designated agent for the seller. At a minimum, what should you obtain from prospective buyers? A. buyer-brokerage agreement B. dual agency agreement C. implied agency agreement D. notice of ministerial acts
D. To protect yourself and to avoid misinterpretation, it is wise to at least obtain a signed notice of ministerial acts, also called a non-agency disclosure, from prospective buyers. If they want representation, you can discuss a buyer-brokerage agreement.
Matt wants to sell his home. He must pay off his existing $96,200 mortgage and pay $3,100 in closing costs. If he pays a 6% commission, what is the minimum offer he can accept? Round your answer to the nearest dollar. A. $99,216 B. $100,208 C. $102,802 D. $105,638
D. Two steps are required to solve this problem. First, add the expenses $96,200 + $3,100 = $99,300. This is the whole/base cost. Now, factor in the broker's commission fee. Sale price = 100%; Commission = 6%, thus net to Matt equals 94% (100% - 6% = 94%). Now use the net to owner/seller pricing formula, Whole (Total/Gross Sale price) = Part (Net amount + Expenses) ÷ Percent (100% minus deductions) and plug in the known values; $99,300 ÷ 0.94 = $105,638.29. Rounded, Matt should sell his home for a minimum of $105,638.