UNIT 11: BUYER RELATIONSHIPS AND COUNSELING UNIT QUIZ

Which is NOT considered a purpose of the purchase contract? A. buyer's offer B. contract between the buyer and the seller C. contract between the seller and the broker D. receipt for the earnest money deposit

C. The contract between the seller and the broker is the listing agreement.

A home inspection generally would not include an assessment of A. the foundation of the property. B. heating and air-conditioning units. C. plumbing. D. radon levels in the basement.

D. A property inspection is a visual examination of the physical structure and systems of a property. Radon tests are more likely conducted separately.

Which would NOT be included in determining a buyer's housing allowance? A. homeowners association fees B. mortgage principal and interest C. property tax D. utility bills

D. Housing allowance generally includes mortgage principal and interest, taxes, insurance, and homeowners association fees, if any. Utilities are not included in the calculation.

You're the agent for the buyer. On the fact sheet, it indicated that the washer and dryer would be included in the sale. Further conversations with the seller confirmed this. The washer and dryer are examples of _____________ property and ______________ need to be in the agreement of sale. A. personal / do B. personal / do not C. real / do D. real / do not

A. Appliances are considered personal property. As such, you should make sure that they are included in any sales contract. Otherwise, the seller could take them and the buyer would have little recourse.

Broker Lisa is representing Jane in a real estate transaction to buy a property in which she has an exclusive agency agreement. Jane asks Lisa for a business card for her sister, Sally, who is interested in moving into the area in the near future. While meeting with Jane, Lisa receives a phone call from Diane, a caller, who wants to know the price of the same property Jane is interested in. In this scenario, who is a client of Broker Lisa? A. Jane only B. Jane and Diane C. Jane and Sally D. Jane, Sally, and Diane

A. At this point, only Jane has an agency agreement with Lisa, therefore, Jane is her only client.

What should be the first thing an agent discusses with a potential buyer client? A. agency disclosure B. amount of money the buyer has to spend C. neighborhoods the buyer is interested in D. number of bedrooms the buyer needs

A. Before an agent discusses potential confidential information, he should disclose the details about possible agency relationships.

Bob is an attorney in Illinois. He is also a licensed real estate broker. Bob may A. not serve in both capacities on the same transaction. B. serve in both capacities on the same transaction. C. serve in both capacities on the same transaction but only if he is paid separately. D. serve in both capacities on the same transaction only with the written consent of both parties.

A. Both Illinois license law and the code of ethics for attorneys prohibit a licensed attorney who is also a licensed real estate broker from acting in the capacity of attorney and broker in the same transaction.

If Josh Walsh has an annual gross income of $66,000 and monthly debts of $460, how much monthly PITI payment can he qualify for if the lender uses 28/36 qualifying ratios? A. $1,520 B. $1,540 C. $1,848 D. $1,980

A. First, calculate the monthly income. You know the annual income is $66,000, so $66,000 ÷ 12 = $5,500. To find the housing expense ratio: 0.28 x $5,500 = $1,540. To find the total debt ratio: (0.36 x $5,500) - $460 = $1,520. You must use the lesser value.

Which of these do you think would LEAST LIKELY be considered a material fact? A. current owner believes the house is haunted B. nearby factory C. previous termite infestation D. warped window frames

A. Information about the condition of the property is usually considered to be material, and the presence of a nearby factory could have some bearing on that property's condition. An owner's opinion about the house being haunted would most likely not be considered a material fact.

Which statement about a "letter of intent" is FALSE? A. It is a legal contract. B. It is more often used for commercial real estate transactions than residential real estate transactions. C. It is not binding on the parties. D. It is a statement of facts used to create a formal contract.

A. Letters of intent may be used in commercial real estate transactions to lay out the terms of the agreement. They should contain explicit language indicating that they are not binding and, therefore, are not legal contracts.

Louise, a potential home buyer, is chatting with a broker. Of the information Louise shares with the broker, which is LEAST LIKELY to be considered confidential information? A. her current address B. her reason for house hunting C. the price range she's looking at D. the terms of her divorce

A. Louise's current address is likely to be a matter of public record. All of the other choices could be considered confidential information, since they could at the very least hint at Louise's financial situation and motivation.

Which statement about loan pre-approval is FALSE? A. It can be completed by a mortgage broker or a real estate broker. B. It can be given prior to having a signed sales contract. C. It can improve a buyer's negotiating position. D. It is binding on the lender.

A. Only a lender can complete a pre-approval of a mortgage loan since it may indeed be binding on the lender. A real estate broker can perform some pre-qualification calculations, however.

Broker Sue has just completed a pre-printed purchase agreement with her client buyer Bob. The agreement includes a good faith deposit of $5,000 in the form of a check, which Bob has given to Sue. Absent any specific instructions, what should Sue do with Bob's check? A. turn it over to her sponsoring broker immediately B. keep it until the offer is accepted C. give it to the seller to hold until closing D. deposit the check in her personal savings account

A. She should tender Bob's check to her broker to deposit in the brokerage's special trust account "as soon as possible," unless her sponsoring broker has given her written authorization to make deposits directly to the account.

A buyer submits an offer to his agent, who gives it to the listing agent for delivery to the sellers. The sellers like the offer and sign their acceptance. They then hand the accepted offer to their agent with instructions to deliver the accepted contract back to the buyer. Has a contract been created? A. No, because the sellers have not relinquished control of the acceptance. B. Yes, because the listing agent now has possession of the accepted offer. C. Yes, because the offer has been delivered to the buyer. D. Yes, because the offer was accepted.

A. The listing agent is under the control of the seller, so there has not yet been delivery or communication of the acceptance. To be delivered, the contract must be out of the possession and control of the party accepting it.

Who are the parties to an agreement of sale? A. buyer and listing broker B. buyer and seller C. buyer, seller, and both brokers D. seller and listing broker

B. A purchase agreement, also called an agreement of sale or a purchase contract, is the only contract between the buyer and the seller.

If you use this calculation while evaluating income, "PITI divided by Gross Monthly Income," you have just determined what? A. combined loan-to-value ratio B. housing expense ratio C. loan-to-value ratio D. total debt service ratio

B. PITI divided by gross monthly income determines the amount of the borrower's income that will be used to pay housing expenses. Underwriters have a maximum housing ratio that can be used to approve a mortgage loan.

You are a buyer's agent for Doris, who is getting ready to make an offer on Clyde's house. A friend of yours tells you that Clyde and his wife are getting divorced. Do you think you should you share this information with Doris? A. Yes, as long as the listing agent gives you permission to share it. B. Yes, this information could affect Doris's negotiating position. C. No, this is gossip and it's none of your business. D. No, you have a duty to keep confidential information confidential.

B. The fact that seller is getting divorced could impact the seller's willingness to accept an offer. Knowing this can impact Doris's negotiating position. You would simply be promoting your client's best interest by sharing this.

Buyer Jim's broker, Bruce, submits to seller Tom an offer to purchase signed by Jim, stipulating a price of $250,000, a commission of 6%, and closing within 90 days. Tom accepts the price and closing, changes the commission to 5%, initials the changes, then signs and returns the contract to Bruce, who gives it to Jim. Is the contract valid? A. No, because the broker's commission is non-negotiable. B. No, because there was no meeting of the minds. C. Yes, because it is in writing and signed by both parties. D. Yes, because Tom initialed his changes.

B. There was no meeting of the minds. Acceptance must not vary the terms of the offer. When Tom failed to accept Jim's offer as submitted, he, in effect, rejected it, and it became void.

What is the loan-to-value ratio if the loan amount is $100,000, the appraised value is $125,000 and the sales price is $127,000? A. 75% B. 78% C. 80% D. 100%

C. $100,000 divided by $125,000 (the lowest of the sales price or appraised value) equals 80%.

An open buyer agency agreement means that broker Susan is paid A. if any broker introduces her buyer client to the property he ultimately buys. B. only if her buyer client purchases a property that she has listed. C. only if she introduces her buyer client to the property he ultimately buys. D. no matter who introduces her buyer client to the property he ultimately buys.

C. A non-exclusive buyer agency agreement or open buyer agency agreement is one in which a sponsoring broker earns a commission only if he is the agent who introduces the buyer to the property he or she purchases.

After showing houses to a buyer, designated agent Mariann returns to the office and complains to a fellow licensee at the brokerage that her buyer is low-balling every offer even though she just inherited a fortune from her grandmother. The agent has breached A. no duty, since her fellow agent would also represent the buyer. B. no duty, as long as she did not mention the buyer's name. C. the client duty of loyalty. D. the customer duty of honesty.

C. An agent should always act in her client's best interest. She is breaching her obligation to be loyal to her client by complaining about her. She is also divulging what might be confidential information. This could be a real problem if the buyer becomes interested in a property listed by Mariann's colleague.

You have a listing for Marilyn's house. She also engages you to represent her in her search to find a new house. This makes you a A. designated buyer's agent only B. designated seller's agent only C. designated seller's agent and designated buyer's agent D. dual agent

C. If you have a listing agreement with Marilyn as well as a buyer brokerage agreement, you are both a designated seller's agent and a designated buyer's agent. You're not a dual agent unless you represent both buyer and seller on the same transaction.

Broker Sally executes a buyer-broker agreement with buyer Brad. Sally reads an ad placed by an FSBO seller, offering 3.5% commission to the broker who brings the buyer. What is the seller considered to be to Sally if Brad makes an offer on the house? A. agent B. client C. customer D. principal

C. In this relationship, the agent, Sally, exclusively represents the buyer. The seller is representing himself and is Sally's customer.

A real estate broker has actual knowledge of structural damage to the floor boards of a home due to termite infestation. He informs the buyer that there are no termites or termite damages in the home. The buyer signs a contract to purchase the property. Is the broker susceptible to claims of fraud? A. No because he is protected by the "as is" clause in the purchase agreement. B. No, because the termite damage would be deemed a latent defect. C. Yes, because his untrue statements could be seen as an inducement to buy. D. Yes, because the termite damage is considered a patent defect.

C. The broker can be held liable because his statements to the buyer were fraudulent and could be looked upon as an inducement to enter into the purchase agreement.

Patrick's home is listed for sale on the MLS by listing broker Abe. There is no mention to compensate the buyer's broker. Buyer-broker Jane has a client who is interested in the Patrick's home and presents an offer which Patrick accepts. Patrick is paying 7% commission. How much of the commission must Patrick pay Jane? A. 7% B. 3.5% C. nothing D. impossible to tell

C. The listing agent commission is 7%, but the seller is not obligated to pay the buyer's broker anything.

If, upon receipt of an offer to purchase under certain terms, the seller makes a counteroffer, the prospective buyer is A. bound by his original offer. B. bound by the agent's decision. C. bound to accept the counteroffer. D. released from his original offer.

D. A counteroffer is both the rejection of the original offer and the making of a new offer with new terms. Once the offer has been rejected, it may not be accepted later.

Which of these is NOT a duty that a licensee acting as a dual agent owes to his buyer client? A. assist in comparing financing alternatives B. explain closing costs and procedures C. help arrange for property inspections D. suggest an appropriate price to offer

D. A dual agent may not assist either client in preparing or negotiating offers.

Which is an example of liquidated damages? A. A broker reimburses a former client who sued for breach of agency obligations. B. A court orders a reluctant seller to pay the commission due a broker. C. A court orders a seller to return the earnest money deposit when he backs out of the sale. D. A seller keeps the earnest money deposit when the buyer backs out.

D. Liquidated damages reflect the amount of money specified in a contract to be

What is the name of the 1996 federal law that requires states to develop a procedure to notify community residents of sexual offenders living in their area? A. Adam's Law B. Amber's Law C. Casey's Law D. Megan's Law

D. Megan's Law, adopted by the federal government in 1996, requires states to develop a procedure to notify community residents of sexual offenders living in their area.

Which statement regarding tax deductions is FALSE? A. Interest on home equity debt is deductible up to $100,000. B. Interest on a home mortgage is deductible up to $1,000,000. C. Points paid to refinance a mortgage are fully tax deductible in most cases. D. A principal residential property can be depreciated over 27.5 years for tax purposes.

D. One's residence is not depreciable for tax purposes, only residential rental property. The other home acquisition-related costs are deductible.

Paul has a buyer-broker agreement with Mary, who agreed to pay him 2.5% commission for finding her a house. He showed her 16 different houses, but when she settled on the one she wanted, she submitted her offer directly to the listing agent, bypassing Paul to avoid paying his commission. What is Paul's best recourse? A. record a lien against Mary's property B. submit to an arbitration hearing with the local board of Realtors® C. sue the listing agent for his 2.5% of the sales price D. sue Mary for breach of contract

D. Paul had a contract with Mary, which she breached. He could take her to court and try to get a judgment against her for the commission.

Buddy makes an offer to buy Wally's home. The offer contained a provision limiting the time for acceptance to 48 hours. Wally immediately rejected the offer as inadequate. After thinking about it overnight, Wally called his agent and said, "I've changed my mind. I'll take the offer." What is the status of Buddy's offer? A. It is a binding contract now that Wally has accepted it B. It is still open because Buddy hasn't formally withdrawn it. C. It is still open because it still had 24 hours to run. D. It was terminated when Wally first rejected it.

D. Rejection automatically terminates an offer. A rejected offer does not have to be formally withdrawn or revoked. An offer may also be terminated by lapse of time, communication, or notice of revocation before acceptance, qualified acceptance (counteroffer), or death or insanity of either the offeror or the offeree before acceptance.

A home has a large, ugly stain on the carpeting, visible as soon as one walks in the door. What is the general rule regarding disclosure of such defects? A. Disclosure of defects is the responsibility of the seller and not the seller's agent; most agents require the seller to sign a waiver attesting to this. B. Regardless of whether a defect is patent or latent, having an "as is" clause in the purchase agreement will protect the seller. C. The stain is considered to be a latent defect and must be disclosed in the disclosure statement to avoid liability. D. Patent defects such as this are typically considered the responsibility of the buyer.

D. The prevailing legal theory is that if a defect is patent, then there is no requirement to disclose it. Yet, to avoid gray areas, many agents recommend that their sellers disclose of all defects, whether patent or latent.

Your buyer client, Sheila, makes a $400,000 offer on Russell's house, which you give to the listing agent. Later that day, another buyer client, Kent, wants to make a $408,000 offer on the same house. Should you give the listing agent Kent's offer? A. No, unless the listing agent has not yet presented Sheila's offer to Russell. B. No, you breached your duty to Sheila by showing Russell's house to another buyer. C. Yes, but only if Russell rejects Sheila's offer. D. Yes, provided that Sheila and Kent give you written consent to do so.

D. This is an example of a contemporaneous offer. If multiple offers are to be considered by the seller simultaneously, the broker must present a notice of contemporaneous offers to both buyers and allow them to decide how to proceed with representation.

A house is listed at $180,000 and your buyer client wants to offer $125,000. Which fiduciary duty are you following by presenting the offer to the seller or the seller's agent? A. accountability B. confidentiality C. disclosure D. obedience

D. You may feel uncomfortable doing this, and you may mention to your clients that such a drastic price cut is unusual, but you must honor the wishes of the client you're representing as long as it's a legal request.