AZ Real Estate Exam

If a licensee is found guilty of a violation, what's the maximum civil penalty per violation that can be assessed?

$1,000

Law

(aka a statute) begins as legislation proposed by and voted into effect by a state legislature

Identify what is and what isn't required to qualify for a broker's license in Arizona if the applicant isn't applying by virtue of holding a license in another state.

-90 hours of approved pre-licensing education for brokers -At least three years' experience as a real estate licensee -Passing score on the licensing exam -Attendance at a Broker Management Clinic

Professional Corporations

-A PC is much like a typical corporation, but to be a real estate PC, each of the corporation's officers, directors, and shareholders must hold an active real estate license. A PC can only conduct business in the field in which its members are licensed.

Developers should then provide these 2 things to each potential timeshare purchaser:

-A copy of the proposed timeshare public report that was submitted to the commissioner -The cancellation policy

Developers who want to jump into presales have to be authorized to do so by submitting 3 things to the commissioner:

-A written request for presales -An application for a timeshare public report, including all required fees and exhibits -Proof that funds received will be deposited into an escrow account

AZ Revised Statutes

-AZ statues are LAWS enacted by the state legislature. Statues inform regulations found in the AAC. -In compliance with State Constitution. Governs real estate activities. -Title 32 (Professions and Occupations), Chapter 20 (Real Estate) of the Arizona Revised Statutes is dedicated to the statutes that govern real estate activities.

Cooperation agreement

-Any elsewhere-licensed person who plans to earn any type of valuable consideration—such as a fee, commission, or other compensation—for real estate transactions in Arizona must enter into a cooperation agreement with an Arizona broker. -Cooperation agreements outline the real estate activities that the out-of-state broker can perform, and acknowledge that the Arizona broker is responsible for the out-of-state broker's actions. -Licensed Arizona salespersons may NOT enter into cooperation agreements with out-of-state brokers, but brokers might.

Possible penalties include:

-Civil penalties -Letter of concern -issuance of a provisional license -denial of issuance, renewal, or reinstatement -summary (immediate) suspension -suspension or revocation of license

Name the 3 Statutory Requirements for Real Estate Employment Agreements

-Detail all material agreement terms, including how the broker will be compensated. -Include a specific beginning and ending date. -Be signed by all agreement parties.

Risk in real estate business can be managed by:

-Developing a policies and procedures manual and an employee manual -Using company checklists to ensure employees complete every process step -Recording everything about a transaction in its file -Providing training for all staff, but especially licensees -Retaining an attorney to ensure laws are not being violated -Practicing good communication skills

Transaction records can be stored at a branch office. What are the 3 parts of the transaction records?

-Earnest money receipts -Closing statement -Sales contracts

The commissioner's rules contain regulations pertaining to:

-General provisions (including definitions) -Licensure requirements -Education requirements -Advertising rules -Document-handling rules -Compensation regulations -Professional conduct expectations -Administrative procedures

The Arizona Administrative Code is made up of regulations and essentially acts as the commissioner's rulebook for enforcing Arizona's real estate laws. Do you recall what sort of topics are covered in that rulebook?

-General provisions (including definitions) -Licensure requirements -Education requirements -Advertising rules Document-handling rules -Compensation regulations -Professional conduct expectations -Administrative procedures

AZ State Constitution

-Highest legal authority; second only to the federal version in authority. Gives certain powers to real estate licensees. -Article 26 empowers licensees to draft or fill out, without charge, instruments related to real estate transactions, such as purchase agreements and leases.

What 3 are exceptions that would mean it's not the licensee's sole responsibility to handle negotiations in a real estate transaction?

-In a For Sale by Owner transaction -When the principal has waived this obligation in writing -When no licensed representative of the principal's broker is available for 24 hours (an unlikely scenario, since a client is a major priority!)

What are the ways in which the commissioner and the ADRE regulate real estate licensees

-Monitoring education requirements and courses -Investigating complaints against licensees -Participating in administrative hearings They do NOT: -establish qualified schools that offer real estate instruction -offer general marketing materials and templates to new licensees -Hiring and firing of licensees

Use of the RE recovery fund may result in:

-Repayment of damages amount to the fund -Interest payments to the fund -License termination

Which three items are included in the timeshare disclosure given to all prospects?

-Sales pitch/tour time limit -Estimated retail value of premium -Conditions and requirements to qualify for premium

Once someone with their eye on the employing broker license has decided what kind of entity they want to form, what else needs to be done in order to gain, and maintain, that license?

-Submit an application. -Come up with a unique name. -Notify ADRE of any changes in the designated broker. -Appoint a designated broker.

The AZ Real Estate Law Book is made up of excerpts from:

-The Arizona State Constitution -Arizona Revised Statutes (Title 32, Chapter 20) -The Arizona Administrative Code (Arizona Real Estate Rules, Title 4, Chapter 28)

If a developer applies to the department for an exception, in order to use a lottery promotion, what information must be included in the submission?

-The developer's contact information -The time when the contest entries will be collected -Any conditions and restrictions to entry -The broker's name -The date, time, and location of winner selection -The public report number

In 2022, team compensation rules were updated. A licensed member of a team can receive payment from an employer other than his legally licensed broker if:

-The employer holds a license. -The licensee is the employer's employee and receives a federal form W-2 Wage and Tax Statement. -The employer has the same employing broker as the licensee. The employer obtains written permission from the employing broker to pay the licensee.

Karen is a licensed real estate salesperson. Which of the following must be true about her, given her status as a licensee, and which may or may not be true?

-at least 18 years old. -given the Arizona Department of Real Estate certain disclosure forms. -completed the 90-hour pre-licensing course and passed the exam. -works for an employing broker.

What 6 fiduciary duties does a real estate agent—owes clients:

-obedience -loyalty -confidentiality -accounting -reasonable skill and care -disclosure.

Describe the difference between the LLC and PLLC

A PLLC can only have members who are licensed, and it can only conduct business in real estate, unlike an LLC.

Professional Limited Liability Companies

A professional limited liability company (PLLC) is much like a typical LLC, except that like a PC, all PLLC members must be real estate licensees and the PLLC may only conduct real estate business. A PLLC can hire unlicensed employees as long as they work under the licensees' supervision and they don't hold themselves out to the public as being licensed.

As part of professional standards of conduct, Arizona licensees are expected to offer their customers ______.

Accounting of all funds with which they're entrusted

Corporation

A business entity and is considered separate from its (human) stockholders and directors. Management power is vested in the corporation's board of directors and not shared amongst the company's stockholders.

The Arizona Department of Real Estate will also publish substantive policy statements when warranted. Which of the following statements best describes a substantive policy statement?

An advisory statement offering clarification on the department's current approach to a specific rule or regulation

Someone who uses or purchases a product or service

Consumer

Someone who's working with a real estate licensee, but isn't represented by him

Customer

A compensation model in which a licensee pays a monthly fee to be affiliated with a firm is called a ______ model

Desk fee

Fiduciary Duties, as well as Statutory Duties

Duties agents owe their clients, which are specified in state statutes -perform all acts expeditiously -exercise reasonable care by ensuring they obtain information material (impactful) to a client's interests & communicating info to client -confirming accuracy of information -recommend that client seeks counsel from insurance, legal, tax and accounting professionals when appropriate.

Licensing Authority

Each state has its own licensing authority, which establishes the requirements of licensure and continued licensure (e.g., continuing education requirements). Many licensing authorities also create and enforce regulations in addition to laws.

Compensation is usually paid via check from the buyer and seller.

False

Professional associations determine which activities are affected by state licensing laws.

False

T/F A transactional broker is a limited agent to the seller.

False - A transactional broker is not an agent to any party.

RESPA requires that licensees be paid only by checks issued through their respective brokerage firms.

False - RESPA does not address licensee compensation (just referral fees from closing services providers).

T/F: a real estate employment agreement is a compensation agreement related to leasing a property

False - it is not an agreement for LEASING a property.

T/F Commission rates are set by the industry.

False - they are negotiated independently w/each client.

If licensees act as transaction brokers, they won't receive compensation.

False - they would need a written compensation agreement that details the amount of compensation & who pays it.

If an Arizona licensee misses the deadline for the continuing education requirements, the Arizona real estate commissioner can grant a waiver or additional time if the licensee shows ______.

Good cause

The Five-Year Rule

Licensees may be disciplined if it appears that within the last five years they have: -Engaged in misrepresentation and fraud -Engaged in improper fund or record handling. -Failed to treat clients fairly and honestly -Disregarded/violated any of the provisions of AZ license law or any of the commissioner's rules. -Violated federal fair housing law, AZ civil rights law, or any similar local ordinance. -Accepted real estate-related compensation from anyone other than their employing broker.

Non-trust funds, as long as they're not commingled with trust funds, are not bound by _______

Real estate laws

Hugh is representing Jacqueline in her purchase of a new condo. She wants to move in before closing, and in order to fulfill his statutory duties, which of the following actions would Hugh take?

Recommend Jacqueline seek the advice of a lawyer.

Fiduciary Duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

The agreements that allow out-of-state licensees to receive commissions from Arizona licensees are established between which two parties?

The out-of-state licensee and an Arizona licensed broker

Who has the power to issue a final order regarding a licensee's penalty for a license law violation?

The real estate commissioner

Partnership

This is similar to a sole proprietorship, except there are two or more individuals or entities involved. Both parties to a partnership are personally and equally liable.

What is the purpose of E&O insurance?

To protect licensees in the event of an accident or mistake in the practice of real estate that results in financial harm to a consumer

AZ Department of Real Estate (ADRE) primary purpose

To regulate real estate brokers and salesperson. Substantive policy statements are published by the ADRE to clarify its current approach to a specific rule or regulation.

License laws exist to protect consumers.

True

License laws often prescribe a standard of conduct for licensees.

True

Licensees can receive compensation from more than one party to the transaction, as long as all parties have provided written consent.

True

Real estate-related compensation is paid through the brokerage firm.

True

T/F A non-agent is a facilitator.

True

T/F Agency representation agreements outline commission details, including the amount, when the compensation has been earned, and even how it may be split with cooperating licensees.

True

T/F Both ethics and laws are rules of conduct.

True

T/F Brokerages may suggest their licensees use a specific commission rate.

True

T/F Commission structures and collection methods are negotiated independently with each client.

True

T/F Compensation does not establish agency.

True

T/F Licensee compensation typically comes out of the seller's proceeds from the sale.

True

T/F: The broker must disclose to all transaction parties, in writing BEFORE CLOSING, the name of each employing broker who represents a transaction party, and who will receive compensation from the transaction.

True

T/F An escrow officer is a limited agent.

True - Because they act in a limited capacity to the parties, an escrow officer is a limited agent.

When is a licensee's compensation usually considered earned?

When the client has entered into a purchase contract

Real Estate Employment Agreement

Written agreement authorizing or employing an agent or broker to purchase or sell real property for compensation or commission

Limited Liability Company (LLC)

a business entity that provides limited liability to its members and managers while avoiding the double taxation aspects of certain corporations by having the income pass directly to the LLC's members, like a partnership. -If a lawsuit is filed against the LLC—the members' personal assets are protected. However, it's important that all administrative formalities must be met in order for members' personal assets to be protected. This means keeping personal and business bank accounts separate, keeping corporate minutes, maintaining company records, etc.

Associate broker

a licensed broker who works under another broker's supervision. Associate brokers generally have the same license privileges as a salesperson. Many agents become associate brokers when they want to show that they have more experience and extra training, but have no desire to take on the extra responsibility of being a designated broker.

Regulation

a standard or rule adopted by a government agency, such as a state department of commerce or a state real estate commission. Although not voted on by a state legislature, these regulations have the same effect as law for licensees.

Commissioner's Rules

enforced by the commissioner and the A.A.C in order to uphold the law (AZ Revised Statues).

Designated Broker

is a licensed broker who's designated to act on behalf of an employing real estate entity. This person is responsible to the state for the real estate activities conducted at the employing broker entity. Each employing broker can have just one designated broker—no matter how many other associated brokers and salespersons employed at the firm.

ADRE

is an administrative government agency that administers the state's real estate laws and regulations under the commissioner's direction. -The department regulates real estate brokers and salespersons by: 1) Overseeing licensee activities 2) Investigating complaints against licensees 3) Participating in administrative hearings pertaining to licensee conduct 4) Approving and monitoring pre-licensing and continuing education courses and schools

Legislatures (like the Arizona State Legislature):

often enact statutes that create a broad framework for an area of law. Then they'll create an agency (like the Arizona Department of Real Estate) with the power to make regulations (like the Arizona Administrative Code) to fulfill the purpose of the law and fill in the details, enforce the law and regulations, and adjudicate disputes.

-Employing brokers may pay licensees through which two kinds of business entities:

professional corporations (PCs) and professional limited liability (PLLCs)

AZ administrative Code (A.A.C.):

the official publication of Arizona's codified rules -The REGULATIONS or RULES that uphold the AZ revised statues. They give the code its authority and carry the force of the law without being the law themselves. -Enforced by the AZ Dept of Real Estate (ADRE). Also known as the "commissioner's rules." -Title 4 is for Professions and Occupations, and Chapter 28 contains the administrative code for the State Real Estate Department. These lay out the rules for licensure process and real estate licensees' conduct requirements.

The real estate commissioner's job:

to protect the public by enforcing the state's real estate law. Oversees the ADRE and has the power to offer final ruling on disciplinary matters, including rules violation-related charges.

If not all parties are aware of a compensation payment, it may be viewed as:

undisclosed compensation

To gain a broker's license in Arizona

you'll need to first have three years of experience as a licensed real estate salesperson.

Sole Proprietorship

The key word here is "sole." A sole proprietorship is a one-person show: One individual is the sole business owner. A sole proprietorship does not offer limited liability. Generally, it's used to kickstart a business since it's easy to form and there aren't any state filing requirements. It also helps people avoid double-taxation issues (e.g., getting taxed as an individual and a business).

Real estate recovery fund

A fund to compensate a CONSUMER'S losses resulting from the violations or actions of a real estate licensee when the licensee is unable to pay

Which of the following is a fact that an Arizona licensee IS NOT required to disclose to transaction parties?

A licensee acting as an agent in more than one transaction at the same time

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, upon written consent from all parties

The commissioner uses the

AAC sometimes called the "commissioner's rules", to enforce the AZ Revised Statues.

Summary Suspension (of license)

ADRE may summarily (immediately) suspend a license if the commissioner finds that the licensee's actions are causing an immediate threat to public health, safety, or welfare. The suspended licensee may request a hearing to challenge the suspension. If a hearing request isn't received within 30 days of the suspension, the suspension is deemed final. -OR if the licensee is convicted of a felony offense and is currently incarcerated, paroled, under a parole/community supervision officer's supervision, or on probation

Identify which of the following choices are types of licenses available to individuals in Arizona who are seeking work in real estate:

Broker, Salesperson

Evelyn received notice of an ADRE audit of her clients' trust accounts. Which three required records has she produced on a monthly basis to keep her in compliance?

Journals, bank statements, and reconciliation report

Does each branch office need an independent employing broker's license?

No. An employing broker may oversee multiple branch offices.

Which Arizona statutory duty requires agents to provide information to clients that they might want to take into consideration as part of the transaction?

Obtaining and effectively communicating information that would be impactful to a client's interests

What's the difference between puffing and misrepresentation?

Puffing appears to a reasonable person as an exaggerated statement that would not be relied on, whereas misrepresentation occurs when a reasonable buyer would consider the statement reliable.

Someone who's a party to a transaction OR the person for whom the agent acts

Principle

The agency representation agreement outlines when compensation is earned. When the representation agreement doesn't make the payment of compensation a matter of contractual obligation, which of these common terms describes what is likely to determine who has earned compensation?

Procuring cause

Trust funds have better protection when deposited into trust accounts because they are ______.

Protected from seizure

Substantive Policy Statements (SPSs)

The ADRE may also produce substantive policy statements (SPSs) to clarify its current approach to a specific rule or regulation. These policy statements are meant to be advisory only and are accessible to the public on the ADRE website. The statements aim to help consumers, should the language or substance of a statute or regulation be found consuming or unclear. -A substantive policy statement does NOT: Include documents that only affect the agency's internal procedures Impose additional requirements or penalties on regulated parties Include confidential information or rules made in accordance with Arizona Administrative Procedure Act

The written disclosure included the premium estimated retail value. What other required element is missing from the disclosure:

The attendance time required to receive the premium

procurring cause

The effort that began a chain of events that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission, depending on the type of agency agreement.

Material refers to

any information a party would consider important in deciding what course of action to take regarding the real estate transaction.

State statutes:

apply to everyone within the state. -Most states have some statute or other regulatory device that provides any authority that real estate licensees have related to real estate contracts and other forms -State statutes may not violate the state constitution, the federal constitution, or federal law.

One of the primary reasons for making Arizona's required disclosures is to

avoid fraud