BUSFIN 3400 Exam 2

Duties included in a fiduciary relationship:

- Confidentiality - Obedience - Accounting - Loyalty - Disclosure - Skill and Care

License laws seek to prevent the following activities:

- Mishandling trust money - Improper handling of fees - Failure to provide required information - Misrepresentation and fraud - Improper business practices

Any contract must contain the following elements:

1. Competent parties 2. Legal objective 3. Offer and acceptance 4. Consideration 5. No defects to mutual assent

Two additional requirements must be part of any contract for the sale of real estate:

1. Written form 2. Proper description of the property

Contract for Sale

A _______________ is the most import document in a real estate transition

Buyer agency agreement

A contract for real estate brokerage services between a buyer and a real estate agent. The broker receives compensation for successfully locating a property for the buyer to purchase.

Blank 1: loyalty or loyal Blank 2: more, higher, or greater Blank 3: terms Blank 4: lower, less, or smaller

A dual agent owes equal ___________ to both parties of a transaction. In this situation the broker cannot reveal to the seller that the buyer will pay ___________ than the listing price, nor to the buyer that the seller will accept financing __________ different than are listed or a ____________ price than is listed.

Blank 1: ready Blank 2: willing Blank 3: able

A listing broker normally is presumed to earn a commission upon finding a buyer who is "_______, ________, ________," or upon closing of the transaction.

Special agent

A person to whom a principal has granted authority to handle a specific business transaction or to perform a specific function. Real estate brokers and salespersons are special agents.

National Association of Realtors

A principal trade or professional organization of real estate brokers. Members agree to abide by a code of ethics.

Blank 1: broker

A real estate salesperson can perform virtually all of the business functions of brokerage, but must do so in the name of their ____________

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.

Blank 1: subagent or agent Blank 2: seller

A transaction involving both a listing broker and a buyer broker can pose a special problem if the brokers are MLS members. In that case, the buyer broker is an agent of the buyer, but also may be automatically a ________ of the __________.

Errors and omission insurance

A type of insurance that indemnifies professionals if they make an error in their profession or if they omit something important from their analyses.

facilitating broker intermediary broker

About half of states have adopted a weakened form of broker relationship known as transaction broker. Other names for the concept are: Multiple select question. - assisting broker - cooperating broker - facilitating broker - intermediary broker

Open listing

Agreement between the seller of property and a broker that provides for the broker to receive a commission if he or she sells the property. No exclusive protection is provided to the broker.

Blank 1: subagent Blank 2: fiduciary or agency

Among MLS members, a broker selling a listing of another broker traditionally became a __________ of the listing broker which implies _________ duties to the seller of the property.

paying commissions to unlicensed persons improper business practices, such as failing to present all offers to a seller failure to provide required information in a timely manner, such as closing costs mishandling trust money

Among the misdeeds for which license law prescribes punishment or penalties are: Multiple select question. - paying commissions to unlicensed persons - inferior business practice, such as failing to advertise properties sufficiently - improper business practices, such as failing to present all offers to a seller - providing inferior compensation to sales associates - failure to provide required information in a timely manner, such as closing costs - mishandling trust money

trust money

Among the most common violations of license law by sale persons and brokers are regulations about the handling of:

Blank 1: universal

An agent who is empowered to act in all matters for a person, personal and financial, is called a __________ agent.

Blank 1: special

An agent who is empowered to act on behalf of a person or firm for one specific event or transaction is a _____________ agent.

Exclusive right of sale listing

An agreement between a seller of property and a broker in which the broker is assured of receiving a commission if the broker or anyone else, including the owner, finds a buyer during the period of the agreement.

Exclusive agency listing

An agreement between a seller of property and a broker in which the seller agrees to pay a commission to the broker if anyone other than the owner finds a buyer, during the period of the agreement.

Listing contract

An agreement between an owner of real estate and a real estate broker that obligates the broker to attempt to sell the property under specified conditions and terms. It obligates the property owner to pay a commission to the broker if the broker is successful in obtaining a ready, willing, and able buyer for the property on terms specified or on terms acceptable to the seller.

Blank 1: service

An old saying in the residential brokerage community is: "If you don't list, you don't last." The flaw in this view is that it ignores how a broker gets listings, and another view is that the primary factor in obtaining listings is a reputation for good ________________

Blank 1: open

An owner of a special-purpose or otherwise hard-to-sell property may not want to give the right to sell to only one broker. In this case the owner will want to have a(n) __________ listing contract.

Real estate commission

Appointed commission responsible for overseeing the implementation and administration of a state's real estate license law. It usually is empowered to grant, revoke, or suspend licenses, and otherwise discipline real estate brokers operating in the state.

Salesperson license

Authority granted by a state to engage in the real estate brokerage business as an employee or agent of a real estate broker.

fewer disruptions and mistakes reduced demand on personal time higher (net) price due to more complete market exposure shorter sale time

Benefits that a property seller may gain by using a broker can include: Multiple select question. - fewer disruptions and mistakes - reduced demand on personal time - higher (net) price due to more complete market exposure - opinions on related legal matters - shorter sale time

It traditionally has created a special agent relationship. It can be oral or written. It normally specifies a time interval and a required price.

Characteristics of a real estate listing contract include: Multiple select question. - It usually specifies the exact dollar amount of the commission to be earned. - It traditionally has created a special agent relationship. - It can be oral or written. - It normally specifies a time interval and a required price.

High required knowledge, skill, and effort. High potential personal and monetary rewards. High visibility. Low capital requirements.

Characteristics of real estate brokerage as a profession include: Multiple select question. - High required knowledge, skill, and effort. - High potential personal and monetary rewards. - High visibility. - High barriers to entry. - Low capital requirements.

financial history of the property certifications of compliance with relevant regulations Cash flow pro formas current lease details information about the market context

Commercial property buyers tend to be knowledgeable and sophisticated and want considerable information about a property, including: Multiple select question. - financial history of the property - certifications of compliance with relevant regulations - Cash flow pro formas - current lease details - warranties on all cash flow projections - information about the market context

Blank 1: disclosures Blank 2: consent

Driven by concern about dual agency, states have imposed strict requirements of explicit __________ and written __________ concerning whom a broker or salesperson represents.

Blank 1: loyalty

Dual agency is inherently problematic because of the divided ____________

Blank 1: shoes

Dual agency is viewed as troublesome by many observers. It has been questioned whether a single broker can "stand in the ________" of both buyer and seller.

Discrimination in housing

Federal and state laws prohibit discrimination in housing on the basis of race, color, religion, national origin, sex, familial status, and handicap.

Blank 1: recovery Blank 2: fund

For protection against financial harm to clients or customers some states require errors and omissions insurance for licensees, while other states have established a __________ _____________ taken from license fees and used to compensate victims of licensee mistakes and misdeeds.

Target Net Price

Gross Price - Comission Rate * Gross price =

Market segmentation

Identification and delineation of submarkets.

loyalty

If a broker recommended a price for a listing that the broker believed was below market in order to get a quick sale, and was not candid about it, this would violate the fiduciary duty of:

Blank 1: exclusive Blank 2: agency

If a property owner is willing to give a broker exclusive right to serve as a broker for the property, but wants to retain the right to sell it by him/herself, the owner will want a(n) __________ _________ listing contract.

Blank 1: buyer Blank 2: listing, seller's, or selling

In a ___________ agency agreement, the broker agrees to use his or her best efforts to find properties meeting the requirements of a person seeking a property. Commonly this broker, if successful, will share a commission with the ___________ broker.

Blank 1: multiple Blank 2: listing Blank 3: service

In a conventional _________ _____________ ___________ (MLS), member brokers are empowered to show a buyer properties listed by all or any of the member brokerages. If a broker obtains a sale of another broker's listing, the two brokers will share the listing commission.

that the owner identifies any items of personal property to be included and the disposition of any possible fixtures. that the seller understands when a commission is owed. that the salespersons will have reasonable access to the property. that the contract period is long enough for an effective marketing effort. that the broker's efforts are protected for a reasonable time after the agreement expires.

In a listing agreement, issues that the broker needs to require include: Multiple select question. - that the owner identifies any items of personal property to be included and the disposition of any possible fixtures. - that the seller understands when a commission is owed. - that the salespersons will have reasonable access to the property. - that the contract period is long enough for an effective marketing effort. - that the owner has good title to the property and can deliver it. - that the broker's efforts are protected for a reasonable time after the agreement expires.

that the broker will provide regular progress reports. that the property will be placed in the local MLS. that the brokerage firm will use diligent efforts to market the property. that the agreement is limited to a reasonable time.

In a listing agreement, issues that the owner-principal needs to require include: Multiple select question. - that the broker will provide regular progress reports. - that the broker has a good reputation. - that the property will be placed in the local MLS. - that the brokerage firm will use diligent efforts to market the property. - that the agreement is limited to a reasonable time.

unless the broker is your single agent, do not rely on the broker's word alone for critical decisions. unless the broker is your single agent give the broker personal information only as necessary to the transaction. clarify whom the broker represents

In a real estate world where transaction brokerage is predominant, advice to a person working with a broker would include: Multiple select question. - unless the broker is your single agent, do not rely on the broker's word alone for critical decisions. - unless the broker is your single agent give the broker personal information only as necessary to the transaction. - clarify whom the broker represents - treat the broker coldly - require the broker to put all information that is important in writing.

managing purchasing selling renting or leasing auctioning

In all states a real estate license is required to perform for anyone other than yourself all real estate activities, including: Multiple select question. - managing - purchasing - repairing - selling - restoring - renting or leasing - auctioning

Principal

In brokerage, the person giving authority to an agent; in finance, the amount borrowed and owed on a loan.

Designated agent

In case a brokerage firm is agent for both a seller and a buyer, the firm sometimes designates one salesperson to serve the buyer and one to serve the seller. The two salespersons are presumed to maintain the privacy, and serve the interest of the party they represent.

Speaking the language of the country involved Making efforts to understand the culture and customs of the country involved

In doing real estate business internationally, factors that can contribute to success include: Multiple select question. - Speaking the language of the country involved - Retaining a strong and forceful attorney in the country involved - Making efforts to understand the culture and customs of the country involved - Assuring that all negotiations occur in the United States.

Blank 1: seller Blank 2: buyer

In dual agency, the broker is an agent to both the __________ and the ___________.

Blank 1: cooperative or joint

In international real estate brokerage, most U.S. brokers work through __________ arrangements with a local broker when working in a non-English speaking country.

Blank 1: service

In markets for homes, the fact that virtually every broker and salesman has access to the same inventory and property information makes it vital to understand that what distinguishes one broker/salesperson from another is the ____________ they provide.

have an active salesperson's license for, generally, 1-3 years take additional prescribed license education

In most states a person can obtain a broker's license only after obtaining a salesperson's license, plus the person must: Multiple select question. - have an active salesperson's license for, generally, 1-3 years - take additional prescribed license education - participate in a specified minimum number of transactions - have an AA degree

Blank 1: signal

Industry designations can serve as a __________ of professionalism and expertise.

administrative and document services for owner-sellers for a fixed fee Internet based services designed for owner-sellers discount brokerage

Innovation in real estate brokerage since about 2000 has included: Multiple select question. - administrative and document services for owner-sellers for a fixed fee - Internet based services designed for owner-sellers - discount brokerage - concierge brokerage service for higher priced properties

Blank 1: residences, houses, properties, or homes

Internet marketing of housing is now central to real estate brokerage. For example, the National Association of Realtors offers listings of ____________ all across the country on www.realtor.com.

Blank 1: service

It is critical that a broker or a salesperson understands thoroughly that what they really are offering to clients is ____________

Blank 1: gross or total

Most commonly, brokers are compensated by a commission that is a percentage of the __________ sale price.

Blank 1: National Blank 2: Association Blank 3: Realtors

Numerous industry designations are maintained by affiliates of the _________ __________of ________.

Blank 1: open Blank 2: honest Blank 3: fair

Obligations of a principal to a fiduciary is to be _________, _____________ , and ___________to the fiduciary.

Universal agent

One to whom a principal delegates the power to act in all matters that can be delegated in place of the principal.

Transaction broker

One who facilitates a real estate transaction but who is not an agent of either buyer or seller. A transaction broker is required to deal honestly and fairly with both parties and to exercise skill, care, and diligence in carrying out his or her duties.

General agent

One who is empowered to represent a principal, often a business firm, in its business relationships. A general agent can contract and bind the principal within the confines of the business or employment relationship.

Commission

Payment a real estate salesperson receives for services rendered, usually expressed as a percentage of the property sale price and not usually paid until the transaction is closed.

trustees and executors on-site residential managers those with power of attorney attorneys government employees dealing with real estate as part of their work

Persons who deal with real estate for others but are exempt from licensure include: Multiple select question. - a cousin or similar relative - trustees and executors - a partner in an unrelated business - on-site residential managers - those with power of attorney - attorneys - government employees dealing with real estate as part of their work

recommendations of friends personal familiarity with the broker local reputation of the firm sometimes, reputation of a franchise

Potential buyers tend to select a brokerage firm, or broker/salesperson, on the basis of several factors, including: Multiple select question. - recommendations of friends - personal familiarity with the broker - local reputation of the firm - sometimes, reputation of a franchise - volume of local sales

geography property type or size

Real estate brokers, recognizing market segmentation, frequently specialize in submarkets. These submarkets commonly are distinguished by some combination of: Multiple select question. - geography - property type or size - size of brokerage firm - type of financing

Recovery fund

Reserve of funds collected from real estate license fees to pay for losses to clients legally judged to have been caused by a licensed salesperson or broker. The existence of such funds varies from state to state.

Submarket

Segment or portion of a market in which all of the properties are considered to be close substitutes by a relatively homogeneous group of potential buyers; properties that provide similar utility or satisfaction.

legislation revising the traditional law of agency compelled new procedures and brokerage arrangements. the internet explosion opened dramatic new possibilities for marketing rapid rise in home values created extraordinarily high brokerage commissions

Several events have spawned an active recent period of innovation in real estate brokerage, including: Multiple select question. - legislation revising the traditional law of agency compelled new procedures and - brokerage arrangements. - the internet explosion opened dramatic new possibilities for marketing - improved public image of real estate brokerage elevated its business status - rapid rise in home values created extraordinarily high brokerage commissions

Multiple listing service (MLS)

Sharing of property sales listings by a number of real estate brokers with an agreement as to how costs and commissions are to be shared.

Commingling deposits with personal funds failure to provide contracts to all parties of a sales agreement paying a commission to an unlicensed person offering property on terms other than those specified by the client

Specific actions that generally violate state real estate broker and sales person license law include: Multiple select question. - Commingling deposits with personal funds - failure to provide contracts to all parties of a sales agreement - making errors in a closing statement - accidentally misleading clients or customers - paying a commission to an unlicensed person - offering property on terms other than those specified by the client

Contract conditions

Specific requirements that must be satisfied by or for a party to a contract. (See contract with contingencies.)

Licensing laws

State laws that authorize persons who meet specified qualifications to engage in a business or profession.

The seller, violating duty of loyalty The buyer, violating duty of disclosure

Survey data from about a decade ago indicates that most potential home buyers working with a real estate agent still believe that the agent represents them, despite years of efforts to inform persons otherwise. If the real estate sales person is, in fact, an agent, he probably has violate fiduciary duties to whom? Multiple select question. - The seller, violating duty of loyalty - The seller, duty of accounting - The buyer, violating duty of disclosure - The buyer, duty of obedience

Gross Price

Target Net Price / (1 - Commission Rate) =

handicap sex national origin race and color familial status religion

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in housing on the basis of: Multiple select question. - handicap - gender preference - sex - national origin - race and color - familial status - religion

refusing to sell, rent, or deal with any person. offering terms and conditions that differ among persons "blockbusting" advertising housing as available only to certain buyers denying that housing is available for sale or rental when it actually is

The Fair Housing Act prohibits discrimination on any of the characteristics named in the law. For brokers this means that there is risk of violation in: Multiple select question. - holding no open houses to show houses for sale - refusing to sell, rent, or deal with any person. - offering terms and conditions that differ among persons - "blockbusting" - advertising housing as available only to certain buyers - denying that housing is available for sale or rental when it actually is

Blank 1: race

The Fair Housing Act provides an exemption to its prohibitions for 1-4 unit housing where the owner is a resident. However the US supreme Court has overridden this exemption in the case of Jones v Mayer Co. for discrimination by _____________

Subagency

The agency role of a broker is extended to one or more additional brokers, who also become a fiduciary of the principal and are empowered to act on his or her behalf. The subagent shares any commission with the original broker. This agency chain can extend through multiple agents in the case of multiple-list services.

Broker license

The authority granted by a state for one to own and operate a real estate brokerage business; the most complete type of real estate license.

Contract terms

The detailed requirements of a fully enforceable contract, such as the price, the down payment, any seller financing, provisions for inspections, type evidence of title, type of deed, dates, and other details of the transaction process.

a state real estate commission

The implementing of state laws concerning real estate licenses is a matter of writing specific rules and regulations and overseeing their implementation. This task generally is the responsibility of:

Contract for sale

The legal document between a buyer and a seller that states the purchase price and other details of the transaction, and the detailed manner in which ownership rights are to be transferred. Is generally regarded as the most important contract in real estate.

Law of agency

The legal rights, duties, and liabilities of principal, agent, and third parties as a result of the agency relationship between them.

Blank 1: transaction

The most widely used arrangement to avoid dual agency is to change the listing relationship from the traditional fiduciary relationship to what is most commonly called a ___________ broker.

Blank 1: designated

The problem of dual agency can arise within a single brokerage firm if a transaction involves both a listing and a buyer's agency within that firm. One solution that has been attempted is to appoint a separate ___________ agent for each party who are to work at "arms length."

Fiduciary relationship

The special duties and obligations to a principal required of an agent, including complete loyalty, confidentiality, obedience, disclosure, accounting, care, skill, and due diligence.

Rental apartments Offices Warehouses

The term "commercial" is used to include which of these types of properties? Multiple select question. - Condominium apartments - Churches - Rental apartments - Offices - Warehouses

Blank 1: single

The traditional agency relationship in real estate brokerage has come to be called a ___________ agency relationship (whether with buyer or seller) to distinguish it from more recent forms of broker agreements.

confidentiality loyalty obedience

The transaction broker, in contrast to the traditional fiduciary duties, removes or lessens these three duties: Multiple select question. - confidentiality - loyalty - obedience - accounting - disclosure - skill and care

creating and administering exams for licensing Enforce the license law through hearings for violations and administering penalties overseeing administration of the state licensing law and regulations specifying education and other requirements for licensing

The typical state real estate commission has these responsibilities: Multiple select question. - creating and administering exams for licensing - Enforce the license law through hearings for violations and administering penalties - act as an appellate court for issues in real property law - overseeing administration of the state licensing law and regulations - specifying education and other requirements for licensing

sale of the property abrogation of the agreement expiration of the agreement term.

Three ways that a listing agreement will terminate include: Multiple select question. - sale of the property - abrogation of the agreement - expiration of the agreement term. - cancellation notice

Net listing

Type of contract in which sellers specify the amount they will accept from the sale, with brokers keeping all proceeds in excess of that amount.

good reputation, sometimes references pass a state licensing exam minimum age (18 - 21) prelicensing classroom education, typically 70 hours high school diploma or GED

Typical required qualifications for a real estate license include: Multiple select question. - some kind of work experience, typically 6 months - good reputation, sometimes references - pass a state licensing exam - minimum age (18 - 21) - prelicensing classroom education, typically 70 hours - high school diploma or GED

Internet marketing

Use of the Internet to advertise real estate services, to market properties, and to provide information about specific properties. While few properties are sold exclusively through the Internet, it has become a central tool to real estate marketing today.

Blank 1: signaling or signal

Virtually every active real estate licensee will affiliate with a local Association of Realtors as a ___________ device of professionalism and as a business resource.

on-line residential brokers national in scope

What do zillow.com, Redfin.com and trulia.com have on common? They all are: Multiple select question. - restrict access to members only - on-line commercial brokers - on-line residential brokers - national in scope

Blank 1: segmentation

When a real estate broker builds a business focusing on a particular type of property - selected office, industrial, retail, residential - or a zone of a city, or a highly specialized type of property such as resorts, the broker is recognizing market ______________