Chapter 3 - 2
If a seller learns, after he has entered into a valid contract with a buyer, that the broker was representing the buyer, the seller has the right to: a. Cancel the contract, without obligation to either buyer or broker. b. Cancel the contract, with written permission of the buyer. c. Cancel the contract, but would be liable to the broker for any expense incurred by the broker. d. The seller has no rights, the contract is valid and must be executed as agreed.
a. Cancel the contract, without obligation to either buyer or broker.
The phrase "a person who is placed in a position of trust to act for someone else's benefit" is the definition of the term: a. Fiduciary. b. Agent. c. Trustor. d. Intermediary.
a. Fiduciary.
A salesperson receives an earnest money deposit on Monday while working with broker Allan. On Friday, the salesperson goes to work for broker Bob. What should be done with the earnest money deposit? a. It stays with broker Allan b. It goes to broker Bob c. It should be given to the seller d. It is returned to the buyer
a. It stays with broker Allan
The client may be obligated to compensate the salesperson for financial losses incurred as a result of actions by the clients. a. True b. False
a. True
Unless agreed to in writing by all the parties, the broker is not entitled to a commission until the transaction has been consummated. a. True b. False
a. True
A client is obligated to her agent for... a. indemnification against loss not caused by the agent. b. reimbursement. c. performance. d. all of the above.
a. indemnification against loss not caused by the agent.
A person that authorizes another to act for him or her is known as the: a. Agent. b. Client. c. Broker. d. Customer.
b. Client.
Which of the following would NOT be an agent? a. A real estate salesperson handling only referrals. b. A property manager employed by the owner. c. A person working for a multiple listing service. d. A person holding a power of attorney.
c. A person working for a multiple listing service.
Seller Corcoran is in very poor health and cannot work his farm. Should a broker, who has a listing on the farm, disclose this fact to prospective buyers? a. Yes, it is a material fact about the farm which Moore must disclose. b. Yes, it may help to get at least a low offer and help sell the farm. c. No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property. d. No, it would be a violation of Federal Fair Housing Laws.
c. No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property.
A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. The owner had filled and painted over the crack and advised the sales agent that the seepage problem had been corrected, but it was obvious to the agent that the problem had not been corrected. If the salesperson shows the property without advising potential buyers of the problem, the salesperson would be guilty of: a. Fraud. b. Misrepresentation. c. Puffery. d. Nothing.
a. Fraud.
A broker and salesperson owe all EXCEPT which of the following to the purchaser/customer? a. Negotiation of the lowest possible price b. Honesty c. Fairness d. Disclosure of defects in the property
a. Negotiation of the lowest possible price
Broker Betty has a listing on Seller Sara's house. Broker Betty puts the listing on the local MLS -- agreeing to share the commission with any other member broker who finds a buyer for the house. Up through the 1970s if another broker found the buyer, that broker would be considered a(n): a. Subagent. b. General Agent. c. Universal agent. d. Special agent.
a. Subagent.
It would NOT be considered commingling of funds, if: a. The broker holds a deposit check at the request of the offeror until acceptance by the offeree. b. The broker holds a deposit check at the request of the offeror after acceptance by the offeree. c. The broker holds an earnest money deposit in his personal account until the offer is accepted or rejected. d. The broker holds an earnest money deposit in his brokerage operating account because the deal is going to be all cash.
a. The broker holds a deposit check at the request of the offeror until acceptance by the offeree.
A broker is representing a buyer. When the broker is showing property, he may NOT disclose to his buyer: a. The current owner is infected with the HIV virus. b. Information the broker knows about the financial condition of the seller. c. Deed restrictions that might affect the buyer's intended use of the property. d. That the seller will not accept an offer based on VA financing.
a. The current owner is infected with the HIV virus.
A listing agreement may be terminated by: a. The seller b. The buyer's broker c. The salesperson that obtained the listing d. Death of the salesperson
a. The seller
Any of the following could cause a listing agreement to be terminated. Which of the following is NOT by operation of law? a. The seller discharges the broker. b. The property is destroyed by fire. c. The broker declares bankruptcy. d. The seller dies.
a. The seller discharges the broker.
Real estate licensees are required to disclose pertinent information relative to property they list. Which of the following are you NOT required to disclose? a. The seller is having financial problems and must sell the property to avoid bankruptcy. b. The state plans to build a new highway near the property. c. The property is subject to seasonal flooding. d. The interior of the house is badly in need of painting .
a. The seller is having financial problems and must sell the property to avoid bankruptcy.
Which of the following would be included in the duties of an agent to a customer? a. To disclose material adverse facts about the property. b. To maintain the confidentiality of information provided to the agent. c. Both to disclose material adverse facts about the property and to maintain the confidentiality of information provided to the agent. d. Neither to disclose material adverse facts about the property nor to maintain the confidentiality of information provided to the agent.
a. To disclose material adverse facts about the property.
When a broker accepts a listing he or she has created an agency relationship. Which of the following is not an agency responsibility? a. To obey all the instructions of the seller. b. To use care in filling out contract forms. c. To be accountable for documents and funds. d. To be loyal to the seller.
a. To obey all the instructions of the seller.
If a broker accepts a promissory note or post-dated check as a deposit on an offer, that information must be disclosed to the seller. a. True b. False
a. True
The instrument authorizing one person to act for another person is: a. An attorney in fact. b. A power of attorney. c. An estoppel certificate. d. A certificate of no defense.
b. A power of attorney.
Broker Bob has opened an escrow account and has deposited a buyer's earnest money deposit in that account. Broker Bob later learns that a different customer is about to file a lawsuit against him so he deposits $100,000 of his own money in that account. This action constitutes: a. Conversion. b. Commingling. c. Disintermediation. d. Wise business practice.
b. Commingling.
A salesperson can set up escrow accounts for each of his or her clients, in the name of the client and the salesperson. a. True b. False
b. False
A salesperson need only disclose such offers to the seller-client that the salesperson thinks the seller-client will seriously consider. a. True b. False
b. False
Escrow records must be kept only until the transaction closes. a. True b. False
b. False
Landlord Lloyd hires Property Manager Paul to manage an apartment complex owned by Lloyd. Property Manager Paul would most likely be considered a(n): a. Subagent. b. General Agent. c. Universal agent. d. Special agent.
b. General Agent.
The avoidance of conflicts of interest would be a key part of which of the following duties of an agent to a client? a. Reasonable care and diligence. b. Loyalty. c. Disclosure. d. Confidentiality.
b. Loyalty.
A seller contacted 3 brokers and asked each to suggest the listing price for his property. Broker A said $78,000. Broker B said $79,000. Broker C said $91,000. The seller listed with Broker C and the house later sold for $76,000. Broker C is guilty of violating which of his or her agency responsibilities? a. Loyalty. b. Reasonable care. c. Disclosure. d. Accountability.
b. Reasonable care.
Licensee Laurie makes a listing presentation to Seller Steve. Steve agrees to give Laurie a listing and agrees to pay her a commission upon sale, but refuses to sign any written contract. How was this agency relationship created? a. There is no agency relationship since it is not in writing b. This is an expressed agency c. This is an implied agency d. This is agency by ratification
b. This is an expressed agency
A listing broker has an agency relationship with his client (the seller). The broker also has a moral and statutory obligation to all prospective customers (buyers). One way to describe the relationship with the buyer would be: a. To obey the letter of the law. b. To do what is right. c. To do those things that are required. d. To do anything that is asked.
b. To do what is right.
When a real estate broker is retained to perform one specific act for a client, it is known as: a. general warranty. b. special agency. c. general agency. d. special warranty.
b. special agency.
If a deed is delivered in escrow, it is given to: a. The buyer's attorney. b. The seller's attorney. c. A neutral third party. d. The mortgagee.
c. A neutral third party.
A broker can do which of the following? a. Accept, as binding, a promissory note given as an earnest money deposit. b. Accept, on behalf of the seller, an offer OVER the listed price of the property. c. Buy and sell property in his own name. d. Represent both buyer and seller, with the permission of the buyer.
c. Buy and sell property in his own name.
Broker escrow accounts must be: a. Provided by every licensed broker. b. The repository for all earnest money deposits, unless otherwise agreed upon by all parties to the contract. c. Designated and labeled as "escrow". d. Transferred to the company's operating account every five days.
c. Designated and labeled as "escrow".
The duty of an agent to follow the instructions of the client applies to each of the following instructions, EXCEPT: a. Do not show the house on Sundays. b. Do not put a lockbox on my door. c. Do not reveal to any buyers that my roof leaks. d. Do not allow buyers to wear shoes inside the house.
c. Do not reveal to any buyers that my roof leaks.
Money or trust instruments received, accepted or held pending consummation or termination of a real estate transaction are: a. Commissions. b. Down payments. c. Escrow funds. d. Anticipated profits.
c. Escrow funds.
Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist? a. Mr. Gregory is Gary's client. b. Gary is Mr. Gregory's agent. c. Gary's broker is the agent of Mr. Gregory for a reasonable time. d. No agency relationship exists.
c. Gary's broker is the agent of Mr. Gregory for a reasonable time.
If a listing broker tells a prospective buyer, "...go ahead and make that offer, I'm sure the seller will accept it...", the broker may have created an agency relationship which would be described as: a. General agency b. Express agency c. Implied agency d. Unilateral agency
c. Implied agency
If you are showing property you are listing and tell a prospective buyer that "...this property is the best for you," the relationship created could be interpreted as: a. Universal agency b. Special agency c. Implied agency d. General agency
c. Implied agency
A real estate broker wishes to deposit an earnest money check in his business operating account until settlement, so the purchaser can earn a higher rate of interest on his funds. Can he legally do this? a. Yes, if the purchaser receives a comparison of available interest rates b. Yes, if the broker promises to insure such funds will be available at closing c. No, these funds must be placed in a separate escrow account d. No, the broker cannot guarantee a higher interest rate
c. No, these funds must be placed in a separate escrow account
Who is an intermediary between a buyer and a seller? a. Lender. b. Mortgage broker. c. Real estate broker. d. FDIC.
c. Real estate broker.
Sara Seller hired Larry Licensee to sell her home under specified terms. Larry Licensee would most likely be a(n): a. Subagent. b. Universal agent. c. Special agent. d. General agent.
c. Special agent.
An agent has the responsibility of care, obedience, accountability, loyalty and disclosure to which of the following? a. The customer. b. The buyer. c. The client. d. All of these choices.
c. The client.
Broker Bob represents both the seller and the buyer as agent in the same transaction. Which of the following statements is correct? a. This arrangement is always illegal. b. This arrangement is never illegal. c. This arrangement is only legal with the informed consent and written permission of both the buyer and the seller. d. This arrangement is legal only in a few states.
c. This arrangement is only legal with the informed consent and written permission of both the buyer and the seller.
A broker has the buyer's earnest money deposit deposited in an escrow account. The amount of the deposit exceeds the amount of the broker's commission for the sale. The broker may remove his commission on this sale ONLY: a. When the buyer moves into the property. b. When the seller moves out of the property. c. When the closing is completed. d. Whenever the seller says it is ok to do so
c. When the closing is completed.
Which of the following choices would be the most accurate definition of the term "agency relationship" in real estate practice? a. A contract whereby a seller hires an agent to represent the seller in the sale of a property. b. A contract whereby a buyer or seller hires an agent to represent the buyer or seller in a real estate transaction. c. A contract which is effectively a power-of-attorney. d. A contract whereby a client hires an agent to represent the client in a real estate transaction of some kind.
d. A contract whereby a client hires an agent to represent the client in a real estate transaction of some kind.
An agency relationship can be terminated in which of the following ways? a. Death of the client. b. Renunciation by the agent. c. Revocation by the client. d. Any of these choices.
d. Any of these choices.
Broker Jane is acting as a dual agent in a real estate transaction and decides to appoint salesperson Sara to represent the seller and salesperson Ben to represent the buyer. Ben and Sara both work in Jane's firm. a. Jane cannot legally do this. b. Ben and Sara are dual representatives. c. Ben and Sara must be independent contractors. d. Ben and Sara are designated representatives.
d. Ben and Sara are designated representatives.
All of the following will automatically terminate a listing by operation of law, EXCEPT: a. Bankruptcy of the client. b. Destruction of the property. c. Condemnation of the property. d. Client's decision.
d. Client's decision.
Licensee Larry has held a real estate license for many years and has completed many residential transactions but never any commercial transactions. His neighbor owns a small strip mall and asks Licensee Larry to sell the property. Licensee Larry should be especially careful to consider which of the following duties to the client? a. Disclosure. b. Accounting. c. Confidentiality. d. Reasonable care and due diligence.
d. Reasonable care and due diligence.
Dave and Pat want to purchase the home that is occupied by their grandparents. They want to take title in such a way that will result in the least amount of income tax liability for them. How should a real estate salesperson or broker advise them? a. Advise them to take title as tenant-in-common with their grandparents. b. Advise them to acquire title as joint tenants with each other. c. Advise them to take title as tenants-in-common but each with an equal interest. d. Refer Dave and Pat to an attorney or tax advisor.
d. Refer Dave and Pat to an attorney or tax advisor.
Broker Johnson has listed the property of Cheever and sells it to Brevard for $175,000. Before closing, Johnson finds that the property has a serious structural defect. What should Johnson do? a. Tell Cheever. b. Tell Brevard. c. Keep it quiet as it might kill the sale. d. Tell both Cheever and Brevard.
d. Tell both Cheever and Brevard.
Which of the following MUST be disclosed by an agent to his client, in a real estate transaction? a. Minority groups are moving into the area b. The average commission recommended by the local real estate association c. The buyer intends to violate deed restrictions d. The buyer has had previous credit problems which may have an impact on loan qualifications
d. The buyer has had previous credit problems which may have an impact on loan qualifications
A salesperson lists a home. The house burns down prior to receiving an offer. Which of the following is true in this situation? a. The vacant lot is still listed. b. The broker can sue the seller for the commission based on the listed price. c. All advertising must be revised to accurately describe the property. d. The listing automatically terminates.
d. The listing automatically terminates.
When does a broker earn his commission? a. When the listing is taken. b. When the title insurance policy is given to the purchaser. c. When closing is complete and title passes. d. When the offer to purchase has been signed and accepted by the seller.
d. When the offer to purchase has been signed and accepted by the seller.
Under Common Law Agency, the listing agent should disclose material facts to the seller AND buyer. Which of the following would NOT be a material fact? a. Worn carpeting. b. Seasonal flooding in the basement. c. A foundation crack covered with paneling. d. A faulty heating system.
a. Worn carpeting.
If a seller has delivered a deed into escrow, but dies before the closing of the sale, the deed is not considered to have been delivered, and the sale need not be consummated. a. True b. False
b. False
The client in a listing agreement would be the: a. Salesperson taking the listing. b. Seller of the listed property. c. Listing broker. d. Buyer.
b. Seller of the listed property.
A broker listed a vacant lot zoned for residential use. Later, an adjacent lot was rezoned causing an increase in value. What should the broker do? a. Buy the listing, have it rezoned, then sell it for a profit. b. Tell the seller of the zoning change and advise the seller to consider application for rezoning the property. c. Continue to market the property as residential property, according to the terms of the listing. d. Offer to terminate the listing agreement.
b. Tell the seller of the zoning change and advise the seller to consider application for rezoning the property.
What is the purpose of earnest money being part of a real estate contract? a. Without it, there would be no consideration. b. It allows the seller to personally hold the earnest money until closing. c. It shows the seller that the buyer is serious about following through with the contract. d. It guarantees the buyer will close.
c. It shows the seller that the buyer is serious about following through with the contract.
In agency representation, the employer is called the... a. seller. b. agent. c. client. d. broker.
c. client.
An agent's authority can arise from: a. Ratification. b. Custom. c. Implication. d. All of these choices.
d. All of these choices.
Broker Bob is holding a buyer's good faith deposit in his escrow account. The offer has an inspection clause which gives the buyer 10 days to have the home inspected and to rescind (cancel) the contract if the inspection reveals adverse facts. The inspector finds that the roof leaks and the buyer notifies the seller in writing of that decision. The seller maintains that the buyer is in breach of the contract. May Broker Bob legally return the buyer's good faith deposit? a. Yes, since his rescission was clearly permissible under the terms of the contract; b. Yes, in all cases. c. No, since the rescission was clearly not permissible under the terms of the contract. d. No, but Broker Bob could give it to a court through an interpleader action.
d. No, but Broker Bob could give it to a court through an interpleader action.
Property owner Kilmer, who is living overseas, lists his property with Broker Huff. Later the land is rezoned for a higher use, increasing its value. Huff buys the property herself and sells it six months later. Which of the following is true? a. As long as Huff informs Kilmer of her intent to buy the property before she does so, her action is above reproach. b. Huff can buy the property only after informing Kilmer of the zoning change and the effect that it has on the property. c. Huff cannot legally act for someone who is overseas. d. When Huff resells the property in six months, she has a legal obligation to inform Kilmer.
b. Huff can buy the property only after informing Kilmer of the zoning change and the effect that it has on the property.
A general agency empowers the agent to... a. transact matters of all types for the client. b. transact the client's affairs in a certain business. c. perform only specific acts for the client. d. perform any legal act for the client.
b. transact the client's affairs in a certain business.
The loan contingency contained in an offer to purchase will contain all of the following EXCEPT: a. The loan amount. b. The rate of interest. c. The name of the financial institution. d. The date of the commitment.
c. The name of the financial institution.
Funds in the escrow account may be dispersed for any of the following reasons EXCEPT when: a. All principals to the transaction agree in writing to the disposition. b. A court orders disbursement of the funds. c. The seller demands forfeiture of the earnest money deposit. d. The transaction is consummated.
c. The seller demands forfeiture of the earnest money deposit.
Brokers must hold their client's funds in a/an... a. office safe. b. savings account. c. trust or escrow account. d. special account managed by the Board of Realtors.
c. trust or escrow account.
An agency relationship can exist between: a. Salesperson and employing broker. b. Broker and seller. c. Broker and buyer. d. All of these choices.
d. All of these choices.
How can an agency relationship be created? a. Written document. b. Action of the parties. c. Words of the parties. d. Any of these choices.
d. Any of these choices.
When will escrow be used? a. When property is purchased and secured by a deed of trust. b. In an exchange of property. c. With contract for sale. d. Any of these choices.
d. Any of these choices.
Barry, a sales agent with XYZ Realty lists a property. Helen, also a sales agent with XYZ, presents an offer from one of her clients and the offer is accepted. Which of the following best describes the position of the broker and XYZ in this situation? a. The broker is an agent for the buyer only. b. The broker is an agent for the seller only. c. The broker is agent of the seller and sub-agent of the buyer. d. The broker is a dual agent.
d. The broker is a dual agent.
Broker Macro was showing a tract of land with irregular boundaries. When asked about a boundary, Macro indicated that it ran from the edge of the stone wall to the creek. Macro knew this was not exactly correct. After the buyer contracted for the property, he was shown a survey which reflected the true boundary. Was Macro guilty of misrepresentation? a. No, verbal statements are not binding. b. No, the buyer was responsible for having the property surveyed. c. Yes, the broker was responsible for verifying the official records. d. Yes, because Macro knew his statement was not completely accurate.
d. Yes, because Macro knew his statement was not completely accurate.
An escrow account is maintained by a broker for the purpose of a. earning interest for the broker. b. earning interest for the broker's clients. c. disposition of money to the buyer. d. impartial protection of both parties.
d. impartial protection of both parties.