Prep Agent- Laws of Agency

The real estate commissioner would prohibit what type of mortgage broker advertisement?

"Call 1-800-FOR- A-LOAN" **It is illegal for any advertisement to suggest that a loan can be acquired over the telephone.

What actions is a broker liable to have his or her license suspended or revoked?

-Placing a "For Sale" sign on a neighbor's property he or she has been told is going on the market before obtaining the owner's consent. -Having been declared mentally incompetent by a recognized agency or authority. -Disclosing the race of a buyer to a seller.

What would terminate an agency relationship?

-fulfillment of the agency purpose. -revocation by the principal (seller) -abandonment by the agent

Compliance with agency relationship law enacted as a part of the civil code would be required in which type of transaction?

A broker who negotiates a lease for a period of longer than one year on one half of a duplex.

A real estate licensee has a buyer agency agreement. What is the seller in this situation?

A customer. The buyer is the licensee's client

In order to be valid all exclusive listings must include:

A definite date of expiration. They may not be automatically renewed, but must be renegotiated.

When a salesperson takes a listing which does not authorize the listing broker to accept a deposit from an offeror toward purchase of the property, the broker should advise his salesperson that:

A deposit will be accepted and retained by the broker from the offeror, but only as agent for the offeror;

If a broker is an agent of a seller, he owes to the buyer:

A duty of fair and honest dealing with the buyer, but the fiduciary duty still lies soley with the seller.

Who cannot file a suit for specific performance?

A licensed real estate broker acting as agent for the principals. His clients would have to file the suit themselves with the court.

Puffing

A licensee exaggerates certain features or benefits of a property

When negotiating a lease on behalf of a commercial real property the landlord and the broker would calculate his commission as:

A percent of the rent due for the entire lease period. ex: 2 year lease period

License

A personal, revocable, non-assignable right to use the property of another.

What is an example of a RESPA violation?

A title insurance company paying $40 for referring clients.

Agency

A valid contract employs someone to do specific legal tasks which involve representing the interests of the client to a third party.

What action is a broker NOT liable to have his or her license suspended or revoked?

Accepting earnest money from a buyer and depositing it directly into a trust account. Placing earnest money directly into a trust account is not only legal, it is required.

The fiduciary obligation to protect a client's confidential information continues:

After the term of the listing agreement

A valid contract employs someone to do specific legal tasks which involves representing the interests of the client to a third party. What kind of relationship is created by the contract?

Agency

What is NOT an essential to the creation of an agency relationship?

Agreement to pay consideration.

Alberto leased his home to Samantha with a verbal agreement to sell the property to Samantha. Alberto knows that Samantha has been making significant improvements to the property in reliance on that verbal agreement. Alberto now declines to sell the property to Samantha. What are the rights of the parties:

Alberto must sell because the doctrine of estoppel will apply in this case. -It states that position cannot be taken that contradicts a prior position. Often used as a legal defense tool used when someone reneges on or contradicts a previous agreement or claim.

Broker Protection Clause

Allows for the possibility of a bonafide commission to the broker for bringing in a qualified buyer during the listing period--who later becomes the purchaser. As long as the buyer that was shown the property during the term of the listing becomes the purchaser, the broker is entitled to compensation.

Exclusive Agency Listing

Allows the owner to appoint an exclusive agent to sell his property, but retains the right to sell the property himself.

Most Essential Element of an Enforceable Broker-Principal Relationship is:

An Employment contract aka Listing contract

A licensed real estate broker may legally negotiate the sale of:

Any registered mobile home. For a Real Estate Licensee to list and sell the Mobile Home, a Mobile Home must be Registered

Armando the realtor is selling Andrews home. Armando finds a "ready, willing and able" buyer who makes an offer that Andrew accepts in writing. However, Andrew later has a change of heart, decides to withdraw his home from the market and cancels the sale. What TRUE regarding Andrew's action?

Armando is entitled to his full commission based on the accepted offer. Once Armando found a "ready, willing and able" buyer and an offer was made and accepted, and a contract existed, Armando had fulfilled his role to the seller.

A real estate licensee generally acts:

As a fiduciary

A listing agreement is essentially a/an:

Bilateral Employment Contract

Diana had listed her property with Blondie but when the agreement expired she changed to a new agency. Now, Blondie has a buyer who is interested in the property. Which of the following statements is correct?

Blondie cannot disclose any offers received on the property while she was the listing agent.

Contracts and offers aren't valid until

Both parties agree and acceptance has been given. -If the listing agreement has expired, the offer should be presented. If it's accepted and the transaction closes, the broker will generally be entitled to his or her full commission.

The principal to whom a real estate agent gives advice and counsel is a:

Client

When a real estate broker misrepresents a property to a buyer while acting as an agent, he may be subject to:

Discipline by the Real Estate Commissioner, Civil law suits and Criminal action.

Agency disclosure is a 3-step process:

Disclose, Elect, and Confirm

The amount of a broker's commission usually is:

Established by agreement between the broker and the seller or the buyer. Commissions are always negotiated on a case-by-case basis.

Procuring cause would not be required for a broker to receive a commission in a(n)

Exclusive right to sell listing.

The usual listing contract authorizes a broker to:

Find a purchaser and accept a deposit with an offer to purchase

As an agent to perform "Dual Agency" by representing both buyer and seller you as the agent must:

Get written permission from both buyer and seller.

If a listing to sell a mobile home expires and is not extended or renewed, how long does the broker have to remove all yard signs and stop all advertising of the mobile home?

He has 48 hours from the termination of the listing.

Jose is a broker who is an officer of a large, multi-office real estate firm. His increase in pay came with an increase in responsibility and one of his agents has recently been the subject of a civil rights investigation. What, if any, potential liability does Jose face in this matter?

He is subject to DRE discipline. Brokers must be mindful of the fact that they are directly responsible for the actions of those working in their offices. Failure to properly supervise exposes a broker not only to disciplinary action, but the possibility of a civil lawsuit.

To whom must agency disclosure be given when a broker represents a seller of property?

He must give the disclosure to the purchaser at their first face to face meeting, so that the buyer is aware of the agency representation options.

When the "selling agent" is a subagent of the listing broker:

His fiduciary duty and primary allegiance are to the seller only.

Usury

Illegal interest. Each state sets its own ceiling for the maximum interest rate lenders may charge. Rates above that ceiling are considered usurious and illegal.

The "hold harmless" clause in the residential Listing Agreement is to protect the broker from any liability or claims resulting from:

Incorrect information supplied by the SELLER.

Tiffany represents the Spark family who are selling their property. What must Ivonne do when prospective buyers ask to see the property?

Inform them in writing that she represents the seller's interests. The disclosure is necessary so that the buyer understands he or she is not being represented by the seller's agent.

Antitrust Violations/Laws

Laws designed to protect trade and commerce from abusive practices such as price-fixing, restraints, price discrimination, and monopolization. Ex: price-fixing.

Jane, a real estate salesperson, advertised in the newspaper that anyone who purchased a home through her would receive a free color television. Such action is:

Legal, provided full disclosure is made to all interested parties.

Open Listing

Listing given to any number of brokers; only selling broker is paid. Whatever broker or salesperson produces the buyer get paid.

RESPA

Makes it illegal for a title insurance company to pay a broker any compensation for referring clients to that title company.

Actual fraud

Making a false statement, making a promise without intending to perform it, suppressing the truth. Ex: Agent promised the seller he would hold an open house every week until the house was sold. The agent failed to hold them as promised.

Arthur, a licensed principal real estate broker, was sued for "conversion". This means Arthur allegedly did what?

Misappropriated his client's funds. Misappropriation is the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purpose.

What action taken in relation to advertising the sale of real property, is considered "prima facie" evidence by the Real Estate Commissioner in California as being misleading or deceptive advertising?

Misleading Advertising is any advertisement that is deceptive or gives a false impression to consumers. Ex: Implying a specific yield on a note which is different from the interest specified in said note.

Two days after entering into a contract for the sale of a home, both the buyer and seller agreed to rescind the contract. The broker representing both the buyer and the seller:

Must return the entire deposit to the buyer. If there is mutual agreement to rescind (cancel) the contract, the entire deposit must be returned to the buyer.

In a typical agency relationship between the broker and the client, the broker's commission is determined by:

Mutual Agreement. There are no rules, regulations, guidelines or "preferred" rates or means of compensation for brokers and salespeople.

On Monday, a woman offers to sell her vacant lot to a man for $35,000. On Tuesday, the man counteroffers to buy the lot for $25,500. On Friday, the man withdraws his counteroffer and accepts the woman's original price of $35,000. Under these circumstances:

NO valid agreement exists because the counteroffer he made voids any prior offer. When entering into the counter offer stage, the original contract is deemed null and void and the counter offer becomes the new proposed contract.

If Zach completed a successful real estate transaction without having a real estate license, and then the seller now refuses to pay the agreed-upon commission. Can Zach sue for damages?

No, Zach had to have been licensed at the time of the agreement to win any compensation.

Which of the following must be done before placing a "For Sale" sign on a listed property?

Obtain the property owner's consent.

Misrepresentation

Occurs when there is obvious knowledge of a certain fact which caused a buyer to enter into a contract. An example of misrepresentation would be claiming that there is no expense on income property. Misrepresentation is fraud!

What is the definition of "dual agency" in California?

One firm represents both the buyer and the seller equally.

Broker Armando entered into an oral listing with the seller without subsequent written verification. As to the payment of a commission to broker Armando, it would be:

Permissible if the seller elects to do so.

Law of Agency

Prescribes the rights and duties between an agent and his clients.

When a real estate agent acts exclusively as a buyer's agent, he can:

Present offers to the seller and the seller's agent

Dual agency

Representing both parties to a transaction. This is unethical unless both parties agree to it and give written consent. It is illegal in many states

If the seller no longer wants the agent to act for him during the period of an exclusive right to sell listing, he may:

Revoke the agency created by the listing contract but may be liable for damages

If Carol wishes to sell her own house does she need a real estate license?

She does not need a license, an owner selling her own property is exempt from real estate licensing requirements.

To the seller, a real estate broker representing the seller usually is the:

Special Agent. This is an agent hired to perform a specific duty for a client (principal).

If the buyer defaulted some time ago on a written contract to purchase a seller's real estate, the seller can still sue for damages, if he is not prohibited from doing so by the:

Statutes of limitations: This exists to keep the legal system from getting bogged down in old disputes and allow for evidence and recollections to remain reasonably fresh. Civil limitations typically range from one to six years, though in some cases up to twenty-five years.

Dan is house shopping and contacts a real estate office. He tells the agent, Stephen, that he is interested in the area but is not ready to sign any agreements just yet. Stephen can be helpful and accommodating with many actions except what?

Stephen cannot prequalify Dan for a mortgage. Stephen cannot obtain confidential information about Dan without first entering into a buyer agency relationship.

Potential sellers tell Firm A's salesperson that Firm B will charge 2% less commission for selling the house. What should Firm A's salesperson say to the owners to get the listing?

That Firm A provides excellent services to market their sellers' properties. -Not only is criticizing another firm's compensation policy a bad business practice, it's also potentially illegal under the Sherman Anti-Trust Act.

Procuring Cause

The actions by a broker which result in the owner being able to make a sale. The effort that brings about the desired result in a real estate sale.

Vivian is a seller who has a change of heart after accepting an offer. Which of the following applies to Vivian's broker?

The broker is entitled to collect a commission. Vivian had accepted the offer, thus the broker had earned a commission. However, the broker may not take his commission from the deposit, which must be returned to the buyer.

On June 5, a prospective buyer gave a broker his personal check $3,000 payable to the seller along with an offer to buy a property. He told the broker that the check should not be cashed until June 30. Which of the following is correct?

The broker may hold the check, but must tell the seller that the money is being held uncashed before the seller accepts the offer.

The buyer's earnest money deposit may be:

The deposit may be a note, a check or anything of value

How is the commissioner selected?

The governor appoints the commissioner, who in turn appoints the ten member Real Estate Advisory Board.

Ethical practices of a real estate licensee means:

The licensee's honesty and fairness in dealing with the public, clients and associates and customers.

Example of ostensible agency?

The principal showed by actions that the agent's actions were accepted. **Ostensible agency is the same as implied agency and means that the relationship is created by the actions of the parties rather than written contract.

Copies of termite reports filed with the Structural Pest Control Board within the preceding two years can be obtained upon request by:

The seller, the buyer and any unlicensed person. They may be acquired by anyone.

Broker Armando represents the Seller and Broker Yang represents the Buyer. What are these 2 agents relationships with each other?

There is not a relationship between the parties. Since each broker represents separate sides in the transaction, no relationship exists.

Which of these is a duty of licensees under both commission rules and fiduciary responsibility?

To disclose material information that might affect the price and/or sale of the property, even if the buyer does not ask for it.

The main purpose of "RESPA"

To provide consumers with enough information to enable them to shop for settlement services.

Give an example of Dual Agency:

Two agents working under a broker, representing both buyer and seller in the same transaction.

In what way could an agency relationship NOT be created?

Voluntary offer by the agent. This is not enough to create an agency relationship.

What is the minimum time period for an exclusive right to sell listing?

Whatever is agreed upon by the seller and the broker.

An interpleader action

When a broker gives the deposit to a court because of the conflict between a buyer and a seller.

An unlicensed personal assistant working for a licensed broker may do which activities?

Write ads and submit them to the newspaper and online approved by the broker.

Do you need a Real Estate license to host an open houses?

YES, it is required!

Both a buyer and a seller have agreements with the same real estate agency. Can the buyer make an offer on the seller's property?

Yes, if both the buyer and the seller give their consent to dual agency.

Stephen, a buyer, wanted to use a promissory note for consideration on the purchase of a property. Can Stephen do this?

Yes. This is acceptable as long as the seller agrees. Both parties agree to the terms and conditions.

If a broker agreed to share a commission with another broker and then refused to pay the other broker, the unpaid broker could file an action in:

a civil court.

A prospective buyer would be entitled to damages from a real estate broker if the broker:

acts in excess of the authority given to the broker by the seller.

When a licensee signs a contract and becomes the buyer's agent, the licensee will want to inform others:

as soon as possible. A Licensee must disclose his Agency relationship to all parties as soon as is possible, regardless of whether he is the buyer's agent, the seller's agent, or an agent to both. The order must be disclose, elect and confirm.

When a listing does not authorize the broker to accept a deposit but the broker finds a purchaser and accepts a deposit anyway, the deposit is held by the broker:

as the agent of the purchaser.

When must an agency disclosure statement be given to prospective purchasers/tenants by a real estate agent?

at the first face-to-face meeting with the agent and the prospective purchasers/tenants before they are shown any property.

The prime obligation of an agent to the client is:

loyalty.

An actual agency relationship that arises by the "actions" of the parties rather than by an expressed written agreement is called:

ostensible/implied agency. -It is recognized in some states, it's not in others and written agreements should always be sought.

A licensee must present all written offers immediately, at the same time. BUT, he is not obligated to present what types of offers?

patently frivolous offer or when the broker is acting on written instructions of the principal.

What would not terminate an agency relationship?

submission by the agent of two offers at the same time.

If Illegal acts occur violating real estate law. Someone who performs real estate acts but does not have a real estate license. Who will prosecute him/her for violating the real estate law?

the District Attorney will prosecute, not the Department of Real Estate itself

An agency can't be terminated by:

the owner cancelling the listing in order to contact the potential buyer and sell to him or her directly. Or, contracts may not be cancelled to avoid paying a commission.

If the buyer wants to move in early or make repairs before the close of escrow, the buyer must obtain what?

the seller's written permission

After receiving an earnest money deposit from a buyer, what should the broker do next?

within three business days, deposit the money in an existing special non-interest bearing escrow account, in which all earnest money received from buyers may be held at the same time