Real Estate Ch. 5 Quiz
23. In which of the following institutions may a broker place escrow deposits? (a) Title companies, banks, savings and loan associations, and credit unions (b) Mortgage companies, savings and loan associations, finance companies, and credit unions (c) Insurance companies, savings and loan associations, credit unions, and title companies (d) Stock brokers, finance companies, banks, savings and loan associations, and mortgage companies
Your answer: A An escrow account or trust account may be in a commercial bank, title company having trust powers, credit union or savings association located in the state of Florida, and not in a stock of bond brokerage house. Reference: Chapter 5, Escrow Funds, Escrow Account
14. Which of the following is an approved depository for earnest money? (a) A bank within the state of Florida (b) A stock brokerage firm (c) A broker's personal checking account (d) A safe located in a real estate office
Your answer: A An escrow account or trust account may be in a commercial bank, title company having trust powers, credit union or savings association located in the state of Florida, and not in a stock or bond brokerage house. Reference: Chapter 5, Escrow Funds, Escrow Account
16. What action should a broker take if a commission dispute arises prior to closing? (a) Return the deposit to the buyer or seller based on which party asks for it first (b) Withdraw the amount of the commission from the escrow account (c) Retain the exact amount of the disputed commission in the escrow account until the dispute is settled (d) Distribute the escrow funds according to the directions of the company attorney
Your answer: C Should a dispute arise regarding the amount of a commission that is due to a broker, or the time for the payment thereof, a broker may retain the exact amount of the claimed commission in the escrow account until the dispute is settled by either agreement, arbitration, or court order. Any amount above that claimed by the broker must be disbursed. Reference: Chapter 5, Escrow Funds, Broker's Rights to Escrowed Funds
6. If a sales associate receives a post-dated check, which of the following is the most appropriate action? (a) The sales associate should immediately give the check to her employing broker. (b) The sales associate should refuse to submit the offer without a cashier's check. (c) The sales associate should hold the check and give the check to her broker when it becomes valid. (d) The sales associate should cash the check and deposit the funds into her broker's escrow account.
Your answer: A A sales associate or broker associate who receives an earnest money deposit on behalf of his or her employer must deliver the deposit to the employer no later than the end of the next business day following receipt. This includes post-dated checks. Reference: Chapter 5, Escrow Funds, Depositing Escrow Funds
20. When two or more parties participate together in one transaction where no formal paperwork or registration is completed, which type of business relationship has typically been formed? (a) Joint venture (b) Corporation (c) General partnership (d) Limited partnership
Your answer: A A joint venture, or joint adventure, is similar to a partnership in some respects. The participants in a joint venture have joint and several liability. However, a joint venture is a temporary business involving a single transaction or a predetermined number of transactions. Since their relationship is temporary, they cannot bind one another to any new transactions. A joint venture can be formed either orally or in writing. No documents must be filed with the Secretary of State to create a joint venture. A joint venture can provide real estate brokerage services if composed of separate real estate brokers. In this situation, the joint venture is not required to register with the DBPR as the brokers are already licensed and permitted to perform services of real estate. Reference: Chapter 5, Types of Business Formations, Joint Venture
33. Bob is a licensed sales associate, employed by broker Jerry. Jerry fails to pay Bob a commission, so Bob resigns and is hired by broker Sam. Bob decides to sue for his lost commission. Which of the following is accurate regarding this scenario? (a) Bob cannot bring a legal action for the claimed commission against anyone other than broker Jerry. (b) Broker Sam must sue broker Jerry for the commission due to Bob, since Bob is now employed by Sam. (c) Sam assumed responsibility for the unpaid commission when he employed Bob. (d) Bob may file a lis pendens against either Sam or Jerry for the commission due him.
Your answer: A A sales associate who is not compensated as agreed upon by his or her employer may not file suit against anyone other than the employer. Reference: Chapter 5, Sales Associate's Duties, Compensation
29. A sales contract contains a contingency which states "this contract is contingent upon the buyer receiving 80% financing with an interest rate not to exceed 6% and a 30 year term." The buyer applied for financing and was turned down by three different lenders, resulting in his/her inability to close on the transaction. The seller is claiming breach of contract. Which statement is correct concerning the escrow deposit? (a) The broker may return the escrow money without notifying the FREC since the contract was subject to financing. (b) The agent should check with FREC before disbursing any money. (c) The Broker may return the money provided there was a rescission period also documented in the Sales Contract. (d) Escrow money is always nonrefundable.
Your answer: A By rule, the Commission may establish the circumstances under which a broker may disburse from the escrow account without notifying the Commission or utilizing one of the approved settlement (escape) procedures. One of the exemptions applies when a sales contract is subject to financing, and the broker is acting as an escrow agent. In this case, the broker may refund the deposit to the buyer without notification to the FREC if the financing cannot be obtained. Reference: Chapter 5, Escrow Funds, Escrow Disbursement Exemptions
17. A prospective tenant pays a licensee for a rental information list. What percentage of the fee paid may the prospective tenant receive if the licensee provides inaccurate information? (a) 100% (b) 75% (c) 25% (d) 0%
Your answer: A If a licensee materially misrepresented what was offered, the tenant applicant can request a 100% refund of any fee paid. The request must be made within 30 days of the contract date. Reference: Chapter 5, Rental Information
27. What should a sales associate do if a purchaser wishes to present a post dated check? (a) Obtain approval from the seller and then turn the check over to the broker by close of business on the next business day. (b) Check with the broker to make sure the broker agrees with the payment. (c) Turn the check over to the broker by close of business the next business day. (d) Return the check to the purchaser and ask them for a new one with the correct date.
Your answer: A Postdated checks are considered to be promissory notes and can be accepted as earnest money with the seller's approval. Reference: Chapter 5, Escrow Funds, Earnest Money Deposits
2. Six individuals decide to form a real estate brokerage partnership. All six individuals are planning to be active in real estate sales. Which statement best applies? (a) The partnership must be registered with the Department, and all six partners must be active real estate brokers. (b) At least one partner must be licensed as an active broker. (c) Only two partners must have a real estate license. (d) A partnership cannot be formed as a brokerage business.
Your answer: A Real estate brokerage partnerships must be registered with the DBPR in the name of the partnership, and have at least one partner licensed as an active broker. Inactively licensed brokers and unlicensed persons can be partners but cannot perform real estate services; however, they must be registered with the DBPR. All partners who provide real estate services to the public either directly or indirectly must hold an active broker's license. Reference: Chapter 5, Types of Business Formations, Real Estate Brokerage Partnership
24. Four individuals wish to form a real estate brokerage partnership. All partners will work with buyers and sellers, showing properties and taking listings. Which statement best describes the necessary legal requirements? (a) All partners must be licensed as active brokers. (b) The partners are not required to have real estate licenses, but the profits must be distributed equally amongst all four partners. (c) The partnership must be registered with the Department of Business & Professional Regulation and at least one partner must be licensed as an active broker. (d) At least one partner must be licensed as an active broker and the others may be licensed as sales associates, or brokers.
Your answer: A Real estate brokerage partnerships must be registered with the DBPR in the name of the partnership, and have at least one partner licensed as an active broker. Inactively licensed brokers and unlicensed persons can be partners but cannot perform real estate services; however, they must be registered with the DBPR. All partners who provide real estate services to the public either directly or indirectly must hold an active broker's license. Sales associates or broker associates cannot be partners in real estate brokerage partnerships. Reference: Chapter 5, Types of Business Formations, Real Estate Brokerage Partnership
1. A sales associate licensed with a real estate brokerage corporation can be which of the following? (a) An officer (b) A stockholder (c) A director (d) An officer and a director
Your answer: B A sales associate or broker associate cannot be an officer or director in a real estate brokerage corporation. Anyone can be a stockholder, licensed or not. Reference: Chapter 5, Types of Business Formations, Real Estate Brokerage Corporation
8. Who has the right to inspect a broker's escrow account records? (a) The parties to a real estate transaction (b) The Department of Business and Professional Regulation or its authorized representatives (c) The state Attorney General (d) A public defender
Your answer: B A broker who receives a deposit must keep an accurate account of each escrow deposit transaction. The broker must make available to the DBPR, or an authorized representative, all deposit slips and bank account statements together with all agreements between the parties to the transaction. Reference: Chapter 5, Escrow Funds, Record Keeping
13. A real estate brokerage firm advertises a listed property. Which requirement is correct? (a) The name of at least one sales associate must be included in the ad. (b) The name of the brokerage must be included in the ad. (c) The ad may not be prepared by sales associate. (d) The names of sales associates may not be included in the ad.
Your answer: B All advertising legally is in the name of, and under the supervision of, the broker. All advertising must be done in a manner so that a reasonable person would know he or she is dealing with a real estate licensee. All real estate advertisements including yard signs, newspaper ads, business cards, and/or any other advertisements must include the registered name or trade name of the brokerage firm. Reference: Chapter 5, Brokerage Office Requirements, Advertising
4. All of the following business formations can register to conduct real estate transactions, EXCEPT: (a) Corporation for profit (b) Not-for-profit corporation (c) Corporation sole (d) Limited partnership
Your answer: C A corporation sole is formed under common law principles for religious purposes. It can buy and sell real estate for its own use, but title is not taken in the corporate name. A corporation sole cannot be registered as a real estate brokerage corporation. Reference: Chapter 5, Types of Business Formations, Corporation Sole
7. Which of the following statements regarding an ostensible partnership is correct? (a) An ostensible partnership is required to file documents with the Secretary of State. (b) An ostensible partnership is not a true partnership. (c) An ostensible partnership cannot be created by real estate brokers. (d) An ostensible partnership will not be treated as though the participants were partners.
Your answer: B An ostensible or quasi-partnership is not a true partnership. It is created when two or more parties act or operate in a manner that deceives or misleads someone into believing a partnership does exist. If two or more brokers operate in such a manner that a partnership appears to exist, an ostensible partnership has been created. A court can judge a broker liable for the actions of all the brokers as if a true partnership did exist. Furthermore, the commission can take disciplinary action against all of the brokers. Reference: Chapter 5,Types of Business Formations, Ostensible Partnership
30. Which business organization can legally register as a real estate brokerage? (a) Corporation Sole (b) General Partnership (c) Ostensible Partnership (d) Joint Venture
Your answer: B Corporation sole and joint ventures cannot register to broker real estate. A general partnership can register with the DBPR to perform brokerage services. An ostensible or quasi-partnership is not a true partnership. It is created when two or more parties act or operate in a manner that deceives or misleads someone into believing a partnership does exist. Reference: Chapter 5, Types of Business Formations; See also, Summary of Business Formations
21. Which statement regarding the registration of real estate branch offices is true? (a) A broker may conduct business from more than one unregistered office as long as the principal office is registered with the DBPR. (b) A brokerage branch office may be closed and reopened at the same location during the same license period by requesting a reissue. (c) When a registered branch office is moved, a fee must be paid, but a new application for registration is not required. (d) A temporary shelter must always be registered as a branch office.
Your answer: B If a broker desires to conduct business from more than one office, each additional office must be registered individually as a branch office with the appropriate fee paid. If a broker closes a branch office, the registration of the branch office cannot be transferred. Each new branch office location must be registered with the DBPR, and the appropriate fee must be paid. If a branch office is closed and later reopened in the same location during the same 2-year license period, a reissue of the license may be requested, without additional fee. If a branch office is moved, a new application for registration with proper fee paid is required for the new location. Unless transactions are closed or sales associates permanently assigned, a temporary shelter used by a broker as protection for sales associates and customers is not considered to be a branch office. The permanence and use of a location and the character of activities conducted there determine whether registration is required. Reference: Chapter 5, Brokerage Office Requirements, Branch Office Requirements
31. There is a dispute over an escrow deposit. The parties agree to have a 3rd party hear both sides and make the final decision. What settlement (escape) procedure is being used to settle the dispute? (a) Mediation (b) Arbitration (c) Interpleader (d) Escrow Disbursement Order
Your answer: B If all parties give written consent, an escrow dispute can be submitted to arbitration. If the parties submit the dispute to arbitration, they agree in advance by contract to abide by the abitrator's decision. After a hearing where both parties have an opportunity to be heard, the arbitrator decides how the funds should be disbursed and issues an "award." The award is binding and can be enforced in a civil law suit if the responsible party fails to abide by the decision. In contrast, if the parties submit the dispute to mediation, they appoint a third party to assist in reaching an agreement. The mediator has no power to impose a decision on the parties. Reference: Chapter 5, Escrow Funds, Dispute Settlement Procedures, Arbitration
15. What must a real estate sales associate do upon receiving an earnest money deposit? (a) Deposit the funds in an insured bank account (b) Deliver the funds to his or her broker or owner-developer (c) Deposit the funds in an escrow account (d) Deposit the funds with the Florida Real Estate Commission
Your answer: B Sales associates and broker associates that receive earnest money must deliver the deposit to the broker no later than the end of the next business day following receipt. Saturdays, Sundays, and legal holidays are not considered business days. Reference: Chapter 5, Escrow Funds, Depositing Escrow Funds
3. Which of the following statements is correct regarding a licensed broker associate who is with a real estate brokerage partnership? (a) The broker associate may be a member of the partnership. (b) The broker associate may make earnest money deposits with the broker's permission. (c) The broker associate must hold an active broker's license. (d) The broker associate may not provide real estate brokerage services to others.
Your answer: B Sales associates or broker associates cannot be partners in real estate brokerage partnerships. A broker associate is an applicant for a broker's license that chooses to continue employment in a sales associate's capacity with a current employer subsequent to passing the state examination. A broker associate may perform the duties of a licensed sales associate, such as depositing escrow funds and providing real estate brokerage services, with permission from the broker. Reference: Chapter 5, Types of Business Formations, Real estate Brokerage Partnership
11. Which statement best describes the office sign requirements for a brokerage office? (a) Only one sign per firm is required regardless of the number of offices. (b) Each sales associate associated with the firm must have a separate sign. (c) Every active broker must maintain a sign at each brokerage office or branch office. (d) Office signs are permitted but not required by law.
Your answer: C A broker is required to have a sign on or about the entrance to the office, and all branch offices, where it can be easily observed and read by persons entering the office. It may be placed either on the exterior or interior of the office. Reference: Chapter 5, Brokerage Office Requirements, Office Signs
9. All of the following businesses are required to file documents with the state, EXCEPT: (a) Corporation for profit (b) Not-for-profit corporation (c) Corporation sole (d) Cooperative association
Your answer: C A corporation sole is formed under common law principles for religious purposes. A corporation sole is not required to file any documents with the state. Reference: Chapter 5, Types of Business Formations, Corporation Sole; See also Summary of Business Formations
26. Which business structure may be registered to broker real estate? (a) Trust (b) Joint venture (c) Limited partnership (d) Unincorporated association
Your answer: C A real estate brokerage limited partnership must be registered with the DBPR. A joint venture is a temporary business involving a single transaction or a predetermined number of transactions. A joint venture can provide real estate brokerage services if composed of separate real estate brokers. In this situation, the joint venture does not register with the DBPR as the brokers are already licensed and permitted to perform services of real estate. A business trust cannot be registered with the Commission as a real estate brokerage corporation. Anyone performing services of real estate on behalf of a trust must have an active real estate license. An unincorporated association results if individuals group together for some purpose without creating one of the other organizations. Frequently, homeowner associations or community improvement associations are unincorporated associations. An unincorporated association cannot be registered with the Commission as a real estate brokerage. Reference: Chapter 5, Types of Business Formations, Real Estate Brokerage Limited Partnership; See also, Summary of Business Formations
28. Which of the following escrow dispute settlement procedures involves the use of Interpleader? (a) The broker asks the Commission for an Escrow Disbursement Order (b) Mediation (c) Litigation (d) Arbitration
Your answer: C A suit in court can be used to resolve an escrow dispute. Two methods are available: Bill of Interpleader or Declaratory Decree. The method chosen depends on whether or not the broker feels that are entitled to some or all of the funds in dispute. In either method, the escrowed funds would be turned over to the registry of the court, pending settlement. The broker would file a Bill of Interpleader if he or she did not claim any rights in the deposit under dispute. If this method is selected, the broker may be awarded court costs and attorney's fees since the broker is making no claim for any of the funds in dispute. A Declaratory Decree would be requested when a broker felt he or she was entitled to some or all of the deposit in dispute. Since the broker is a claimant to some or all of the money in dispute, the broker must pay his or her own court costs and attorney's fees when this alternative is selected. Reference: Chapter 5, Escrow Funds, Dispute Settlement Procedures, Litigation (Court Action)
5. If a broker has conflicting demands on money held in escrow, what is the first thing the broker should do? (a) Consult with a real estate attorney who is experienced in handling escrow problems (b) Refer the parties to FREC (c) Notify the Florida Real Estate Commission in writing (d) Give the escrow money to the closing agent
Your answer: C Conflicting demands from the buyer and seller demanding that the broker release escrowed funds is termed an escrow dispute. If a broker receives conflicting demands for escrowed funds, or if the broker has good faith doubt as to which person is entitled to escrowed property, the broker must give written notification to the FREC within 15 business days from the date of the last party's demand. The broker is required to institute an authorized settlement procedure to resolve the dispute within 30 business days from the first party's demand. Authorized settlement procedures include: mediation, arbitration, court action, or an escrow disbursement order. Reference: Chapter 5, Escrow Funds, Escrow Disputes
22. Where may a real estate brokerage office be located? (a) In a residential neighborhood which prohibits commercial properties (b) In a motorhome (c) In at least one room in a fixed location wherein books and records may be retained and negotiations may be conducted (d) In a broker's car
Your answer: C Each active broker is required to open and maintain an office, which must be registered with the DBPR. The office must consist of at least one enclosed room in a building of stationary construction where negotiations and the closing of real estate transactions can be conducted with privacy. The law does not require a broker to have a telephone, desk or checking account. A broker must maintain books, records and files pertaining to transactions of others in the broker's office for a period of at least 5 years. A broker can have an office or branch office in his or her home, if not in conflict with local zoning ordinances. Reference: Chapter 5, Brokerage Office Requirements, Principal Office Requirements
25. A business legally formed and registered as Rich Real Estate, Inc. is considered to be what type of organization? (a) Joint venture (b) Limited partnership (c) General partnership (d) Corporation
Your answer: D A corporation for profit is an artificial person created by law. The corporate name must include the word "corporation," "company," "incorporated," or the abbreviation "Corp.," "Inc.," or "Co.". No business is allowed to use the word "company" in its name unless it is formed legally as a corporation or unless the words "not inc." are added. Reference: Chapter 5, Types of Business Formations, Corporation for Profit
18. Three individuals decide to open a real estate brokerage office. Which statement best describes the legal requirements? (a) Sales associates are not permitted to own stock in the entity. (b) All sales associates, broker associates, and brokers who are registered with the firm must be either officers or directors. (c) If a sales associate wishes to be an officer or director, his or her license must be placed on inactive status. (d) At least one officer must be an active broker.
Your answer: D A real estate brokerage corporation must provide proof of legal corporate existence prior to initial registration with the Department. The corporation will be registered, and the names of all officers and directors of the corporation are registered. At least one corporate officer must be licensed as an active real estate broker. All corporate officers and directors who provide real estate services to the public either directly or indirectly must hold active real estate broker's licenses. Inactive brokers and unlicensed persons that serve as corporate officers or directors may not perform real estate services, but must be registered with the Department. A sales associate or broker associate cannot be an officer or director in a real estate brokerage corporation. Anyone can be a stockholder, licensed or not. Reference: Chapter 5, Types of Business Formations, Real Estate Brokerage Corporation
32. If a real estate licensee is involved in a personal real estate transaction, which of the following would be correct? (a) The licensee must disclose his or her license status in any advertising. (b) The licensee must disclose the license status on any yard sign using terminology such as "owner agent." (c) The licensee is not required to disclose his or her license status in a personal transaction. (d) The licensee should disclose his or her license status prior to entering into any serious negotiations.
Your answer: D Brokers, sales associates and broker associates are entitled to deal in real property for personal benefit. Licensees should make clear that they are dealing on their own account and not acting on behalf of others. Licensees must make known their status as licensees to members of the public. This disclosure must take place prior to entering into serious negotiations, but is not required to take place in the preliminary stages of a transaction such as newspaper advertising. The licensee should also ensure that this disclosure is in writing in the Purchase and Sale Contract. Reference: Chapter 5, Brokerage Office Requirements, Personal Transactions
19. A buyer drops off an escrow check on Tuesday. To avoid any trouble with Commission, the broker must deposit the check by close of business on which day? (a) The following Monday (b) Wednesday (c) Thursday (d) Friday
Your answer: D Sales associates and broker associates that receive earnest money must deliver the deposit to the broker no later than the end of the next business day following receipt. A broker must immediately place earnest money deposits in an escrow or trust account. "Immediately" is defined by the FREC as no later than then end of the third business day following receipt. Saturdays, Sundays, and legal holidays are not considered business days. Reference: Chapter 5, Escrow Funds, Depositing Escrow Funds
12. All of the following are authorized alternatives for a broker to use in order to resolve an escrow dispute, EXCEPT: (a) Seek an escrow disbursement order from the Commission (b) Submit the escrow dispute to mediation or arbitration (c) Seek a court decision to resolve the escrow dispute (d) Obtain an attorney's opinion
Your answer: D The following authorized procedures are available to settle an escrow dispute: mediation, arbitration, litigation (filing a Bill of Interpleader or a Declaratory Decree), or escrow disbursement order. With an escrow disbursement order, the broker requests that the Commission determine which party is entitled to the escrowed property. Reference: Chapter 5, Escrow Funds, Dispute Settlement Procedures
10. Which condition would require a location to be registered as a brokerage branch office? (a) Tables and chairs are provided for sales associates and customers (b) The location is used as a shelter to get out of the sun or rain (c) Literature which contains the broker's office address is handed out (d) Sales associates are permanently assigned to the location
Your answer: D Unless transactions are closed or sales associates permanently assigned, a temporary shelter used by a broker as protection for sales associates and customers is not considered to be a branch office. The permanence and use of a location and the character of activities conducted there determine whether registration is required. Reference: Chapter 5, Brokerage Office Requirements, Branch Office Requirements