Real Estate Law - UNIT SIX - REAL ESTATE CONTRACTS

On an exclusive listing of a single-family home a broker can be disciplined for failure to_________

(a) include a definite termination date. (b)indicate that the commission is negotiable. (c)give a copy to the owner.

Liquidated damages are typically limited to __________ of purchase price in the event of buyer default.

3 percent

net listing

A type of listing where the agent's commission consists of all money received over a stated amount is called a(n) ____________

45

Loan brokers' listings cannot exceed ____ days when seeking a residential loan of $2,000 or less.

Which provision would LEAST likely be found in a real estate purchase contract?

Safety clause

A valid listing agreement must contain which stipulation?

Specific reference to the subject matter of the listing

A termination date is required for all contracts below EXCEPT

an open listing.

When a listing includes a purchase right and the broker informs the owner that the broker will buy the property, the broker must________________

(a)disclose all known facts to the seller. (b)present any offers received. (c)obtain the seller's written consent to exercise the option.

A real estate broker must retain all records for a minimum of ______

3 years

Loan broker listing agreement

A mortgage loan broker represents a borrower, as his or her agent, to obtain a loan. The agency agreement setting forth the rights and obligations of the parties is known as a ____________________.

RETENTION OF RECORDS

A real estate broker must retain, for three years, copies of all listings, deposits, receipts, canceled checks, trust records, and other documents executed by the broker or obtained in connection with any transaction for which a real estate license is required. The retention period runs from the date of closing a transaction or, if not closed, from the date of the listing. CalBRE has taken the position that texts, emails, tweets and the like created and sent or received by a licensee during the negotiations for the sale or purchase of property must be maintained as part of the transaction file.

As-is clause

A seller who wishes to sell "as is" should make a full disclosure of all defects known to the seller and state that additional defects, which the seller is unaware of, may be found. A seller who is not familiar with the property for any reason (such as occupancy by tenants) should disclose this fact.

statute of frauds

Agreements between brokers to split commissions are not required by the _________________ to be in writing. They deal in dollars and not real estate.

multiple open listings

An owner who has given ____________may assume, unless notified otherwise, that the broker presenting the offer is the procuring cause.

Interim occupancy agreement

At times, a buyer will be given possession before closing. It must be fully understood that the buyer's position is as a renter and not as a buyer taking early possession.

Listing contracts

Because listings are contracts, they require all the elements of a valid contract to be enforceable: mutual consent, consideration, legal purpose, and competent parties

Mortgage loan disclosure statement

Before a borrower is obligated to complete a non-federally related loan agreement arranged by a real estate broker, the borrower must be given and must sign a mortgage loan disclosure statement setting forth all costs and fees, payments, liens, et cetera. The disclosure must be made on a form approved by the Bureau of Real Estate, and the mortgage broker must keep a copy of the disclosure form for three years. The first Tuesday Mortgage Loan Disclosure Statement is an approved form for this purpose.

BROKER-SALESPERSON AGREEMENT

Brokers are required to have a written contract with their salespeople.

legal

Even though net listings are _____________in California, agents should be aware that the seller is likely to allege fraud or misrepresentation should the sales price result in a commission that is greater than customary.

finder's fee

Generally, in ____________ agreements, the finder agrees not to participate in or conduct negotiations with prospective clients or to solicit loans on behalf of prospective clients.

An exclusive right-to-sell listing provides for 20% down and owner financing at 13% interest. The owner received a full-price cash offer that he does not wish to accept. Which is TRUE regarding the owner's rights?

He may reject the offer without obligation regarding commission.

Buyer's listing

In a ____________________the agent can represent the buyer only rather than the seller. A buyer listing, like a listing from owners, can be exclusive: the broker has the sole right to locate property for the buyers. In a buyer exclusive-agency listing, the buyers can locate property for themselves, but the broker is the exclusive agent. In an open buyer listing, the broker is given nonexclusive authorization to locate property.

limited

Loan brokers' commissions and costs on regulated loans are __________ by law (see Unit 4).

disclosures

Many of the required disclosures are set forth in the California Association of REALTORS® standard forms, although the failure of a form to include a required disclosure does not excuse a broker from liability.

advance costs

Monies collected to cover ___________________ must be treated as trust money and must be placed in the broker's trust account. The trust fund remains the property of the principal until disbursed by the agent for the principal.

consideration

Some option forms provide for option extensions upon the payment of additional _____________

Bureau of Real Estate

The ___________________ requires approval of all advance fee forms (approval does not extend to photocopies of approved forms). Any additions or deletions to an approved form must be submitted to the Bureau of Real Estate at least ten days before entering into an agreement. Failure to do so could result in disciplinary action. Advance fees must be placed in the broker's trust account until they are earned.

advance fee addendum

The ___________________ usually sets forth specific activities that the agent is to be compensated for, as well as an hourly rate (or set rate) for the compensation. The agreement is very similar to an agreement that an attorney makes with his or her client.

net commission

The agent must disclose the amount of the _______________ before or at the time the principal commits to the transaction. Failure to do so could be grounds for disciplinary action.

Procuring the sale

The agent who initiated an uninterrupted series of events that led to the sale of the property is entitled to a commission based upon

procuring cause

The agent who is the ______________ of a sale is that agent who initiated an uninterrupted series of events that led to the sale. Under open listings and exclusive-agency listings, an agent who was the procuring cause of the sale is entitled to a commission.

principal

The broker must provide the _____________with a quarterly accounting of all disbursements, and any remaining funds must be returned to the principal at the expiration of the agreement along with a final accounting.

Estimated buyer's costs

The estimated buyer's costs sheet is similar to a seller's net form and is not a contract. It is a disclosure form to show a buyer the funds needed to complete a transaction. The form can be used for purchase agreements, counteroffers, exchange agreements, or even option agreements.

unilateral contract

The open listing is really a _____________. The agent makes no promise to use diligence to obtain a buyer. By procuring a buyer the agent accepts the owner's promise to pay a commission.

Hold-Harmless clauses

The owner agrees to hold the agent harmless and indemnify the agent for losses in the event the owner fails to provide a disclosure or fails to provide correct information. Such a clause probably would to entitle the brokers to recover a loss if they knew, or should have known, an owner was mistaken. Like most contracts, listings usually provide that, in the event of legal action, the prevailing party will be entitled to legal fees.

Cancellation of contract

The parties to a purchase agreement can agree to release each other from the contract. The agreement could provide for a full return of the deposit to the offeror (a rescission) or a forfeiture of the total deposit or a partial forfeiture. A release agreement should provide that all further rights and obligations are null and void.

A broker brought an offer to an owner. While the broker did not have a listing, the offer provided for a commission. The owner crossed out the provision for a commission above the signature block and signed the acceptance. Which is TRUE regarding the broker's rights?

There was no listing, so no commission need be paid.

safety clause

This ________________clause customarily provides that the owner is obligated to pay a commission if a sale is made within a stated period after expiration of the listing to any person the agent negotiated with and whose name was furnished in writing to the owner within three days after the expiration of the listing. Sometimes, these clauses provide that in the event another listing is entered into, the owner no longer is obligated under the safety clause. Without such an exception, an owner could be obligated to pay more than one commission.

exclusive agency

Under an ___________________ listing, the named broker is the exclusive agent for the owner, and if the listing broker or any other agent procures a purchaser in accordance with the terms of the listing, or any other price and terms the owner might agree to, the agent has earned a commission. The owner can, however, sell the property without any obligation to pay a commission.

definite

Unlike exclusive listings, open listings need not have a ____________ termination date. An owner generally can cancel the open listing at any time without obligation but cannot cancel an open listing to avoid paying a commission and then accept thebenefits of the agent's efforts by consummating a sale to a buyer procured by the agent. An owner who cancels an open listing in good faith is not obligated to the agent simply because a sale later was made to a buyer the agent had contacted.

Residential Lease Agreement

When a landlord accepts a deposit on a rental from a prospective tenant, the landlord could be entering a lease agreement unless it is clear it is only an application to rent and not an agreement to rent. Most standard forms make it very clear that it is an application to rent only and must be approved by the owner.

Multiple offers

When separate forms are signed and dated individually for each counteroffer, it is called multiple offers.

Seller financing disclosure statement

When the seller provides carryback financing on one to four residential units, Section 2956 of the Civil Code requires that a disclosure statement be provided to both buyer and seller. While technically not a contract, it is ordinarily an attachment or an addendum to a purchase agreement.

Listing modification

While it is possible for a broker and a principal to enter into a new listing agreement that by its terms supersedes an existing listing, it is far simpler to enter a simple modification. Brokers can use an all-purpose addendum form or a specific listing addendum form for this purpose.

expired listings

While listings of real property are required to be in writing to be enforceable, one exception may exist. If, after a listing expires, the owners encourage the broker to continue to work on the sale of the property, the owners may have waived their rights to claim the statute of frauds as a defense against paying a commission. The doctrine of estoppel might apply. See Filante v. Kikendall (1955) 134 C.A.2d 695 for an example.

exclusive authorization and right-to-sell listing

With an _________________, the owner agrees to pay a commission to an agent if the agent, any other agent, or the owner procures a buyer in accordance with the price and terms of the listing, or for any other price or terms that the owner accepts. The broker will not be entitled to a commission if the buyer located lacks the financial ability to complete the purchase because the broker has failed to procure a ready, willing, and able buyer. Because the listing agent earns a commission no matter who sells the property, this is the most desirable listing for brokers.

Time

_____________ is considered to be of the essence in options in that the option must be exercised within the period provided.

Finders' fees

_____________, however (discussed in Unit 3), are legal. They are not paid for an act requiring a real estate license; they are paid for a referral or introduction to a buyer, seller, borrower, or lender.

Net listings

______________ refer to the commission payment only and provide that all money received over a stated or net amount will be the agent's commission. They are illegal in many states because they create a serious conflict of interest. The agent under a net listing really is dealing more as a principal than as an agent. The agent is closer to being an optionee (with an option to buy) than a representative of the owner.

Open listings

_______________ are nonexclusive listings; they may be offered to one or more brokers. The broker who earns the commission is the first agent to bring the owner an offer that meets the terms of the listing or that the owner accepts. A sale under one open listing automatically cancels all other open listings. The principal has no duty to notify the agents under other open listings of the sale.

Option-to-purchase

_________________ forms provide for the method of exercising the option, include any agreed-on sales terms, and contain provisions for escrow and delivery of title, as well as for brokerage fees.

Advance costs

__________________ differ from advance fees in that they are paid to the agent to cover cash outlays in carrying out the agency. They are not intended to cover brokerage fees or general overhead expenses. As an example, if an owner wanted an expensive ad in the Wall Street Journal, the broker might require cost in advance.

A broker's promise to use diligence makes a listing

a bilateral contract.

lis pendens

a notice of a pending lawsuit

The rate of commission for the sale of real property is set by_______________

agreement between the parties.

option

an ______________ is a contract to make a contract.

If a party to a listing refuses to release funds when there is no good-faith dispute, the party may be subject to _____________

civil damages.

An offer to purchase which depends on something happening in the future refers to a(n)_____________

contingency

An acceptance that varied from the original offer on a material term is called a(n) ____________

counter offer

Most listings are _______ listings.

exclusive. Most listings are exclusive listings, in which the owner makes the agent his or her exclusive agent to procure a buyer and agrees to pay a commission should the agent succeed.

To be the procuring cause of a sale, the broker must have_________

initiated an uninterrupted chain of events that led to the sale.

A finder's fee paid to an unlicensed party is considered to be________________

legal

A hold-harmless clause would be found in a ______________

listing agreement

Listing agreements must contain a statement that the amount or rate of commission is____________

negotiable between seller and broker.

After signing an exclusive right-to-sell listing, an owner refuses to accept an offer that conforms exactly to the terms of the listing. In this case specific performance can be obtained by_____________

neither the broker nor the offeror.

Open listings are_______________

nonexclusive listings

Procuring cause is of greatest significance in

open listings.

Procuring cause is of greatest significance in_____________

open listings.

Which of the following entitles the listing agent to a commission for a sale made after the listing expired?

safety clause

privity of contract

same as contractual relationship

To collect a commission for a sale on an exclusive right-to-sell listing, the broker must prove all of the following EXCEPT

that the broker was the procuring cause of the sale.

Which of the following describes the disclosure requirements of Megan's Law?

the availability of information of known sex offenders in the area.

A commission is ordinarily earned by a broker when

the broker procures a ready, willing, and able buyer.

Using preprinted lease forms is dangerous because

the forms probably will not accurately reflect the needs and intent of the parties.

An oral agreement by a buyer to pay a commission is ____________.

unenforceable

Generally, a verbal real estate listing is ____________ because of the statute of frauds.

unenforceable