Real Estate Principles Chapter 12

An owner wants to receive a net amount of a property of $200,000. The broker commission is 6 percent of the gross sales price. The gross price necessary (the nearest hundred dollars) to achieve this will be ________________.

$212,800

Characteristics of a real estate listing contract include:

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

Characteristics of real estate brokerage as a vocation include:

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

Commercial property buyers tend to be knowledgeable and sophisticated and want considerable information about a property, including:

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

In a real estate world where transaction brokerage is predominant, advice to a person working with a broker would include:

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

The typical State real estate commission has these responsibilities:

-creating and administering exams for licensing. -overseeing administration of the State licensing law and regulations. -enforce the license law through hearings for violations and administering penalties. -specifying education and other requirements for licensing

Three ways that a listing agreement will terminate include:

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

About half of the States have adopted a weakened form of broker relationship known as transaction broker. Other names for the concept are:

-facilitating broker -intermediary broker

In most States a person can obtain a broker's license only after obtaining a sales person's license, plus the person must:

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

Typical required qualifications for a real estate license include:

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

Traditional duties of a fiduciary include:

-loyalty -skill and care -disclosure -confidentiality -obedience -accounting

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in housing on the basis of:

-national origin -sex -familial status -religion -handicap -race and color

The transaction broker, in contract to the traditional fiduciary duties, removes or lessens these three duties:

-obedience -confidentiality -loyalty

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:

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

Among the misdeeds for which license law prescribes punishment or penalties are:

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

A well-prepared broker has knowledge in numerous valuable areas, including:

-properties available and their features and terms. -legal obligations of buyer and seller. -price and terms of recent market transactions. -most effective market procedures. -prospective buyers and their needs

Several events have spawned an active recent period of innovation in real estate brokerage, including:

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

Potential buyers tend to select a brokerage firm, or broker/sales person, on the basis of several factors, including:

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

Benefits that a property seller may gain by using a broker can include:

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

In a listing agreement, issues that the broker needs to require include:

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

In a listing agreement, issues that the owner-principal needs to require include:

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

In a listing agreement, issues that the broker needs to require include:

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

Reasons why the exclusive right of sale listing contract is the most widely used listing contract include:

-the broker needs to avoid the risk of being "scooped" after making substantial effort and investment in marketing a property. -a broker who is sure of capturing the benefits of a marketing program is likely to work harder at it. -In an MLS context, for an owner to be able to sell an MLS property and preempt the commission could undermine the MLS system.

Persons who deal with real estate for others but are exempt form licensure include:

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

Match each description to the appropriate type of listing contract. 1. open listing 2. exclusive agency listing 3. exclusive right of sale listing ____ Broker has the right to sell a property and earns a commission if any broker finds a buyer and also if the owner finds a buyer. ____ Broker has the right to sell a property and earns a commission if any broker finds a buyer, but not if the owner finds a buyer. ____ Broker has the right to sell a property, but earns a commission only by actually finding a buyer.

__3__ Broker has the right to sell a property and earns a commission if any broker finds a buyer and also if the owner finds a buyer. __2__ Broker has the right to sell a property and earns a commission if any broker finds a buyer, but not if the owner finds a buyer. __1__ Broker has the right to sell a property, but earns a commission only by actually finding a buyer.

Most States have two levels of real estate licensing; the senior one is broker while the lower level one is sales person. Which license enables the licensee to operate his or her own brokerage firm?

broker only

A 2015 survey of the National Association of Realtors reports that brokers were involved in the highest percentage of home sales since the survey began in 1981, and purchases directly from an owners had decreased between the years 2001 and 2015.

true

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

true

A listing broker normally is presumed to earn a commission upon finding a buyer who is "ready, willing, and able" to purchase the property, or upon closing of the transaction.

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A listing contract that gives a broker the right to sell a property, but entitle the broker to a commission only if the broker actually produces a buyer is called an open listing.

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

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An agent who is empowered to make commitments or contracts obligating a person of firm within a specific sphere of activity is a general agent.

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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 an open listing contract.

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

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Dual agency is controversial due mainly to divided loyalty.

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

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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 an exclusive agency listing contract.

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In a buyer 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 listing broker.

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

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In dual agency, the broker is an agent to both the seller and the buyer.

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

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In markets for home, 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 service they provide.

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

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

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

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Most commonly brokers are compensated by a commission that is a percentage of the gross sales price.

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Occasionally a broker is compensated based on a predetermined sales price, and the broker retains any amount of the actual sales price above the amount. This is known as a net listing.

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Real estate brokers are market facilitators, bringing buyers and sellers together both physically and emotionally.

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The Fair Housing Act provides an exemption to tis prohibitions for 1-4 unit housing where the owner is a resident. However, the U.S. Supreme Court has overridden this exemption in the case of Jones vs. Mayer Co. for discrimination by race.

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The most troublesome form of dual agency is unintended dual agency, which can occur quite easily in the common case where a sales person from one firm shows a property listed by another firm.

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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 transaction broker.

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

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The websites ccim.net, Costar.com, and LoopNet.com all offer vast amount of information about commercial properties across the nation.

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

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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 hight specialized type of property such as resorts, the broker is recognizing market segmentation.

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When buyers and sellers are "at odds," commercial brokers must be prepared to negotiate compromises.

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