Review 02: Agency & Contracts (7-10)
A broker has an Exclusive Right to Sell Listing Agreement with Fast-Food Market with a $4,000 commission fee. The same broker has a similar listing with Smithy-Hardware Store with a $7,000 commission. Due to changing demographics, the two stores decide to swap locations and ownership of the stores through a 1031 tax deferred exchange. In this case, the broker's commission would be? A) None, because an exchange of real property is not a sale of the property that results in a commission payment. B) $4,000, assuming that Fast-Food Market was listed prior to Smithy-Hardware. C) $7,000, assuming that Smithy-Hardware was listed prior to Fast-Food Market. D) $11,000 because the broker assisted in the conveyance of real property.
$11,000 because the broker assisted in the conveyance of real property.
Several months ago, Bill purchased four lots for $24,000 each. He later divided the lots into six lots and sold each for $20,000. What was Bill's percent of profit (loss)? A) 20% B) 25% C) 80% D) 125%
25%
A buyer is under an exclusive buyer's agency agreement and using their buyer agent they submit an offer to a listing agent who then submits the offer to the seller. The parties have many discussions and negotiations. The seller decides to contact the buyer directly. During their phone call, the buyer and seller agree to the terms of the contract. The seller makes the changes and faxes them directly to the buyer. The buyer initials the changes, dates and signs the counteroffer and faxes it back to the seller. Neither the buyer's agent nor the listing agent are aware of these communications. Which of the following is correct? A) The buyer and seller have violated NC licensing law by directly communicating. B) A contract has not been formed because all communication must go through the agents when an exclusive agency agreement exists. C) A contract has been formed because the parties reached an agreement, the agreement was signed and it was communicated to the seller. D) The Uniform Electronic Transactions Act expressly forbids faxed copies to create legally binding contracts.
A contract has been formed because the parties reached an agreement, the agreement was signed and it was communicated to the seller.
Once a binding contract exists between two parties, the document that the licensee would use to make any changes or modifications to an already existing contract or to add to the terms of a contract would be called a(an): A) addendum B) adaptation C) counteroffer D) contingency clause
Addendum
According to North Carolina law, what are the buyer and seller allowed to negotiate after contract formation? A) Nothing. The buyer and seller are bound to the terms of the agreed to contract. B) Assuming that they are both interested in negotiating, all terms of the contract may be renegotiated during the contractual period. C) The buyer and seller may renegotiate, but they will need to create a new contract through novation. D) The buyer and seller may renegotiate, but only during the due diligence period.
Assuming that they are both interested in negotiating, all terms of the contract may be renegotiated during the contractual period.
At what point in the transaction must the real estate licensee have an agency discussion with the consumer and use the "Working With Real Estate Agents" brochure? A) at first substantial contact B) at initial contact C) prior to writing an offer D) prior to showing a home
At first substantial contact
Under which type of listing agreement does the seller lose his/her right to compete for the commission? A) open listing B) exclusive agency listing C) exclusive right to sell listing D) net listing
Exclusive right to sell listing
A deed was not properly recorded. This would best be described as: A) Failure of contract, but valid between the parties B) Failure of notice, but valid between the parties C) Failure of privity, but valid between the parties D) Failure of estate, but valid between the parties
Failure of notice, but valid between the parties
Adam is a licensed real estate agent and has a written buyer agreement with Sally. At the time that Sally hired Adam she authorized exclusive agency only. Which of the following statements is true regarding the properties which Adam may show to Sally? A) He may not show any of his firm's listings without getting oral dual agency authorization B) He is not allowed to show his company's listings at all. C) He may show an in-house listing, but must get written dual agency authorization prior to Sally making an offer. D) He may show an in-house listing so long as he gets Sally to consent to dual agency authorization in writing before showing an in-house listing.
He may show an in-house listing so long as he gets Sally to consent to dual agency authorization in writing before showing an in-house listing.
Lucy Jones, a subagent of the seller and provisional broker with ABC Realty, sold a property listed with XYZ Realty. The buyer made a low offer but told Lucy they would be willing to offer more money and better terms if the sellers did not accept the original offer. Lucy presented the offer to Joe Baker, listing agent, and repeated to Joe the buyer's statement that, "They would be willing to offer more money and better terms." Joe presented the offer, making no mention that the buyers would be willing to go higher. Which agent(s) violated the Law of Agency? I. Joe, the listing agent II. Lucy, working with a buyer, as a seller's subagent A) I only B) II only C) Both I and II D) Neither I nor II
I only
Under North Carolina law and commission rules, which of the following is a correct statement regarding designated agency? I. The BIC cannot be a designated agent. II. An agent cannot be appointed as a designated agent if the agent has prior confidential knowledge about the other party in the transaction. A) I only B) II only C) Both I and II D) Neither I nor II
II only
Which of the following is NOT true about the North Carolina Residential Property Disclosure form? A) If the form is not provided per the statute, the buyer may be able to cancel any resulting contract. B) If the buyer rescinds the contract within the allowed time period both the due diligence fee and the earnest money deposit will be returned to the buyer C) If the seller marks, "No Representation" on the form the licensee is relieved of their duty to discovery and disclose material facts. D) The use of the form is required of a seller even if no real estate licensee is involved in the transaction.
If the seller marks, "No Representation" on the form the licensee is relieved of their duty to discovery and disclose material facts.
An agency relationship is BEST established in what way? A) implied B) voluntarily C) in a written agreement D) by an oral agreement
In a written agreement
A seller notified his listing agent that the water heater was not working properly. The agent failed to mention this to a buyer's agent. Which of the following would be at fault if the buyer is harmed due to the malfunctioning water heater? A) seller and listing agent B) listing agent and buyer's agent C) buyer's agent D) listing agent
Listing agent
Mary Smith is broker-in-charge of Smith Realty, which has several affiliated agents. Mary is actively involved in listing and selling properties. Sue Long, a provisional broker with Smith Realty, has a buyer client who has expressed interest in one of Mary's listings. Which of the following agency agreements is permissible in this situation? A) Mary and Sue may act as dual agents. B) Mary and Sue may act as designated agents. C) Mary and Sue may both represent the seller, treating the buyer as a customer. D) Mary may represent her seller, and Sue may represent her buyer.
Mary and Sue may act as dual agents.
Broker Ron Thompson listed and sold Mr. Simpson's property. Thompson did not disclose to Mr. Simpson that there was a potential zoning change in the works that would allow the property to be used as a convenience store. The new use would substantially increase the value of Mr. Simpson's property. Which of the following is/are true? I. Thompson did not have to divulge the zoning change since it had not been put into effect. II. Thompson did not have to divulge the zoning change since the property sold at its fair market value. A) I only B) II only C) Both I and II D) Neither I nor II
Neither I nor II
A seller's residence is listed with a broker and the seller stipulates that they want to receive $100,000 from the sale and the broker can keep any amount higher than that as the commission. What type of listing agreement is this? A) Exclusive right to sell listing B) open listing C) exclusive agency listing D) net listing
Net listing
The Statute of Frauds requires that certain agreements must be in writing in order to be enforceable. Which of the following types of agreements is subject to the Statute of Frauds? A) Exclusive right to sell listing agreements B) Offers to purchase and contract C) One year leases with tenants D) Buyer brokerage agreements
Offers to purchase and contract
Jim, a provisional broker, is an agent for ABC Realty. While discussing agency with a prospective buyer which of the following would be a correct statement that Jim can make to the buyer? A) You don't have to decide you want to hire me until you are ready to write an offer. Let's start out by me just showing you homes. B) I can present your offer so long as we have a buyer's agency agreement in writing before closing. C) Our firm practices designated agency. If we look at at home that is listed by my BIC, then my BIC will act as the designated agent for the seller and I can fully represent you as your designated agent. D) Once you hire me, I agree to protect and promote your interests and to protect your confidential information, even if our agreement is oral.
Once you hire me, I agree to protect and promote your interests and to protect your confidential information, even if our agreement is oral.
A contract that binds the owner of real estate to hold an offer to sell open for a set period of time, and gives the buyer the legal right to either accept or withdraw is a(n): A) right of first refusal B) option to purchase contract C) backup offer D) installment land contract
Option to purchase contract
When must a licensee working for a buyer reduce the oral agency employment agreement to writing? A) at first substantial contact B) at initial contact C) prior to submitting an offer D) prior to showing a home
Prior to submitting an offer
Which of the following would be used to terminate a contract in a situation where the buyer is entitled to be relieved of all liability and have all of their money returned? A) rescission B) relegation C) revision D) reversion
Rescission
An oral real estate sales contract is unenforceable under: A) Real Estate Licensing Law B) Statutes of Limitations C) Law of Agency D) Statute of Frauds
Statute of Frauds
An agent works for Smith & Wesson Realty and is acting as a buyer's agent. The buyer is interested in a property that is listed with Jones Realty. From whom will the agent receive her commission check? A) The Jones Realty firm. B) Either firm may pay the licensee. C) The licensee will be paid directly by the buyer/client. D) The Smith & Wesson Realty firm.
The Smith & Wesson Realty firm.
Jones is acting as a buyer's agent under a signed buyer agency agreement. Jones assists the buyer in preparing an offer to purchase, which the buyer signs. The buyer then immediately leaves town on business. Jones presents the offer to the listing agent. The seller signs the offer without any changes, and Jones is notified of the acceptance at 4 p.m. Jones checks his voice mail messages at 5 p.m. and discovers that the buyer left him a message a 2 p.m. withdrawing his offer. Which of the following statements regarding this situation is true? A) The contract became legally binding when Jones was notified of the seller's acceptance. B) No contract was legally created because the buyer withdrew his offer before his agent was notified of the seller's acceptance. C) The contract is voidable because the buyer was not notified personally of the acceptance. D) The contract is voidable because the buyer withdrew the offer before it had been accepted.
The contract became legally binding when Jones was notified of the seller's acceptance.
Barney Buyer made an offer to a seller which was accepted. Three days prior to closing, Barney dies. What is the status of the agreement between the buyer and the seller? A) The contract was automatically voided at the time of Barney's death. B) The contract is still valid and enforceable. The contract is now an obligation of the estate and the probate court will direct the proper way to proceed with the agreement. C) Barney's heirs have the option of making the contract voidable. D) The seller will have to enforce the contract through a court order for specific performance.
The contract is still valid and enforceable. The contract is now an obligation of the estate and the probate court will direct the proper way to proceed with the agreement.
Smith and Baker executed a valid contract to buy and sell a home. The home burns down. What is the status of the contract? A) The contract is void. B) The contract is voidable at the buyer's option. C) The buyer and seller are still under contract and must go through with the terms as written. D) The seller may void the contract.
The contract is void.
Which of the following would not terminate a listing? A) The seller's home burns down. B) The real estate firm goes out of business. C) The listing agent leaves the real estate company for another firm. D) The seller declares bankruptcy.
The listing agent leaves the real estate company for another firm.
A seller entered into an Exclusive Right to Sell Listing Agreement. A qualified buyer presented an offer for the listed price. The seller refused to sell to the buyer. Which of the following is a correct statement? A) The seller can refuse to sell, but a commission may still be owed to the firm. B) The seller can refuse to sell and has no legal liability to anyone. C)The seller must accept the offer because it was for the listed price. D) The seller must still sell based on the obligation he agreed to in the Exclusive Right to Sell Listing Agreement.
The seller can refuse to sell, but a commission may still be owed to the firm.
If a seller's agent or subagent has been informed of a latent defect in the property and the seller on the property disclosure statement checks "No Representation" and the agent fails to inform the buyer of the defect who is liable? A) seller B) the seller's agent C) both seller and agent D) neither seller nor agent
The seller's agent
A licensee has a listing agreement with the seller. The seller dies before the agent can enter the listing into the MLS. What should the licensee do? A) There is still a valid agreement so the licensee should put the information into the MLS and is under an obligation of fiduciary duties to market the property on behalf of the heirs. B) The agent can enter the information into the MLS and show the property, but the agent must wait for probate court approval of the heirs before receiving any offers. C) There is no valid agreement and the agent must cease all activity. D) The property can be advertised but the licensee cannot show the property without probate court approval.
There is no valid agreement and the agent must cease all activity.
Which of the following is TRUE regarding oral buyer agency agreements? A) They can be exclusive, prohibiting the buyer from working with other agents. B) They must be for a set period of time. C) If there is an oral agreement then the brochure "Working With Real Estate Agents" must be provided at the time the agreement is reduced to writing. D) They are permitted up until a written offer is submitted on behalf of the buyer.
They are permitted up until a written offer is submitted on behalf of the buyer.
Mr. Jones makes a full price offer on a home contingent on his wife approving the contract within one week after the offer becomes legally binding. If the seller accepts Mr. Jones' offer what is the status of the agreement between the parties to the contract? A) This is a valid agreement, although the contract will be voidable at the Jones' option should Mrs. Jones not approve of the agreement. B) Mr. Jones has created a binding contract which is not voidable. As a spouse, Mr. Jones can bind his wife to the agreement without her signature. C) There is no contract in existence because all parties must sign a contract for it to be binding. D) This is an illegal agreement because an Offer to Purchase and Contract cannot include contingencies.
This is a valid agreement, although the contract will be voidable at the Jones' option should Mrs. Jones not approve of the agreement.
A buyer and seller enter into a contract. The seller backs out and the buyer sues for specific performance. What is the buyer seeking in this lawsuit? A) money damages B) a new contract C) deficiency judgment D) transfer of the property
Transfer of the property
An intoxicated individual enters into a sales contract to purchase a home. The contract would be considered: A) void B) unenforceable C) voidable D) valid
Voidable
Sam, a prospective buyer, signs an option contract and pays the seller $500 for an option fee. Which term best describes this contract? A) voidable B) unenforceable C) valid D) void
Voidable
Which of the following is not required for a contract to be valid and enforceable? A) legal capacity B) consideration C) mutual assent D) witnesses
Witnesses
Jason is a licensee who is representing a seller. At the open house a buyer indicates that they are interested in purchasing the home. Jason has an agency discussion with the buyer, provides them with the Working with Real Estate Agents brochure and has the buyer sign a buyer brokerage agreement. What else must Jason have from both the seller and buyer in order to proceed with the transaction A) Written disclosure and consent to dual agency representation. B) Oral disclosure and consent to dual agency representation. C) Written acknowledgement that the buyer and seller agree to the single agency representation. D) Since the parties have both signed a written employment agreement, nothing else is required.
Written disclosure and consent to dual agency representation.
Sam was recently declared incompetent and sister Sally was appointed his guardian by the courts. To raise funds to assist with Sam's medical needs, Sally hires a real estate agent to sell a home which is in Sam's name. A buyer is found and Sally signs the Offer to Purchase and Contract on behalf of Sam as his legal guardian. Is this legal? A) No, only the court can enter into a legal contract on behalf of Sam since he has been declared incompetent. B) No, the creation of a guardianship is always for medical needs and decisions only. C) Yes, because Sally is now a special agent on behalf of Sam. D) Yes, because a court appointed guardian would be able to enter into contracts on behalf of their ward.
Yes, because a court appointed guardian would be able to enter into contracts on behalf of their ward.
When must a licensee get an Exclusive Right to Sell Listing Agreement signed? A) before the seller receives an offer B) prior to closing C) at first substantial contact D) at the time of employment or the start of the relationship
at the time of employment or the start of the relationship
A valid and binding contract is created by a seller when acceptance of an offer is: A)delivered in writing to the offeror B) communicated either in writing or verbally to the listing agent C )communicated to either the buyer representative or the buyer D) created by an affirmative act of the seller
communicated to either the buyer representative or the buyer
A broker receives two offers on a property that he has listed. He submits the first offer at 9:00 AM to the seller but does not submit the second offer until the seller has decided how to respond to the first offer. The actions of the broker would best be described as: A) allowed, providing he notifies the buyer's agents. B) allowed, if the company policy specifically permits this conduct. C) not allowed, because the broker must submit all offers to the seller. D) not allowed, because the seller must notify each buyer of the other offer.
not allowed, because the broker must submit all offers to the seller
A broker has an exclusive right to sell listing on a building. An offer to purchase the building is received while the owner is out of town. The offer requires a commitment from the seller before the seller is scheduled to return to the city. Under these circumstances, the: A) broker may create a binding agreement on behalf of the seller B) broker may collect a commission even if the transaction falls through because of the seller's absence from the city C) the buyer is obligated to keep the offer open until the seller returns D) the broker must obtain the acceptance of the seller to effect a contract
the broker must obtain the acceptance of the seller to effect a contract
All of the following are true regarding the "Working with Real Estate Agents Brochure" EXCEPT: A) the brochure must be provided at first substantial contact. B) the buyer must sign the brochure before the agent can work as a buyer's agent C) if first substantial contact is by phone, the brochure must be mailed within 3 days D) the brochure includes a place for disclosure of seller subagency and an acknowledgement of such agency status by the prospective buyer.
the buyer must sign the brochure before the agent can work as a buyer's agent
A buyer's agent is permitted to have an oral agency employment agreement with a buyer so long as the licensee gets the written employment agreement no later than the: A) time an offer is submitted B) time an offer is accepted C) formation of a contract between the seller and buyer D) date of closing
time an offer is submitted
At an open house, the seller's agent must disclose his/her agency status to a prospective buyer: A) when the prospect first walks into the house and shows interest in the property B) when the prospect asks questions about the price of the property and its features C) when the prospect begins to talk about his/her property needs and ability to purchase D) prior to giving the prospect a tour of the property and providing detailed information about the features of the property
when the prospect begins to talk about his/her property needs and ability to purchase
Acme real estate brokerage has been in business for many years. A new company, Flat Fee Listers, has been charging much less than the Acme firm charges to list and sell homes. At a recent company meeting the owner of Acme instructed their agents not to show any listings that were being sold by Flat Fee Listers. Such conduct: A) would likely be a boycotting violation under the Sherman Antitrust Act. B) would be considered illegal redlining. C) is considered an acceptable and normal business practice D) is legal because Acme has the right as a brokerage firm to choose the companies with which it wants to work.
would likely be a boycotting violation under the Sherman Antitrust Act.
Which of the following is TRUE regarding the assignment of contracts? A) Contracts may not be assigned without the seller's permission. B) Assigned contracts make the assignee solely liable in the event of breach. C) An assignment transfers all rights and obligations of a contract to a third party. D) Contracts are assignable, unless the contract specifically prohibits assignment.
Contracts are assignable, unless the contract specifically prohibits assignment.
Which of the following statements is/are correct? I. In dual agency, the seller client and buyer client are aware and understand that the firm's dual agency role is to provide balanced and fair representation of the seller client and buyer client and to encourage and effect communication between them rather than as an advocate or exclusive agent or representative. II. In designated agency, the firm designates an agent to represent the seller client and another agent in the firm to represent the buyer client as long as both agents have not actually received confidential information concerning the other client and shall represent the interests of the parties to the extent permitted by law. A) I only B) II only C) Both I and II D) Neither I nor II
Both I and II
A buyer made an earnest money deposit of $1,500 and gave the licensee a due diligence fee of $500. The licensee submitted the offer to the seller. However, the buyer contacted the licensee and withdrew their offer before it was accepted. The licensee is responsible for taking what action with the earnest money and due diligence fee? A) Both the earnest money and due diligence fees should be turned over to the seller. B) The seller will get to keep the due diligence fee, but the earnest money must be deposited into the trust account. C) Both the earnest money and the due diligence fee should be returned to the buyer. D) The earnest money gets returned to the buyer, but the seller is entitled to the due diligence fee.
Both the earnest money and the due diligence fee should be returned to the buyer.