Unit 5
A broker sold a residence for $188,000 and received $13,160 as her commission in accordance with the terms of the listing. What percentage of the sales price was the broker's commission? A) 7.5% B) 6.5% C) 6% D) 7%
The answer is 7%. The broker's compensation is a percentage of the selling price of the property. Sales price times percentage commission equals the commission amount (Selling price × % = $ commission). Therefore, the amount of commission divided by the selling price equals the percent commission, expressed as a decimal ($13,160 ÷ $188,000 = 0.07 or 7%).
Under the Real Estate Seller Disclosure Act, the real estate licensee is responsible for A) completing the disclosure form. B) all of these. C) verifying the accuracy of the information on the disclosure form. D) advising the seller of the duty to disclose defects.
The answer is advising the seller of the duty to disclose defects. The seller must complete a disclosure statement; the licensee is responsible for advising the seller of this duty and providing an appropriate form for the seller's use. Agents should caution sellers to make truthful disclosures to avoid litigation arising from fraudulent or careless misrepresentations.
What is a buyer broker agreement? A) A guarantee that the buyer will pay less by employing the broker B) A non-fiduciary agreement C) A discussion of the duties that the broker owes sellers D) An employment contract
The answer is an employment contract. Like a listing agreement, a buyer agency agreement is an employment contract in which the broker is employed as the buyer's agent. An agency agreement gives the buyer a degree of representation possible only in a fiduciary relationship.
In what type of buyer agency, if ever, is the broker entitled to a commission even if the buyer buys directly from the seller? A) Exclusive buyer agency B) Exclusive agency buyer agency C) Never D) Nonexclusive buyer agency
The answer is exclusive buyer agency. In exclusive buyer agency, the buyer is legally bound to compensate the broker if the buyer purchases a property of the type described in the contract within the agreed-upon time frame, regardless if the broker, the buyer, or another licensee locates the property.
The authority to install a For Sale sign on the property is usually included in the A) separate document "Authority to Market". B) listing agreement. C) purchase agreement. D) addendum specifying that the broker has the authority to make legal decisions on behalf of the seller client.
The answer is listing agreement. The listing agreement should specify whether the broker may place a sign on the property and advertise it and when it can be shown.
What should the Seller's Property Disclosure Statement reveal? A) Potential for loss of value B) Racial composition of the neighborhood C) Material defects D) Potential for increase in value
The answer is material defects. The seller is obligated to complete a disclosure statement in which any possible material defects should be noted. The licensee is responsible for advising the seller of this duty and for providing an appropriate form for the seller's use.
All of the following provisions are usually found in a listing agreement EXCEPT A) contract expiration rights. B) monthly utility bills. C) the price the seller wants. D) the broker's compensation.
The answer is monthly utility bills. Listing agreements include provisions for the listing price, the compensation due to the broker, and the terms of the contract. Monthly utility bills are not part of the agreement between the broker and the property owner.
The buyers want to be represented by several different agents looking at various properties. This is an example of A) exclusive agency buyer agency. B) exclusive buyer agency. C) nonexclusive buyer agency. D) transaction brokerage.
The answer is nonexclusive buyer agency. Some buyers incorrectly think that they should look at various properties with different licensees; they do not realize that they have no one looking after their best interests in this situation.
A property owner signed a 90-day listing agreement with a broker. The owner was killed in an accident before the listing expired. At this point, the listing is A) terminated automatically upon the death of the seller. B) still in effect as the owner's intention was clearly defined. C) binding on the owner's spouse for the remainder of the 90 days. D) binding only if the broker can produce offers to purchase the property.
The answer is terminated automatically upon the death of the seller. Some of the ways that a listing is terminated include when the agreement's purpose has been fulfilled, when the term expires, upon the death of either the broker or seller, and if the property has been destroyed.
When does Pennsylvania law require a written agreement between a broker and a consumer? A) When the consumer may be obligated to compensate the broker B) When the broker assigns the work to an affiliated salesperson C) Before the broker presents the Consumer Notice D) Before the seller completes the Seller Disclosure Statement
The answer is when the consumer may be obligated to compensate the broker. The Pennsylvania licensing law requires a written agreement between a broker and a consumer when the consumer is or may be obligated to compensate the broker for services; the document should provide proof of what the parties are expected to do.
A property was listed with a broker who belonged to a multiple listing service and was sold by another member broker for $153,500. The total commission was 6% of the sale price. The selling broker received 60% of the commission, and the listing broker received the balance. What was the listing broker's commission? A) $3,684 B) $9,210 C) $1,842 D) $5,526
The answer is $3,684. Total commission on the transaction is $9,210 ($153,500 × 6% = $9,210). If the selling broker received 60% of the $9,210, the listing broker received the balance of $3,684 ($9,210 × 40% = $3,684).
What document must be provided to the buyer at the earliest possible time? A) Lead-Based Paint Disclosure B) Consumer Notice C) Seller's property disclosure notice D) Buyer agency contract
The answer is Consumer Notice. Before any substantive issues may be discussed with the buyer, the licensee must provide the prospective buyer with the Consumer Notice. Only after discussing these options should the licensee discuss the buyer agency contract.
In Pennsylvania, what is the first document that must be discussed with the potential seller of a home built in 1921? A) Seller Property Disclosure Statement B) Lead-Based Paint Hazard Disclosure Statement C) Consumer Notice D) Comparative market analysis (CMA)
The answer is Consumer Notice. In Pennsylvania, licensees are required to present the Consumer Notice at their first meeting with a consumer, and at that time, licensees should explain the various types of agency options available to the consumer.
The home was built in 1955 and has been owned continuously since then by one couple. Now they are planning to sell it. What must they provide their buyers? A) A statement that they did not use any lead-based paint B) Money in an escrow account to pay for lead paint mitigation C) Protect Your Family from Lead in Your Home pamphlet D) A recent test for lead-based paint
The answer is Protect Your Family From Lead In Your Home pamphlet. If the residential property was built before 1978, then the seller is required to provide the buyer with the EPA pamphlet Protect Your Family from Lead in Your Home. No one has to test and no one has to mitigate; the sellers must simply make the disclosure.
To what properties does the Pennsylvania Real Estate Seller Disclosure Act apply? A) Agricultural property of less than 10 acres B) An old manufacturing facility C) A 2-unit apartment building D) A 50-unit apartment building
The answer is a 2-unit apartment building. The Seller Property Disclosure Act specifically requires that a disclosure be made by sellers of not less than one and not more than four residential dwelling units.
An owner wants to know how to determine the best asking price. How does a comparative market analysis (CMA) compare to an appraisal? A) A CMA contains a compilation of similar properties indicating trends and prices buyers are not willing to pay. B) A certified real estate appraiser prepares the CMA. C) An appraisal determines the sale price. D) A CMA is the same as an appraisal.
The answer is a CMA contains a compilation of similar properties indicating trends and prices buyers are not willing to pay. The comparative market analysis (CMA) is not an appraisal and includes information about properties recently sold, those currently on the market (showing market trend), and the prices of those that were listed but did not sell.
The listing agreement should include A) a statement that the seller and broker will pursue legal action if either supplies incorrect information. B) the number of times that the broker will show the property. C) a description of the premises. D) an automatic renewal clause.
The answer is a description of the premises. In addition to the street address, the legal description, lot size, and tax parcel number may be required for future purchase offers. The agreement usually includes a statement that the seller and the broker will hold each other harmless (not sue each other) for any incorrect information supplied by either.
All of the following should be included in written agreement between the broker and the consumer EXCEPT A) a statement that indicates the fee is standard for the local real estate community. B) the duration of the contract between the parties. C) the purpose of the Real Estate Recovery Fund. D) a notice indicating a potential for dual agency.
The answer is a statement that indicates the fee is standard for the local real estate community. The written agreement between the broker and the consumer should indicate that the fee to be charged is a result of negotiation between the consumer and the broker; neither the form nor conversation should ever even hint at the possibility of collaboration between competing brokers, which would be a violation of the antitrust laws.
At what time should a real estate licensee present the Consumer Notice to a prospective buyer? A) After showing two properties B) At the open house as people sign in C) At the first substantive meeting D) Never, this form must be given to sellers, not buyers
The answer is at the first substantive meeting. Before any substantive issues can be discussed, the licensee must provide the prospective buyer with the Consumer Notice, providing the licensee the opportunity to explain the forms of agency available and the parties' rights and responsibilities under each type. The specific services provided to a buyer-client should be clearly explained.
Which of the following is a similarity between an exclusive agency listing and an exclusive right-to-sell listing? A) Under both, the seller authorizes only one particular salesperson to show the property. B) Both are open listings. C) Both give the responsibility of representing the seller to one broker only. D) Under both types of listings, the seller retains the right to sell the real estate without the broker's help and without paying the broker a commission.
The answer is both give the responsibility of representing the seller to one broker only. Both an exclusive right-to-sell listing and an exclusive agency listing authorize one broker to represent the seller. However, in an exclusive agency listing, the seller reserves the right to sell the real estate without an obligation to compensate the broker.
A man owned his home for five years and when he married, he added his wife's name to the deed. Now they are preparing to sell the home they lived in for the last 25 years. Who must sign the listing agreement? A) Only the wife B) The heirs to the property C) Only the husband D) Both husband and wife
The answer is both husband and wife. All owners of the property, regardless of when their names were added to the deed, must sign the listing agreement. The heirs have no interest in the property at this time.
What does the license law require in a written agreement between a broker and a consumer? A) Acceptable national origin of buyers B) Paragraph limiting either party from suing the other C) Limits on working with similar clients D) Broker's fee was negotiated
The answer is broker's fee was negotiated. Any written agreement between a consumer (buyer or seller) should include a statement that the broker's fee was determined as a result of negotiations between the broker and the consumer. It should also include a statement identifying any possibility that the broker may provide services to more than one consumer in the transaction.
A listing taken by a real estate salesperson belongs to the A) salesperson. B) broker. C) seller. D) salesperson and the broker equally.
The answer is broker. A licensed real estate salesperson performs services for, or on behalf of, the employing broker. Listings secured by the salesperson are the property of the employing broker.
A comparative market analysis A) by law must be completed for each listing taken. B) should not be retained in the property's listing file. C) can help the seller price the property. D) is the same as an appraisal.
The answer is can help the seller price the property. One of the best tools available to help the seller establish a realistic listing price is a comparative market analysis (CMA). A CMA, however, is not an appraisal, though there is no requirement that an appraisal be used unless the seller so desires.
The written agreement signed by a consumer when hiring a real estate broker should include a statement A) that recognizes that the brokerage fee is similar to those charged by other brokers. B) defining the race of acceptable buyers. C) describing the purpose of the Real Estate Recovery Fund. D) limiting the ability of the broker of working with other consumers.
The answer is describing the purpose of the Real Estate Recovery Fund. All written agreements between a broker and a consumer must include a statement describing the purpose of the Real Estate Recovery Fund and the telephone number where a consumer may receive further information.
A written agreement between a broker and a client includes the following language: "In return for the compensation agreed upon, Broker will assist Client in locating and purchasing a suitable property. Broker will receive the agreed compensation regardless of whether Broker, Client, or some other party locates the property ultimately purchased by Client." What kind of agreement is this? A) Exclusive agency buyer agency agreement B) Exclusive buyer agency agreement C) Exclusive agency listing D) Open buyer agency agreement
The answer is exclusive buyer agency agreement. An exclusive buyer agency agreement entitles the broker to compensation regardless of whether the property the buyer purchased was located by the broker, the buyer, or another licensee.
In Pennsylvania, in what type of listing must the broker include an extra clause, in bold type, explaining that the seller will owe the broker a commission no matter how the property is sold? A) Open listing B) Net listing C) Exclusive agency listing D) Exclusive right-to-sell listing
The answer is exclusive right-to-sell listing. Section 35.332 of the Real Estate Commission's Rules and Regulations requires that an exclusive right-to-sell or exclusive right-to-lease agreement contain a statement in boldface type: The broker earns a commission on the sale (or lease) of the property, regardless of who, including the owner, makes the sale (or lease) during the listing period.
The sellers hired a broker under the terms of an exclusive right-to-sell listing. While the listing was in effect, the sellers—without informing the broker—sold the property to their neighbor. How much, if anything, must the sellers pay the broker? A) The broker's marketing expenses B) Nothing C) Full commission D) Half the commission
The answer is full commission. Under the terms of an exclusive right-to-sell listing, the broker is entitled to compensation if the property is sold by anyone, including the owner, during the term of the contract.
Which of the following is TRUE about a listing contract? A) It obligates the seller to convey the property if the broker procures a ready, willing, and able buyer. B) It is an employment contract for the professional services of the broker. C) It obligates the broker to work diligently for both the buyer and the seller. D) It automatically requires the payment of a commission while the broker protection clause is in effect.
The answer is it is an employment contract for the professional services of the broker. A listing contract is essentially an employment rather than a real estate contract. Brokers agree to use their professional skills to secure a ready, willing, and able buyer according to the terms specified in the contract. In return, sellers agree to compensate brokers according to the contract terms.
How is a buyer's agent usually compensated? A) Negotiated hourly rate B) Buyer pays out of pocket C) The seller pays the buyer agent directly D) Listing agent shares the commission paid by the seller
The answer is listing agent shares the commission paid by the seller. Although buyers may pay their agent directly, most commonly, the listing agent shares with buyer the commission paid by the seller. However, buyer agents may be compensated by an hourly rate, a flat fee, or per showing.
Property owners listed their property for sale with a broker. During the negotiations, the owners told the broker that they wanted $138,000 for the property and that the broker could keep anything above that amount as commission. What type of listing is this? A) Non-exclusive listing B) Net listing C) Open listing D) Incentive listing
The answer is net listing. A net listing provision specifies that the seller will receive a net amount of money from a sale, with the excess going to the listing broker as commission. A net listing can create a conflict of interest between the broker's fiduciary responsibility to the seller and the broker's profit motive. For this reason, net listings are illegal in many states and discouraged in others.
The buyers contact the listing agent who shows them the property for sale. Given this information, who represents the buyers' interests? A) The listing agent's broker B) The listing agent represents both the sellers and the buyers C) The listing agent D) No one
The answer is no one. The listing agent represents the sellers. Absent any discussion about buyer representation or dual agency or designated agency, these buyers are not represented by anyone.
After signing an agency agreement with a broker, the buyers also sign other agency agreements with other brokers. Despite all these agency relationships, the buyers find a house on their own. Under the terms of these agency agreements, the buyers do not owe any broker a commission. What kind of an agency agreements were these? A) Nonexclusive buyer agency agreements B) Exclusive agency agreements C) Exclusive agency buyer agency agreements D) Exclusive buyer agency agreements
The answer is nonexclusive buyer agency agreements. A buyer agency agreement is an employment contract between the buyers and the broker. Similar to an open listing, a buyer agency contract is a nonexclusive agreement under which buyers can have contracts with several brokers and still retain the right to purchase a property on their own without obligation to any of the brokers.
All of the following may terminate a listing EXCEPT A) death or incapacity of the broker. B) nonpayment of the commission by the seller. C) expiration of the contract. D) destruction of the improvements on the property.
The answer is nonpayment of the commission by the seller. Listing agreements may be terminated in a number of ways, including expiration of the contract term, death or incapacity of either party, or destruction of the property. Nonpayment of the commission by a seller does not terminate the agreement and may create legal liability for the seller.
What is the maximum listing period, if any, in Pennsylvania? A) Indefinitely, so long as the listing automatically renews B) 180 days C) One year D) 60 days
The answer is one year. Section 35.332(c) of the Rules and Regulations states that the listing period cannot exceed 12 months. An automatic renewal provision and the requirement to serve a cancellation notice to terminate an exclusive agreement at the end of the listing period are prohibited.
Six weeks after a couple listed their property with a broker, the broker brought an offer at full price and terms of the listing from buyers who were willing and able to pay cash for the property. The couple rejected the buyers' offer. In this situation, the couple A) is liable to the buyers for compensatory damages. B) must sell the property because they received a full-price offer. C) owes a commission to the broker. D) is liable to the buyers for specific performance.
The answer is owes a commission to the broker. The sellers are not obligated to sell the property. However, the sellers are obligated to compensate the broker because the broker secured a ready, willing, and able buyer according to the terms of the listing contract.
In Pennsylvania, how can a broker guide the seller to an appropriate asking price? A) No need, the broker should list at whatever the seller wants. B) Present a recent comparative market analysis (CMA). C) Conduct an appraisal. D) Ask the salespeople in the office to view the property and then offer their suggestions.
The answer is present a recent comparative market analysis (CMA). Unlike an appraisal that considers only recently sold properties, a comparative market analysis (CMA) (sometimes known as a competitive market analysis) compares location, size, age, style, and amenities of properties that are comparable to the seller's property.
What is the first step when taking a listing? A) Gain agreement for dual agency B) Explain the Seller Property Disclosure Statement C) Present the Consumer Notice D) Present the comparative market analysis (CMA)
The answer is present the Consumer Notice. In Pennsylvania, the broker must first present the Consumer Notice, which provides the broker with the opportunity to explain the various types of listing agreements, the ramifications of different agency relationships, and the marketing services the broker provides.
The buyers are concerned that they might overpay for the property. What information may their buyer agent provide to ensure that they make the BEST investment? A) Prices of recently sold properties in the area B) The asking prices of similar properties C) What the seller paid for the property D) Broker statement of area values
The answer is prices of recently sold properties in the area. The buyer's agent can prepare a comparative market analysis (CMA) from the buyer's point of view; that is, showing what other buyers have been willing or not willing to pay for similar properties.
Who is responsible for completing the Seller Property Disclosure Statement? A) Seller B) Licensed home inspector C) Licensed engineer D) Listing agent
The answer is seller. Pennsylvania's Real Estate Seller Disclosure Act requires sellers of residential real properties (an individual, partnership, corporation, trustee, or combination) who intend to transfer an interest in a one- to four-family residential property to disclose to the buyer all material defects.
Who does the broker protection clause protect? A) The broker who was procuring cause B) The seller C) All brokers who showed the property D) The buyer
The answer is the broker who was procuring cause. The broker protection clause provides that the property owner will pay the listing broker if, within a specified number of days after the listing expires, the owner transfers the property to someone with whom the broker negotiated during the original term of the listing. This clause protects a broker who was the procuring cause from losing a commission because the transaction was completed after the listing contract expired.
Which of the following should be included in the listing agreement? A) The seller's net after expenses B) The mortgage amount C) The listing price D) Automatic renewal clause
The answer is the listing price. The listing price is the proposed sale price; the listing agreement does NOT include how the seller's proceeds will be reduced by unpaid real estate taxes, special assessments, mortgage debts and any other outstanding obligations.
The listed price for a property should be based on A) its appraised value. B) what the seller chooses. C) the maximum of a range of values. D) the net to the seller.
The answer is what the seller chooses. The property owner has the right to choose the price at which the property will be offered for sale. The broker has the right to refuse to accept a listing that the broker feels is not being offered at a price that will result in a timely sale.
In Pennsylvania, when is a written agreement between the broker and consumer required? A) Only for residential listings but not commercial listings B) When the consumer may be obligated to compensate the broker for services C) When the broker is not sure that the seller will ultimately pay the commission D) Only for listing agreements longer than six months
The answer is when the consumer may be obligated to compensate the broker for services. The Pennsylvania licensing law requires a written agreement between a broker and a consumer when the consumer is or may be obligated to compensate the broker for services. As a practical matter, a written document provides proof of what the parties are expected to do, which is particularly important if either party takes legal action against the other.
A statement regarding any possible conflicts of interest is most likely to be found in the A) seller disclosure statement. B) Consumer Notice. C) written agreement between the broker and the consumer. D) rules and regulations of the State Real Estate Commission.
The answer is written agreement between the broker and the consumer. Statements about the broker's policies regarding cooperation and compensation as well as notice about any possible conflicts of interest and ongoing duty to disclose conflicts in a timely manner will be found in the written agreement creating an agency agreement between the broker and the consumer.