Unit Exam 2: Real Estate Brokerage

A salesperson took a listing on a house that sold for $329,985. The commission rate was 8%. Another salesperson employed by another broker found the buyer. The listing broker received 60% of the commission on the sale; the buyer's broker received 40%. If the listing broker kept 30% and paid the listing salesperson the remainder, how much did the listing salesperson earn on the sale? A) $3,167.86 B) $11,087.50 C) $15,839.28 D) $7,391.66

The answer is $11,087.50. Total commission earned on the transaction was $26,398.80 ($329,985 × 8%). The listing broker received 60% of the total commission or $15,839.28 ($26,398.80 × 60%). The listing salesperson received 70% of the amount paid to the broker of $11,087.50 ($15,839.28 × 70%).

Two licensees were found guilty of conspiring with each other to allocate real estate brokerage markets. A woman suffered a $90,000 loss because of their activities. If the woman brings a civil suit against the two licensees, what can she expect to recover? A) Actual damages plus attorney's fees and costs B) Only $90,000—the amount of actual damages the woman suffered C) $270,000 plus attorney's fees and costs D) Nothing, a civil suit cannot be brought for damages resulting from antitrust activities

The answer is $270,000 plus attorney's fees and costs. In a civil suit alleging a violation of antitrust laws, a person who has suffered a loss because of the activities may recover triple the value of the actual damages plus attorney fees and costs. The woman could recover $270,000 ($90,000 × 3).

After the last transaction, real estate licensees may call consumers with whom they have an established business relationship for up to A) 12 months. B) 24 months. C) 6 months. D) 18 months.

The answer is 18 months. Real estate licensees may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment, even if the consumer is listed on the National Do Not Call Registry.

The real estate website should include A) an endorsement from the local association of REALTORS®. B) a disclaimer that the site is for information only. C) a notice that the information on the website is factually correct. D) a notice that the site has been approved by the real estate commission.

The answer is a disclaimer that the site is for information only. The website is as correct as it was last checked, but much can happen to listings and sales in a short period of time. Check for accuracy, and make disclaimers.

Violations of federal antitrust laws committed by individuals can result in A) a fine of up to $100 million. B) a fine of up to $1 million. C) imprisonment for six months. D) censure by the State Real Estate Commission.

The answer is a fine of up to $1 million. For antitrust violations committed after 2004, individuals face a fine up to $1 million and/or up to 10 years imprisonment; corporations can be fined up to $100 million per offense.

Pennsylvania's real estate licensee law considers the broker's affiliated licensees, whether associate broker or salesperson, as A) independent contractors who are free from supervision. B) supervised independent contractors. C) an employee of the broker. D) nonagents

The answer is an employee of the broker. Pennsylvania's real estate license law treats the affiliated licensees (associate broker or salesperson) as employees of the broker, regardless of whether they are considered employees or independent contractors for income tax purposes because the broker is accountable for their licensed activities and, therefore, can control what they do to ensure that their conduct complies with the law.

Real estate brokers will lose the right to compensation in real estate transactions if they A) are not licensed when employed. B) accept a commission from another licensee. C) do not personally market and sell the listings. D) do not advertise the properties

The answer is are not licensed when employed. To be entitled to compensation, the broker must be properly licensed, be employed under a valid contract, and perform under the terms of that agreement. An unlicensed party is not entitled to compensation.

Any comment about a new listing on an internet social site A) is not taken seriously. B) can be easily erased from history. C) can become a permanent record. D) is not subject to real estate license law.

The answer is can become a permanent record. Many people have discovered that internet entries can take a life of their own and are often very difficult to delete. License laws cover advertising in any form.

As a general agent of the broker, a salesperson may A) make contracts with other brokers. B) carry out real estate activities in the name of the broker. C) represent more than one broker. D) receive compensation from other brokers.

The answer is carry out real estate activities in the name of the broker. All of a salesperson's activities must be performed in the name of that broker. The salesperson can carry out only those responsibilities assigned by the employing broker and can receive compensation only from that broker. In Pennsylvania, salespersons may be licensed with only one broker.

Which of the following is required under the CAN-SPAM Act? A) Routing information may be hidden. B) Commercial emails may appear to be personal messages. C) Email recipients must have an opt-out method. D) If not pornographic, misleading subject lines are permitted.

The answer is email recipients must have an opt-out method. The CAN-SPAM Act prohibits false or misleading header information and deceptive subject lines. It also requires that commercial email be identified as an advertisement and that email recipients have an opt-out method.

A licensed real estate salesperson entered a written contract with a broker, specifying that the salesperson is not an employee. In the past year, just less than half of the salesperson's income from real estate transactions came from sales commissions. The remainder was based on an hourly wage paid by the broker. Using these facts, it is likely that the IRS would classify the salesperson as which of the following for federal income tax purposes? A) Self-employed B) Part-time real estate salesperson C) Independent contractor D) Employee

The answer is employee. The fact that the salesperson received income based on an hourly wage paid by the broker demonstrates that the salesperson does not meet one of the basic requirements under federal law to be considered an independent contractor. Notwithstanding the contract, the salesperson would be classified as an employee.

Who is responsible for setting the commission rates that a real estate firm charges sellers? A) State Real Estate Commission B) Firm's broker of record C) Multiple listing service (MLS) D) Salespeople

The answer is firm's broker of record. The broker of record may require that the affiliated salespeople charge a certain percentage rate. The broker has the right to do this so long as it is based on the broker's business judgment and revenue requirements without input from other brokers

Price-fixing and group boycotting are A) illegal activities prohibited by consumer protection laws. B) legal but questionably ethical activities. C) legal activities associated with successful real estate firms. D) illegal activities prohibited by antitrust laws.

The answer is illegal activities prohibited by antitrust laws. State and federal antitrust laws prohibit price-fixing and group boycotting. These activities are more than unethical; they are illegal.

With regard to commission rates, a broker may A) set rates determined by racial composition of the area. B) agree to charge a rate similar to other area brokers. C) impose a minimum rate in the office. D) use rates suggested by the local multiple listing service (MLS).

The answer is impose a minimum rate in the office. The amount of a broker's compensation is negotiable in every case; it is clearly a violation of state and federal antitrust laws to impose uniform commission rates. However, a broker may set the minimum rate acceptable for that broker's firm.

A salesperson can set up her own website so long as she A) includes her broker's name. B) indicates that she is not a broker. C) receives permission from her local association of REALTORS®. D) pays a marketing fee to the real estate commission.

The answer is includes her broker's name. All advertising must done in the name of the brokerage. Neither the real estate commission nor the local association of REALTORS® is involved.

Licensees who are paid in a lump sum and who are personally responsible for paying their own taxes are probably A) independent contractors. B) transactional brokers. C) employees. D) buyer's agents.

The answer is independent contractors. Independent contractors are responsible for paying their own income, Social Security, and Medicare taxes. The earnings are not subject to withholding by the employing broker.

In general, under the Junk Fax Prevention Act of 2005, without express written consent or without an established business relationship with the recipient, real estate licensees A) may not legally send out an unsolicited commercial fax message. B) are permitted to send up to 100 unsolicited commercial fax messages per month. C) may legally send out an unsolicited commercial fax message. D) may send out commercial faxes unless requested otherwise.

The answer is may not legally send out an unsolicited commercial fax message. Although the Junk Fax Prevention Act of 2005 does allow for an established business relationship exception, as a general rule, a real estate licensee could not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the recipient.

A real estate salesperson, classified by the IRS as an independent contractor, receives A) a monthly salary or hourly wage. B) a company-provided automobile. C) negotiated commissions on transactions. D) company-provided health insurance.

The answer is negotiated commissions on transactions. To be treated, for IRS purposes, as an independent contractor, the licensee must receive more than 90% of income as a result of negotiated commissions, not hours worked or a salary.

A broker advertises the commission rates that her firm charges sellers. This advertising is A) permitted by antitrust laws. B) prohibited by multiple listing services. C) illegal under antitrust laws. D) unethical, but legal.

The answer is permitted by antitrust laws. Antitrust laws permit a broker to charge sellers whatever is appropriate for that firm. The broker is free to advertise those rates to the public.

A broker was accused of violating antitrust laws. Of the following, the broker was MOST likely accused of A) undisclosed dual agencies. B) price-fixing. C) not having an equal housing opportunity sign in the office window. D) dealing in unlicensed exchange services.

The answer is price-fixing. Brokers have been accused of setting fees between them (i.e., price-fixing). Undisclosed dual agency is a violation of state license law; fair housing laws determine whether an equal opportunity poster should be displayed.

A real estate broker who engages salespersons as independent contractors must A) withhold income tax from all commissions earned by them. B) refrain from controlling how the salesperson conducts business activities. C) require them to participate in office insurance plans offered to other salespersons hired as employees. D) withhold Social Security from all commissions earned by them.

The answer is refrain from controlling how the salesperson conducts business activities. The key distinction between a licensed salesperson who is an employee and one who is an independent contractor is the extent of the control exercised by the broker over the salesperson's activities.

By Pennsylvania rule, what information should be included on a real estate company's website? A) The specialties of each salesperson B) Registered name of the broker C) Number of active listings D) How many salespeople are in the office

The answer is registered name of the broker. The website of a brokerage must include the name of the broker as registered with the real estate commission, telephone number, and the state(s) where the broker is licensed to sell real estate.

What rules does Facebook impose on real estate marketing? A) May use the personal site to ask for help in locating buyers B) Can use the personal site for displaying listings C) Set up a business page D) Nothing special that relates to real estate licensees

The answer is set up a business page. Facebook allows for both a personal profile and a business page. Marketing on the personal site is not permitted and is annoying to your friends.

Two salespersons who work for the same brokerage firm agree to divide their town into a northern region and a southern region. One salesperson will handle listings in the northern region, and the other salesperson will handle listings in the southern region. Which statement is TRUE regarding this agreement? A) The agreement constitutes illegal price-fixing. B) The two salespersons have violated the Sherman Antitrust Act and are liable for triple damages. C) The two salespersons are guilty of group boycotting with regard to other salespersons in their office. D) The agreement does not violate antitrust laws.

The answer is the agreement does not violate antitrust laws. Because the salespersons are both employed by real estate firms, there is no violation of antitrust laws. Allocating customers or markets involves an agreement between competing brokerage companies to refrain from competing for each other's business.

A broker has established the following office policy: "All listings taken by any salesperson associated with this real estate brokerage must include compensation based on a 7% commission. No lower compensation rate is acceptable." If the broker attempts to impose this uniform commission requirement, which statement is TRUE? A) The salespersons associated with the brokerage will not be bound by the requirement and may negotiate any commission rate they choose. B) The broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. C) A homeowner may sue the broker for violating the antitrust law's prohibition against price-fixing. D) The broker must present the uniform commission policy to the local professional association for approval.

The answer is the broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. The broker establishes compensation policies for the firm, which the salespersons employed by that broker must then follow. An antitrust violation occurs when two or more competing brokers conspire to fix prices or establish uniform policies.

After a particularly challenging transaction finally closes, the client gives the listing salesperson a check for $500 "for all your extra work." Which statement is TRUE? A) While such compensation is irregular, it is appropriate for the salesperson to accept the check. B) The salesperson should accept the check and deposit it immediately in a special escrow account. C) The salesperson may receive compensation only from the broker. D) The salesperson's broker is entitled to 80%of the check.

The answer is the salesperson may receive compensation only from the broker. As a licensed salesperson, the only party the salesperson can receive compensation from is the employing broker. Acceptance of any fee, compensation, or other valuable consideration by a salesperson or from anyone other than the employing broker violates the licensing law.

In Pennsylvania, a salesperson may advertise a property for sale on the internet only if the salesperson A) personally listed the property. B) is a member of the local real estate association. C) personally pays for the advertisement. D) uses the employing broker's name in the advertisement.

The answer is uses the employing broker's name in the advertisement. As with all advertising, internet advertising must be a true representation, not be misleading, and include the name of the employing broker.