Question 1

In determining the appropriate listing contract to be used, it is important to know whether a multiple listing service (MLS) will be employed. The MLS only accepts which of the following types of listing contracts?

Accepted Answer

The MLS only accepts exclusive right of sale listings, also known as exclusive listings. This is because exclusive right of sale listings give the listing agent the exclusive right to earn a commission on the sale of the property, regardless of who brings the buyer. This is important for the MLS because it ensures that all members of the MLS have an equal opportunity to earn a commission on the sale of the property. Open listings, FSBO listings, and exclusive agency listings do not offer this same level of protection to MLS members.

Question 2

As an agent for the buyer or seller, a broker has 6 basic fiduciary responsibilities. Which of the following definitions best describes the responsibility of "Obedience"?

Accepted Answer

The responsibility of "Obedience" means that the broker must follow the instructions of their client (either the buyer or seller) to the fullest extent allowed by law and ethics. This includes not just obeying instructions related to the sale process itself, but also following any specific requests or preferences of the client.

Question 3

State licensing laws generally prescribe two levels of real estate brokerage licensing: the broker license and the salesperson license. Which of the following responsibilities is an individual with a salesperson license permitted to do?

Accepted Answer

An individual with a salesperson license is permitted to negotiate listing contracts or contracts for sale, but is not allowed to own and operate a real estate brokerage business, handle money in trust for clients, or complete legal documents used in sales and leases in their own name. These responsibilities are reserved for individuals with a broker license.

Question 4

Blockbusting, which involves persuading an individual to sell her home by telling her that minority groups are moving into the neighborhood, is one form of discrimination in housing that is prohibited by which of the following acts of Congress?

Accepted Answer

The Fair Housing Act (Title VIII of the Civil Rights Act) prohibits discrimination against protected classes in housing, including blockbusting. The Riegle Community Development and Regulatory Improvement Act addresses banking and financial regulations. The Secure and Fair Enforcement for Mortgage Licensing Act regulates mortgage loan originators. The Equal Credit Opportunity Act prohibits discrimination in lending.

Question 5

Real estate brokers serve as intermediaries by bringing buyers and sellers together in the real estate market. For this service, brokers are paid what is commonly referred to as a:

Accepted Answer

Real estate brokers are typically paid a commission, which is a percentage of the sale price of the property, for their services in connecting buyers and sellers. This commission can vary depending on the location and type of property being sold.

Question 6

According to the law of agency, real estate brokers are required to observe several duties as they act as an agent for an individual trying to buy or sell a property. Which of the following duties refers to a broker's obligation to be completely open and honest with the principal?

Accepted Answer

The duty of disclosure refers to a broker's obligation to be completely open and honest with their principal. This means that brokers must disclose any information that may affect the principal's decision-making process or the value of the property being bought or sold. Failing to disclose important information can result in legal consequences for the broker.

Question 7

In dual agency, conflicts of interest may arise since a single broker has both the listing contract with the seller and a buyer agency agreement with the purchaser. One way that states have attempted to deal with this issue is to develop a new type of brokerage relationship in which the broker assists the buyer and seller, but does not represent either party. This type of brokerage relationship is commonly referred to as:

Accepted Answer

The type of brokerage relationship wherein the broker assists the buyer and seller but does not represent either party is called transaction brokerage. This type of brokerage relationship is a way for states to address the potential conflicts of interest and ethical concerns that arise with dual agency. Transaction brokers are neutral parties and do not owe a fiduciary duty to either the buyer or the seller. They provide assistance with the transaction but do not advocate for one party over the other.

Question 8

State licensing laws prescribe behavioral requirements with which licensees must comply to keep their licenses. Licensing laws generally seek to prevent brokers from partaking in all of the following activities EXCEPT:

Accepted Answer

Handling money in trust for clients is a common and acceptable practice for brokers, as long as it is done in accordance with the law and ethical standards. This activity involves managing escrow accounts or holding deposits, which is a standard part of real estate transactions. The other options (B, C, D) are unethical or illegal practices that licensing laws aim to prevent.

Question 9

One of the traditional requirements for individuals who wish to obtain a brokerage license has been to demonstrate financial capacity to cover damage judgments brought against them by clients. In order to address this concern, some states have required licensees to first obtain:

Accepted Answer

The traditional requirement for demonstrating financial capacity to cover damage judgments brought against them by clients can be fulfilled by obtaining errors and omission insurance. This insurance provides coverage for professionals in case a client alleges that they suffered financial harm as a result of a mistake or an omission by the professional. It is commonly required for many professional licenses, including brokerage licenses. Private mortgage insurance, deposit insurance, and hazard insurance are not relevant to this requirement.

Question 10

The importance of brokers in the real estate market is often overlooked. In the absence of a real estate broker, one would expect all of the following to be true EXCEPT:

Accepted Answer

Brokers often help in setting competitive market prices, and their absence could lead to less informed pricing decisions by sellers, not necessarily higher prices. Sellers without brokers might overprice due to lack of market knowledge or underprice due to urgency or lack of exposure to enough buyers.

Question 11

In acting as an agent for another person, the broker carries several special responsibilities, which by law must be adhered here to throughout the transaction process. These responsibilities constitute what is commonly referred to as a:

Accepted Answer

The special responsibilities that a broker must adhere to when acting as an agent for another person constitute a fiduciary relationship. This means that the broker is legally obligated to act in the best interests of their client, to keep their client's information confidential, and to disclose any information that may be relevant to the transaction. A subagency relationship refers to a situation where a broker delegates their duties to another broker. A dual agency relationship occurs when the broker represents both the buyer and the seller in a transaction. An open listing relationship is when the seller lists their property with multiple brokers, and only pays a commission to the broker who finds a buyer.

Question 12

Critical to any listing contract is the question of when the broker becomes entitled to a commission. Traditionally, the broker is still entitled to a commission in all of the following scenarios EXCEPT:

Accepted Answer

The broker typically earns a commission when they fulfill their part of the agreement, which is usually finding a buyer who is ready, willing, and able to purchase the property on the terms agreed upon by the seller. If a contract is contingent upon the buyer obtaining financing and the buyer is unable to secure financing, the broker has still performed their duty by finding a qualified buyer under the agreed terms. The failure to obtain financing is a condition beyond the broker's control and does not negate their right to a commission in traditional agreements. However, in this scenario, it is stated as an exception, which is not typically the case in standard real estate practices.

Question 13

Real estate brokers operate under the law of agency, which gives a broker the right to act for a principal in trying to buy or sell a property. In the basic principal-agent relationship of real estate brokerage, real estate brokers act in the capacity of a:

Accepted Answer

Real estate brokers operate as special agents, meaning they have limited authority to act on behalf of their client for a specific purpose (i.e. buying or selling a property). They are not authorized to make decisions on behalf of the client outside of the purpose of the agency agreement. A universal agent has broad authority to act on behalf of the principal for any and all purposes, while a general agent has authority to act for the principal within a specific area or scope of responsibility. An undercover agent is not relevant in the context of real estate brokerage.

Question 14

It is common for real estate firms to identify submarkets, such as property types or particular sections of a city, in which they can specialize and concentrate their transaction activity. This practice is referred to as:

Accepted Answer

Market segmentation refers to the practice of identifying specific submarkets within the real estate industry in order to specialize and focus on certain types of transactions. This allows firms to develop expertise in a particular area and better serve clients looking for properties in that submarket.

Question 15

Although the function of commercial brokerage is the same as that of residential brokerage, the activities of commercial brokers usually differ considerably from those of residential brokers due to fundamental differences in these two markets. All of the following statements regarding commercial brokerage are true EXCEPT:

Accepted Answer

This statement is not necessarily true as both commercial and residential mortgage transactions involve parties with varying levels of knowledge and expertise.

Question 16

All 50 states have licensing laws that regulate persons and companies that engage in the brokerage business. Interpreting and enforcing state licensing laws falls under the responsibilities of which of the following parties?

Accepted Answer

State licensing laws are enforced and interpreted by the real estate commission in each state. The other options (broker, salesperson, National Association of Realtors) may have some influence on the real estate industry, but they do not have the authority to interpret or enforce state licensing laws.

Question 17

Modern real estate brokerage normally relies on a multiple listing service (MLS) through which brokers have access to each other's listings. Which of the following types of agency agreements is established with the use of a MLS?

Accepted Answer

A subagency agreement is established when an agent working for a listing broker cooperates with and shares their listing with a buyer's agent from a different brokerage. In this scenario, the buyer's agent becomes a subagent of the listing broker and owes fiduciary duties to both the listing broker and the buyer. The MLS system facilitates the sharing of listings between brokers and their agents, making subagency agreements common in modern real estate brokerage.

Question 18

Federal and state laws prohibit discrimination in housing. However, exemptions do exist depending on the particular type of property that is being considered. All of the following activities could be considered exempt in specific scenarios EXCEPT:

Accepted Answer

Refusing to sell or rent to a person because of race is never an exempt activity and is always considered illegal discrimination under federal and state laws.

Question 19

There are a number of different types of listing contracts that can be used when marketing a property. Which of the following types of listings requires the broker to be paid a commission if any other broker, or even the owner, sells the property during the contract period?

Accepted Answer

An exclusive right of sale listing gives the broker the exclusive right to sell the property and guarantees the broker a commission if the property is sold during the contract period, regardless of who sells the property.

Question 20

The recent emergence of discount brokerage services has had a modest effect on the price of brokerage services. The average commission that a broker could expect to receive today would most likely range between:

Accepted Answer

The answer of The recent emergence of discount brokerage services...

Quiz 12: Brokerage and Listing Contracts