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CH 12

Terms in this set (59)

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
commission
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
the asking price would most likely be higher, on average, than in the case where a broker was involved because the seller is in total control of the sale.
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
special agent
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
fiduciary relationship.
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
transaction brokerage
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?
real estate commission
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
market segmentation
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?
disclosure
Which of the following duties refers to a broker's obligation to never subordinate the best interest of their principal to the interests of others?
loyalty
Which of the following duties refers to a broker's obligation to keep the principal informed about financial aspects of their assignment?
accounting
Which of the following duties refers to a broker's obligation to represent the interests of their principals to the best of their ability in the same way they would represent themselves, acquiring and applying the necessary knowledge and information about
relevant laws and regulations, the market, and subject property?
skill and care
Jim has hired a real estate broker to help facilitate the sale of his home. If the broker requires a commission of 6%, how much will Jim clear from the sale (after the commission has been paid) if he is able to sell his house for $478,723? (Assume that Jim has already paid off his mortgage.)
$450,000
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
errors and omission insurance
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

-handling money in trust for clients
-taking kickbacks without the employer's knowledge
-offering the property at terms other than those specified by clients
-failing to submit all offers to the client
handling money in trust for clients
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
market segmentation
In an open-listing contract, an individual broker is entitled to a commission if
she procures the buyer of the property
Amy is trying to decide whether or not it would be beneficial to employ the services of a real estate broker in order to facilitate the sale of her home. She has estimated that the marketing costs and opportunity cost associated with time spent dealing with prospective buyers amounts to $5,000. If Amy were to sell the house on her own for $200,000, but a broker would have been able to negotiate a higher price of $206,350, what commission rate should Amy have been willing to accept from a real estate broker to make her indifferent between selling the house on her own and hiring a real estate broker?
5.5%
Which of the following duties refers to a broker's obligation to represent the interests of their principals to the best of their ability in the same way they would represent themselves, acquiring and applying the necessary knowledge and information about relevant laws and regulations, the market, and subject property?
skill and care
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?
subagency agreement
There are three basic types of listing contracts. These include all of the following except

-open listing
-exclusive agency listing
-exclusive right of sale listing
-multiple listing
multiple listing
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
5% and 6%
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
the parties in commercial mortgage transactions are typically less knowledgeable that those in residential transactions
Suppose that a recent purchase of a residential home has been facilitated equally by a listing agent and a buyer broker. Based on your understanding of how commissions are determined, which of the following scenarios best describes who would be entitled a commission upon sale of the property? (Note: For simplicity, you can assume the seller did not procure the buyer on his or her own.)
both the listing broker and the buyer broker
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?
?
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 refusing to sell or rent
to a person because of race
Which of the following duties refers to a broker's obligation to never subordinate the best interest of their principal to the interests of others?
loyalty
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
transaction brokerage
As an agent for the buyer or seller, a broker has six basic fiduciary responsibilities. Which of the following definitions best describes the responsibility of obedience?
a broker must follow the instructions of the principal to the limits of what is legal and ethical
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
commission
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
the asking price would most likely be higher, on average, than in the case where a broker was involved because seller is in total control of the sale
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?`
disclosure
Christopher has hired a real estate broker to help facilitate the sale of his home. Realizing that Christopher is most likely going to realize a loss on his investment due to the recent decline in housing values in his neighborhood, the broker has agreed to charge Christopher a lower commission rate as long as Christopher enters into an exclusive right of sale listing contract. If Christopher ends up selling his house for $364,583 and takes home $350,000 after paying the real estate broker's commission, what was the commission rate that the broker ended up charging?
4%
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?
negotiate listing contracts or contracts for sale
A. $282,540
B. $300,000
C. $316,500

D. $317,460
23. Suppose you are interested in selling your home and would like to clear a net value of $300,000.

If you have agreed to pay your broker a commission of 5.5% (no matter who ultimately is responsible for finding the buyer), what price must you sell the home for in order to meet your net profit (rounded to the nearest dollar)?
A. Open listing
B. FSBO listing

C. Exclusive Agency Listing

D. Exclusive right of sale listing
22. 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 anyone, other than the owner, sells the property during the contract period?
A. 4.0%

B. 4.2%
C. 8.0%
D. 14.6%
24. Christopher has hired a real estate broker to help facilitate the sale of his home. Realizing that Christopher is most likely going to realize a loss on his investment due to the recent decline in housing values in his neighborhood, the broker has agreed to charge Christopher a lower commission rate as long as Christopher enters into an exclusive right of sale listing contract.

If Christopher ends up selling his house for $364,583 and takes home $350,000 after paying the real estate broker's commission, what was the commission rate that the broker ended up charging?
A. $10,800

B. $13,500
C. $16,200
D. $27,000
25. Jonathan recently sold his home and was able to take home $423,000 after paying the real estate broker's commission of 6%. If the buyer was ultimately found through a buyer broker, the dollar commission will need to be split between the listing broker and buyer broker. If the buyer broker is entitled to 40% of the commission, what is her share of the commission rounded to the nearest dollar?
A. $424,528

B. $450,000

C. $478,723
D. $507,446
26. Jim has hired a real estate broker to help facilitate the sale of his home.

If the broker requires a commission of 6%, how much will Jim clear from the sale (after the commission has been paid) if he is able to sell his house for $478,723

(Assume that Jim has already paid off his mortgage)?
A. 2.4%
B. 3.1%
C. 5.0%

D. 5.5%
27. Amy is trying to decide whether or not it would be beneficial to employ the services of a real estate broker in order to facilitate the sale of her home. She has estimated that the marketing costs and opportunity cost associated with time spent dealing with prospective buyers amounts to $5,000.

If Amy were to sell the house on her own for $200,000, but a broker would have been able to negotiate a higher price of $206,350, what commission rate should Amy have been willing to accept from a real estate broker to make her indifferent between selling the house on her own and hiring a real estate broker?
Christopher has hired a real estate broker to help facilitate the sale of his home. Realizing that Christopher is most likely going to realize a loss on his investment due to the recent decline in housing values in his neighborhood, the broker has agreed to charge Christopher a lower commission rate as long as Christopher enters into an exclusive right of sale listing contract. If Christopher ends up selling his house for $364,583 and takes home $350,000 after paying the real estate broker's commission, what was the commission rate that the broker ended up charging?
4.0%
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?
real estate commission
Jim has hired a real estate broker to help facilitate the sale of his home. If the broker requires a commission of 6%, how much will Jim clear from the sale (after the commission has been paid) if he is able to sell his house for $478,723? (Assume that Jim has already paid off his mortgage.)
$450,000
When the principal in an agency relationship delegates the power to act within the confines of a business or employment relationship, the agent is more commonly referred to as a:
general agent
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?
exclusive right of sale listing
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:
refusing to sell or rent to a person because of race.
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:
market segmentation
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:
The parties in commercial mortgage transactions are typically less knowledgeable than those in residential transactions.
Jonathan recently sold his home and was able to take home $423,000 after paying the real estate broker's commission of 6%. If the buyer was ultimately found through a buyer broker, the dollar commission will need to be split between the listing broker and buyer broker. If the buyer broker is entitled to 40% of the commission, what is her share of the commission rounded to the nearest dollar?
$10,800
Which of the following duties refers to a broker's obligation to never subordinate the best interest of their principal to the interests of others?
loyalty
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:
handling money in trust for clients
Under the law of agency, a real estate broker is given the right to act on behalf of another individual or entity who is trying to buy or sell a property. The individual or entity that grants authority to the broker to act on their behalf is more commonly referred to as the:
principal
Suppose you are interested in selling your home and would like to clear a net value of $300,000. If you have agreed to pay your broker a commission of 5.5% (no matter who ultimately is responsible for finding the buyer), what price must you sell the home for in order to meet your net profit (rounded to the nearest dollar)?
$317,460
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:
The asking price would most likely be higher, on average, than in the case where a broker was involved because the seller is in total control of the sale.
Which of the following duties refers to a broker's obligation to keep the principal informed about financial aspects of their assignment?
accounting
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:
5-6%.
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?
subagency agreement
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?
disclosure
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"?
Broker must follow the instructions of the principal to the limits of what is legal and ethical.
Amy is trying to decide whether or not it would be beneficial to employ the services of a real estate broker in order to facilitate the sale of her home. She has estimated that the marketing costs and opportunity cost associated with time spent dealing with prospective buyers amounts to $5,000. If Amy were to sell the house on her own for $200,000, but a broker would have been able to negotiate a higher price of $206,350, what commission rate should Amy have been willing to accept from a real estate broker to make her indifferent between selling the house on her own and hiring a real estate broker?
5.5%
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