Chapter 10

Question 1

In a buyer representation agreement, the broker acts as the agent of the buyer and must protect the buyer’s interests

a. at all points in the transaction.
b. only during property showings.
c. until the representation agreement is signed.
d. only when negotiating on behalf of the buyer.

Answer 1

a. at all points in the transaction.

Feedback
In a buyer representation agreement, the broker acts as the agent of the buyer and must protect the buyer’s interests at all points in the transaction.

Question 2

2. A homeowner listed the home for sale with a broker. When the owner sold the home without the broker’s assistance, no one was owed a commission. Based on these facts, what type of listing did the broker and the owner most likely sign?
   a. Exclusive-right-to-sell listing
   b. Net listing
   c. Multiple listing
   d. Open listing

Answer 2

d. Open listing

Feedback
d. Under an open listing, the seller is permitted to sell the house without the broker’s assistance and is not be obligated to pay a commission.

Question 3

3. All of this information is generally included in a listing agreement EXCEPT
   a. lot size.
   b. termination clause.
   c. client’s specific requirements for a suitable property to buy.
   d. property condition disclosures.

Answer 3

c. client’s specific requirements for a suitable property to buy.

Feedback
c. When obtaining the listing, the agent should gather as much information as possible, including the lot size and property conditions. The listing should also include a termination clause. When taking the listing from the seller, however, the agent is not concerned about the seller’s future housing needs.

Question 4

When may a broker’s agreement to represent a property buyer be terminated?

a. The property buyer dislikes all of the properties shown by the broker.
b. Only agreements between brokers and sellers can be terminated.
c. The broker and buyer mutually agree to cancel the agreement.
d. None of these

Answer 4

c. The broker and buyer mutually agree to cancel the agreement.

Feedback
A broker’s agreement to represent a property buyer may be terminated for various reasons, one of which is mutual agreement between the broker and buyer.

Question 5

A listing agreement is

a. a contract between the buyer and the seller.
b. a contract to purchase real property.
c. an employment agreement between the broker and the sales associate.
d. an employment contract between the seller and the broker.

Answer 5

d. an employment contract between the seller and the broker.

Feedback
d. Although the broker can subcontract the work to sales associates, the listing agreement is an employment contract between the seller and the broker.

Question 6

6. Who are the parties to a listing agreement?
   a. Buyer and seller
   b. Seller and broker
   c. Seller and sales associate
   d. Buyer and sales associate

Answer 6

b. Seller and broker

Feedback
The seller and broker are parties to the listing agreement. Listings remain the property of the broker even if the sales associate who represented the broker in securing the listing leaves the company.

Question 7

There are five different brokerage signs in the front yard of a home for sale. Evidently, the seller has signed

a. an exclusive agency listing.
b. an exclusive right-to-sell listing.
c. a net listing.
d. an open listing.

Answer 7

d. an open listing.

Feedback
In an open listing, the seller retains the right to sell the property and may employ more than one broker to perform agency duties.

Question 8

A broker just explained the value of signing an exclusive agency listing with a broker who is a member of the multiple listing service. The broker is trying to overcome the misconceptions of the seller who asked about

a. an open listing.
b. an option listing.
c. an exclusive right-to-sell listing.
d. a net listing.

Answer 8

a. an open listing.

Feedback
a. Sellers are often confused, thinking that the only way to find buyers from a number of brokers is to enter into an open listing. Explaining the advantages of a multiple listing service can overcome the misconception.

Question 9

What kind of listing agreement is illegal in many states because of the potential for conflict of interest between a broker’s fiduciary responsibility to the seller and the broker’s profit motive?

a. Open listing
b. Net listing
c. Exclusive right-to-sell
d. Exclusive agency listing

Answer 9

b. Net listing

Feedback
Because a broker is free to offer the property at any price greater than the net amount, a net listing can create a conflict of interest between the broker’s fiduciary responsibility to the seller and the broker’s profit motive. Thus, net listings are illegal in many states and discouraged in others.

Question 10

Buyer agents typically are compensated in any of these ways EXCEPT

a. flat fee for service.
b. percentage of selling price.
c. hourly rate.
d. percentage of list price.

Answer 10

d. percentage of list price.

Feedback
d. Buyer agents are most likely compensated by sharing the commission paid by the seller, a flat fee, percentage of selling price, or an hourly rate. Although very uncommon, a few buyer’s agents have been compensated by a percentage of the listing price when the buyers feel that this will encourage the buyer’s agent to negotiate an even lower sale price.

Question 11

Any of these will terminate a listing agreement EXCEPT

a. performance.
b. expiration.
c. an offer to purchase.
d. abandonment by broker.

Answer 11

c. an offer to purchase.

Feedback
Because an offer to purchase may not be accepted, it would not terminate the listing agreement.

Question 12

A broker is retiring and wants to submit the firm’s listings to another broker. How can the broker do this?

a. The broker must sign over the listings to the new broker.
b. The new broker has to sign an acceptance agreement.
c. Each sales associate must sign over the listings to the new broker.
d. Each seller must agree to a new listing with the new broker.

Answer 12

d. Each seller must agree to a new listing with the new broker.

Feedback
Because the listing agreement is a contract for the personal services of the original broker, each seller has the right to cancel the listing agreement and not be represented by the new broker.

Question 13

13. In which of these types of listing agreements is the broker appointed as the seller’s only agent?
    a. Exclusive right-to-sell and exclusive agency listings
    b. Open listing
    c. Net listing
    d. Option listing

Answer 13

a. Exclusive right-to-sell and exclusive agency listings

Feedback
Under an exclusive right-to-sell or exclusive agency listing, one broker is appointed as the seller’s sole agent. Open and option listings do not specifically exclude other brokers from acting as the seller’s agent.

Question 14

In most states, a broker’s license can be suspended or revoked if the broker

a. breaches the terms of the listing agreement.
b. cancels the listing agreement without cause.
c. takes a listing that does not include a date on which the listing expires.
d. does not include an automatic extension clause in the listing agreement.

Answer 14

c. takes a listing that does not include a date on which the listing expires.

Feedback
c. If the broker breaches the listing contract or cancels it without cause, the broker may be liable for damages; however, it is not usually grounds for suspension or revocation of the license. Courts discourage the use of automatic extension clauses, and these clauses are even illegal in some states.

Question 15

What information is NOT needed for a listing agreement?

a. The dimensions of the lot
b. The possibility of seller financing
c. The age of the seller
d. The most recent property taxes

Answer 15

c. The age of the seller

Feedback
Information needed for the listing agreement includes lot size, possibility of seller financing, and the property taxes. The age of the seller is not needed.

Question 16

An example of personal property that a seller may leave with the real estate and which, therefore, MUST be identified on the listing agreement is

a. a built-in dishwasher.
b. the door key.
c. stacked firewood.
d. a ceiling light fixture.

Answer 16

c. stacked firewood.

Feedback
Firewood is not attached to the real estate and is therefore considered personal property. All the other items, even the door key, are normally considered to be part of the real estate.

Question 17

A brokerage charged the seller $1,000 as an advertising fee and 4% of the selling price. The house was listed for $439,500 and sold for $429,350. What was the total amount the seller paid the brokerage?

a. $15,174
b. $15,580
c. $16,580
d. None of these

Answer 17

d. None of these

Feedback
The seller paid the brokerage none of these: The sales price is $429,350 × 4% + $1,000 = $18,174.

Question 18

18. A seller agreed to a 5% commission on a sale price of $175,000. The brokerage split with salespeople is 30/70, with 30% remaining with the company. How much is the sales associate’s share if the sales associate both lists and sells the property?
    a. $2,625
    b. $6,125
    c. $8,750
    d. None of these

Answer 18

b. $6,125

Feedback
The sales associate’s share is $6,125: $175,000 × 5% × 70% = $6,125.

Question 19

It is the broker’s office policy that a sales associate keep 60% of the firm’s share of any commission earned from any property the associate lists. A sales associate listed a property that was later sold by a cooperating broker for $285,000. If the two brokers agree to split the 6.5% commission equally, what will the sales person receive?

a. $5,557.50
b. $6,092.00
c. $7,235.25
d. $7,654.00

Answer 19

a. $5,557.50

Feedback
The sales associate receives $5,557.50: $285,000 × 6.5% × 50% × 60% = $5,557.50.

Question 20

The commission on the sale of a house was $16,500, which was based on a 7.5% commission rate. What was the final selling price of the house?

a. $127,000
b. $145,000
c. $199,000
d. $220,000

Answer 20

d. $220,000

Feedback
The selling price was $220,000: $16,500 ÷ 7.5% = $220,000.

Question 21

The broker listed a home for $360,000 under a 90-day exclusive right-to-sell listing agreement with a 6% commission. The next week, the broker began advertising the home in a local paper and showed the property to two prospective buyers. Later that week, the seller announced that to the property would be sold to a relative for $340,000. The seller is liable to the broker for

a. $1,200.
b. $20,400.
c. $21,600.
d. none of these.

Answer 21

b. $20,400.

Feedback
b. The seller is liable to the broker for $20,400: $340,000 × 6% = $20,400. Because the seller had signed an exclusive right-to-sell listing agreement, the seller is responsible for paying a commission regardless of who finds the buyer.