Chapter 13 - The Brokerage Business

Question 1

Which of the following represents the core activity of real estate brokerage?

a. Prospecting for and qualifying potential customers
b. Buying and selling properties for one’s company
c. Procuring customers for clients and effecting transactions
d. Negotiating sale or lease terms for a client

Answer 1

c. Procuring customers for clients and effecting transactions

Question 2

What is co-brokerage?

a. An owner agent and a buyer agent combine efforts to complete a sale.
b. Outside brokers acting as subagents assist a listing agent in procuring a customer.
c. An owner or buyer lists with several brokers to complete a transaction.
d. Agents from a single agency cooperate to generate listings for the broker.

Answer 2

b. Outside brokers acting as subagents assist a listing agent in procuring a customer.

Question 3

Which of the following best summarizes the critical skills in real estate brokerage?

a. Communications, market knowledge, mathematics, and analysis
b. Selling skills, law, and qualification
c. Fiduciary duties
d. Listing, marketing, facilitating transactions, and managing information

Answer 3

d. Listing, marketing, facilitating transactions, and managing information

Question 4

Which of the following is a valid distinction between a corporation and a proprietorship?

a. A corporation has perpetual existence; a proprietorship terminates upon the owner’s death.
b. Proprietorships are liable for their actions, while corporations are not.
c. Proprietorships may broker real estate, while corporations may not.
d. Corporations are not subject to taxation, while proprietorships are.

Answer 4

a. A corporation has perpetual existence; a proprietorship terminates upon the owner’s death.

Question 5

One similarity between a general partnership and a limited partnership is that

a. both are subject to double-taxation.
b. both may broker real estate if properly licensed.
c. the partners in both organizations take an active role in managing the business.
d. all partners bear full liability for debts to the extent of the debt.

Answer 5

b. both may broker real estate if properly licensed.

Question 6

Two real estate companies agree to conjoin their resources for the development and sale of an apartment complex, for which profits will be shared equally. This is an example of

a. a cooperative association.
b. a real estate investment trust.
c. a limited partnership.
d. a joint venture.

Answer 6

d. a joint venture.

Question 7

Which of the following characterizes a real estate franchisee?

a. A local brokerage owned and operated by a national franchisor
b. A locally-owned brokerage affiliated with a national franchisor for purposes of enhanced image and resources
c. A national brokerage company which charges local brokers fees for membership
d. A national firm which contracts with local franchisors to promote the national identity

Answer 7

b. A locally-owned brokerage affiliated with a national franchisor for purposes of enhanced image and resources

Question 8

The term “Realtor”

a. is the generic name used by brokers throughout the country as a trade identity.
b. is the identity for any duly licensed, active agent or broker.
c. is the trade identity for all members of any properly chartered real estate trade organizations.
d. may only be used by brokers belonging to the National Association of Realtors®.

Answer 8

d. may only be used by brokers belonging to the National Association of Realtors®.

Question 9

Real estate sales agents are legally authorized to

a. represent their employing broker in procuring clients and customers.
b. act directly on a client’s behalf to discharge the broker’s listing responsibilities.
c. negotiate and execute contracts for sale on behalf of the client.
d. take on the listing responsibilities for other listings in MLS.

Answer 9

a. represent their employing broker in procuring clients and customers.

Question 10

An important distinction between an independent contractor salesperson (IC) and an employee salesperson is

a. the IC is responsible for taxes; the broker does not withhold.
b. the IC must obtain his or her own training; it is not provided by the broker.
c. the employee is not entitled to company benefits.
d. the IC must abide by all office policies and meeting schedules.

Answer 10

a. the IC is responsible for taxes; the broker does not withhold.

Question 11

An important commitment employing brokers make to salespeople is

a. a pledge of continued employment over a predetermined period.
b. a guarantee of market-based, competitive commission structures.
c. providing them with all listings in the agency.
d. producing a sufficient number of customers through advertising to make a reasonable living.

Answer 11

c. providing them with all listings in the agency.

Question 12

A salesperson’s commission rate and structure is established by

a. state regulation.
b. competitive conditions.
c. agreement with other brokers in the market.
d. negotiations with the client.

Answer 12

b. competitive conditions.

Question 13

Three of the most important skills involved in the listing process are

a. persuasion, appraisal, and market analysis.
b. communicating, co-brokering, and timing.
c. marketing, advertising, and conducting open houses.
d. locating clients, pricing property, and making listing presentations.

Answer 13

d. locating clients, pricing property, and making listing presentations.

Question 14

Pricing property correctly is pivotal to marketing listings, because

a. underpriced properties do not require the broker’s services.
b. overpricing a property will lengthen the time required to receive compensation for services.
c. underpricing a property does not serve the best interests of a client.
d. overpricing a property does not serve the best interests of customers.

Answer 14

c. underpricing a property does not serve the best interests of a client.

Question 15

The objective of the listing presentation is to

a. explain how the agent and the agency enjoy a competitive advantage over other companies.
b. condition the owner to price the property at the lowest possible level.
c. provide all information necessary for the owner to execute the listing.
d. execute the listing agreement, then explain its provisions.

Answer 15

c. provide all information necessary for the owner to execute the listing.

Question 16

In marketing an owner’s property, the objective of an agent’s marketing plan is to

a. actively participate in the multiple listing service.
b. expose the property to the maximum number of prospects in relation to marketing expenses and efforts.
c. ensure that a transaction occurs that will compensate the agent.
d. convince prospects of the property’s superiority over other properties.

Answer 16

b. expose the property to the maximum number of prospects in relation to marketing expenses and efforts.

Question 17

In obtaining offers from a buyer, an agent must be careful to

a. pursue only those offers which are at or near the listing price.
b. balance the owner’s price expectations with the buyer’s opinion of value.
c. avoid disclosing what price the owner will accept
d. avoid completing offers that are beneath market value.

Answer 17

c. avoid disclosing what price the owner will accept

Question 18

When a property is “under contract,”

a. the principals have agreed to an option to purchase, provided the buyer can obtain financing.
b. the buyer and the seller are engaged in negotiations to complete a sale contract.
c. the principals have entered into a sale contract and must satisfy any contingencies prior to closing.
d. certain contingencies must be satisfied before the buyer or seller will agree to sign the sale contract.

Answer 18

c. the principals have entered into a sale contract and must satisfy any contingencies prior to closing.

Question 19

Conversion is the act of

a. mixing escrow funds with the broker’s operating funds.
b. appropriating client or customer deposits for use in the agency’s business.
c. converting an offer into a binding contract.
d. converting escrow funds into equity funds in a property at the closing.

Answer 19

b. appropriating client or customer deposits for use in the agency’s business.

Question 20

Commingling is the practice of

a. blending escrow funds on a number of properties in one escrow account.
b. mixing socially with prospects at open houses or other marketing functions.
c. appropriating client or customer deposits for use in the agency’s business.
d. mixing escrow funds with the broker’s operating funds.

Answer 20

d. mixing escrow funds with the broker’s operating funds.

Question 21

Real estate advertising is a regulated activity. One important restriction in placing ads is

a. a broker may only place blind ads in approved publications.
b. a broker must have all advertising approved by the proper state regulatory agency.
c. the advertising must not be misleading.
d. sales agents may only advertise in their own name.

Answer 21

c. the advertising must not be misleading.

Question 22

The three principal brokerage firms in a market agree to pay sales agents 15% more than any other competitor currently in practice. This is an example of

a. collusion.
b. price fixing.
c. allocation of markets.
d. steering.

Answer 22

a. collusion.

Question 23

Two leading agencies jointly agree to raise commissions charged a certain class of client to 8% of the sales price. Which of the following is true?

a. This is a perfectly legitimate business practice.
b. The brokers have illegally fixed prices.
c. The brokers have allocated markets.
d. The brokers have engaged in legal collusion.

Answer 23

b. The brokers have illegally fixed prices.

Question 24

A corporation would like an agent to sell its country grocery store. Included in the sale are the inventory, equipment, and real property. The agent locates a full-price buyer who does not want to acquire any of the business’s actual or potential liabilities. To do this transaction, the corporation would most likely

a. propose an asset sale.
b. undertake a stock sale.
c. propose an exchange.
d. enter into a sale-leaseback transaction.

Answer 24

a. propose an asset sale.

Question 25

A broker is reviewing the balance sheet of her new listing to sell a business. Three of the entries on the books are licenses, trademarks, and goodwill. These would be examples of

a. tangible assets.
b. intangible assets.
c. short-term liabilities.
d. long-term liabilities.

Answer 25

b. intangible assets.

Question 26

In business brokerage, the notion of goodwill is best defined as

a. the commitment by the agent to expend maximum effort on the listing.
b. establishing pricing levels that will generate the good will of prospective customers.
c. the value or price of the business over and above the value of its other assets.
d. the portion of the sale price that is depreciable.

Answer 26

c. the value or price of the business over and above the value of its other assets.

Question 27

A syndication is

a. a group of general partners who invest in and manage real estate for a profit.
b. a group of inactive investors who join with a number of active partners to purchase, manage, and sell properties for a profit.
c. a network of active brokers who purchase and sell properties.
d. an organization engaged in illegal property acquisition and sale.

Answer 27

b. a group of inactive investors who join with a number of active partners to purchase, manage, and sell properties for a profit.

Question 28

In order to sell interests in a syndication, an agent must

a. obtain a Series 39 securities license.
b. obtain a Series 22 securities license.
c. obtain a real estate broker’s license.
d. obtain a syndicator’s license.

Answer 28

b. obtain a Series 22 securities license.