Chapter 3: Agency, Brokerage, and Ethical Considerations REVIEW QUESTIONS

Question 1

The legal relationship between a broker and seller is generally a(n)

Answer 1

special agency.

Question 2

The real estate broker can be hired as an agent through the document known as a

Answer 2

listing agreement.

Question 3

The statement “a broker must be employed to recover a commission for his or her services” means

Answer 3

someone must have agreed to pay a commission to the broker for selling the property.

Question 4

The procuring cause of a sale is

Answer 4

sometimes hard to determine.

Question 5

A listing may be terminated when either broker or principal

Answer 5

goes bankrupt

Question 6

When retained by the seller, the broker owes a prospective buyer

Answer 6

honest treatment.

Question 7

The salesperson who sincerely tries to represent both buyer and seller is practicing

Answer 7

dual agency.

Question 8

A seller who wishes to cancel a listing agreement in New Jersey

Answer 8

may be held liable for money and time expended by the broker.

Question 9

The buyer of residential property is entitled to find out about the presence of a convicted sex offender in the neighborhood

Answer 9

after the sale of the property has closed.

Question 10

Mollie’s father bought a house in 1940 for $4,500. She asks Bob Broker to list it and instructs him to see if he can get as much as $85,000 “because she’s heard houses have gone up in value.” Bob knows the property might bring $250,000. Bob should

Answer 10

tell Mollie that he believes the house is worth much more.

Question 11

An example of a latent defect is a

Answer 11

malfunctioning septic system.

Question 12

An independent contractor may be paid

Answer 12

commissions on sales.

Question 13

Commissions usually are earned when

Answer 13

the seller accepts the buyer’s offer without conditions.

Question 14

Even if a proposed transaction does not go through, the broker sometimes may collect a commission where the

Answer 14

seller simply backed out.

Question 15

A salesperson’s commission on a real estate transaction is

Answer 15

paid within ten days after the broker is paid for the transaction.

Question 16

To be entitled to collect a commission on a real estate transaction, an agent must

Answer 16

be the procuring cause of the transaction.

Question 17

Henry lists his house with broker Larry. Henry offers a bonus commission of $500 to the agent who brings a good buyer before Thanksgiving. Sam, who is associated with the cooperating firm of Olive Olsen, effects the sale on November 1. Sam may collect that bonus from

Answer 17

Olive Olsen.

Question 18

Eileen Brenner walks into the Rivera open house and realizes that the house is exactly what she’s been looking for. That evening, Tyrone, the salesperson who held the open house, calls Eileen and asks her if she wants to present an offer. Eileen says she wants to think it over. The next day, Eileen’s sister Helen, a real estate agent in another part of the state, presents an offer for her which the Riveras accept. Who was the procuring cause of the sale?

Answer 18

Tyrone, because he introduced her to the property and followed up

Question 19

Commission rates are set by

Answer 19

agreement between seller and broker.

Question 20

At a booth in the neighborhood coffee shop, broker Larry Jones is seated with his friendly rival, Olive Olsen. Olive says, “Did you hear about that firm that’s charging a flat fee for selling property? Do you think they’ll make it?” Larry’s proper response is to

Answer 20

point out to Olive that it is a violation of federal antitrust law for competing brokers to discuss any aspect of commission rates.

Question 21

The transaction broker represents

Answer 21

no one.

Question 22

A Consumer Information Statement (CIS) is required for transactions involving

Answer 22

one- to four-family dwellings.

Question 23

A dual agent cannot provide advice on

Answer 23

the right price to accept.

Question 24

Jenny purchases a lovely vintage home from an elderly woman who has lived there for many years. Valerie enters into a contract to have Boffo Builders construct a new home for her in the new Settling Pond development. If a hazardous waste landfill is discovered within a quarter-mile of either of these properties, what will be the result?

Answer 24

Valerie, but not Jenny, has five days in which to cancel.

Question 25

All of the following would be considered material information about a property in New Jersey, EXCEPT

Answer 25

the previous owner’s suicide.

Question 26

The duty of loyalty forbids the seller’s broker to

Answer 26

suggest an offer under the listed price.

Question 27

When the buyer gives a seller’s broker information about possible financial problems in completing the purchase, the broker should

Answer 27

inform the seller immediately.

Question 28

If the agent in the previous question is acting as a buyer’s broker, the most correct response for the broker is to

Answer 28

explain to the buyer that not revealing the problem to the seller may constitute concealment of a material defect.

Question 29

Negligent misrepresentation occurs when

Answer 29

the speaker should know the statement is false.

Question 30

The term REALTOR® applies only to

Answer 30

members of a private organization.

Question 31

New Jersey’s Consumer Fraud Act

Answer 31

allows exemption from liability in some circumstances.