Chapter 5

Question 1

Arbitration

Answer 1

If the parties cannot come to a mutual agreement, the issue is submitted to arbitration and a third-party (the arbitrator) makes a decision based upon the facts of the dispute. If arbitration fails, the disputing parties go to Litigation.

Question 2

Blind Advertisement

Answer 2

An advertisement that fails to provide the name of the brokerage firm.

Question 3

Commingle

Answer 3

To illegally mix personal funds with money held in trust on behalf of a client.

Question 4

Conflicting Demands

Answer 4

Where the requirements of the parties involved do not concur, as in disbursement of earnest money held in escrow when a contract is terminated.

Question 5

Conversion

Answer 5

The unlawful appropriation of another’s property, as in the conversion of trust funds.

Question 6

Corporation (Inc)

Answer 6

An entity established and treated by law as an individual or unit with rights and liabilities, or both, distinct and apart from those of the persons composing it. A corporation is a creature of having certain powers and duties of a natural person. Being created by law, it may continue for any length of time the law prescribes.

Question 7

Deposit

Answer 7

Funds entrusted to another to be held for later use in a transaction.

Question 8

Earnest Money

Answer 8

The cash paid by a prospective buyer of real property as evidence of good-faith in completing the transaction.

Question 9

Escrow Account

Answer 9

An escrow or trust account is a separate account held by a third party for the deposit of funds such as earnest money. The account must be separate from the broker’s own operating funds.

Question 10

Escrow Disbursement Order

Answer 10

In the event of a dispute, an Escrow Disbursement Order (EDO) can be requested by the broker from the FREC which will issue instructions on disbursement of funds in Escrow. Once an EDO is requested the broker must follow the instructions issued.

Question 11

Failure to Account and Deliver

Answer 11

The act of failing to pay money to a person entitled to receive it.

Question 12

General Partnership

Answer 12

A business owned by more than one broker with each partner being equally liable for any debt; each partner is involved in decision making and receives a share of the profits.

Question 13

Good-Faith Doubt

Answer 13

Where the broker is not convinced that the sale has failed for a legitimate reason and seeks direction from the FREC regarding disbursement of escrow funds.

Question 14

Interpleader

Answer 14

A process through the courts to determine the rightful owner of disputed escrow funds.

Question 15

Kickback

Answer 15

Payment for referrals. It is unlawful for a licensee to pay any fee to an unlicensed individual for performing the services of real estate.

Question 16

Limited Liability Company (LLC)

Answer 16

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Question 17

Limited Liability Partnership (LLP)

Answer 17

A form of ownership that provides liability protection similar to limited partners in a limited partnership however the partner is only liable for what he has done, rather than the actions of the partnership.

Question 18

Limited Partnership

Answer 18

A business owned by one or more general partners, one of which must be an active broker, and one or more limited partners.

Question 19

Litigation

Answer 19

Another term for a lawsuit.

Question 20

Mediation

Answer 20

Intervention to promote compromise, reconciliation or settlement.

Question 21

Ostensible Partnership

Answer 21

An apparent, or quasi partnership where there may be a hidden relationship; an ostensible partnership cannot be registered as a real estate brokerage.

Question 22

Personal Assistant

Answer 22

An individual (typically unlicensed) who assists a licensee in their day-to-day work as an agent.

Question 23

Professional Association (PA)

Answer 23

A business corporation engaged in a primary business that provides a professional service.

Question 24

Point of Contact Information

Answer 24

Any means by which the brokerage firm or individual licensee can be contacted.

Question 25

Sole Proprietorship

Answer 25

A business owned by one person who takes sole responsibility for any actions taken.

Question 26

Team Advertising

Answer 26

A name or logo used by one or more real estate licensees who represent themselves to the public as a team or group. The team or group must perform licensed activities under the supervision of the same broker or brokerage.

Question 27

Trade Name

Answer 27

A fictitious or adopted name used to designate a business.