Chapter 8: Agency Contracts

Question 1

antitrust laws

Answer 1

Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Most violations of antitrust laws in the real estate business involve either price fixing (brokers conspiring to set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties)

Question 2

buyer agency agreement

Answer 2

A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency

Question 3

co-brokered sale

Answer 3

A real estate transaction involving two or more brokerage firms, one firm representing the seller and the other representing the buyer.

Question 4

co-listing

Answer 4

Two brokerage firms team up to sell a property, usually to create a more effective marketing for the listing client.

Question 5

comparative market analysis (CMA)

Answer 5

A comparison of the prices of recently sold homes that are similar to a listing seller’s home in terms of location, style, and amenities; an estimate of market value; also called a broker price opinion

Question 6

cooperative listing service (CLS)

Answer 6

Another term for MLS

A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing, and able buyers for their properties more quickly than they could on their own. Most MLSs accept only exclusive right-to-sell or exclusive-agency listings from their member brokers

Question 7

employment contract

Answer 7

A document evidencing formal employment between employer and employee or between principal and agent. In real estate, this is generally a listing agreement, a buyer agency agreement, or a management agreement.

Question 8

exclusive-agency listing

Answer 8

A listing contract under which the owner appoints a real estate broker as the exclusive agent for a designated period of time to sell the property, on the owner’s stated terms, for a commission. The owner reserves the right to sell without paying anyone a commission if the owner sells to a prospect who has not be introduced or claimed by the broker

Question 9

exclusive right-to-sell listing

Answer 9

A listing contract under which the owner appoints a real estate broker as the exclusive agent for a designated period of time to sell the property, on the owner’s stated terms, and agrees to pay the broker a commission when the property is sold, regardless of who sells the property.

Question 10

extender clause

Answer 10

A carry-over or protection clause in a listing contract that says the listing broker is entitled to a commission for a time period after expiration of the listing term if the property is transferred to a prospect that the broker introduced to the property during the listing term; override clause. This clause is void if the property is listed with another broker.

Question 11

fee-for-service agreement

Answer 11

Arrangment where consumer asks licensee to perform specific real estate services for a set fee; unbundling of services; limited service firms

Question 12

frontage

Answer 12

The length of a property along the street or waterfront

Question 13

in-house sale

Answer 13

A real estate transaction where the listing firm actually produces the buyer for their listing, as opposed to a co-brokered or cross sale that involves two firms.

Question 14

limited services agreement

Answer 14

AKA fee-for-service agreement
A listing agreement that offers a menu of services and fees for separate broker activities that the client desires (unbundling of services).

Question 15

listing agreement

Answer 15

An employment contract between a property owner (as principal) and a real estate firm/broker (as agent) by which the broker is employed to find a ready, willing, and able buyer for the owner’s real estate on the owner’s terms, for which service the owner agrees to pay a commission

Question 16

Mineral and Oil and Gas Rights Mandatory Disclosure Statement

Answer 16

Since 2015, a separate North Carolina disclosure form that must be completed by most sellers of residential dwellings regarding the status of mineral, oil, and gas rights

Question 17

multiple listing service (MLS)

Answer 17

A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing, and able buyers for their properties more quickly than they could on their own. Most MLSs accept only exclusive right-to-sell or exclusive-agency listings from their member brokers

Question 18

National Do Not Call Registry

Answer 18

A national registry, managed by the Federal Trade Commission, that lists the phone numbers of consumers who prefer to limit the telemarketing calls they receive.

Question 19

net listing

Answer 19

A listing based on the net price the seller will receive if the property is sold. Under a net listing, the broker can offer the property for sale at the highest price obtainable to increase the commission. While this type of listing is illegal in many states, it is legal but not encouraged in North Carolina

Question 20

North Carolina Residential Property Disclosure Act

Answer 20

The state law that requires sellers to provide a prescribed property disclosure statement to any prospective buyer prior to presentation of first offer on the property. Exemptions include new construction, foreclosed properties, and lease purchases but not for sale by owner transactions.

Question 21

open-listing

Answer 21

A listing agreement under which the brokers commission is contingent on the broker personally producing a ready, willing, and able buyer before the property is sold by the seller or another broker.

Question 22

override clause

Answer 22

A carry-over or protection clause in a listing contract that says the listing broker is entitled to a commission for a time period after expiration of the listing term if the property is transferred to a prospect that the broker introduced to the property during the listing term; extender clause. This clause is void if the property is listed with another broker.

Question 23

price fixing

Answer 23

brokers conspiring to set fixed compensation rates

e.g.,

Question 24

procuring cause

Answer 24

The effort that began a chain of events that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission

Question 25

protection agreement

Answer 25

An agreement between an unlisted property owner and a broker to secure payment for the broker if the property is sold to the particular buyer named in the agreement; it does not create a general listing, and may not create agency at all – only compensation for a buyer’s agent. Sometimes called a one-shot listing

Question 26

puffing

Answer 26

Exaggerated or superlative comments or opinions: e.g., “This house has the best view in town!”

Question 27

ready, willing, and able buyer

Answer 27

One who is prepared to buy property on the seller’s terms and is ready to take positive steps to consummate the transaction; one of the agent’s requirements for entitlement to commission

Question 28

retainer fee

Answer 28

A small fee paid by the client upon creation of a buyer agency relationship as an advance partial compensation for services; it may be nonrefundable or applied to final compensation due depending on the agency agreement.

Question 29

success fee

Answer 29

Compensation that is due and payable upon the creation of a valid sales contract for property located by the buyer’s agent.