Class 2: Overview of Lawyer’s Role in Real Estate Conveyancing and Broker Competition - Jan. 10

Question 1

What is the market role of brokers? (Emanuel)

Answer 1

Brokers have expertise in locating parties who wish to enter into real estate transactions. (13)

Question 2

What is the market segmentation of brokers? (Emanuel)

Answer 2

Most brokers specialize geographically and by type of transaction. (14)

Question 3

What are residential brokers? (Emanuel)

Answer 3

Residential brokers mainly sell homes and condominiums.

Question 4

What are commercial brokers? (Emanuel)

Answer 4

Commercial brokers sell office buildings, apartment houses, and other commercial properties.

Question 5

What are the broker’s duties to their clients? (Emanuel)

Answer 5

The broker’s duties to their clients are the duty of loyalty, disclosure of the bottom line, duty against self-dealing, duty of full disclosure, and duty of confidentiality.

The broker’s duties stem from the law of agency. They are fiduciary duties. (C-3,15-16)

Question 6

What is the broker’s duty of loyalty? (Emauel)

Answer 6

The broker’s duties stem from the law of agency. They are fiduciary duties. (C-3, 16)

Question 7

What is the broker’s duty regarding disclosure of the bottom line? (Emanuel)

Answer 7

A broker may not disclose the seller’s lowest acceptable price.

Question 8

What is the broker’s duty regarding self-dealing? (Emanuel)

Answer 8

A broker is prohibited from self-dealing.

Question 9

What is the broker’s duty of full disclosure? (Emanuel)

Answer 9

A broker must promptly give the client all material information. (17)

Question 10

What is the duration of the broker’s duty of full disclosure? (Emanuel)

Answer 10

The duty ends when the client relationship is terminated.

Question 11

What is the broker’s duty of confidentiality? (Emanuel)

Answer 11

The broker must keep the confidences of the client. (17)

Question 12

What are leasing brokers? (Emanuel)

Answer 12

Leasing brokers represent landlords who own residential or commercial properties.

Question 13

What are mortgage brokers? (Emanuel)

Answer 13

Commercial mortgage brokers help developers and other owners locate project financing at favorable terms. Residential mortgage brokerage began as a major activity in the United States in the 1980s.

Question 14

What is a listing broker? (Emanuel)

Answer 14

A listing broker is engaged by a property owner to assist in selling the property.

Question 15

What is a selling broker? (Emanuel)

Answer 15

A selling broker brings a buyer to the seller.

Question 16

How does a broker own their commission on an open listing (nonexclusive) contract? (Emanuel)

Answer 16

The broker earns his commission by procuring a ready, willing, and able buyer. (17)

Question 17

What does the procuring cause mean? (Emanuel)

Answer 17

To earn the commission the broker must be the procuring cause of the sale.

Question 18

What is exclusive agency? (Emanuel)

Answer 18

The broker is the exclusive agent for the listed property. The owner can sell without paying a commission. (17–18)

Question 19

What is the exclusive right to sell (executive listing)? (Emanuel)

Answer 19

The seller must pay the commission even if he sells the property on his own. (18)

Question 20

What is a net listing? (Emanuel)

Answer 20

The seller agrees to pay the broker all amounts received in excess of a set price. (18)

Question 21

What is constructional preference for the seller? (Emanuel)

Answer 21

Courts construe an ambiguous contract in favor of the client. (18)

Question 22

What is duration of listing contract? (Emanuel)

Answer 22

Listing contracts normally have fixed expiration dates. (18)

Question 23

What is the protective period of a listing contract? (Emanuel)

Answer 23

A term requires the owner to pay a commission for a sale to a person who had contact with the broker within a set period of time after expiration of the listing contract.

Question 24

Whom does the broker represent? (Emanuel)

Answer 24

The broker represents the seller. (18)

Question 25

Who is the cooperating or selling broker? (Emanuel)

Answer 25

In many sales, two brokers are involved—not only a listing broker, but also a cooperating or selling broker. Within the Multiple Listing Service (MLS) system, most sales involve two brokers. The cooperating or selling broker is an agent of the listing broker and thus a subagent of the seller. (18– 19)

Question 26

Who is the buyer’s broker? (Emanuel)

Answer 26

The buyer’s broker represents the buyer. (19)

Question 27

May a broker represent both the seller and buyer in the same transaction? (Emanuel)

Answer 27

A broker may, with full disclosure and consent, lawfully represent both seller and buyer in the same transaction. (19)

Question 28

What is an implied dual agency? (Emanuel)

Answer 28

A dual agency may arise by implication when both seller and buyer are led to believe the broker is representing them.

Question 29

What is a transaction broker? (Emanuel)

Answer 29

A transaction broker has an arm’s-length relationship with all parties. (19)

Question 30

What happened in Crutchley v. First Trust & Savings Bank (1990)? (Q/TB)

Answer 30

The broker gave advice to seller regarding nonrecourse clause that downplayed it’s significance and advised clients not to consult an attorney. A broker should never discourage a client from hiring a lawyer. If the client’s interest would be best served by hiring a lawyer then encourage it. Legal advice + lack of encouragement to seek lawyer = negligence. Incorrect explanations (legal advice) = lawsuit.

Question 31

What happened in Douglas v. Visser (2013)? (Q/TB)

Answer 31

Buyer who has notice of defects has duty to further investigate. Buyer beware – caveat emptor. Additionally, the Douglases cannot rely on the seller-disclosure statement to prove that they made further inquiries of the Vissers, because many of the questions posed in the disclosure statement were not addressed by the Vissers.

Question 32

What is the traditional rule of when brokers earn their commissions? (Emanuel)

Answer 32

The traditional rule is when customer is found: The broker earns his commission when he procures a ready, willing, and able buyer at terms acceptable to the seller.

Question 33

What is the new rule of when brokers earn their commissions? (Emanuel)

Answer 33

The new rule is that there is an implied condition that the sale must close: A growing trend is to imply the condition that the sale must close in order for the broker to earn the commission.

Question 34

What is the contract vs. conveyances test? (Emanuel)

Answer 34

A growing trend is to imply the condition that the sale must close in order for the broker to earn the commission.

Question 35

What is the simple-complex test? (Emanuel)

Answer 35

A broker can complete simple forms.

Question 36

What is the incidental test? (Emanuel)

Answer 36

A broker can complete simple forms.

Question 37

What is the public interest test? (Emanuel)

Answer 37

A broker can complete simple forms.