National Brokerage Flashcards
Agent
person who is empowered by contract to represent the interest of someone called a principal
Agency relationship is when….
one person is empowered by another to represent him in any type transaction (MONEY OR COMMISSIONS DO NOT CREATE IT)
The four ways agency is created
- written or expressed
- implied
- ostensible agency
- ratification
Ostensible agency
agency relationship that arises by the actions of the parties rather than by express agreement
Ratification
method of creating agency relationship in which the principal accepts the conduct of someone who acted without prior authorization as the principals agent
Universal agent
Handles all delegated business of principal. Agent has power of attorney; sometimes called an attorney-in-fact
General agent
handles multiple transactions of a client; best example would be property manager
Special agent
One limited in authority to transact a single business affair or a specific series of business affairs (listing one property for sale)
Agency coupled with interest
when the real estate licensee is a partner in the ownership of the property
A good agent does what….(3 things)
- CHOOSES who he represents
- COMMUNICATES decision to all parties
- CONDUCTS business in a manner consistent with choice
What does an agent owe his/her principal (C.O.A.L.N.)
CARE OBEDIENCE ACCOUNTING LOYALTY NOTICE
What does an agent owe 3rd party customers (H.A.D.)
HONESTY
ACCURACY
DISCLOSURE OF DEFECTS - must make aware of latent (hidden) defects
Puffing
an exaggeration or superlative comment, it is legal, subjective opinion
Fraud
not legal….deception intended to cause a person to give up property or a lawful right
Latent defects
something that is known to the seller, but not to the purchaser and not readily discoverable by inspection…must disclose to buyer
For dual agency to happen…
dual agency agreements and/or disclosure forms must be signed by all parties, and finally acknowledged in the final agreement between the parties.
What is required to collect a commission (3 things)
- Must be a licensed broker or salesperson under a broker
- Must have been employed by the principal under a valid contract
- Must have been the procuring cause of the sale (action to start or cause a chain of event that resulted in the sale)
A broker can only pay…….
A salesperson licensed to him/her or another broker…never a direct payment to a salesperson licensed to another company
A commission can be a…..
Percentage of sale price, flat fee or salary, or any other amount set forth in listing agreement
Sherman Anti Trust Act prohibits….(3 things)
- Price Fixing: collusion with competitors to set commission rates
- Group Boycotts
- Division of markets by location or price
Sherman violations can….
include prison terms and fines up to $350K per violation
What are the 5 types of listing agreements?
- Exclusive right to sell
- Exclusive agency
- Open
- Net listing
- Agency coupled with an interest
Exclusive right to sell listing agreement
Listing broker is always entitled a fee regardless of who procures the buyer. Most protection to broker. Selling broker compensated by the listing broker.
Automatic extender clauses are…
not legal in many states because listing agreements must have a beginning and ending date in most states
Exclusive agency listing agreement
Only one broker allowed to act on behalf of principal, however if owner sells the property himself, they don’t have to pay a commission to broker.
Open listing agreement
An agreement between an owner and many brokers. If a broker produces a ready willing, and able buyer, a commission is due. However, the owner still has the right to sell his/her property and is not obligated to pay a commission to anyone
Net listing agreement
Seller is to receive a certain amount of money from the sale and anything over that amount is what the broker gets as commission….ILLEGAL IN MOST STATES
Termination of listings can happen how…(7 ways)
- Fulfillment of the purpose of the listing (performance)
- Expiration of time as stated in the agreement
- Breach or cancellation by one of the parties (renunciation by broker or revocation by principal)
- Transfer of title (bankruptcy or foreclosure)
- Mutual consent
- Death or incapacitation of either party
- Destruction or change in property use by outside forces
Responsibilities of listing agent once listing agreement has been signed are….(6 specific things)
- show property
- locate buyer
- communicate terms
- promote features and terms to customers
- assist in negotiations
- safeguard property (remove valuables before showing, etc.)
Brokerage companies must have a don not call policy, even if they do not engage in cold calling, and must maintain an updated list every……
31 DAYS
Violations of calling people on a ‘no call’ list can be up to…
$11,000 per call placed
Exemptions to the “do not call” law are…(3 organizations)
POLITICAL ORGANIZATIONS, CHARITIES, TELEPHONE SURVEYORS
May call a consumer who has an established business relationship with the company for up to….
18 months after their last payment, purchase, delivery etc….even if they are on a DNC list
After a consumer makes an inquiry or submits an application to a company, you can call them up to…
3 months after
If a consumer asks specifically not to be called…
no person in the company may call them even if an established relationship exists
CAN-SPAM act addresses requirements for sending commercial emails and prohibits/enforces….(5 things)
- false or misleading info
- deceptive subject lines
- email must have opt out method
- commercial email must be identified as an ad and include senders physical postal address
- fines up to $11,000
In sellers net math formula….
take amount seller wants to net, add expenses, subtract refunds, and divide by the difference between 1 and the commission
Express agreement
an oral or written contract in which the parties state the contract’s terms and express their intentions in words
Implied contract
contract that is unwritten and inferred from the actions of the parties
Bilateral contract
Both parties promise to do something; promise for a promise (contract between seller and buyer)
Unilateral contract
contract in which one party promises to do something if the other party acts (ex: option contract or listing agreement)
A contract may be EXECUTORY if….
something remains to be completed in the contract (closing hasn’t taken place yet)
Minors lack the…..
capacity to convey property
The elements needed for a valid contract are…(4 things)
- Legally competent parties
- Offer and acceptance
- Consideration- valuable or good
- Legal purpose
An offer is not a contract until it has been….
signed by both parties and communicated back to the offeror
All contracts for the sale of real property must be…
in writing to be enforceable
All leases for more than one year must be…
in writing to be enforceable
“time is of the essence” in a contract means…
work must be performed within a certain time frame or the party is guilty of breach of contract
The contract term ‘assignment’ refers to..
the transfer of rights or duties to a third party while the original party remains secondarily liable
The contract term ‘novation’ refers to..
Substituting a new contract for an old one.
A tenant assigning his lease to another will still remain liable for the original lease without a ‘novation’ from the landlord.
With regards to making a counteroffer, the original offer becomes….
terminated
The contract term mirror image means
seller agrees to an offer exactly as it was made
Liquidated damages are…
the amount of money and or personal property agreed upon as settlement if one party doesn’t live up to the terms of the contract
A ‘contingency’ is..
term or condition in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.
An ‘option’ is….
An agreement to keep open, for a set period, an offer to sell or lease real property. Optionor (seller) is obligated to sell if optionee (buyer) exercises the option. However, buyer is not obligated to purchase.
Option is an example of what type of contract?
Unilateral
If buyer (optionee) does not decide to purchase the property in an option they must…
give the seller some form of consideration
Equitable title is…
The interest the buyer has in property between time of acceptance of contract and closing….gives the buyer the right to receive legal title upon closing.
If the seller defaults in a real estate contract, the buyer may….(3 things)
- cancel the contract and recover the earnest money
- file a suit for specific performance forcing seller to convey the property
- sue seller for compensatory damages
If the buyer defaults in a real estate contract, the seller may…(4 things)
- declare the contract forfeited (seller usually has right to retain EM)
- rescind contract and return all payments made by buyer
- sue for specific performance
- sue for compensatory damages
Statute of limitations is…
period of time within which certain actions must be brought to court
A freehold estate lasts for at least…
a lifetime or greater
A property manager is defined as…
one who preserves the value of an investment property while generating income as an agent for the owners
A management agreement would NOT contain…
a statement of the lessee’s purpose
A property management agreement would contain…..(7 things MAP’T’DER)
Management fee Allocation of costs Property description 'Term of agreement Definition of responsibilities Extent of authority Reporting requirements
The owner’s objectives will be the deciding factor in an adoption of….
management plans
A property manager would not want his job dependent on the…
ALLOWABLE VACANCY RATE…might rent to anyone regardless of credit rating to keep it up
Must be two escrow accounts in property management in which…
- The property management escrow account used for current rents and management
- A separate account the broker is required to deposit security deposits and any rent other than current rent into
A property manager could be paid…..(3 things)
a percentage of income, salary, or a flat fee
Functions of a property manager are…(7 things)
- budgeting expenses
- renting the property
- maintaining good relations with the tenants
- maintaining the property
- handling environmental concerns
- adjusting rates
- showing units
Property manager is usually what type of agent?
General
The property manager’s first responsibility is to…
realize the MAXIMUM PROFIT on the property that is consistent with the owner’s instructions.
A property manager needs to make sure that if he/she is recommending substantial improvements to the property, that the net result will be an…
increased rate of return for the owner
A preventative maintenance system is…
a routine schedule of tasks to be completed that keeps the mechanical systems in the best working order, and prevents larger, more costly repairs later.
Routine maintenance is..
regularly performed tasks like mowing the lawn, trimming shrubs, etc.
Property managers owe tenants…(H.A.D.)
the same duties that you owe a buyer when you are the seller’s agent. HONESTY, ACCURACY, DISCLOSURE
A more specific list of duties to the landlord from the property manager include…(10 things)
- Advertising property
- Evaluating rental market
- Obtaining tenants
- Screening applicants
- Tenant complaints and conflicts
- Fiduciary responsibility to owner
- Income, expenses, and rate of return to property
- Federal fair housing laws followed
- Maintenance
- Fees, security deposits, and rent collection
Tenant selection criteria and duties owed are…(5 things)
- size of space meets tenant needs
- tenant has ability to pay for space
- tenant’s business is compatible with building
- space available for tenant expansion(not possible all the time)
- rules for one tenant are rules for all tenants
Order of priority of standards for individuals with disabilities is…(4 things)
- get to the door standard (ramps, widening entrance)
- provision of access to all areas where goods are made available to the public
- accessibility to restrooms
- access to all remaining areas
If a tenant is involved in something illegal the property manager should…
report to the owner immediately
Warranty of habitability means that..
the landlord is responsible for properly maintaining the property in good condition
Some common reasons for evicting a tenant are…(4 things)
- nonpayment of rent
- unlawful use of the premises
- noncompliance with health and safety codes
- violation of terms of the lease
What are the three categories of risk that need to be considered for insurance on property
- destruction of the property
- injury to others while on the property
- theft of property on the premises (this one is usually up to the individual tenants to cover)
The 7 areas of illegal discrimination in fair housing are…
- race
- color
- religion
- national origin
- sex
- handicap
- familial status
Blockbusting or panic peddling refers to…
making a profit by inducing owners to sell by telling them that persons of a protected class are moving into a neighborhood
What three areas are not covered in the fair housing laws?
- age
- marital status
- dependence on public assistance
There are NO EXCEPTIONS for racial discrimination based on the 1866 Civil Rights Act. However, there are…
exceptions in other areas to the 1968-88 laws
Exceptions to areas of discrimination other than race are allowed in the sale or rental of a sigle family home by an owner if….(4 things)
- owner does not own more than three homes
- property is owner occupied
- owner does not use discriminatory advertising
- owner does not use a real estate agent
Exceptions to areas of discrimination other than race are allowed in rental of units in…
an owner occupied one to four family dwelling (if bigger than 4 family, no exceptions)
Religious organizations may…
restrict housing to members of the same religious organization
Private clubs may…
restrict to members only
Senior citizen projects may…
residents must be at least 62 years old or 80% of the residents must be at least 55
BROKERS MUST DISPLAY A POSTER FOR
EQUAL HOUSING OPPORTUNITY!!
Channeling away of home seekers to particular areas based on race, religion, etc. is referred to as..
STEERING
Refusing to make mortgage loans or issue insurance policies in specific areas regardless of financial abilities of individuals is….
REDLINING
Familial status refers to..
having a child under 18, custody of one, seeking custody of one or being pregnant
With regards to a tenant modifying a property to make it handicap accessible for use, the landlord may require…
a higher security deposit in case the property is not restored to it’s original condition.
Requirements for handicap accessibility features are for buildings that are ready for first occupancy after….
March 13, 1991 and have an elevator and four or more units. If no elevator and four or more units the accessibility features only apply to the ground floor.
First offense fair housing discrimination charges range from…
$16,000
Seond offense fair housing discrimination charges within 5 years of the first range from…
$37,500 and $65,000 if two or more violations occur in 7 years
Can make fair housing complaints to who..(2 parties)
- Federal District Court (may bring civil suit here within 2 years of alleged violation or 1 year if complaint has already been filed with HUD)
- Department of Housing and Urban Development (HUD)
Complaints brought under the Civil Rights Act of 1866 must be taken directly to…
federal court
Equal access to housing regardless of sexual orientation or gender identity applies to….
HUD assisted housing and FHA insured mortgage financing. Important to remember that the regulations apply only to federally supported housing programs and not to programs that are not HUD related. Does not recognize sexual orientation and gender under the Fair Housing Act.
A real estate licensee is considered a “creditor” if ….
he routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.
Under Equal Credit Opportunity Act, lenders can base lending decisions on a consumer’s…(4 things)
- income
- net worth
- job stability
- credit rating
When computing income for federal tax purposes, managers must indicate wages paid in any form other than money, at their fair market value. Included in this category are…..
automobiles furnished to employees and living quarters provided for on-site managers. Living quarters are however, NOT TAXABLE to the employee if the employee is required to reside on the premises as a condition of employment.
The original cost basis of a property reduced by certain deductions and increased by certain improvement costs is called the…
adjusted basis (used to determine the amount of gain or loss upon the sale of the property)
The dollar amount that the IRS attributes to an asset for the purposes of determining annual depreciation or cost recovery is the…
basis
Money or other property that isn’t like kind that is given to make up the difference in value between exchanged properties is called…
boot
Cash flow
the spendable income from an investment after deducting from gross income all operating and fixed expenses, including principal and interest
Depreciation cannot be taken on…
a personal residence
A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of “like kind” is referred to as…
1031 Tax Deferred Exchange
Leverage
the impact of borrowed funds on investment return
A REIT does not have to pay corporate income tax as long as….
95% of its income is distributed to its shareholders.
To qualify as a REIT…..
75% of the income must come from real estate. Investors purchase certificates in the trust which in turn invests in real estate and/or mortgages.
This refers to ta provisions that enable the taxpayer to defer paying taxes in certain situations such as the exchange of real property
Rollover rule
IRS home sale exclusion rules are:
Up to $250K ($500K for a married couple filing jointly) of capital gains from sale of principal residence can be excluded from tax.
Exclusion can be claimed repeatedly but usually once every two years.
Cap gains exclusion may include gain from the sale of vacant land that has been used as part of the residence if…
the land sale occurs within two years before or after the sale of the residence.
To exclude gain , a taxpayer must both…
own and use the home as a principal residence for two of the five years before the sale (ownership use periods need not be concurrent)
Lenders will require homeowners to have insurance to replace the…
home only but not the lot
A coinsurance clause requires….
homeowner to have insurance to cover 80% of replacement cost, otherwise insurance company will not pay to replace the building if lost in fire, etc.
In knowing your market, the conditions an agent must stay abreast of include….(5 things)
- interest rates
- demographics
- employment levels
- vacancy rates
- absorption levels
Law requires disclosures of any lead tests and the possibility of lead based paint being present on site, however it does not….
require the seller to have a test performed or to remove lead based paint.
Pertaining to offers and counteroffers..at a minimum the agent should assist the client or customer with…(4 things)
- development of the offer or counteroffer
- presentation of the offer or counteroffer
- questions concerning the transaction
- negotiations leading to the acceptance of the offer
Home warranties can be purchased by? …and are usually valid for??
the agent, seller or buyer and valid for 1 year after purchase usually
The survey is usually paid for by the…
buyer
The type of survey used to determine boundaries of parcels for defining ownership is called a…
cadastral survey
Some of the records a broker must keep include copies of…(7 examples)
- deeds
- title searches
- title insurance policies
- surveys
- inspection certificates
- home warranties
- closing documents
