Questions - Chapter 8 Flashcards by Dan Fuhrman

The clause in a listing contract that protects the broker’s commission entitlement beyond the listing term in the event of a sale of the property by the owner to a prospect who was shown the property by the listing firm or its agents is called a(n):

A. forfeiture clause.
B. extender clause.
C. settlement clause.
D. exclusive right clause.

8-1 B

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Exclusive Right to Represent Buyer Agreements must have all of the following characteristics EXCEPT:

A. being in writing.
B. having a definite termination date.
C. specifying provisions for an automatic renewal.
D. incorporating conspicuously the commission prescribed “Description of Agent Duties and Relationships:’

8-2 C

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Which of the following clauses is required by the NC Real Estate Commission to be contained within every listing agreement?

A. protection clause
B. antitrust clause
C. compensation clause
D. antidiscrimination clause

8-3 D

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Earnest money is:

A. synonymous with consideration.
B. typically held in a trust account.
C. a minimum of $250.
D. all of the above.

8-4 B

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Samuel Seller lists his property with Exclusive Realty. Eventually Samuel convinces a co-worker, Wanda Wish, to purchase his home. In which situation would Samuel not owe a commission to Exclusive Realty?

A. an open listing
B. a percentage listing
C. an exclusive right to sell listing
D. a net listing

8-5 A

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The type of listing agreement for which the seller will owe the listing agency a commission regardless of who sells the property is a/n):

A. open listing.
B. exclusive agency listing.
C. exclusive right to sell listing.
D. co-brokered listing.

8-6 C

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All of the following will automatically terminate a residential listing agreement EXCEPT:

A. expiration of the listing period.
B. death of the seller.
C. death of the listing broker who works at a large residential firm with many agents.
D. sale of the house.

8-7 C

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Which of the following would likely NOT constitute a violation of the Sherman Antitrust Act?

A. a boycott of a discount brokerage’s listings
B. agreement with competitors to set commission rates
C. refusal to place advertisements in a local paper that accepts ads from for sale by owners
D. a firm’s raising of its own commission rates

8-8 D

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The primary difference between an open listing and an exclusive agency agreement would be:

A. the seller retains the right to sell the property himself and is not liable for a commission.
B. the seller can list with as many brokerages as he wishes in the open listing.
C. the exclusive agency agreement stipulates the firm is the only one that can sell the property and be entitled to a commission regardless of who sells it, even the seller.
D. the seller can sell it himself in the exclusive agency agreement but is not allowed to sell it himself in the open listing without being liable for the commission.

8-9 B

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Which of the following is true regarding the Residential Property and Owners’ Association Disclosure Statement?

A. This form must be provided to the purchaser by a seller who is selling his own property without assistance from a real estate broker.
B. In the event a seller does not provide the purchaser with this form by the date of the first offer, the transaction is automatically terminated by law.
C. If the seller does not provide the purchaser with a copy of this form by the date of the offer, the buyer is automatically entitled to a refund of his earnest money deposit.
D. This form is required to be provided by the seller in the sale of new construction that has been used as a model home but has not been occupied as a personal residence.

8-10 A

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The rate of commission to be lawfully charged in a real estate transaction is set by:

A. the local MLS.
B. the Association of REALTORS®·
C. the Sherman Antitrust Law.
D. the firm and the seller.

8-11 D

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Which is true of a valid listing agreement in North Carolina?

A. it must contain a nondiscriminatory clause
B. it may be oral up to presentation of the first offer
C. it requires the seller to sell if a full price offer is made by a buyer
D. it can contain an automatic renewal clause if both parties agree to it in writing

8-12 A

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Steve Seller needs to receive $180,500 from the sale of his house after paying the broker a 5% commission. How much must the house sell for?

A. $190,000
B. $180,500
C. $189,525
D. $17l,475

8-13 A

$180,500 / 95% = $190,000

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Angela wishes to net $25,000 from the sale of her house after paying off her loan of $121,900, miscellaneous costs of $3,500, and a commission of 6%. What should be the selling price of the property?

A. $141,376
B. $158,404
C. $159,424
D. $160,000

8-14 D

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A property recently sold for $225,000 at a commission rate of 6%. If the firm collects a 6% franchise fee from the total commission and then pays the agent 55% of the remainder, how much did the agent make on this transaction?

A. $8,235.00
B. $7,425.00
C. $6,979.50
D. $5,7l0.00

8-15 C

$225,000 X 6% = $13,500 - 6% = $12,690 X 55% = $6,979.50

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Christy has sold a property, which was listed at a 5% commission rate with another firm, for $240,000. The listing firm agrees to a 50/50 commission split with the selling firm. Christy’s company will charge a 5% franchise fee on all earned commissions and will then pay her 65% of the remainder. How much did Christy earn on this sale?

A. $4,200
B. $3,705
C. $3,900
D. $5,700

8-16 B

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A broker’s commission schedule calls for him to make 7% of the first $150,000 of sales price, 6% on the next $150,000, and 5% on the balance. What is the total commission on a sales price of $380,000?

A. $19,000
B. $22,000
C. $23,500
D. $27,000

8-17 C

An investor paid $150,000 for a property that he sold four years later for $210,000. What was his average annual rate of profit?

A. 10%
B. 4.5%
C. 7.25%
D. 40%

8-18 A

$210,000 - $150,000 = $60,000 / $150,000 = 40% / 4 = 10%

Buyer originally paid $150,000 for his house by paying $25,000 down. If the house is now valued at $160,000, by what percentage has his equity increased?

A. 22%
B. 40%
C. 6.25%
D. 5.0%

8-19 B

Lewis purchased a home two years ago for $120,000 by paying $30,000 as a down payment. Assuming that the value of the home has increased by 10%, by what percentage has his equity increased?

A. 6.8%
B. 31.8%
C. 40.0%
D. 46.7%

8-20 C

A valid listing agreement may be terminated for any of the following reasons, EXCEPT:

A. sale of the property
B. expiration of the individual listing agent’s license
C. agreement of the parties
D. destruction of the premises

T8-1 B

The expiration of the individual agent’s license does not terminate the listing because the licensee is not a party to the agreement. The listing agreement is between the client and the firm.

According to North Carolina Real Estate Commission Rules, all of the following are required to be part of a listing agreement, EXCEPT:

A. signature of all parties
B. the licensee’s license number
C. a definite termination date
D. an automatic renewal clause

T8-2 D

Listing agreements and buyer broker agreements may not provide for an automatic extension of the agreement. However, the client and the firm can agree to extend the listing period by mutual agreement and a properly executed addendum.

By entering into an exclusive agency listing agreement with a seller, a real estate brokerage firm:

A. is not entitled to receive a commission if another agency finds a buyer for the property
B. has become the seller’s designated agent
C. has become the exclusive agent of the seller, but is not entitled to receive a commission if the seller finds a buyer for the property
D. has agreed to renegotiate the commission with the seller should another agency offer a lower commission rate

T8-3 C

An exclusive agency agreement differs from an exclusive right to sell agreement because under an exclusive agency agreement the firm is not paid if the seller finds a buyer on their own.

If a seller needs to net $50,000 after the sale of a property, what is the minimum acceptable sales price if the selling expenses include a 7% commission and $1,200 in additional expenses?

A. $53,763.44
B. $54,784
C. $55,053.76
D. $55,633.25

T8-4 C

If the seller will net 93% of the total sales price (100%-7%), then $50,000 + $1,200 = $51,200÷.93 = $55,053.76

A property owner lists a property for sale with a broker. The owner told the broker during the listing negotiations that he wanted $138,000 for the property, and anything above that amount the broker could keep as commission. The listing with this type of provision is known as: A. gross listing B. net listing C. open listing D. nonexclusive listing

T8-5 B A net listing provides for the brokerage commission to be an excess amount over a predetermined net amount to be received by the seller. Net listings are legal, but they are discouraged by the real estate commission due to their potential for taking advantage of a client.

The fact that the NC listing agreement and buyer agency agreement must be in writing is required by: A. Statute of Frauds B. Commission Rule C. Conner Act D. Contract law

T8-6 B Employment agreements are not a right or interest in real estate subject to the statute of frauds, but need to be in writing due to commission rules. The listing agreement must be in writing at the time of the listing and the buyer brokerage agreement must be in writing prior to the submission of the buyer's offer.

A licensee has just discovered a major roofing leak in one of his current listings even though the seller has indicated “no representation” on the Residential Property Disclosure Statement. The listing agent does not inform the selling agent of the defect and since the defect, is hidden, the selling agent does not discover or disclose the problem to the buyer. According to the North Carolina Real Estate Commission, who is held responsible for this nondisclosure? A. the listing agent B. the listing broker and the selling broker C. the seller and the listing agent D. the seller

T8-7 A There is no obligation of a seller to disclose the defect, though the seller has a mandatory duty to complete the Disclosure Statement. Regardless of how the seller completes the form, the licensee has a duty to disclose all material facts so the liability rests with the listing agent. The buyer's agent has the same disclosure obligation, however, in this question because the defect was hidden it does not appear to be an item for which the selling broker (buyer's agent) had liability.

Ricardo is showing the buyer a house in the capacity of seller sub-agent. Prior to being shown any house, the buyer indicates to Ricardo that it is essential he have a fence erected around the backyard of any house he purchases. Ricardo finds the perfect house for the buyer but it does not have a fenced in backyard nor does the listing information sheet indicate whether fences are allowed or not. Ricardo does not inquire of the listing agent anything about a fence. The buyer purchases the house and later learns that he cannot erect a fence. Which of the following statements regarding these facts are true? A. The listing agent had a duty to disclose in the listing information sheet that fences were not permitted. B. Ricardo had a duty to determine if fences were permitted even though the listing information sheet did not indicate anything regarding fences. C. Since Ricardo and the listing agent are acting in the capacity of seller sub-agent, they have no responsibility to determine if fences are permitted. D. Since the buyer did not have a buyer agent in the transaction, it is solely his responsibility to check into the permissibility of having a fence.

T8-8 B Whether working with a client or a customer a licensee has a duty to disclose all material facts. A potential buyer can make an issue a material fact by asking about or expressing their intentions. Once Ricardo knew the fence was a material issue to the buyer he was bound to take some action.

Which of the following is TRUE about the North Carolina Residential Property Disclosure Act? A. All agents in the transaction should facilitate the timely delivery of the property disclosure report to the buyer. B. The property owner should disclose the condition of the listed property or be subject to a 3-day rescission period on any contract formed. C. All residential sellers are exempt from this act unless a broker is not involved in the transaction. D. Buyers must receive the completed disclosure report no later than the beginning of the due diligence period.

T8-9 A The Residential Property Disclosure Report should be provided to buyers in a timely fashion.

The seller wants to net $165,000 after paying the broker fee of 6% of the sales price. What is the minimum acceptable gross sales price to the nearest dollar? A. $169,850 B. $174,900 C. $175,532 D. $178,745

T8-10 C If the seller will net 94% of the sales price (100%-6%), then $165,000÷.94 = $175,531.915 (rounded up to $175,532).

A seller and a broker are engaged in a dispute over a forfeited earnest money deposit. The seller feels that he does not owe this broker a commission. In fact, the seller has no reasonable basis for refusing to allow the broker to return the earnest money to the buyer who cancelled within their due diligence period. According to the North Carolina Real Estate Commission, what should the broker do about the earnest money? A. wait for a signed release from the buyer B. try to obtain mutual consent from all parties as to the disposition of the earnest money and if that is not possible then the funds cannot be released and may be paid into the clerk of courts with proper notice C. inform the buyer that the seller is being unreasonable and explain that the broker must release the earnest money to the seller D. disperse the money according to the terms of the Offer to Purchase and Contract

T8-11 B

Anti-trust laws prohibit all of the following, EXCEPT: A. property management companies all agreeing to charge standardized management fees B. three different brokerage firms allocating markets based on the value of homes C. real estate companies agreeing not to cooperate with a broker because of the fees that broker charges D. a broker requiring all the agents of his firm to join the local listing service

T8-12 D Anti-trust laws apply to activities between firms and their interaction. They do not limit the ability of a firm from setting company policies as to fees, rates or geographical areas.

Earnest money deposits, when paid in the form of a personal check given on an Offer to Purchase and Contract, must be deposited in an escrow account: A. no later than three banking days after acceptance of contract B. no later than 72 hours after receipt of money C. no later than three business days after receipt of the money D. no later than 72 hours after acceptance of contract

T8-13 A When dealing with money the rules all reference "banking" not business days. Earnest money must be deposited no later than 3 banking days. If a check was provided NCREC allows BIC's and firms to start counting the 3 days from the acceptance of a contract.

If a seller and a listing firm have a commission dispute prior to the closing, the listing firm: A. is not allowed to release any earnest money being held until the commission dispute is settled B. is to hold up the closing until the dispute is settled C. must allow the transaction to close D. cannot release any earnest money until there is a signed release between the seller and buyer

T8-14 C Licensees may not allow their own individual disputes over commissions and fees to adversely affect the transaction. If the dispute cannot be resolved the firm should allow the transaction to close and then bring a lawsuit against the seller for the commission, but the brokerage cannot hold the transaction between the parties hostage.

Which of the following statement(s) is/are true regarding death of a seller? l. If a seller dies after signing a listing agreement, the listing agreement is terminated. ll. If a seller signs a sales contract and dies before the closing of the property, the sales contract is terminated. A. l only B. ll only C. Both l and ll D. Neither l nor ll

T8-15 A Death of the party to an agreement ends an employment contract such as a listing or buyer broker agreement. Once there is a valid and enforceable sales contract, death of the parties does not end that agreement.

A buyer paid $45,000 for a home. Five years later, she put the home on the market for 20% more than she originally paid. The home eventually sold for 10% less than the asking price. At what price was the home sold? A. $49,500 B. $54,000 C. $44,000 D. $48,600

T8-16 D The home was listed for $54,000 ($45,000 x 120%). If it sold for 10% less than the asking price, then it sold for 90% of the list price. $54,000 x .90 = $48,600.

Two brokers split a 6% commission equally on a $73,000 home. The selling provisional broker, Joe, was paid 70% of his broker’s share. The listing provisional broker, Janice, was paid 30% of her broker’s share. How much did Janice receive? A. $657 B. $1,314 C. $1,533 D. $4,380

T8-17 A The total commission for the sale was $4,380 ($73,000 x 6%). The brokers split the commission equally so each broker received $2,190 ($4,380÷2). Jan received 30% of her broker's share ($2,190 x 30%) = $657.

You are on a listing appointment and the sellers tell you they would like to net $135,000 from the sale of their home. You estimate they will have to pay $950 in miscellaneous settlement costs. You will charge them a 6.5% commission to sell the property. They also have a loan payoff of $53,500. What must the property sell for to ensure they receive their desired net? A. $145,401.06 B. $201,604.27 C. $201,764.25 D. $202,620.32

T8-18 D The amount needed to cover the itemized items is $189,450 ($135,000 + $950 + $53,500). The payoff of those items represents 93.5% (100%-6.5%). $189,450÷.935 (93.5%) = $202,620.32.

An investor sold a property for $590,000. He made a 35% profit on the sale. What did he originally pay for the property? A. $206,500.5 B. $437,037.03 C. $428,500.25 D. $286,222.41

T8-19 B If the investor made a 35% profit, then he got back 135% of his money. $590,000÷1.35 (135%) = $437,037.03

A seller sold his property for $97,000. He made a 321.74% profit. What was the purchase price of the property? A. $13,000 B. $23,000 C. $74,000 D. $97,000

T8-20 B If the investor made a profit of 321.74%, then he got back 421.74% of his money. $97,000÷4.2174 (421.74%) = $22,999.95 (rounded up to $23,000).