Real Estate Ky Test Ch 4 part 1 Flashcards
What are the required provisions to be in a listing contract?
(a) Listing price of the property, unless the sale is to be by auction;
(b) Date and time of the signing of the listing contract for all parties who sign;
(c) First and last name of the principal broker and the full name of the real estate brokerage company;
(d) Effective date and time of listing and advertising, if different;
(e) Date of expiration of the listing contract;
(f) Fee, compensation, or other valuable consideration agreed upon between the principal broker and the client;
(g) Address or a general description of the real estate sufficient to identify the parcel or parcels;
(h) Signatures and printed names of all parties necessary to affect a sale of the property, including any dower or courtesy considerations or the official representative of a legal entity, that is the subject of the listing agreement;
(i) Special directions of the client concerning limitations or restrictions on showings; and
(j) Date, time, and initials for all changes on the contract prior to acceptance.
The listing contract creates __________ relationship between the _______ and ___________ _______
- Special Agency aka: limited agency
- seller
- principal
- Broker
What are the 3 types of listings?
- exclusive right to sell listing
- exclusive agency listing
- open listing
D: Exclusive Right to Sell Listing
Once the listing is signed by all of the owners, regardless of who finds the buyer, the principal broker is, by the terms of the contract, the procuring cause and has earned the commission.
This listing assures the principal broker that the seller will not try to find a buyer and cut the principal broker out of his/her commission.
What type of contract is a Exclusive Right to Sell Listing?
Bilateral Contract
D: Bilateral Contract
There are two parties to the contract and each has duties to perform.
Under the contract the principal broker has to attempt to find a buyer and the seller is obligated to pay the commission if the principal broker finds the buyer.
Neither can terminate the agreement without the agreement of the other one.
D: Exclusive Agency Listing
The seller retains the right to sell the property and not pay the principal broker a commission.
The listing broker is the only principal broker with the listing, but is still in competition with the seller.
If the principal broker, not the seller, is the procuring cause of the sale, the principal broker is paid.
D: Open Listing
Is the least popular type of listing.
The seller can list the property with as many principal brokers as he/she chooses.
Commission is paid to the principal broker who is the procuring cause.
If the seller sells the property, none of the principal brokers are paid.
What type of contracts are
- Exclusive Agency Agreement
- Open Listing
Unilateral Contracts
D: Unilateral Contracts
Only one party has to perform, and that is the seller.
The principal broker is not required to perform, but is he/she does perform and sell the property, the seller is obligated to pay the commission.
In what ways can listings be terminated?
- The very best way is when the property is sold and closed. That is referred to as performance.
- They may expire by their terms, which is why Kentucky requires a termination date and time in each listing.
- Destruction of the property will terminate the listing. If a tornado takes the house away, the listing contract is terminated.
- If the use of the property is changed through no fault of the owner. For example, the state wants to widen a road and “takes” the property for that purpose.
- Operation of law where the title to the property is taken away from the owner through foreclosure or bankruptcy. Basically, there is a law that overrides the owner’s right to retain title to the property.
- Mutual agreement between the principal broker and seller.
- If the principal broker dies or becomes mentally disabled, the listing will terminate. This does not apply if it is the affiliate who dies or becomes mentally disabled. Remember, the listing contract is between the seller and principal broker, not seller and sales associate.
True or False
The best way to terminate a listing is by mutual agreement.
False
The best way to terminate a listing is by performance.
True or False
The statute of frauds requires real estate contracts to be in writing to be enforceable.
True
This is the basic rule of real estate. It also requires leases for longer than a year and listing contracts to be in writing to be enforceable.
True or False
The listing principal broker is known as the selling agent.
False
The principal broker who lists the property is known as the listing broker.
True or False
The principal is the seller in the listing contract.
True
True or False
Procuring cause refers to the licensee who was responsible for bringing the buyer to the property.
True
The procuring cause rule is sometimes referred to as the “but for” rule. But for the efforts of the licensee the transaction would not have occurred.
True or False
If fire destroys the property, the listing terminates
True
Destruction of property is one way the listing contract terminates.
True or False
A bi-lateral contract can be terminated by one party.
False
A bi-lateral contract takes two parties to form and two parties to terminate.
True or False
An open listing may only have one principal broker listing the property.
False
An open listing may only have one principal broker listing the property.
True or False
The listing that gives the listing principal broker the most protection is the exclusive agency agreement.
False
The listing principal broker gets the most protection from the exclusive right to sell contract, because the principal broker gets paid even if the seller sells the property.
D: One-Time Showing Agreement
AKA: Compensation Agreement
The contract permits the principal broker and his/her affiliates to show the property to one prospective purchaser, and if that person buys the property, the principal broker is entitled to the commission that’s been agreed upon.
D: Comparative Market Analysis
Although not explicitly required under the license law, it is recommended that the listing agent prepare a comparative market analysis (comparing this property to similar properties in the area that have recently sold).
The CMA will inform the seller of the likely fair market value (fmv) for the property.
After the fmv is estimated, the listing agent can calculate the net for the seller.
cooperating (co-op) agents is also know as?
- Selling Broker
- Buyer’s Broker
- Cooperating Broker
D: Extender Clause
AKA: Protection Clause, Carry Over Clause
This clause protects the broker from having the seller sell or lease the property after the listing ends to someone who has been introduced to the property during the listing period.
The effective number of days is limited in the listing contract
Many times the seller and buyer either forget about the clause or decide not to wait that long to close.
Prudent agents will give their sellers a list of potential buyers when the listing expires.
Licensees should always follow-up on their expired listings to see if the extender clause has been violated.
A licensee may discuss newly listing the seller’s property that is currently listed if?
- The seller initiates contact with the new licensee to obtain a new listing contract.
- The proposed listing contract states that it shall not take effect until the expiration of the seller’s current listing contract with the original licensee.
- The licensee and seller properly complete and sign the Seller-Initiated Listing Form.
The carry-over clause in a listing
protects the broker from the seller trying to deal around him.
All of the following are types of listings EXCEPT:
A. exclusive right to sell listing
B. exclusive listing.
C. multiple listing.
D. open listing.
C. multiple listing.
Allegations of antitrust violations against principal brokers include all of the following EXCEPT
A. price fixing.
B. boycotting.
C. comparison pricing.
D. tie-in arrangements.
C. comparison pricing.
If the commission is based on the amount of the sales price less the amount the seller wants to receive, the commission is known as
net listing.
When showing a For Sale By Owner property, the appropriate form to get signed to protect the principal broker’s interest is a(an)
one time showing agreement.
The anti-trust laws are designed to
keep the market place competitive.
Under the license law all of the following must be included in the listing contract EXCEPT
A. signature of all owners.
B. listing price.
C. square footage.
D. expiration date.
C. square footage.
Steve lists his property with Principal Broker Chuck by signing an Exclusive Right to Sell Listing Contract. Later that same day, Steve’s neighbor drops by and wants to buy Steve’s house for his son. If Steve’s neighbor buys the house
A. Steve should complain to the KREC that the he is being treated unfairly.
B. Steve must pay the full commission.
C. Steve can pay Broker Chuck one-half (1/2) of the commission, because Chuck has not had any advertising expenses.
D. Steve will not have to pay a real estate commission, because he has three days to terminate Broker Chuck’s contract.
B. Steve must pay the full commission.
In order to educate the seller on the fair market value of her property, a good listing agent will prepare a(an)
CMA
D: Executory Contract
is a contract that has been signed by all parties, but not yet completely performed.
What are the basic essential contract elements?
- Offer & Acceptance
- Consideration
- Legal Competency
- Legal Purpose
D: Offer
AKA: Offer to Purchase
Is the document that is completed by the selling licensee (licensee working with the buyer) that is presented to the listing licensee (licensee working with the seller that may be referred to as the seller’s agent)
D: Offeror
The offeror is the party making the offer or counteroffer and the offeree is the person receiving the offer or counteroffer.
True or False
One essential element of a contract is consideration.
True
Elements of an enforceable contract are offer and acceptance, consideration, legal competency, legal purpose, and consent.
True or False
Legal age to enter into a contract in Kentucky is 21 years.
False
The legal age in Kentucky is 18 years.
True or False
A bilateral contract is for the purchase and sale of two properties.
False
True or False
When an offer is completely agreed upon and signed by all parties but it has not yet been performed, it becomes known as an executory contract.
True
The contract is executory contract because it hasn’t been completely performed.
True or False
An offer is written by the offeree.
False
The offer is written by the offeror.
True or False
Licensees may not give inducements to prospective buyers and sellers.
False
Licensees may give inducements to prospective clients and customers.
True or False
A sales contract and a purchase contract are not the same thing.
False
These terms are used interchangeably.
True or False
If a licensee is giving an inducement, he/she must inform the person being offered the inducement details of the inducement in a written statement.
True
True or False
The selling licensee is the agent of the seller.
False
The selling licensee is the agent of the buyer.
True or False
Offer and contract are words that can be used interchangeably.
False
An offer becomes a contract once all parties agree to the terms in the offer and sign the offer.
D: Without Delay
As soon as reasonably possible based on the availability of the licensee and the client, and subject to any written agreement between them as to how and when written offers will be submitted.
What seems to be required by the KREC, is to present the offer immediately when it is received.
The licensee cannot delay in presenting the offer for the licensee’s convenience.
If the licensee is getting ready to go to dinner when the offer comes in, dinner needs to be delayed until the seller is notified of the offer.
Also applies with Counteroffers
D: Present The Offer
There is no definition of what it means to present the offer or how the offer needs to be presented.
It is generally accepted that the seller controls how he/she wants it presented.
In person, by phone, by fax, or e-mail are all possible ways to present the offer, depending on seller’s wishes.
The KREC regulations now require a licensee representing a seller to submit a notice in writing through electronic, text, or other media to the licensee representing a buyer of the date and time when the offer was presented to the seller.
D: Counteroffer
A counteroffer occurs when the offer is presented to the seller and the seller makes changes.
Of course, counteroffers can continue for some time as the buyer makes changes to the counteroffer from the seller.
Regardless of the number of counteroffers, each written counteroffer needs to be presented without delay.
The KREC regulations now require a licensee representing a seller to submit a notice in writing through electronic, text, or other media to the licensee representing a buyer of the date and time when the offer was presented to the seller.
D: Back-Up Offer
AKA: Back-Up Contract
Occasionally, a written offer will be presented on a property that currently has an executory contract.
In the event of a back-up offer, language must be included in the offer or counteroffer stating that it is clear that there is an executory contract on the property that has priority over the back-up contract.
Once the offer is accepted it is known as a “back-up contract” and will remain a back-up until something happens with the first contract.
If the first contract closes, the back-up contract is terminated. If the first contract falls through for any reason, the back-up contract becomes the primary contract.
It is critical that the listing agent make it clear when there is a primary contract and when there is a back-up contract.
If it is not clear, it could result in legal problems for the seller who has sold his/her property twice.
What are the requirements that must be in a OFFER and the COUNTEROFFER by licensees?
- The purchase price or, a valid escalation clause with the maximum purchase price.
- the amount of contract deposit (earnest money or good faith).
- who is to hold the contract deposit
True or False
When a property is jointly owned by spouses, only one spouse needs to sign the sales contract to sell the property.
False
All owners must sign the offer before an executory contract is formed.
True or False
The licensee working with the buyer may be called the cooperating agent.
True
True or False
Written offers must be presented without unreasonable delay
False
Written offers must be presented without undue delay. “Without unreasonable delay” refers to the three (3) day requirement for placing the earnest money deposit into the broker’s escrow account.
True or False
Regardless of the business model, the listing agent must present all written offers to the seller, unless waived by the client in writing.
True
All listing agents are required to present written offers without delay regardless of the business model.
True or False
A written counteroffer must be presented without undue delay.
True
Just like written offers, counteroffers must be presented without undue delay.
True or False
Written offers must be presented to the seller in person.
False
Written offers must be presented without undue delay to the seller, but the method of presentation depends on the agreement between the seller and listing agent.
True or False
Earnest money deposits must be held by the listing principal broker.
False
The contract states which principal broker will hold the earnest money deposit.
True or False
It is illegal to use the mailing address in a purchase contract because it is too confusing.
False
Any address can be used in the purchase contract that sufficiently describes the property being bought and sold.
True or False
Showing property that is under contract is illegal.
False
If the seller still wants to market the property, other prospective purchasers may look at the property, and if they want to make an offer the offer can be a back-up offer.
D: Contingency Clause
AKA: Subject to Clause
A contingency clause provides that some event has to happen, and if it does not happen, the buyer or seller had the right to not purchase or sell the property.
Is a condition that the seller or buyer wants to write into the contract.
If that condition is not met, the buyer or seller does not have to perform the contract.
According to the Kentucky Bar Association, Unauthorized Practice of Law Opinion KBA U-42, real estate licensees may fill out form sales contracts, but cannot “write” contracts.
The issue always becomes how much can an agent write in a contingency without practicing law.
A reading of the ethics opinion seems to say licensees cannot write contingencies without practicing law without a license.
Licensees should consult their principal broker for assistance when a contingency has to be written in a sales contract.
Because so much litigation is created by poorly worded contingencies, this is an area you want to understand completely when you start practicing real estate.
D: Financing Contingency Clause
With a financing contingency clause, the buyer must be able to obtain financing before he/she is obligated to purchase the property.
Because financing is so significant in real estate contracts, the license regulations in 201 KAR 11 provides that the contract shall “
(a) specifically state the manner in which the purchase shall be financed; and
(b) the amount of any encumbrance and whether it is to be underwritten by the seller or a commercial institution or otherwise.
D: Broker Lien Law
AKA: E]ngineers’, architects, landscape architects, real estate brokers’ and land surveyors’ liens
The statute provides real estate principal brokers with rights to file a lien against real property to collect earned real estate commissions that the seller has failed to pay and refuses to pay.
For the lien to arise for a listing principal broker, the principal broker must have a written listing contract with the owner, or the owner’s authorized representative, to “sell, lease, or otherwise convey any interest in the subject property.”
Once the principal broker, or his affiliated sales associates, produces a “person or entity ready, willing, and able to purchase, lease, or otherwise accept a conveyance of the property or any interest” therein, upon the terms contained in the written agreement or that are otherwise acceptable to the owner, or the owner’s authorized agent, the lien rights arise.
There is no requirement in the statute for the principal broker to wait until the transaction actually closes to file the lien.
Liens must be filed within six (6) months after the principal broker ceases to provide services under the listing contract.
The lien must be filed in the office of the county court clerk in the county in which the property is located.
Although there is no specific format for the lien required by statute, the lien must contain the amount claimed, credits and set offs from that amount, a description of the property that sufficiently describes the real estate covered by the lien, the name of the owner, and whether or not the contract was with the owner or with someone acting on the owner’s behalf.
Prior to recording, the lien statement must be signed by the principal broker or someone acting on her behalf. His/her signature must be subscribed and sworn to by a notary public or other appropriate official.
Unless action to enforce the lien is taken within 12 months from the date the lien is recorded, the lien will be dissolved.
Enforcement of the lien is foreclosure by judicial sale.
Once the lien is properly filed, it is valid and effective against purchasers of the property and creditors of the seller.
The broker’s lien law is very technical and the legal advice of an attorney should be sought whenever this issue may arise.
If a broker’s lien is filed and the seller does not pay the earned commission, the principal broker may collect the lien by
A. filing a complaint with the KREC.
B. foreclosing on the property.
C. filing a lawsuit against the buyer and seller.
D. stopping the closing until the commission is paid.
B. foreclosing on the property.
If a seller refuses to pay the listing principal broker earned commission, the listing principal broker may
A. stop the closing.
B. file a judgment lien on all assets.
C. void the sales contract.
D. file a broker’s lien.
D. file a broker’s lien.
After the executory contract is in place, the agent’s job is
A. to get the information needed for the lender, hire the home inspector, and the termite inspector.
B. finished.
C. to assist his/her client in following through on all deadlines
D. to give the client a list of his/her obligations and encourage him/her to finish everything.
C. to assist his/her client in following through on all deadlines
The license law requires which of the following clauses to be included in the purchase contract?
A. Home inspection contingency clause.
B. Financing contingency clause.
C. Termite inspection contingency clause.
D. Risk of loss contingency clause.
B. Financing contingency clause.
The license law requires which of the following clauses to be included in the purchase contract?
A. Home inspection contingency clause.
B. Financing contingency clause.
C. Termite inspection contingency clause.
D. Risk of loss contingency clause.
B. Financing contingency clause.
True or False
Principal Broker Dick was just informed by the seller that the seller believes his real estate commission is too much and the seller doesn’t intend to pay it at the closing. Dick can file a mortgage on the property for his commission.
False
Dick can file a broker’s lien on the property, not a mortgage.
True or False
The date and time of expiration must be included in the listing contract.
True
The date and time of expiration is required under the license law.
True or False
The death of the listing agent terminates a listing agreement.
False
The listing contract is between the seller and the principal broker, not between the seller and listing agent.
True or False
Multiple listing is a type of listing contract.
False
A multiple listing service is the way for principal brokers to share listings.
True or False
In Kentucky, listing contracts are required to be in writing under the license law.
True
The license law requires listing contracts to be in writing.
True or False
The type of listing agreement that provides the least protection for the listing principal broker is the exclusive-right-to-sell listing.
False
The exclusive right to sell listing affords the listing principal broker the most protection.
True or False
Kentucky licensees may give inducements in any amount to prospective buyers and sellers.
True
Licensees may give inducements in any amount at any time. The licensee must state the inducement in writing, and, if advertised, must comply with the advertisement.
True or False
When the seller and buyer agree on the terms of a contract and sign it, they have created an executed contract.
False
They have created an executory contract.
True or False
A listing agent was making a listing presentation to the sellers, trying to obtain their listing. During the listing negotiations, the sellers told him that they want $150,000 for the property and anything above that amount the agent can keep as a commission. This is a good way for the broker to state his/her commission.
False
What was described is a net listing, which is illegal.
True or False
If the seller needs to change something on the listing, he can authorize his agent to do it by telephone.
False
All instructions need to be in writing.
True or False
A principal broker entered into a listing contract with the seller. She now learns that her client has been declared incompetent by the court. Her listing is probably unenforceable.
True
Mental incompetency by one party makes the contract unenforceable.
True or False
A property owner signed a 60-day listing agreement with a principal broker. The broker was killed in an accident at work before the end of the 60-day listing. The listing is terminated automatically because of the death of the principal broker.
True
One of the ways a listing will expire is with the death of the principal broker.
True or False
The seller and buyer decided to wait and enter into the purchase contract after the listing expired. This is a good way to avoid paying the commission.
False
If the listing contract has an extender clause, the seller will likely owe the commission.
True or False
If the seller wants to carry owner financing for the buyer that information does not need to be included in the sales contract.
False
One of the license law requirements is to state the manner of financing in the purchase contract.
True or False
Under an exclusive agency listing, the listing principal broker would be entitled to a commission if the seller sells the property to a neighbor.
False
True or False
Billy is holding an open house and a really nice couple came to the open house. Unfortunately, they had just signed a lease for six (6) months and wouldn’t be able to buy a house until the lease expires. Billy suggested they break the lease. This was a good suggestion.
False
The license prohibits licensees from interfering with another person’s contract. Billy’s action was a violation of the license law.
True or False
The appropriate document to use when showing a FSBO is the listing contract.
False
The appropriate document is a one-time showing agreement.
True or False
Under an open listing agreement the sellers can sell the property and not have to pay a commission to the listing broker.
True
True or False
Andrew wrote an offer on Kristy’s listing. He called Kristy and she said she was too busy to present it and would get it presented within three (3) days. Kristy’s behavior is acceptable.
False
The license law states that all written offers will be presented without delay. Three (3) days would likely be considered a delay.
True or False
If a seller files bankruptcy, the listing contract is terminated by operation of law
True
Bankruptcy and foreclosure by the seller will terminate the listing contract by operation of law.
True or False
By executing a listing contract with a seller, a real estate principal broker becomes a limited agent of the seller.
True
You would have learned this by watching your anti-trust video.
True or False
The two most common antitrust violations alleged against real estate agents are price fixing and boycotting.
False
The property is not listed until all sellers sign and the property cannot be advertised until it is listed. The sign in the yard is advertising.
True or False
If Helen wants to write an offer stating that she must obtain financing before she is obligated to purchase the property, this contract is known as a back-up contract.
False
True or False
If a seller wants to list his farm at an unrealistic price, the agent should tell the seller that it is illegal to list for more than amount stated on the CMA.
False
It is not illegal to list property for more than indicated on the CMA; however, the agent may be wasting time marketing over-priced property.
Kentucky license law requires all of the following to be included in an offer EXCEPT
A. amount of earnest money
B. closing date
C. purchase price
D. arbitration clause
D. arbitration clause
If a seller enters into a valid contract to sell his property to one party, he can continue to market the property and take a(an)
A. counteroffer to the first contract.
B. back-up offer.
C. novation
D. executory contract.
B. back-up offer.
All of the following must be included in the listing contract EXCEPT
A. the responsibilities of the broker.
B. the automatic extension clause.
C. the price the seller is asking for the property.
D. the commission rate to be paid to the listing broker.
B. the automatic extension clause.
In Kentucky, when preparing an offer, the license law requires
A. the name of the agent preparing the form be on the offer.
B. the form be prepared in duplicate.
C. all contingencies be written on an addendum
D. principal broker approval before the offer is presented
A. the name of the agent preparing the form be on the offer.
The mixing of trust funds with a broker’s personal funds is
A. permitted in offices with fewer than three agents.
B. conversion.
C. legal in most states.
D. commingling.
D. commingling.
The listing agent receives an offer from a buyer’s agent at 1:00 p.m. She knows that another offer is going to be delivered tomorrow morning. The acceptance date on the offer isn’t until 5:00 p.m. tomorrow. Under Kentucky law, the listing agent
A. must present the offer within a reasonable time.
B. must present the offer without delay because waiting until tomorrow would be delay.
C. must present the offer before 5:00 p.m. tomorrow because it will expire at that time
D. can wait to present the first offer until she receives the second offer
B. must present the offer without delay because waiting until tomorrow would be delay.
The term in the listing contract that allows the broker to share listings with other brokers is known as the
A. joint listing clause.
B. multiple listing clause.
C. open listing clause.
D. net listing clause.
B. multiple listing clause.
If a principal broker has the property listed for only one purpose, she must
A. reduce the fee.
B. place a notice of limited service on the yard sign.
C. deliver all written offers.
D. notify the buyer’s agent.
C. deliver all written offers.
The seller’s signed the listing agreement, but Mr. Seller failed to add the date and time he signed it. Under Kentucky license law the listing
A. agreement is invalid.
B. broker has three (3) days to get the date and time added to the listing.
C. agreement only needs to have the date and time of one of the sellers.
D. broker is in violation of the license law and may be fined.
D. broker is in violation of the license law and may be fined.
The law that requires real estate contracts to be in writing to be enforceable is the
A. parole evidence rule.
B. statute of limitations.
C. law of descent and distribution.
D. statute of frauds.
D. statute of frauds.
A listing contract that has several brokers working on selling the same property is known as a(n)
Open Listing
Principal brokers generally work as
Independent Contractors
Last month, Principal Broker Wanda took a listing on a property. She now learns that her client has died. Her listing is
Terminated
The type of listing agreement that provides for payment of a commission to the broker even if sellers sell the property without the broker’s assistance is called an
A. Option Listing
B. Exclusive Agency Listing
C. Exclusive Right to sell Listing
D. Open Listing
C. Exclusive Right to sell Listing
If a listing is terminated by operation of law that means that the seller
A. Got Divorced
B. Filed Bankruptcy or Foreclosure
C. Has been arrested
D. died
B. Filed Bankruptcy or Foreclosure
