Real Estate Transactions, Brokers and Agents - Mar. 7

Question 1

What are the two major events of a real estate transaction? (Barros)

Answer 1

The signing of the purchase and the sale contract and the closing. (381)

Question 2

What is the signing of the purchase and sale contract? (Barros)

Answer 2

Where the seller agrees to sell, and the buyer agrees to buy the subject real estate. (381)

Question 3

What is the closing? (Barros)

Answer 3

Where, among other things, the seller delivers title to the buyer, and the buyer delivers the purchase price to the seller. (381)

Question 4

What are the three phases of a real estate transaction? (Barros)

Answer 4

The pre-contract phase, executory contract phase, and the post-closing phase. (381)

Question 5

What happens during the pre-contract phase? (Barros)

Answer 5

The contract hasn’t been signed yet. (381)

Question 6

What happens during the executory contract (middle) phase? (Barros)

Answer 6

The middle phase is the time when the parties’ contract is executory—in other words, when the parties have signed the contract but not yet performed the obligations they have undertaken in the contract. (381)

Question 7

What happens during the post-closing phase? (Barros)

Answer 7

The post-closing phase is the time after the seller and the buyer have performed their core obligations under the contract: for the seller, to deliver title (typically through a deed) and possession of the property to the buyer, and for the buyer to deliver the purchase price to the seller. (381)

Question 8

How are fiduciary relationships created? (Barros)

Answer 8

Fiduciary relationships are created in circumstances where one person is representing another in a relationship of special trust and confidence. (382)

Question 9

What are the three basic types of listing agreements? (Barros)

Answer 9

Open listing, exclusive agency, and exclusive right to sell. (384)

Question 10

What is an open listing? (Barros)

Answer 10

In an open listing, the broker earns her commission by securing a ready, willing, and able buyer. The seller can list the property with other brokers, and if someone else secures the buyer, the broker in the open listing will not get paid anything. (384)

Question 11

What is exclusive agency? (Barros)

Answer 11

In an exclusive agency, the seller agrees that the broker will be the only real estate professional allowed to sell the property. If another broker finds a buyer, the broker in an exclusive agency agreement will still get paid a commission. If, however, the seller finds a buyer on her own, the broker in an exclusive agency agreement will not get paid a commission. (384)

Question 12

What is exclusive right to sell? (Barros)

Answer 12

In an exclusive right to sell, the broker is the only person allowed to sell the property. The broker earns a commission regardless of who finds a buyer. The key difference between exclusive agency and exclusive right to sell is what happens if the seller finds a buyer on her own. In an exclusive agency, the broker does not get a commission in this circumstance. In an exclusive right to sell, the broker does get a commission in this circumstance. (384)

Question 13

What questions need to be asked about ready, willing, and able buyers? (Barros)

Answer 13

First, has the potential buyer expressed a willingness to enter into a binding contract for the purchase of the property? Second, does the buyer have the financial wherewithal to pay the purchase price (either in cash or with borrowed money)? If the answers to these two questions are “yes,” then the broker will have gone a long way toward establishing that the buyer was ready, willing, and able. (384)

Question 14

What is a tail when referring to a listing agreement? (Barros)

Answer 14

A tail entitles the broker to a commission if the property is sold within a certain time after the listing agreement terminates. (384)

Ex: Broker is entitled to a commission under this agreement if a sale of the property occurs within six months of the ending date of this agreement.

Question 15

What is a real estate broker? (E&E)

Answer 15

A real estate broker is the potential seller’s agent. (347)

Question 16

What is the broker’s employment agreement called? (E&E)

Answer 16

The broker’s employment agreement is known as the listing agreement. (347)

Question 17

What is the executory period or the gap period? (E&E)

Answer 17

The gap period is the time period between date the buyer and seller execute a sales contract to the day that it is completed. (347)

Question 18

What does it mean that a contract is executory? (E&E)

Answer 18

It means that it is in the process of being performed by the parties. (347)

Question 19

What is the typical split for a real estate commission between a real estate broker and cooperating selling broker? (E&E)

Answer 19

50-50 with a part of each commission split again with any agent involved in the transaction or the broker’s firms. (349)

Question 20

What is the listing broker? (E&E)

Answer 20

The initial broker who the seller signs the first contract with. (351)

Question 21

What is the selling broker? (E&E)

Answer 21

The selling broker is the broker who find the ready, willing, and able buyer. (351)

Question 22

What is the prohibition of self-dealing? (E&E)

Answer 22

The prohibition against self-dealing means the listing broker can buy the property from his principal (the seller) but must disclose to the seller that the broker is buying the property and must disclose, if true, that the seller has set a below-market asking price.

Question 23

Are brokers barred from disclosing a listing owner’s lowest acceptable (reservation) price? (E&E)

Answer 23

Yes. (352)