Section 13 Brokerage Business

Question 1

The business of procuring customers on behalf of clients for the purpose of completing a real estate transaction.

Answer 1

Brokerage

Question 2

A brokerage practice where agents and brokers outside of the listing broker’s agency assist as subagents in procuring a customer in exchange for portions of the commission.

Answer 2

Co-Brokerage

Question 3

An organization of brokers who agree to cooperate in marketing the pooled listings of all members.

Answer 3

Mulitple Listing Service:

Question 4

A sales agent who works for a broker but is not legally an employee. The employer exerts only limited control over the
contractor’s actions, does not provide employee benefits, and does not withhold taxes from the contractors’s pay.
Im

Answer 4

Independent Contractor:

Question 5

A sales agent may be an employee. The broker is responsible and liable for the for the sales agent’s actions. A broker has greater control over the actions of an employee. Specifically:
• a broker can impose a sales methodology. In addition, a
broker can enforce all office policies, including hours, meeting attendance, and telephone coverage.
-a broker must withhold income taxes and pay
unemployment compensation tax on behalf of an employee
• an employee may receive the benefits enjoyed by the
broker’s non-selling employees

Answer 5

Employee

Question 6

Compensation earned by a sales agent for procuring listings and for procuring buyers or tenants, whenever a transaction results. In the jargon of brokerage, these are the two
“sides” to a commission: the listing side and the selling side

Answer 6

Commission

Question 7

any activity designed to generate listing prospects: parties who intend to sell or lease property and who have not yet committed to a broker. Prospecting activities include mailing newsletters and flyers, selling directly and person-to-person, advertising, and selling indirectly via community involvement.

Answer 7

Prospecting:

Question 8

An unlawful practice of mixing escrow funds with the agency’s operating funds or broker’s personal funds.

Answer 8

Commingling:

Question 9

An illegal act of appropriating escrow funds for payment of an agency’s operating expenses or broker’s personal use.

Answer 9

Conversion:

Question 10

Laws designed to prevent monopolies and unfair trade practices.

Answer 10

Anti-trust Laws:

Question 11

An unlawful agreement between competitors to monopolize a market, disadvantage other competitors, or otherwise undertake activities in violation of fair trade laws.

Answer 11

Collusion

Question 12

An act of collusion where competitors agree to establish prices at certain levels to the detriment of customers or other competitors.

Answer 12

Price Fixing:

Question 13

The practice of colluding to restrict competitive activity in portions of a market in exchange for a reciprocal restriction from a competitor: “we won’t compete against you here if you won’t compete against us there.”

Answer 13

Market Allocation:

Question 14

The brokerage of a business enterprise in addition to any real property it may own or lease.

Answer 14

Business Brokerage:

Question 15

An intangible business asset valued at the difference between the sale price and the value of all other assets of the business.

Answer 15

Goodwill:

Question 16

A type of personal property investment, for example, bonds, stocks, and mutual funds.

Answer 16

Securities

Question 17

Which of the following business entities is generally prohibited from brokering real estate?

Answer 17

non-profit

Question 18

A joint venture may generally broker real estate if the co-venturers

Answer 18

are duly licensed.

Question 19

What is an independent brokerage?

Answer 19

A brokerage that is not affiliated with a franchisor.

Question 20

A licensed salesperson may work only for

Answer 20

a single employing broker who has an active broker’s license.

Question 21

Which of the following activities is a licensed salesperson allowed to conduct?

Answer 21

Offer a property for sale on behalf of the employing broker.

Question 22

If a salesperson works for a broker as an independent contractor, who pays for the salesperson’s business expenses?

Answer 22

A written agreement between broker and employee or independent contractor should clearly state each party’s duties and responsibilities to the other.

Question 23

A salesperson’s primary obligation to an employing broker is to

Answer 23

fulfill the fiduciary duties owed to the broker and the broker’s clients.

Question 24

If a salesperson has worked on a completed transaction that involved a listing agent, a selling agent, and several subagents for each of these, from whom will the salesperson receive any compensation that is due?

Answer 24

The employing broker.

Question 25

A property has sold for $127,000. The listing agreement calls for a commission of 7%. The listing broker and selling broker agree to share the commission equally. What will the listing agent receive if the agent is scheduled to get a 40% share?

Answer 25

Sale price: $127,000

Commission: 7% = $8,890

Co-brokerage split: 50% = $4,445 to each side

Listing agent’s scheduled commission: 40% = $1,778

Question 26

Obtaining exclusive listings for the broker is traditionally one of the salesperson’s most fundamental tasks because

Answer 26

it is likely to generate revenue.

Question 27

A salesperson working with a customer shows a property that is listed by a brokerage firm other than the salesperson’s and obtains an offer that is $10,000 less than the listing price. What must the salesperson do about this offer?

Answer 27

Present the offer to the seller at the earliest possible moment.

Question 28

During the pre-closing period of a sale contract, what is the listing broker’s primary responsibility?

Answer 28

Handle deposited funds according to law.

Question 29

A broker receives an earnest money deposit from a buyer and signs the check over to the listing agent as a commission advance. What is wrong with this procedure?

Answer 29

The broker has illegally converted the deposit for business use.

Question 30

Under what circumstance may a property listed for sale with a brokerage be advertised without identifying the broker?

Answer 30

never

Question 31

The practice of competing brokers in a local market agreeing on a standard commission rate is a violation of

Answer 31

Price fixing

Question 32

To engage in business brokerage, a broker generally must hold a real estate license because

Answer 32

Business brokerage is effecting a sale or exchange of an existing business. In most cases, the sale of a business entails the simultaneous transfer of an estate in land, whether a leasehold or a fee. Thus to sell businesses, a broker must generally hold a real estate license.

Question 33

In order to sell interests in a syndication, an agent must

Answer 33

obtain a Series 22 securities license.

Question 34

A syndication is

Answer 34

a group of inactive investors who join with a number of active partners to purchase, manage, and sell properties for a profit.

Question 35

In business brokerage, the notion of goodwill is best defined as

Answer 35

the value or price of the business over and above the value of its other assets.

Question 36

A broker is reviewing the balance sheet of her new listing to sell a business. Three of the entries on the books are licenses, trademarks, and goodwill. These would be examples of

Answer 36

Intangible assets

Question 37

A corporation would like an agent to sell its country grocery store. Included in the sale are the inventory, equipment, and real property. The agent locates a full-price buyer who does not want to acquire any of the business’s actual or potential liabilities. To do this transaction, the corporation would most likely

Answer 37

propose an asset sale.

Question 38

Two leading agencies jointly agree to raise commissions charged a certain class of client to 8% of the sales price. Which of the following is true?

Answer 38

The brokers have illegally fixed prices.

Question 39

The three principal brokerage firms in a market agree to pay sales agents 15% more than any other competitor currently in practice. This is an example of

Answer 39

Collusion

Question 40

Real estate advertising is a regulated activity. One important restriction in placing ads is

Answer 40

advertising must not be misleading