Unit 10 Exam

Question 1

Match the following Listing Agreements with the correct definition: Open Listing, Exclusive right-to-sell, or Exclusive Agency

A)
Seller must pay the real estate professional a commission, regardless of who sells the property.

B)
One real estate professional is authorized to act as the exclusive agent of the principal, but seller can sell property without paying commission.

C)
Seller retains right to employ any number of real estate professionals as agents and pays only the agent who produces a buyer.

Answer 1

A = Exclusive right-to-sell
B =  Exclusive Agency
C = Open Listing

Question 2

In an open listing, the seller is obligated to pay a commission to only the broker who successfully produces a ready, willing, and able buyer.

Answer 2

True.

Question 3

In an exclusive agency listing, the seller is obligated to pay the broker a commission regardless of who sells the property.

Answer 3

False.

Question 4

Place the following in proper order:

1)
Seller provides comprehensive information about the property and any personal concerns

2)
Real Estate Professional explains types of listing agreements, agency, and services

3)
RE Professional meets with seller and answers questions

4)
RE Professional accepts listing and obtains information and disclosure for marketing

Answer 4

3
2
1
4

Question 5

Courts have encouraged the use of automatic extension clauses in exclusive listings.

Answer 5

False

Question 6

Before signing a contract, the seller’s main concerns typically are the selling price of the property and the net proceeds.

Answer 6

True

Question 7

Match the following with its definition:

Warranties by the owner

Encumbrance

Broker protection clause

Nondiscrimination

Indemnification or hold harmless

A)
Property will be offered without regard to race, color, religion, national origin, family status, sex, or disability of buyer

B)
Lien to be paid or assumed by the buyer at closing

C)
Assurances and disclosures such as suitability for use and compliance to zoning and building codes

D)
Circumstances under which the real estate professional will be entitled to a commission after the listing expires or is terminated

E)
The seller and the real estate professional may agree not to sue each other for any incorrect information supplied by one to the other

Answer 7

Warranties by the owner = C

Encumbrance = B

Broker protection clause = D

Nondiscrimination = A

Indemnification or hold harmless = E

Question 8

Most states specifically allow a real estate professional to go over the terms of a preprinted contract with a client without risking an accusation of the unlawful practice of law.

Answer 8

True

Question 9

If one or more of the owners in a listing agreement is married, the spouse’s consent and signature on the contract to release any marital rights is required in most states.

Answer 9

True

Question 10

Buyer Representation can Terminate on certain circumstances. Match the following with either Valid or Invalid:

Term expires

Cancelled by mutual agreement

Buyer dies

Broker breaches contract

Title transfers to buyer

Buyer dislikes broker

Sales associate dies

Broker has argument with buyer

Answer 10

Term expires = Valid

Cancelled by mutual agreement = Valid

Buyer dies = Valid

Broker breaches contract = Valid

Title transfers to buyer = Valid

Buyer dislikes broker = Invalid

Sales associate dies = Invalid

Broker has argument with buyer = Invalid

Question 11

In an exclusive buyer representation agreement, the buyer can work with more than one broker.

Answer 11

False

Question 12

In a buyer-agency agreement, just as in any agency agreement, the source of compensation does NOT determine the relationship.

Answer 12

True

Question 13

Which of the following is a similarity between an open listing and an exclusive agency listing?

A)
Under each, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period.

B)
Each grants a commission to any broker who procures a buyer for the seller’s property.

C)
Each grants the exclusive right to sell to whatever broker produces a buyer for the seller’s property.

D)
Under each, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure.

Answer 13

Explanation
The answer is under each, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. Both open and exclusive agency listings allow owners to sell without broker aid and thus avoid paying a commission.

Question 14

All of the following are typically found in a listing agreement EXCEPT

A)
the commission rate to be paid to the listing broker.

B)
the price the seller is asking for the property.

C)
the responsibilities of the broker.

D)
the date the real estate professional will schedule an open house.

Answer 14

Explanation
The answer is the date the real estate professional will schedule an open house. All listing contracts tend to require similar information: type of listing agreement, real estate professional’s authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, and so on, but not the dates of open houses.

Question 15

What is prepared by a sales associate by a review of MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred?

A)
Comparative market analysis

B)
Purchase contract

C)
Disclosure statement

D)
Listing presentation

Answer 15

Explanation
The answer is comparative market analysis. The sales associate preparing a comparative market analysis, also called a competitive market analysis, will review MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred. While the sales associate should be sensitive to the seller’s purchase price and financial needs, the market is the best indicator of the property’s current value.

Question 16

A broker sold a residence for $485,000 and received $26,675 as commission in accordance with the terms of the listing agreement. What was the broker’s commission rate?

A)
6.5%

B)
6%

C)
5%

D)
5.5%

Answer 16

Explanation
The answer is 5.5%. Commission rate × selling price = commission, so commission ÷ selling price = commission rate; therefore, $26,675 commission ÷ $485,000 selling price = 0.055, or 5.5% commission rate.

Question 17

A prospective buyer signs an agreement with a broker to find a property for the buyer, and the buyer agrees to work only with that broker. While this agreement is in effect,

A)
the broker cannot show the buyer a property that is listed by the broker.

B)
the broker can represent other buyers.

C)
only one sales associate of the broker can work with the buyer.

D)
the sales associate working with the buyer cannot work with other buyers.

Answer 17

Explanation
The answer is the broker can represent other buyers. The broker is free to represent other buyers; the buyer cannot sign an agreement or work with another broker while the first agreement is still in effect.

Question 18

Which person should make the final determination on a property’s asking price?

A)
The appraiser
B)
The seller
C)
The seller’s attorney
D)
The seller's broker

Answer 18

Explanation
The answer is the seller. Although a listing agent, an appraiser, and an attorney voice their opinions, the seller finally sets the listing (offering) price for a property.

Question 19

In many states, a residential property seller is required to

A)
guarantee the condition of property listed for sale.

B)
provide the original building plans to a prospective buyer.

C)
hire a property inspector to uncover any defects in the property.

D)
complete a property condition disclosure form.

Answer 19

Explanation
The answer is complete a property condition disclosure form. By completing such a form, the seller does not guarantee the condition of the property but does reveal the present condition of the property so that a prospective buyer can make an informed decision. The buyer usually will make a satisfactory property inspection a condition of the sale.

Question 20

The information required for the listing agreement does NOT include

A)
names and relationship, if any, of the owners.

B)
street address and legal description of the property.

C)
Social Security number of seller(s).

D)
size, type, age, and construction of improvements.

Answer 20

Explanation
The answer is Social Security number of seller(s). The information necessary to prepare the listing agreement does not include a seller’s personal data, such as Social Security number.

Question 21

Any of these will terminate a listing agreement EXCEPT

A)
performance.

B)
expiration.

C)
abandonment by broker.

D)
an offer to purchase.

Answer 21

Explanation
The answer is an offer to purchase. Because an offer to purchase may not be accepted, it would not terminate the listing agreement.

Question 22

Under a brokerage agreement with a property owner, the broker is entitled to sell the property for any price, as long as the seller receives $85,000. The broker may keep any amount over $85,000 as a commission. This type of listing might be illegal and is called

A)
a net listing.

B)
an exclusive agency listing.

C)
an open listing.

D)
an exclusive right-to-sell listing.

Answer 22

Explanation
The answer is a net listing. Whether an open, an exclusive agency, or an exclusive right-to-sell, any listing that allows the broker to keep all of the selling price over the net amount that the seller requires is a net listing. Net listings are illegal in many states.

Question 23

In a listing agreement, the proposed dates for closing and buyer’s possession

A)
can be left open-ended if there are financial or other issues to be resolved.

B)
should be based on an anticipated closing date.

C)
should state a date certain that cannot be extended.

D)
can never be firm because there are so many unknowns in the average transaction.

Answer 23

Explanation
The answer is should be based on an anticipated closing date. The listing agreement should allow adequate time for the paperwork involved, especially if the approval of the lienholder for a short sale must be obtained.

Question 24

What information is NOT needed for a listing agreement?

A)
The possibility of seller financing

B)
The dimensions of the lot

C)
The age of the seller

D)
The most recent property taxes

Answer 24

Explanation
The answer is the age of the seller. Information needed for the listing agreement includes lot size, possibility of seller financing, and the property taxes. The age of the seller is not needed.

Question 25

In which type of listing agreement does a seller employ multiple brokers?

A)
Open listing

B)
Exclusive agency

C)
None of these

D)
Exclusive right to sell

Answer 25

Explanation
The answer is open listing. in an open listing, the seller employs multiple brokers and only the successful listing broker is paid. The seller also retains the right to sell without obligation to any listing broker.

Question 26

Buyer agents may be compensated in any of these ways EXCEPT

A)
percentage of list price.

B)
flat fee for service.

C)
hourly rate.

D)
percentage of selling price.

Answer 26

Explanation
The answer is percentage of list price. Buyer agents are most likely compensated by sharing the commission paid by the seller, or by receiving a flat fee, percentage of the selling price, or hourly rate from the buyer.

Question 27

In which of these types of listing agreements is the broker appointed as the seller’s only agent?

A)
Open listing

B)
Option listing

C)
Net listing

D)
Exclusive right-to-sell and exclusive agency listings

Answer 27

Explanation
The answer is exclusive right-to-sell and exclusive agency listings. Under an exclusive right-to-sell and exclusive agency listing, one broker is appointed as the seller’s sole agent. Open and option listings do not specifically exclude other brokers from acting as the seller’s agent.

Question 28

Which of the following is a similarity between an exclusive agency listing and an exclusive right-to-sell listing?

A)
Both types of listings give the responsibility of representing the seller to one broker only.

B)
Both types of listings are open listings.

C)
Under each, the seller authorizes only one particular sales associate to show the property.

D)
Under each, the seller retains the right to sell the real estate without the broker’s help and without paying the broker a commission.

Answer 28

Explanation
The answer is both types of listings give the responsibility of representing the seller to one broker only. Each listing is exclusive, meaning it is granted to one broker exclusively. While the exclusive agency listing would allow the seller to find a buyer without paying a commission, the exclusive right-to-sell listing would require a commission to be paid even if the seller alone procured the buyer. Open listings impose no limit on the number of additional brokers that might be hired by the seller.

Question 29

A buyer signs an agreement to be represented by a broker. This agreement is an acceptable exclusive agency

A)
if the buyer pays the commission.

B)
if the broker does not use the MLS.

C)
if the broker gets paid by someone other than the buyer.

D)
in all cases.

Answer 29

Explanation

The answer is in all cases. A broker may represent a buyer.

Question 30

By executing a listing agreement with a seller, a real estate broker becomes

A)
responsible for sharing the commission.

B)
the agent of the seller.

C)
a procuring cause.

D)
obligated to open a special trust account.

Answer 30

Explanation
The answer is the agent of the seller. As agent, the broker represents the seller with whom the broker executed the listing agreement.

Question 31

The form of listing that is illegal in many states is

A)
the open listing.

B)
the net listing.

C)
the exclusive right-to-sell listing.

D)
the exclusive agency listing.

Answer 31

Explanation
The answer is the net listing. A net listing, which specifies an amount the seller will receive from a property sale, with any excess going to the listing broker, is illegal in many states and discouraged in others.

Question 32

In an agreement to represent the seller in a sale of real estate, the listing broker’s ability to place a sign on the property, advertise it for sale, and show the property to prospective buyers should be

A)
specified in the listing agreement.

B)
detailed in a separate marketing agreement.

C)
understood by the seller without having to be mentioned.

D)
discussed as part of the listing presentation but need not be included in the listing agreement.

Answer 32

Explanation
The answer is specified in the listing agreement. The listing agreement should specify whether the broker may place a sign on the property and advertise. It should also address when the property can be shown, allowing reasonable notice to the seller.

Question 33

In most states, a broker’s license can be suspended or revoked if the broker

A)
takes a listing that does not include a date on which the listing expires.

B)
breaches the terms of the listing agreement.

C)
does not include an automatic extension clause in the listing agreement.

D)
cancels the listing agreement without cause.

Answer 33

Explanation
The answer is takes a listing that does not include a date on which the listing expires. If the broker breaches the listing contract or cancels it without cause, the broker may be liable for damages; however, it is not usually grounds for suspension or revocation of the license. Courts discourage the use of automatic extension clauses, and these clauses are even illegal in some states.

Question 34

An exclusive agreement to list property for sale should include all of the following EXCEPT

A)
multiple listing clause.

B)
automatic extension clause.

C)
broker protection clause.

D)
expiration of listing period.

Answer 34

Explanation
The answer is automatic extension clause. All exclusive listings should specify a definite period during which the broker is to be employed. Automatic extension clauses are illegal in some states, and an exclusive listing agreement with such a clause may be interpreted by a court as actually creating an open listing rather than an exclusive agency agreement.

Question 35

Which statement is TRUE of a listing agreement?

A)
It is an employment contract for the professional services of the broker.

B)
It automatically binds the owner, the broker, and the MLS to its agreed provisions.

C)
It obligates the seller to transfer the property if the broker procures a ready, willing, and able buyer.

D)
It obligates the broker to work diligently for both the seller and the buyer.

Answer 35

Explanation
The answer is it is an employment contract for the professional services of the broker. The listing is the broker’s contract of employment by the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer might make an offer that is the “mirror image” of the terms of the listing. In such an event, however, the seller may owe the broker a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy according to the terms of the listing.

Question 36

What kind of listing agreement is illegal in many states because of the potential for conflict of interest between a broker’s fiduciary responsibility to the seller and the broker’s profit motive?

A)
Exclusive agency listing

B)
Exclusive right-to-sell

C)
Open listing

D)
Net listing

Answer 36

Explanation
The answer is net listing. Because a broker is free to offer the property at any price greater than the net amount to be paid to the seller, a net listing can create a conflict of interest between the broker’s fiduciary responsibility to the seller and the broker’s profit motive. Net listings are illegal in many states and discouraged in others.

Question 37

An employment contract that establishes the rights and obligations of the broker as agent and the buyer as principal is

A)
the nonexclusive right-to-buy agreement.

B)
the exclusive right-to-buy agreement.

C)
the buyer agency contract.

D)
the buyers sales contract.

Answer 37

Explanation
The answer is the buyer agency contract. A buyer agency contract establishes the relationship between a buyer and the buyer’s agent.

Question 38

A broker’s agreement to represent a property buyer may be terminated because

A)
the sales associate who has worked with the buyer becomes incapacitated.

B)
the agreement’s purpose is fulfilled by the transfer of title to the buyer.

C)
the buyer employs a different broker to find property in a different area.

D)
the buyer decides to work with a different broker.

Answer 38

Explanation
The answer is the agreement’s purpose is fulfilled by the transfer of title to the buyer. The death or incapacity of a sales associate does not the terminate the agreement, which is with the employing broker.

Question 39

Most states require that a real estate listing agreement contain

A)
a definite contract termination date.

B)
an automatic extension clause.

C)
a multiple listing service (MLS) clause.

D)
a broker protection clause.

Answer 39

Explanation
The answer is a definite contract termination date. Failing to specify a definite termination date in a real estate listing can be grounds for suspension or revocation of a license in most states. Automatic extensions have been discouraged by courts. Broker protection clauses and MLS clauses are not required.

Question 40

The listing agreement that allows the property seller to employ multiple brokers is

A)
the exclusive right-to-sell listing.

B)
the exclusive agency listing.

C)
the net listing.

D)
the open listing.

Answer 40

Explanation
The answer is the open listing. In an open listing, which may also be called a nonexclusive listing, the seller retains the right to employ any number of brokers as agents.

Question 41

The listing agreement on a residential property states that it expires on May 2. Which event would NOT terminate the listing?

A)
The agreement is not renewed prior to May 2.

B)
The owner dies on April 29.

C)
On April 15, the owner tells the listing broker that the broker’s marketing efforts are not satisfactory.

D)
The house is destroyed by fire on April 25.

Answer 41

Explanation
The answer is on April 15, the owner tells the listing broker that the broker’s marketing efforts are not satisfactory. A mere complaint to the broker by the principal does not end the listing, whereas the expiration of the listing, the death of the owner, or the destruction of the property would end it.

Question 42

A property owner signed a 90-day listing agreement with a real estate professional. The owner was killed in an accident before the listing expired. Now the listing is

A)
terminated automatically because of the death of the principal.

B)
binding on the owner’s spouse for the remainder of the 90 days.

C)
binding only if the real estate professional can produce offers to purchase the property.

D)
still in effect as the owner’s intention was clearly defined.

Answer 42

Explanation
The answer is terminated automatically because of the death of the principal. A listing agreement may be terminated if either party dies or becomes incapacitated.

Question 43

In a listing agreement, the broker protection clause describes the circumstances under which

A)
the broker may be entitled to a commission after the termination of the listing.

B)
the broker is insured against errors or omissions.

C)
the seller will guarantee the broker’s safety while showing the property.

D)
the broker is relieved of liability for any act of the seller that may cause damages that could be claimed by any party against the seller.

Answer 43

Explanation
The answer is the broker may be entitled to a commission after the termination of the listing. The broker’s protection clause describes the circumstances under which the broker may be entitled to a commission after the termination of the listing.

Question 44

Proof of title to real estate may be provided by a warranty deed, title insurance policy, or

A)
abstract of title with attorney's opinion.
B)
property tax statement.
C)
homeowners insurance policy.
D)
any utility bill.

Answer 44

Explanation
The answer is abstract of title with attorney’s opinion. Proof of ownership of real estate may be provided by a warranty deed, title insurance policy, or abstract of title with attorney’s opinion.

Question 45

When should a sales associate prepare a comparative market analysis?

A)
Before making a listing presentation to a prospective property seller
B)

After agreeing on a sales price

C)
Never

D)
After selling the property

Answer 45

Explanation
The answer is before making a listing presentation to a prospective property seller. The sales associate who prepares a comparative market analysis, also called a competitive market analysis, will review MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred. While the sales associate should be sensitive to the seller’s purchase price and financial needs, the market is the best indicator of the property’s current value.

Question 46

A broker just explained the value of signing an exclusive agency listing with a broker who is a member of the multiple listing service. The broker is trying to overcome the misconceptions of the seller who asked about

A)
an exclusive right-to-sell listing.
B)
an open listing.
C)
a net listing.
D)
an option listing.

Answer 46

Explanation
The answer is an open listing. Sellers are often confused, thinking that the only way to find buyers from a number of brokers is to enter into an open listing. Explaining the advantages of a multiple listing service can overcome the misconception.

Question 47

A broker who works for the buyer has which of the following responsibilities?

A)
Negotiate on the buyer's behalf
B)
Explain important documents to buyer
C)
Be fair with the seller but responsible to the buyer
D)
All of these

Answer 47

Explanation
The answer is all of these. Obligations of the broker to the buyer include skill and care surrounding all aspects of the transaction in keeping the buyer’s best interests front and center.

Question 48

An example of personal property that a seller may take away from the property and, therefore, MUST be identified on the listing agreement is

A)
the door key.

B)
a ceiling light fixture.

C)
stacked firewood.

D)
a built-in dishwasher.

Answer 48

Explanation
The answer is stacked firewood. Firewood is not attached to the real property and is therefore considered personal property. All the other items, even the door key, are normally considered to be part of the real property.

Question 49

Which of the following is TRUE of a listing agreement?

A)
Only the sales associate of the employing broker needs to be identified.

B)
The listing price is not included.

C)
Broker’s compensation is not included.

D)
The sales associate of the employing broker is not a party to the agreement.

Answer 49

Explanation
The answer is the sales associate of the employing broker is not a party to the agreement. The brokerage company name, the employing broker, and if applicable, the sales associate taking the listing must all be identified, even though the sales associate only acts on behalf of the broker and is not a party to the agreement.

Question 50

A buyer signed an agreement with a broker to compensate the broker even if the buyer purchases the property from a relative. This is called

A)
an open buyer representation agreement.

B)
an invalid agreement.

C)
an exclusive agency buyer representation agreement.

D)
an exclusive buyer representation agreement.

Answer 50

Explanation
The answer is an exclusive buyer representation agreement. An exclusive buyer representation agreement binds the buyer to compensate the agent whenever the buyer purchases a property of the type described in the contract, even if the buyer finds the property independently.

Question 51

A listing broker was informed by another broker that a prospective buyer would be making an offer on the listed property, in an amount that would be 25% lower than the $345,000 asking price. The listing broker said that such a low offer would be insulting and would not be presented to the seller. The listing broker joked about the proposed offer when speaking to the property owner the next day. The property owner has the right to

A)
terminate the listing agreement.

B)
reduce the listing broker’s commission.

C)
contact the prospective buyer directly.

D)
give the listing broker permission to contact the prospective buyer directly.

Answer 51

Explanation
The answer is terminate the listing agreement. A listing agreement may be terminated if either the broker or the seller breaches the agreement, such as by the broker’s refusal to present an offer to the seller.