Unit 12 Flashcards
Learning Objective: Describe the steps a license holder can take to prevent issues and manage risk in their real estate practice.
Answer: License holders can manage risk and prevent issues by practicing preventive brokerage. This includes using written disclosures, clarifying roles in transactions, developing written office policies and procedures, utilizing external services when necessary, and obtaining errors and omissions insurance to cover potential mistakes during transactions.
Learning Objective: Describe the process a broker should follow in working for or with a seller.
Answer: A broker working with a seller should begin by discussing agency disclosure and roles in the transaction. They should review the listing agreement line by line, explain subagency and commission splitting, and ensure the seller understands their obligations. After signing the listing agreement, the broker develops a marketing strategy, provides a Seller’s Disclosure Notice, and manages showings and negotiations. They must keep the seller informed and guide them through all offers and contractual obligations until closing.
Learning Objective: Describe the process a broker should follow in working for or with a buyer.
Answer: A broker working with a buyer starts by discussing the Information About Brokerage Services Notice and the buyer representation agreement. After signing, they establish a buyer profile, search for properties that meet the buyer’s criteria, and facilitate property showings. During negotiations, the broker advocates for the buyer’s interests and ensures all deadlines and contractual obligations are met. The broker helps the buyer navigate inspections, appraisals, financing, and closing.
Learning Objective: Describe how multiple offers, default, and commissions can become problematic in a real estate transaction and how to prevent issues in these areas.
Answer: Multiple offers can create dilemmas for sellers, requiring brokers to present all offers with clear net proceeds analyses. Defaults can complicate transactions, especially when earnest money is involved; brokers should ensure agreements clarify how funds are divided. Commissions, being negotiable, should be clearly discussed and documented to avoid disputes. Preventing issues requires timely presentation of offers, full disclosure, and adherence to legal and ethical practices.
Key Point Question: How should license holders prepare clients for a real estate transaction?
Answer: License holders should carefully prepare their clients and customers for the real estate transaction by explaining the process and providing disclosures.
Key Point Question: What practices are essential for brokers to manage risk and ensure smooth transactions?
Answer: In practicing preventive brokerage, brokers should use written disclosures, clarify the roles of associated license holders, develop a written set of office policy and procedures, and when needed, use the services of others in their real estate transactions.
Key Point Question: How should offers to purchase be presented to sellers?
Answer: Offers to purchase should be presented in a timely manner. Multiple offers should be presented together, giving the seller an opportunity to choose the offer that best meets their goals. The seller should be able to decide whether or not to accept backup offers.
Key Point Question: How is earnest money handled in the event of a buyer’s default?
Answer: There should be an understanding of how retained earnest money will be divided in case of a buyer’s default.
Key Point Question: How are commissions typically structured in real estate transactions?
Answer: Commissions are negotiable and may be paid by either a client or a customer. An agency relationship is not necessarily determined by which party in the transaction pays the commission.
Key Point Question: How can license holders prepare for difficult conversations or scenarios?
Answer: Using rehearsed dialogue will help license holders overcome uneasiness with situations that are difficult for them.
Key Point Question: How can errors and omissions in real estate transactions be mitigated?
Answer: Having errors and omissions insurance may be helpful in managing inevitable errors or omissions made by either brokers or their sales associates during a real estate transaction.
Brokers should do all of the following EXCEPT:
A. Use written disclosures.
B. Clarify their roles in the transaction.
C. Use the help of others when needed.
D. Warrant the condition of a property.
Answer: D. Warrant the condition of a property.
Reasoning for the answer: Brokers are not responsible for guaranteeing the condition of a property but are required to use written disclosures, clarify roles, and seek help when necessary.
Listing brokers:
A. Always offer subagency to other brokers.
B. Should explain brokerage policies regarding representation of clients.
C. Are not required to use disclosures other than those in the listing contract.
D. May assume that sellers are aware of how commissions are split with other brokers.
Answer: B. Should explain brokerage policies regarding representation of clients.
Reasoning for the answer: Listing brokers have a duty to clearly explain their policies to ensure all parties understand their roles and obligations.
When selecting properties to show a buyer/customer, the license holder:
A. Should select those properties that best match the buyer’s desires.
B. Should show only the company’s listings because of fiduciary duties to their sellers.
C. Should match available properties with the buyer’s needs, desires, and ability to pay.
D. Always should show properties somewhat above the buyer’s desired price range because buyers typically “buy up” from their initial requested price range.
Answer: C. Should match available properties with the buyer’s needs, desires, and ability to pay.
Reasoning for the answer: Properties shown should align with the buyer’s criteria and financial capacity, ensuring ethical and effective service.
Which term BEST describes a real estate license holder, working through a listing broker, who is paid a fee for working with a buyer but is not an agent of the buyer?
A. Listing broker
B. Subagent
C. Finder
D. Buyer’s broker
Answer: B. Subagent.
Reasoning for the answer: A subagent works with the buyer on behalf of the seller and does not establish a direct agency relationship with the buyer.
