Unit 3.2 - Agency and Disclosures (LTP Flashcards)
What’s the difference between exclusive agency listing agreement and exclusive right to sell listing agreement?
Exclusive Agency = one broker competing against the seller. if the seller finds the buyer, seller is not obligated to pay the listing broker/agent
Exclusive Right to Sell = no matter who finds the buyer, the broker gets paid
What is initial contact?
The point in time in which the broker must disclose that he/she represents the buyer to the seller/listing agent. The first time they are in contact.
This is not the same as first substantial contact, which is what triggers the requirement for disclosing the WWREA brochure.
When is compensation earned? When is it paid?
Listing (Seller’s) Agent – compensation is earned when agent brings ready, willing and able buyer that makes a full price offer that meets the seller’s criteria/requirements (terms) or if the seller enters into contract for less.
Buyer’s Agent – compensation is earned when a buyer enters into a purchase contract.
Both are paid at time of closing or breach.
Note: Neither agent is entitled to commission if contingency is not met (
How is agency created?
by AGREEMENT. depending on type might be in writing or may be oral.
Listing Agreement - any agreement to list a property for sale MUST BE IN WRITING.
Buyer Agreement - may be in writing or oral until time of offer. must be in writing if agent seeks exclusivity.
What must written agency agreement contain?
- Definite end date
- Anti-discrimination language
- Broker’s license number
What is the Sherman Antitrust Act?
Bans price fixing and boycotting.
Price fixing:
- occurs when brokers make statements that infer that all firms of brokers charge the same commission
- commissions should always be negotiated between the client and the firm
- on a test, brokers should always avoid discussing compensation with any brokers affiliated with other firms.
Boycotting:
-occurs when brokers/agents/firms “collude”/ to push a competitor or service provider out of the market.
~essentially two or more brokers or firms agree to avoid using a specific service provider to push them out of business.
In order for a broker to have a valid listing agreement, what must happen?
- Must be in WRITING (always) and include:
- Definite end date
- Non-discriminatory language
- Broker’s license number
Must also include:
- Listing price
- Legal description
- Compensation amount
- Signatures of all owners
What is an open listing?
A non-exclusive listing.
Multiple listing agents and client are all seeking buyers. The seller need not pay anyone if they find their own buyer. Only has to pay the agent who finds.
What is RPOADS?
NORTH CAROLINA RESIDENTIAL PROPERTY & OWNER’S ASSOCIATION DISCLOSURE STATEMENT
What is the remedy to a buyer when the seller fails to provide RPOADS or MOG and when does it need to be remediated?
Buyer has the right to terminate contract and receive refund of due diligence fee and earnest money deposit.
Termination must occur EARLIER OF:
3 calendar days following receipt
3 calendar days following the effective date of the contract/property closing
Carlos lists a property for sale at 108 Main Street in Garner. He tours the property with the sellers in anticipation of listing it in the local Multiple Listing Service. As part of his tour of the property, he notes that the sellers are using the dishwasher to store food and inquires about the operability of the appliance. The sellers inform him that they do not believe the dishwasher works but that they have not tried it in years so they cannot say for certain. Armed with all of the information he collected during this visit, Carlos places his listing for the home in the MLS and conducts several open houses over the coming weeks. During one such open house, a potential buyer inquires about the functionality of the kitchen appliances. Carlos states that to the best of his knowledge all of the appliances are in good working order. Later, the dishwasher is found to be completely inoperable and require replacement by the new buyers. Which of the following best describes Carlos’s actions relating to this material fact disclosure?
Choose only ONE best answer.
A
This is a willful misrepresentation because the listing broker gave incorrect information knowing that it was likely wrong at the time.
B
This does not constitute a violation of North Carolina license law because the sellers did not inform the listing agent that the dishwasher does not function.
C
This would constitute a willful omission of material fact because the listing agent failed to give information relating to the condition of the property as required by NC license law.
D
This action could result in a fine by the North Carolina Real Estate Commission due to the licensee’s failure to properly disclose material fact.
A
This is a willful misrepresentation because the listing broker gave incorrect information knowing that it was likely wrong at the time.
Carlos misrepresented the situation when he SAID that all of the appliances were in good working order. His misrepresentation is willful because he had knowledge that what he was saying was very likely wrong. This is not an omission because the information wasn’t left out….it was given incorrectly. Furthermore, NCREC does not have the power to fine a licensee even if they have violated license law.
Broker Smith has a listing on a house in North Carolina which contains a provision that the house is to be sold in an “as is” condition. Smith learns of a major hidden defect in the property and, when showing a prospective purchaser, should
Choose only ONE best answer.
A
Advise the buyer of the defect
B
Point out that the house will be sold in an “as is” condition
C
Mention the defect to the buyer only if asked
D
Inform the buyer that the seller has told him of no defects
A
Advise the buyer of the defect
North Carolina is a caveat emptor state, which means let the buyer beware. The seller has very limited items that they are required to disclose to a buyer – lead-based paint, synthetic stucco (EIFS), leaking polybutylene, flood hazard, meth lab contamination and the Mineral Oil and Gas Disclosure. The duty to disclose falls upon the agent – that is responsible to disclose what they know or reasonably should have known about the property. A broker is responsible for disclosing patent defects. A broker is not responsible for disclosing latent defects (hidden), unless they are aware of the issue.
Broker Ron Thompson listed and sold Mr. Simpson’s property. Thompson did not disclose to Mr. Simpson that there was a potential zoning change in the works that would allow the property to be used as a convenience store. This new use would substantially increase the value of Mr. Simpson’s property. Which of the following is true?
Choose only ONE best answer.
A
Thompson did not have to divulge the zoning change since it had not been put into effect
B
Thompson did not have to divulge the zoning change since the property sold at its current fair market value
C
Thompson is only obligated to disclose the zoning change to the buyer as they will be subject to the potential change
D
Thompson is obligated to disclose the zoning change to both the buyer and the seller
D
Thompson is obligated to disclose the zoning change to both the buyer and the seller
A broker must disclose material facts to all parties to the transaction. If Thompson was aware of the change then this is an example of willful omission. If Thompson was not aware of the change and it is widely publicized, then this is an example of negligent omission. Willful vs. negligent comes down to intent. Misrepresentation vs omission will depend if something is said orally or in writing.
Sam Sleazy tells broker Hank Honor that he wants to list his property with him, but that Hank should not disclose problems with the septic tank to potential buyers. Since Hank owes obedience to his seller, Hank should
Choose only ONE best answer.
A
Take the listing and follow the seller’s instructions not to disclose the problem
B
Refuse to take the listing unless the seller agrees for him to disclose the problem to the buyers
C
Take the listing and disclose the problem against the seller’s instructions
D
Take the listing, not show the property himself; and let another company sell the listing, thereby avoiding the need to disclose
B
Refuse to take the listing unless the seller agrees for him to disclose the problem to the buyers
A broker must comply with their client’s lawful instructions. A client requesting an agent to omit material facts would not be considered a lawful instruction. The agent must explain to the client that they cannot withhold material facts and if the seller insists, must refuse the listing.
A broker tells a prospective buyer that the owner of his listing is having financial problems and must sell. This is:
Choose only ONE best answer.
A
Acceptable since it may promote an offer
B
Acceptable if the broker does not disclose specific financial information concerning his client
C
Not acceptable unless the seller’s financial position might result in an inability to close
D
Never acceptable to disclose by a buyer or seller’s agent
C
Not acceptable unless the seller’s financial position might result in an inability to close
A material fact is loosely defined as something that would impact a buyer’s decision to buy or a seller’s decision to sell. Certain items are always material facts – a party not being able to perform, meth lab, leaking polybutylene pipes, or a defect that the broker is aware of. The fact that a seller is having financial problems is not a material fact unless it is possible that they will not be able to close. The listing broker must keep that information confidential (conceal it) , unless pre-foreclosure notice has been received which makes it a material fact.
