Unit 4 Flashcards
Objective 1: Describe the requirements for and different types of listing agreements and arrangements, which include express and implied agreements, exclusive right to sell listings, exclusive-agency listings, open listings, and net listings.
Answer: Listing agreements establish the agency relationship between a broker and a seller. The primary types of listing agreements include:
Express Agreement: Explicitly stated terms and conditions, either written or oral.
Implied Agreement: Created by actions or conduct, without formal documentation.
Exclusive Right to Sell: The broker has the exclusive right to represent the seller and is entitled to a commission even if the seller finds the buyer.
Exclusive Agency: The broker has exclusive rights, but no commission is earned if the seller finds a buyer independently.
Open Listing: The seller may list with multiple brokers, and only the broker who brings a buyer is entitled to a commission.
Net Listing: The broker receives a commission based on any amount over a predetermined net price agreed to by the seller.
Objective 2: Describe the benefits of seller agency and how choosing to represent sellers only affects a brokerage’s practices (i.e., exclusive seller agency vs. nonexclusive seller agency).
Answer: Choosing to represent sellers exclusively allows a brokerage to focus on the seller’s interests and avoid potential conflicts that arise from representing both parties.
Exclusive Seller Agency: The brokerage only represents sellers and does not engage in dual agency, ensuring loyalty and minimizing conflicts of interest.
Nonexclusive Seller Agency: The brokerage may represent multiple sellers but not exclusively, and it can involve other brokers to assist in the transaction.
Objective 3: Explain what subagency is, how it is created, and the concerns associated with subagency arrangements.
Answer: Subagency is a type of agency relationship in which a broker, with the principal’s consent, appoints other brokers to assist in selling the property. The subagent works on behalf of the seller and owes fiduciary duties to the seller, not the buyer. Concerns with subagency include confusion about representation, lack of direct relationship with the client, and potential legal liability for actions of the subagent.
Objective 4: Describe the disclosures required of a seller’s agent to a seller and to a buyer.
Answer: Disclosures required by a seller’s agent include:
To the Seller: The agent must disclose all material facts about the property, market conditions, and any offers received.
To the Buyer: The agent must disclose any known defects or issues with the property, ensuring transparency and compliance with state laws. Additionally, the agent must provide the Information About Brokerage Services (IABS) form and explain agency relationships.
Keyterm: Exclusive Right to Sell
Meaning: A type of listing agreement in which the broker has exclusive rights to market and sell the property. The broker receives a commission regardless of who finds the buyer.
Keyterm: Exclusive Agency Listing
Meaning: A listing agreement in which the broker represents the seller exclusively, but the seller retains the right to find a buyer without owing a commission to the broker.
Keyterm: Open Listing
Meaning: A non-exclusive listing that allows multiple brokers to market the property. Only the broker who brings the buyer receives the commission.
Keyterm: Net Listing
Meaning: An agreement in which the broker’s commission is any amount above a specified price agreed to by the seller. This type of listing is discouraged due to potential conflicts of interest.
Keyterm: Procuring Cause
Meaning: The broker whose actions directly result in a sale, entitling them to commission. This concept is critical in resolving disputes when multiple brokers claim to have found the buyer.
Keyterm: Exclusive Agency Addendum
Meaning: An addendum that can be attached to a listing agreement, specifying any exceptions or additional terms for the exclusivity of the agency.
Keyterm: Seller’s Disclosure Notice
Meaning: A form required by Texas law, where sellers disclose known material defects of the property to prospective buyers.
Keyterm: Listing Agreement
Meaning: A contract between a broker and a seller, authorizing the broker to market and sell the property under specific terms and conditions.
Keyterm: Broker’s Authority
Meaning: The rights granted to a broker in a listing agreement, including the authority to market the property, advertise, and negotiate with potential buyers.
Keyterm: Commission Agreement
Meaning: A separate agreement that outlines how commission will be shared among brokers involved in a sale, particularly when there are multiple agents or brokers working together.
Keyterm: MLS (Multiple Listing Service)
Meaning: A database system that brokers use to share information about properties available for sale, providing increased exposure for listings and facilitating cooperation between brokers.
Keyterm: Protection Period
Meaning: A period following the termination of a listing agreement during which the broker may still be entitled to a commission if the property sells to a buyer they introduced during the listing period.
Keyterm: Cooperation with Other Brokers
Meaning: The practice of working with other brokers to sell a property, often through the MLS, where commission agreements and cooperative relationships are established.
Keyterm: Subagent
Meaning: A broker or sales agent who represents a principal through cooperation with the principal’s broker, usually in a property listing. Subagents owe fiduciary duties to the principal and must act in their best interest.
Keyterm: Subagency
Meaning: A type of agency relationship in which a broker, with the principal’s consent, appoints other brokers to assist in selling the property. The appointed subagents owe their duties to the principal and work under the listing broker.
Keyterm: Exclusive Seller Representation
Meaning: An agency relationship where the broker represents only the seller in a transaction and works solely in the seller’s best interest, without representing the buyer in any capacity.
Keyterm: Nonexclusive Seller or Single Representation
Meaning: An agency relationship where the broker represents the seller but is not the exclusive representative. Other brokers may represent the seller, and the broker is not guaranteed compensation if they do not procure the buyer.
Keyterm: Intermediary Agency
Meaning: A special form of agency in Texas where the broker represents both parties (buyer and seller) in a real estate transaction, with the written consent of both parties. The intermediary broker must remain impartial and cannot disclose confidential information of either party unless required by law.
Keypoint Question: What are expressed listing agreements, and how are they created?
Keypoint Answer: Expressed listing agreements can be written or oral. These agreements explicitly state the terms and conditions agreed upon by the parties, forming a clear and legally enforceable agency relationshi
Keypoint Question: What are implied listing agreements, and how are they created?
Keypoint Answer: Implied listing agreements are created by the words or conduct of the parties, even without a formal agreement. The relationship is inferred based on the actions of both parties, leading to an understanding that an agency relationship exists.
Keypoint Question: Why is early disclosure of seller agency important?
Keypoint Answer: Early disclosure of seller agency helps lessen the chance that the buyer will claim later that the broker also represented them. By making roles and duties clear from the start, misunderstandings and potential legal issues are minimized.
Keypoint Question: What is the purpose of written disclosures and brochures in real estate transactions?
Keypoint Answer: Written disclosures and brochures help clarify that the buyer is the customer and the seller is the client. This helps avoid confusion and misinterpretation about the agency relationships. However, it’s important to note that while the customer must be treated fairly by law, the agent is not required to treat them impartially or equally relative to the license holder’s client.
Keypoint Question: What duties does a seller’s subagent owe to the buyer and the seller?
Keypoint Answer: A seller’s subagent owes a general duty of fairness and honesty to the buyer (customer) but owes full fiduciary duties to the seller (client). The subagent’s primary responsibility is to the seller, as they are not representing the buyer.
Keypoint Question: How is subagency handled under an MLS system?
Keypoint Answer: Under an MLS system, offering subagency is optional. As a matter of routine, the listing office should clarify the subagency status of any other broker involved in the transaction to ensure everyone understands their role and duties.
Keypoint Question: Why do some cooperating brokers choose to treat buyers as customers instead of clients?
Keypoint Answer: Some cooperating brokers prefer to treat certain buyers as customers because it allows them to maintain subagency to the seller. This ensures that their fiduciary duty remains solely to the seller, avoiding conflicts that could arise from representing both parties.
Keypoint Question: What are the risks of treating a buyer as a client when they are actually a customer?
Keypoint Answer: It is dangerous to appear to treat buyers as clients if they are in fact “customers,” as it could lead to an accidental undisclosed agency relationship. This can cause legal liability for the agent if the buyer believes they were being represented without proper disclosure.
A listing broker owes which of the following duties to the prospective buyer/customer?
A. Loyalty
B. Obedience
C. Agency disclosure
D. All of these
Correct Answer: C – Agency disclosure
Explanation of Answer: The listing broker is required to disclose agency relationships to the prospective buyer/customer. However, loyalty and obedience are fiduciary duties owed to the seller-client, not the buyer-customer.
Three different subagents show a property to the same buyer over a span of two weeks. Which subagent is entitled to a share of the commission?
A. The subagent who procures the sale
B. The subagent who first showed the property to the buyer
C. The subagent who last showed the property to the buyer
D. All three subagents in equal shares
Correct Answer: A – The subagent who procures the sale
Explanation of Answer: Only the subagent who is the procuring cause of the sale is entitled to a share of the commission. The procuring cause is the agent whose efforts resulted in the buyer purchasing the property.
A listing broker normally can do all of the following EXCEPT:
A. Sell the listing broker’s own listings
B. Advertise listed properties
C. Hold open houses
D. Split fees with a buyer’s broker without the seller’s knowledge
Correct Answer: D – Split fees with a buyer’s broker without the seller’s knowledge
Explanation of Answer: A listing broker cannot split fees with a buyer’s broker without the seller’s consent. Transparency is required when it comes to commissions and fees to avoid disputes.
A buyer approaches broker Smith, an exclusive seller’s agent, and asks to be represented in the purchase of a home. Smith should:
A. Explain that there are no real benefits to buyer representation
B. Explain that while he cannot personally work with the buyer, one of his associates may do so
C. Describe the services that the buyer may receive as a customer, but if the buyer still wants representation, refer the buyer to a buyer’s broker
D. Show the buyer only properties listed by other brokers
Correct Answer: C – Describe the services that the buyer may receive as a customer, but if the buyer still wants representation, refer the buyer to a buyer’s broker
Explanation of Answer: An exclusive seller’s agent cannot represent the buyer but should explain the services available and, if necessary, refer the buyer to a broker who can provide representation.
A net listing requires that:
A. The seller accept the net amount of money remaining after all costs of sale
B. The seller independently determine the value of the property
C. The agent advise the seller of the value of the property
D. The agent limit the amount of commission charged
Correct Answer: C – The agent advise the seller of the value of the property
Explanation of Answer: A net listing requires the agent to provide the seller with an estimated value of the property to ensure that the seller is fully informed before agreeing to the arrangement.
The listing that allows the seller to list with several brokers is:
A. Exclusive right to sell
B. Exclusive agency
C. Open listing
D. Net agency
Correct Answer: C – Open listing
Explanation of Answer: An open listing allows the seller to list the property with multiple brokers. Only the broker who brings a buyer will earn a commission, providing less protection to the brokers involved.
According to TRELA, brokers are responsible for the negligent acts of subagents:
A. Under no circumstances
B. To the extent that they knew of the negligent acts
C. No matter whether they knew of the negligent acts or not
D. Only when they encourage the subagent to commit a negligent act
Correct Answer: B – To the extent that they knew of the negligent acts
Explanation of Answer: Brokers are responsible for the actions of subagents if they knew or should have known about the negligent acts. Brokers must supervise subagents and ensure compliance with TRELA.
The seller says he will list with you as long as he gets enough to pay his loan balance and closing costs. Your commission will be anything above those costs. This is an example of:
A. An open listing
B. A one-time showing agreement
C. A net listing
D. A fixed commission listing
Correct Answer: C – A net listing
Explanation of Answer: A net listing is when the broker’s commission is any amount above a specified net amount required by the seller, making it a unique and less common type of listing agreement.
A subagent brings a full-priced offer to purchase to the listing broker but is later informed that the seller has elected not to sell the property. The subagent:
A. Has no right to sue under the terms of the listing agreement
B. May file suit against the listing broker for his commission
C. May force the listing broker to file suit against his client
D. May file suit against the seller for his commission
Correct Answer: A – Has no right to sue under the terms of the listing agreement
Explanation of Answer: The subagent is not a party to the listing agreement and therefore has no right to sue for commission if the seller elects not to sell.
A buyer asks a broker, who is the subagent of the listing broker, whether the seller would accept $4,000 less than the asking price. The listing broker already has told the subagent that the seller will take $5,000 less. Which is the BEST response for the subagent?
A. “Go ahead and make the offer because the seller needs to sell before the bank forecloses.”
B. “You may make the offer, and we’ll see what the seller says. But remember, you may want to make your very best offer the first time because we don’t discuss the existence or nonexistence of other offers.”
C. “I can’t present an offer that is less than the asking price.”
D. “If I get the seller to accept this low offer, I want a $1,000 bonus.”
Correct Answer: B – “You may make the offer, and we’ll see what the seller says. But remember, you may want to make your very best offer the first time because we don’t discuss the existence or nonexistence of other offers.”
Explanation of Answer: This response avoids disclosing confidential information about the seller’s lowest acceptable price while encouraging the buyer to present their best offer.
