Unit 6

Question 1

Exclusive Right-to-sell Listing

Answer 1

A listing contract under which the owner appoints a designated broker as his exclusive agent for a designated period to sell the property on the owner’s stated terms. The owner agrees to pay the designated broker a commission when the property is sold, whether by the designated broker, the owner, or another broker.

Question 2

Exclusive-agency Listing

Answer 2

A listing contract under which the owner appoints a broker as his exclusive agent for a designated period of time to sell the property on the owner’s stated terms for a commission. The owner reserves the right to sell without paying anyone a commission if he sells to a prospect who has not been introduced or claimed by the sponsoring broker.

Question 3

Exclusive listing agreements must include:

Answer 3

the list price of the property,
the agreed-upon amount of commission and the time of payment,
the duration of the agreement,
the names of the broker and seller,
the identification of the property involved (address or legal description),
the duties of the listing broker,
minimum services language,
a statement of nondiscrimination, and
a statement regarding antitrust.

Question 4

Open Listing

Answer 4

A listing contract under which the sponsoring broker’s commission is contingent on the sponsoring broker producing a ready, willing, and able buyer before the property is sold by the seller or another sponsoring broker.

Question 5

Net Listing

Answer 5

A listing based on the net price the seller will receive if the property is sold. Under a net listing the sponsoring broker can offer the property for sale at the highest price obtainable to increase the commission. This type of listing is legal in Illinois, though it is discouraged.

Question 6

Option Listing

Answer 6

Listing with a provision that gives the listing sponsoring broker the right to purchase the listed property. Sometimes, brokers and sellers enter into guaranteed sale agreements, in which the broker agrees to buy the listed property if it fails to sell before the end of the listing period. Typically, these guarantees are made to the seller as an inducement to list the property with the broker.

Question 7

Comparative Market Analysis (CMA)

Answer 7

A comparison of the prices of recently sold homes that are similar to a listing seller’s home in terms of location, style, and amenities.

Question 8

CMA should include:

Answer 8

(1) A statement of the intended purpose of the broker price opinion or comparative market analysis
(2) A brief description of the interest in real estate that is the subject of the broker price opinion or comparative market analysis
(3) A brief description of the methodology used to develop the broker price opinion or comparative market analysis
(4) Any assumptions or limiting conditions
(5) A disclosure of any existing or contemplated interest of the broker or managing broker in the interest in real estate that is the subject of the broker price opinion or comparative market analysis
(6) The name, license number, and signature of the broker or managing broker that developed the broker price opinion or comparative market analysis
(7) A statement in substantially the following form: “This is a broker price opinion/comparative market analysis, not an appraisal of the market value of the real estate, and was prepared by a licensed real estate broker or managing broker, not by a State certified real estate appraiser.”
(8) Such other items as the broker or managing broker may deem appropriate

Question 9

What is a CMA based on?

Answer 9

recently closed (sold) properties,
properties currently on the market (properties in competition with the subject property), and
properties that did not sell (expired listings in the area).

Question 10

Definition of a bedroom

Answer 10

Midwest Real Estate Data (MRED) states that a bedroom is a private room that is closed off from other living spaces and does not have its only entrance from another bedroom, a configuration that would make it a tandem room. Bedrooms are not required to have a closet and/or a window.

Question 11

How do you calculate total commission?

Answer 11

Sales price × commission rate = commission

Question 12

How do you calculate sales price?

Answer 12

Commission ÷ commission rate = sales price

Question 13

How do you find commission rate?

Answer 13

Commission ÷ sales price = commission rate

Question 14

How do you find net to seller $?

Answer 14

Sales price × (100% – commission rate) = net to seller

Question 15

Which disclosures must be included with listing contracts?

Answer 15

Disclosure of Material Facts

A broker must not withhold material facts concerning a property of which she has knowledge from any purchaser, prospective purchaser, seller, lessee, lessor, or other party to the transaction. Material facts are any facts on which a reasonable person would base a contractual decision.

Disclosure of Interest

A broker must disclose in writing to the parties to the transaction her status as a broker and any direct or indirect interest she has or may have in the subject property. For example, if the buyer or the seller is a licensed broker, this must be clearly stated in the contract.

Disclosure of Special Compensation

A broker is prohibited from accepting “any finder fees, commissions, discounts, kickbacks, or other compensation from any financial institution, title insurance company, or any other person other than another licensee, without full disclosure in writing of such receipt to all parties to the transaction.” Sponsored licensees receive any such compensation only through their respective sponsoring brokers. Such fees may also be in violation of federal law.

Earnest Money and Purchaser Default

When any written listing includes provision that the seller will not receive the earnest money deposit if the purchaser defaults, this fact must appear emphasized in letters larger than those otherwise used in the listing agreement.

Disclosure of Property Condition

Seller disclosure of property conditions is required by law in Illinois. These disclosures normally cover a wide range of structural, mechanical, and other conditions that a prospective purchaser should know about to make an informed decision. Brokers should caution sellers to make truthful disclosures to avoid litigation arising from fraudulent or careless misrepresentations. A property disclosure statement must be given to the buyer before an offer is made and accepted or the buyer will have three business days in which to rescind the contract, based on any negative disclosures.

Lead paint disclosure is required on any property built before 1978

Question 16

broker protection clause

Answer 16

provides that the property owner will pay the listing broker a commission if, within a specified time period after the listing agreement expires, the owner transfers property title to someone who saw the property while it was listed with the broker. The protection clause protects brokers from losing a commission on a sale involving buyers who saw the property while it was listed and to discourage others from trying to reach private arrangements with sellers.

Question 17

Buyer Agency Agreement

Answer 17

A principal-agent relationship in which the sponsoring broker is the agent for the buyer, with fiduciary responsibilities to the buyer.

Question 18

Exclusive-agency buyer agency agreement

Answer 18

Like an exclusive buyer agency agreement, this is an exclusive contract between the buyer and the broker. However, this agreement limits the broker’s right to payment. Brokers are only entitled to payment if they locate the property the buyer ultimately purchases. The buyer retains the right to locate and buy property without financial obligation to the broker. Under this type of agreement, brokers risk “educating” buyers about the purchase process and showing many homes only to find that the buyers avoid compensating the broker by working directly with the owners of an unlisted property.

Question 19

Open buyer agency agreement

Answer 19

This agreement is a nonexclusive buyer representation agreement between a broker and a buyer. It permits the buyer to enter into similar agreements with an unlimited number of brokers. The buyer is obligated to compensate only the broker who locates the property the buyer ultimately purchases.

Question 20

An employment agreement may be canceled for the following reasons:

Answer 20

When the agreement’s purpose is fulfilled
When the agreement’s term expires without a successful transfer
If the property is destroyed or its use is changed by some force outside the client’s control, such as a zoning change or condemnation by eminent domain
If title to the property is transferred by operation of law, as in the case of the client’s bankruptcy or foreclosure
If the sponsoring broker and the client mutually agree to end the agreement
If either the sponsoring broker or the client dies or becomes incapacitated
If either the sponsoring broker or the client breaches the contract, the agreement is terminated and the breaching or canceling party may be liable to the other for damages.

Question 21

contemporaneous offers

Answer 21

multiple offers on same house on behalf of different clients. must notify other clients and find other agent if requested by them

Question 22

exclusive buyer agency agreement

Answer 22

“In return for the compensation agreed upon, Broker will assist Client in locating and purchasing a suitable property. Broker will receive the agreed compensation regardless of whether Broker, Client, or some other party locates the property ultimately purchased by Client

Question 23

Exclusive Agency Listing

Answer 23

A contractual agreement under which the listing broker acts as the agent or as the legally recognized non-agency representative of the seller(s), and the seller(s) agrees to pay a commission to the listing broker if the property is sold through the efforts of any real estate broker. If the property is sold solely through the efforts of the seller(s), the seller(s) is not obligated to pay a commission to the listing broker.

Question 24

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

Answer 24

The answer is both types of listings give the responsibility of representing the seller to one broker only. In an exclusive right-to-sell listing, one broker is appointed as the seller’s sole agent. The listing broker is given the exclusive right, or authorization, to market the seller’s property. In an exclusive-agency listing, one broker is authorized to act as the exclusive agent of the seller-principal. However, the seller retains the right to sell the property without obligation to the broker.

Question 25

In Illinois, what brokerage agreements must be in writing?

Answer 25

Exclusive brokerage agreements