Unit 9: Agency Contracts

Question 1

What is a fiduciary relationship?

Answer 1

A relationship of trust and confidence, in which one party owes the other loyalty and a higher standard of good faith than is owed to third parties.

Question 2

What is a listing contract?

Answer 2

An employment contract that appoints a brokerage firm as an owner’s special agent for the specific purpose of finding a buyer who is ready, willing, and able to buy according to the terms of the contract.

Question 3

Who are the parties in a listing contract?

Answer 3

Seller = principle/client

Brokerage Firm = agent/fiduciary

Question 4

What are the 8 elements of a listing contract?

Answer 4

1) In writing
2) Price and terms
3) Amount and/or method of compensation
* *4) “Negotiable commission” clause
* *5) Definite beginning & expiration dates
6) Multiple-listing clause
7) Broker protection/extension/safety/holdover clause
8) Signatures

Question 5

What are the 3 methods of compensation?

Answer 5

1) Flat fee
2) Percentage of sales price
3) Net listing

Question 6

Which method of compensation is illegal or not recommended in most states?

Answer 6

Net listing. In a net listing, brokerage receives as commission all money above a minimum agreed sales price. This method does not protect the seller because they may not be aware of true market value.

Question 7

T/F Commissions are not negotiable.

Answer 7

False. As required under the Sherman Antitrust Act, commissions are ALWAYS negotiable.

Question 8

What happens when a listing goes past the expiration date stated on the listing contract?

Answer 8

The contract must be amended to extend the listing past the expiration date.

Question 9

T/F If a listing goes past the expiration, an automatic renewal clause is allowed.

Answer 9

False. An automatic renewal clause is NOT ALLOWED.

Question 10

What is the multiple-listing clause?

Answer 10

Allows the broker to list property in the MLS and offer cooperation (co-op) fee to other brokers.

Question 11

T/F The brokerage is entitled to a commission if prospect buys after listing expires.

Answer 11

True

Question 12

What are the 3 types of listings?

Answer 12

1) Exclusive Right to Sell
2) Exclusive Agency
3) Open/Nonexclusive

Question 13

Which type of listing gives the maximum protection to the brokerage?

Answer 13

Exclusive Right to Sell

Question 14

T/F Under an Exclusive Right to Sell listing, the brokerage does not get paid if the seller sells the property.

Answer 14

False. Under an Exclusive Right to Sell listing, the brokerage GETS PAID if the property sells, regardless of who finds the buyer or even if the seller sells the property.

Question 15

What is an Exclusive Agency listing?

Answer 15

Seller has no liability to pay the brokerage if the seller finds the buyer.

Question 16

T/F Under an Open/Nonexclusive listing, only the brokerage who procures (finds) the buyer gets paid.

Answer 16

True. Seller can sign open contracts with more than one brokerage firm.

Question 17

Which type of listing is a unilateral contract?

Answer 17

Open/Nonexclusive listing

Question 18

What is a property management contract?

Answer 18

It is an agreement between the owner of an income-producing property and a brokerage firm that will act as the property manager.

Question 19

Who are the 2 parties in a property management contract?

Answer 19

1) Property owner - principle

2) Property manager (brokerage firm) - general agent

Question 20

In an open listing, when does the listing agent paid?

Answer 20

Only if the listing agency obtains the buyer.

Question 21

In an exclusive agency, when does the listing agent get paid?

Answer 21

When the following:

1) Co-op agency obtains buyer
2) Listing agency obtains buyer
3) Someone else obtains buyer

• Not when the owner obtains the buyer.

Question 22

In an exclusive right to sell agency, when does the listing agent get paid?

Answer 22

When the following:

1) Co-op agency obtains buyer
2) Listing agency obtains buyer
3) Someone else obtains buyer
4) Owner obtains buyer

Question 23

Can broker associates and sales people be a party of a property management contract?

Answer 23

Yes but they need to tell their brokerage firm.

Question 24

What are the responsibilities of the property manager?

Answer 24

1) Maintain value of the property
2) Generate income from the property
3) Find well-qualified tenants

Question 25

What are the 2 warranty programs available to buyers?

Answer 25

1) Home warranty

2) New home construction warranty

Question 26

What do home warranties cover?

Answer 26

Home warranty programs cover the majority of an existing home including all major systems and appliances

Question 27

Who determines the term and length of a home warranty?

Answer 27

While it is often provided as part of the listing or offer it is determined by the contract with the warranty company.

Question 28

T/F Real estate professionals can recommend a home warranty program to obtain a referral fee.

Answer 28

False. Real estate professionals SHOULD NOT recommend a home warranty program just to obtain a referral fee.

Question 29

What is another name for a new home construction warranty?

Answer 29

Warranty of habitability or suitability.

Question 30

What does a new home construction warranty cover?

Answer 30

Roof or other structural failure, poor materials or workmanship, or faulty appliances after closing.

Question 31

T/F New home construction warranty does not cover structural damage from outside forces.

Answer 31

True

Question 32

How are agency contracts terminated?

Answer 32

1. Full performance
2. Death of principal or brokerage firm
3. Destruction of improvements (house burns down)
4. Mutual rescission
5. Breach by either party