Unit 9: Agency Contracts Flashcards
What is a fiduciary relationship?
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.
What is a listing contract?
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.
Who are the parties in a listing contract?
Seller = principle/client
Brokerage Firm = agent/fiduciary
What are the 8 elements of a listing contract?
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
What are the 3 methods of compensation?
1) Flat fee
2) Percentage of sales price
3) Net listing
Which method of compensation is illegal or not recommended in most states?
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.
T/F Commissions are not negotiable.
False. As required under the Sherman Antitrust Act, commissions are ALWAYS negotiable.
What happens when a listing goes past the expiration date stated on the listing contract?
The contract must be amended to extend the listing past the expiration date.
T/F If a listing goes past the expiration, an automatic renewal clause is allowed.
False. An automatic renewal clause is NOT ALLOWED.
What is the multiple-listing clause?
Allows the broker to list property in the MLS and offer cooperation (co-op) fee to other brokers.
T/F The brokerage is entitled to a commission if prospect buys after listing expires.
True
What are the 3 types of listings?
1) Exclusive Right to Sell
2) Exclusive Agency
3) Open/Nonexclusive
Which type of listing gives the maximum protection to the brokerage?
Exclusive Right to Sell
T/F Under an Exclusive Right to Sell listing, the brokerage does not get paid if the seller sells the property.
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.
What is an Exclusive Agency listing?
Seller has no liability to pay the brokerage if the seller finds the buyer.
T/F Under an Open/Nonexclusive listing, only the brokerage who procures (finds) the buyer gets paid.
True. Seller can sign open contracts with more than one brokerage firm.
Which type of listing is a unilateral contract?
Open/Nonexclusive listing
What is a property management contract?
It is an agreement between the owner of an income-producing property and a brokerage firm that will act as the property manager.
Who are the 2 parties in a property management contract?
1) Property owner - principle
2) Property manager (brokerage firm) - general agent
In an open listing, when does the listing agent paid?
Only if the listing agency obtains the buyer.
In an exclusive agency, when does the listing agent get paid?
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.
In an exclusive right to sell agency, when does the listing agent get paid?
When the following:
1) Co-op agency obtains buyer
2) Listing agency obtains buyer
3) Someone else obtains buyer
4) Owner obtains buyer
Can broker associates and sales people be a party of a property management contract?
Yes but they need to tell their brokerage firm.
What are the responsibilities of the property manager?
1) Maintain value of the property
2) Generate income from the property
3) Find well-qualified tenants
What are the 2 warranty programs available to buyers?
1) Home warranty
2) New home construction warranty
What do home warranties cover?
Home warranty programs cover the majority of an existing home including all major systems and appliances
Who determines the term and length of a home warranty?
While it is often provided as part of the listing or offer it is determined by the contract with the warranty company.
T/F Real estate professionals can recommend a home warranty program to obtain a referral fee.
False. Real estate professionals SHOULD NOT recommend a home warranty program just to obtain a referral fee.
What is another name for a new home construction warranty?
Warranty of habitability or suitability.
What does a new home construction warranty cover?
Roof or other structural failure, poor materials or workmanship, or faulty appliances after closing.
T/F New home construction warranty does not cover structural damage from outside forces.
True
How are agency contracts terminated?
- Full performance
- Death of principal or brokerage firm
- Destruction of improvements (house burns down)
- Mutual rescission
- Breach by either party
