Principles of Real Estate ch. 5

  1. The broker is strictly accountable only to
    the principles.  Not customers
  2. Section 1101.557 of the Real Estate License Act provides that a broker who represents a party in a ______________ or who _____________ for a party is that parties agent.
    • -real estate transaction
    • -lists real estate for sale under an exclusive agreement
  3. Agency is created at the ______ level, not the salesperson level
  4. Listing agreement
    broker-seller relationship, employment contract
  5. Buyer representation agreement
    broker-buyer agency relationship
  6. express agency
    an agency created by specific agreement, whether written or oral, of principal and agent
  7. implied agency
    an agency created by acts or words of principal and agent; an agency inferred by circumstances; implied by actions
  8. Having a written contract is a requirement for creating an agency relationship.
    false; a written expressed agency listing agreement is preferred, but not required to created an agency relationship
  9. The primary ingredients in creation of agency are:
    • -delegation (representation) of authority by the principal
    • -acceptance of such by the agent
    • -reliance (confidence/trust/rely) on the agent by the principal
    • -control of the agent by the principal
  10. Compensation of the agent is not required to create a relationship; it merely indicates an agency relationship
  11. An agency can be terminated at any time
    true; but agency cannot be terminated wrongfully to avoid paying a fee.
  12. What are the five common law fiduciary duties?
    • -COALD
    • -Care
    • -Obedience
    • -Accounting
    • -Loyalty
    • -Disclosure
  13. In what situation can the obedience duty be broken between an agent and a principal
    if the principals instructions are unlawful, such as, discriminating to show a minority group the property
  14. With the accounting duty law, brokers deposit all funds entrusted to them in
    -a special trust, or escrow, account "by the close of business of the second working day after execution of the contract by principals."
  15. Commingle
    an unlawful act, by mixing monies with personal funds
  16. A broker or agent cannot disclose the principal (seller's) financial information or other info that will harm the bargaining price for the seller.  On the other hand...
    loyalty dictates that the broker (if representing the seller), must disclose to the seller any statements made by a buyer that reflect willingness to raise the offer if an initial offer is not accepted.
  17. In Texas law, brokers and agents cannot buy or sell property...
    listed with them, or will have personal interest
  18. A broker owes the client a full, fair, and timely disclosure of all known facts relevant to the transaction.  This falls under which of the five fiduciary duty laws?
  19. Give an example of disclosure duties
    pg 58
  20. What are the principal's responsibilities to the agent?
    • -compensation
    • -information; accurate info
    • -indemnification; reimburse the broker if the broker suffers financial injury while performing duties as broker
    • -availability
  21. puffing
    opinion; exaggerated statements of value on property to sell; should be avoided because of the Deceptive Trade Practices Act that they mislead the customer.
  22. Agent's responsibilities to customer
    • -no puffing, misrepresentation, or fraud.
    • -the agent must disclose to the buyer-customer all material facts about the condition of the property, such as known structural defects, building code violations, and hidden dangerous conditions.
  23. Section 1101.556 of the Texas Real Estate License Act releases the seller or a seller's agent from the duty to disclose info related to whether a death by natural causes, suicide, or accident unrelated to condition of the property occurred on the property.  Sellers or seller's agent do have to disclose though,
    -murder, molestation, or haunted activity on the property
  24. What are the four positions a broker might take when doing business with a seller, buyer, landlord, or a tenant?
    • -seller's agent
    • -Subagent
    • -buyer's agent
    • -intermediary
  25. What is an intermediary broker?
    a broker who is employed to negotiate a transaction between both parties and who for that purpose may be an agent of both parties to the transaction, acting fairly so as not to favor one party over the other.
  26. Only a broker can act as an intermediary.  The intermediary broker must act fairly and impartially and is not allowed to give advice or opinion.
  27. A real estate salesperson is any person licensed to perform real estate activities on behalf of a licensed real estate broker.
  28. A salesperson has no authority to make contracts or receive compensation directly from a principal.  All compensation to the salesperson must be paid with the knowledge and written consent of or through the...
    sponsoring broker or through the broker under whom the salesperson was licensed at the time the right to compensation was earned.
  29. Remember that agency with the principal is at the broker level.
  30. What is the difference between being an employee for a broker or an independent contractor?
    -employee, the broker has more control over what you do and withholds SS tax, whereas an independent contractor, a broker can control what an IC does but not how they do it with a written contract.  IC also do their own taxes.
  31. IRS Independent Contractor Test
    • IRS use to evalute evidence of the degree of control and independence in three categories:
    • -behavioral control
    • -financial control
    • -type of relationship between the parties
  32. The broker's commission
    • -specified in the listing agreement, the buyer representation agreement, the management agreement, or other contract with the principal
    • -paid is in form of commission or service fee as a percentage of the total amount of money involved, which is negotiable b/t the principal and broker
  33. To be entitled to sales commission, what must the selling broker have to do and what are the requirements?
    • -Show that they were the procuring cause--the broker must have started a chain of events that resulted in a sale.
    • -have a valid real estate broker's license
    • -written agreement and signed by party to be charged
    • -the buyer should obtain or be furnished with a title insurance policy or have the abstract covering the subject property examined by an attorney of the buyer's choice.
  34. The broker will still be compensated even if the contract expires or because of a seller's default or backing out of the contract depending on if...
    the buyer is ready, willing and able; preapproved
  35. Can a licensee pay or split a commission or fee to a person who is not licensed with a TREC?
    no, the principal must pay unlicensed others involved (lawyers) a separate commission or fee
  36. What is the amount a real estate broker can give as a gift? What else can a broker give?
    • -not exceed a $50 retail cash value.
    • -rebates for referrals
  37. A salesperson's compensation is set by mutual agreement b/t broker and salesperson, and that agreement must be in writing.
  38. Usually, the higher the commission split to the agent,...
    the more expenses the broker will require the agent to pay (advertising, office space, etc)
  39. What happens in a 100% commission firm?
    If a salesperson achieve a predetermined sales quota, they receive 100% of the commissions from the sales, and pay a monthly service charge to their broker (office costs, advertising, etc.)
  40. Real estate agents can use unlicensed assistants to perform myriad tasks (phone calls, scheduling appointments, host at open house) but they cannot do what?
    engage in any activity for which a license is required (interviewing prospects, advertising listings, accepting the deposit of rent, or respond to inquiries about a property of info that has not been specifically advertised.
  41. Antitrust law violations include
    • -price-fixing; brokers agree to set sales commissions, fees, or management rates; cannot hint to clients there is a "going rate", brokers must state that the rate or fees is only for their firm
    • -boycotting a competitor; brokers cannot disagree to work with other brokers based on their type of practice.
    • -allocation of customers or markets; brokers agreeing on specific territories as their own (Wylie).
  42. Antitrust laws are subject to
    federal and state
  43. caveat emptor
    let the buyer beware.
  44. In the past, real estate transactions were governed mostly by caveat emptor, leaving the responsibility of inspecting the property to the buyer, now the responsibility is placed more on...
    the seller and agent.  In Texas the sellers are required to give a Seller's Disclosure Notice to the buyer on or before the effective date of a contract to disclose the seller's knowledge of the property conditions, along with a list of appliances and if they are working
  45. What is DTPA?
    • Texas Deceptive Trade Practices--Consumer Protection Act.
    • -declares that false, misleading or deceptive acts or practices in advertising, offering for sale, selling or leasing of any real or personal property are unlawful.
  46. A real estate broker acting as the special agent of the seller...
    is obligated to render faithful service to the seller
  47. A real estate broker who engages salespersons as independent contractors must
    refrain from controlling how the salesperson conducts business activities
  48. The statement "a broker must be employed to recover a commission for service" means that the..
    seller must have signed an agreement to pay a commission to the broker for selling the property.
  49. A real estate broker hired to sell a parcel of real estate must

    a. disclose a customer-buyer's comment that he will pay up to $70,000 if the seller makes a counteroffer.

    b. keep confidential a customer-buyer's comment that he will pay up to $70,000 if the seller makes a counteroffer.
  50. As an independent contractor for a real estate broker, a real estate salesperson has the authority to

    a. act as an agent for another person
    b. assume only responsibilities assigned by the broker.
  51. Reckless disregard for truth withe the intent to obtain a financial advantage over another is a definition of
  52. Alice is a broker, Rich lists a home with Alice for $89,500.  Later that same day, Robert comes into Alice's office and asks for general info about homes for sale in the $80,000 to $100,000 price range.  Based on these facts, which statement is TRUE?

  53. Tomas, a broker, learns that his neighbor, Paul, wishes to sell his house.  Tomas knows the property well, and while Paul is out of town for a week, Tomas convinces Barney to buy the property.  Tomas obtains Barney's signature on purchase offer, together with a check for an earnest money deposit.  When Paul returns, Tomas presents Barney's offer. In this situation,

  54. Role of an intermediary broker
    The broker is acting on behalf of both the buyer and the seller and must not disclose any confidential information to either party without written permission
  55. The legal relationship b/t broker and seller is generally
    special agency
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Principles of Real Estate ch. 5
Principles of Real Estate ch. 5