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Answers to various questions regarding agency disclosures, listing contracts, and buyer representation agreements in real estate transactions. Topics include when agency disclosure is required, the types of agency relationships, commission structures, and the provisions of specific real estate contracts. Useful for students studying real estate law, property management, or business law.
Typology: Exams
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A seller signs a listing contract with a firm. Who is the agent and who is the principal? ______________ - ANS; The seller is the principal. The firm is the agent. A buyer asks a listing agent to draft an offer. The buyer does not sign a buyer agency agreement. Is the buyer a customer or a client? - ANS; The buyer is a customer. What kind of agency is a firm practicing if the firm represents just one party in the transaction? - ANS; Single agency When can a firm engage in multiple representation? - ANS; Written consent of both parties, agency disclosure to both parties In what kind of transactions must a firm provide agency disclosure? ____________________________ - ANS; All transactions (residential, commercial, vacant land etc.) By when must a firm provide agency disclosure to a client? A customer? _________________________ - ANS; Before or at the time of entering into the agency agreement By when must a buyer's agent disclose the buyer agency relationship to the seller or the listing firm? _____ - ANS; The earliest of first contact, a showing, or any other negotiations with the seller or the listing firm. What are a listing firm's agency disclosure obligations when working with a customer who wants to write an offer on a duplex? What if the buyer wants to write an offer on a commercial warehouse? - ANS; Provide agency disclosure to buyer for duplex and ask that buyer to sign the agency disclosure because this is a 1-4 family transaction. Provide agency disclosure to buyer for commercial warehouse but you do not have to ask that buyer to sign because it is not a 1-4 family property. When does a property manager need to have a real estate license? ____________________________ - ANS; If signing or negotiating leases on behalf of the property owner. If a licensee is representing a family member who is writing an offer on a property, what are the licensee's disclosure obligations? customer? _____ - ANS; Disclose the relationship in writing and obtain consent of both parties.
What are a licensee's disclosure obligations if the licensee is going to receive a fee from referring a lawn maintenance company? What if the licensee is a listing agent who is referring a client to a buyer's agent? - ANS; For the lawn maintenance company, disclose the potential referral fee in writing before or at the time of making the referral. Referral fees from license to license do not need to be disclosed. When must a licensee disclose that the licensee holds a real estate license when selling the licensee's own home? What if the licensee is selling commercial property owned by the licensee? ____ - ANS; The earliest of first contact, a showing, or any other negotiations. The disclosure shall be in writing and is the same whether selling personally owned home or commercial property. What tie-in arrangements are legal? - ANS; +Condition the sale of vacant land owned by the licensee upon the buyer's agreement to use a specific builder if the builder co- owns the property with the licensee. +Condition the sale of vacant land owned by the licensee upon the buyer's agreement to use a specific builder if the builder and the licensee are the same person. +Condition the sale of vacant land owned by the license upon the buyer's agreement to use a specific builder if the agreement to use the builder is a legitimate effort to maintain developmental quality/ architectural uniformity and no compensation passes from the builder to the licensee. Who can retain an unlicensed personal assistant? Who can retain a licensed personal assistant? _______ - ANS; Unlicensed personal assistant - anyone. Licensed personal assistant - just the firm. Which agency duty survives the transaction? - ANS; Confidentially
When negotiating on behalf of a party, present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals. What are the additional duties owed to a client? ______________________________________________ - ANS; Loyally represent the client's interests by placing the client's interests ahead of the firm's interest. Provide, when requested by the client, information and advice to the client on matters that are material to the client's transaction and that are within the scope of the knowledge, skills and training required of a licensee. Disclose all material facts affecting the transaction, not just adverse facts. (divorcing spouses list with two firms = owe two commissions, seller's daughter wants to offer selling bonus) Fulfill any obligation required by the agency agreement (listing contract/buyer agency agreement) and any order of the client that is within the scope of the agency agreement and is consistent with other duties. Negotiate on behalf of the client unless released from this duty. [The duty of negotiation may be waived by a client in part or full, if an express written waiver of negotiation duties is made by the client.] When a firm has a multiple representation relationship with designated agency, to whom will each salesperson provide information, opinions, and advice? - ANS; Their respective clients. How should a client withdraw consent to a multiple representation relationship? _____________________ - ANS; In writing. How should a client waive a firm's duty of negotiation? ________________________________________ - ANS; In writing and the firm must provide disclosure language regarding waiver of negotiation. What type of agency relationship is created with written words? ______________________________ - ANS; Express What type of agency relationship gives an agent the authority to represent a principal in more than one transaction? - ANS; General What are the seven ways to terminate an agency relationship? ________________________________ - ANS; Death or incapacity of principal Destruction of condemnation of the property Expiration Mutual agreement Breach Operation of law Completion
Which listing contracts do not require the seller to pay a commission to the listing firm when the buyer is procured? - ANS; Exclusive agency, one-party listing, open listing What type of listing contract is illegal in Wisconsin? _ - ANS; Net What are the six requirements to create a valid agency agreement? - ANS; Description of the real estate; Statement of the price; Statement of the commission; Statement of the term; In writing; and Signed by the person who will pay the commission. In an unmodified WB-36 Buyer Agency/Tenant Representation Agreement, does a buyer's firm have to be directly involved in negotiations in order to earn a commission? - ANS; No - if the buyer buys or enters into an enforceable contract for sale, the firm earns a commission. What are the three remedies if an agent breaches an agency agreement? __________________________ - ANS; Rescission Forfeiture of commission Sue for damages A seller sold his home for $180,000 and paid a 6% commission. What is the listing firm's commission after giving 40% to the selling firm? - ANS; 180,000 X.06 = 10, total commission $10,800 x .6 = $6480 (listing firm) $10,800 x .4 = $4320 (selling firm) The seller of a property nets $90,000 on the sale of a parcel of land after paying the listing firm a 10% commission. What was the selling price of the property? - ANS; 100%
On what lines of the WB-1 Residential Listing Contract does the firm address the marketing plan? - ANS; Marketing is at lines 18-26, firm's specific plans go on lines 20- 12 Who are the parties to the listing contract - ANS; Seller and listing firm, line 264 How long is the listing period extended for protected buyers in the WB-1 Residential Listing Contract Extension of Listing provision? - ANS; One year, line 220 How many days does a firm have to deliver to the seller the list of protected buyers? _________________ - ANS; Three days, line 212 The seller accepts the responsibility for preparing the property to minimize the likelihood of injury, damage and/or loss of personal property during open houses and individual showings. When will a firm be held responsible? - ANS; Negligence or intentional wrongdoing, lines 257- On what lines of the WB-4 Residential Condominium Listing Contract is the right of first refusal of the condominium association addressed? - ANS; Lines 25- On what lines of the WB-36 Buyer Agency/Tenant Representation Agreement is the authorization for the buyer's firm to accept compensation from the seller or listing firm? - ANS; Lines 50- Once a buyer's firm earns compensation, when is it due and payable? - ANS; Closing or the date set for closing, lines 41- On what lines in the WB-1 Residential Listing Contract does the seller address the incentives the seller wants to offer to potential buyers? - ANS; Lines 18-26 are marketing, seller incentives are on lines 22- How many days does the seller have to provide the new listing firm with the previous listing firm's protected buyer list? - ANS; Seven days, line 161 Where in the WB-1 Residential Listing Contract does the client indicate the agency model the client wants to structure the relationship with the firm? - ANS; Lines 113- On what line of the WB-1 Residential Listing Contract does it state that the buyer may accompany inspectors? - ANS; Lines 260- Where in the WB-36 Buyer Agency/Tenant Representation Agreement does the client indicate the agency model the client wants to structure the relationship with the firm? - ANS; Lines 117-
Where in the WB-36 Buyer Agency/Tenant Representation Agreement do the parties indicate if the agreement terminates upon the purchase of the property? - ANS; Line 336 When is a licensee associated with a firm allowed to advertise without mentioning the firm's name in the advertisement? - ANS; Advertising for tenants for personally owned rental property What must a licensee do with the results of a third party's inspection report? What must a licensee do if the licensee's own knowledge or observation of the property is contradictory to the report? - ANS; Provide a copy to all parties. If the licensee haw information that contradicts the report, the licensee must disclose it. Within how many days does a condominium seller have to provide condominium documents to a buyer? - ANS; Within 10 days of acceptance, no later than 15 days prior to closing Sellers of what types of property must complete the Real Estate Condition or Disclosure Report? - ANS; Residential (1-4 family) and vacant land Which sellers are exempt from providing a real estate condition or vacant land disclosure report? - ANS; Exceptions to RECR/VLDR a. Personal representatives, trustees and other court appointed officials who have never lived on the property New construction Transfers exempt from the transfer fee A licensee is showing a property to a buyer and observes what may be a material adverse fact. The seller did not mention the problem in the seller's real estate condition report. What should the licensee do? - ANS; Disclose in writing to all parties in a timely manner What information is a licensee is NOT required to disclose, even if asked? - ANS; Not required to disclose: Information in a 3rd party report provided to all the parties (like a home inspection report) Stigmatized factors (haunted/crime) Group homes and nursing homes Sex offenders as long as give DOC website and phone number for sex offender registry If a buyer does not receive a real estate condition report within 10 days of acceptance, how many days does the buyer have to rescind the contract? How should the buyer rescind? - ANS; Two business days, rescind in writing A seller becomes aware of a defect after an Offer to Purchase has been accepted. Does the seller have to amend the real estate condition report and deliver a copy to the
buyer? - ANS; No. if there is no accepted offer on the property and the seller becomes aware of information that would change sellers answers on condition report, then seller amends. A seller of target housing wants to accept an offer without the lead-based paint attachment. The licensee tells the seller that is fine. Is this a permissible act by the licensee under the LBP disclosure law? - ANS; No. Lead based paint disclosure must be a part of all transactions involving target housing (pre-1978 housing). Which in-use underground storage tanks must be tightness tested every two years? - ANS; 1,100 gallons or greater Asbestos is considered most dangerous when it is: - ANS; Friable Fair housing laws do not apply to what types of properties? - ANS; Commercial and industrial What are the 13 protected classes under federal and state fair housing laws? - ANS; 1. Race: A person's membership in a group possessing characteristics and traits transmitted by descent.
When is it permissible to mention a protected class in an advertisement? - ANS; Affirmative marketing designed to attract people who may not know property is available such as "accessible unit," "ADA complaint." Telling existing homeowners that a certain class of people will lower property values in an effort to obtain listings is a form of - ANS; Blockbusting Under fair housing when is it permissible to refuse to sell a property to someone because of the person's age? - ANS; Housing for older people Under fair housing laws, when can an advertisement contain a gender preference? - ANS; Rent a room in your own home and shared living space Who is responsible to provide and pay for auxiliary aids and services under the ADA? - ANS; The firm Describe the process of market analysis and how it establishes market value. - ANS; Use comparables (active, pending, sold, expired) to arrive at market value for the subject property. Market value = what we think a buyer is going to pay. Market price = what a buyer actually pays. A licensee is trying to determine value for a property. The subject property is surrounded by smaller properties that are not in as good of shape. The surrounding properties are bringing the value of the subject property down. This is an example of: - ANS; Regression The primary principal of value used by a licensee when conducting a market analysis is
1200 sq feet but you have to double that for a two-story property so square footage = 2400 sq. feet. Price per square foot $285,000/2400 = $118. What rights are in the bundle of legal rights? - ANS; Rights to property Dispose (sell it, give it, leave it to your heirs) Encumber (liens, encroachments, easements, taxes, etc.) Exclude Possession Quiet enjoyment Control What forms of ownership allow title to pass to the surviving owner(s) without probate? - ANS; Property to surviving owner without probate Joint tenancy with a right of survivorship (anyone can use this) Survivorship marital property (special ownership just for married people) A condominium unit is generally held under what type of ownership? - ANS; Severalty (everyone else's interest are severed) How do condominium owners hold ownership of the common elements? - ANS; Tenants in common An owner of property receives a proprietary lease under what form of ownership? - ANS; Cooperative (co-op) What is a limited common element? - ANS; A common element reserved for use by one or more (but not all) condominium owners What is a leasehold estate? - ANS; Personal property interest Which type of property is automatically included in the purchase of real estate - personal or real? - ANS; Real Explain how title insurance provides evidence of title. - ANS; The offer to purchase requires the seller to provide evidence of title with title insurance, which protects the policy holder from defects in the holder's title. How does an abstract protect a purchaser from gaps in the chain of title? - ANS; It does not, it just shows the chain of title. What is the benefit to a buyer of receiving a gap endorsement? - ANS; Provides coverage for the gap, which is the date of the title insurance commitment to the date the deed is recorded. Which type of deed offers the most comprehensive guarantee of title? - ANS; Warranty
What type of lien attaches to both real and personal property? - ANS; General lien (like a money judgement for credit care debt/ medical debt) If a property has a market value of $175,000 and is assessed at 97% of its value, what is the assessed value? - ANS; Assessed value a. $175,000 x .97 = $169, A property is assessed at $280,000. The mill rate in the city where the property is located is 28 mills. What is the annual tax bill? - ANS; $280,000 x .28 = $ A property has a market value of $136,000 and is assessed at 90% of value. The mill rate in the community is 20. What is the annual tax bill? - ANS; Tax bill $136,000 x .90 = $122, $122,400 x .02 = $ The owners of a property paid a tax bill of $10,725. The assessed value of the property is $325,000. What is the mill rate? - ANS; $10,725/$325, A seller's property sold for $150,000. How much was the transfer fee? - ANS; $150,000 x .003 = $ A buyer just purchased a property for $210,050. What was the transfer fee? - ANS; Transfer fee Round up to $210, Multiply by. $630. What is the purpose of a comprehensive plan? - ANS; Guide and coordinate growth, health and safety and welfare, accounting for existing and future needs, morals, order, convenience, prosperity, general welfare How does one determine the permitted uses for a particular area? - ANS; Zoning ordinance What type of zoning allows land to be used in a way that was already in existence when a zoning ordinance was enacted but does not comply with current zoning regulations? - ANS; Non-conforming use A vacant parcel of land that was zoned residential has been re-zoned to conservancy. What type of zoning has occurred? - ANS; Downzoning An owner of a property would like to transfer title. Will the existing deed conditions stay in place or are they terminated upon transfer of title? - ANS; Stay in place, they "run with the land."
Describe a planned unit development. - ANS; A zoning district written and negotiated specifically for the subject property. It may allow a developer to cluster buildings together The buyers have a home inspection. The buyers are wondering if some of the information disclosed on the report constitutes a defect and if they should give notice to the seller. Can the licensee give them advice on whether there is a defect? - ANS; Do not answer, refer buyer to the definition in offer and buyer can talk to attorney if needed. What must occur before a licensee gives a third-party buyer's offer to a party holding a right of first refusal? - ANS; Disclose in writing to the potential buyer. When is a licensee prohibited from submitting a personal offer to purchase on a property listed with the licensee's firm? - ANS; If the licensee have knowledge of the term of a pending offer, the licensee cannot submit an offer. A buyer submits earnest money with an Offer to Purchase. The offer is rejected. To whom is the earnest money disbursed? - ANS; The buyer. See lines 67-69 of the WB- 11 Residential Offer to Purchase. When can a licensee refuse to draft or submit any offer? - ANS; If drafting or submitting would be contrary to the party's instructions. Any income, taxes or expenses shall accrue to the seller and be prorated through: - ANS; Day prior to closing. See 364 of the WB-11 Residential Offer to Purchase. When the buyer is drafting the WB-11 Residential Offer to Purchase and wants to represent that the buyer has reviewed a seller's real estate condition report, where will buyer indicate this? - ANS; Line 107 of the WB-11 Residential Offer to Purchase. In the Inspections and Testing section of the WB-11 Residential Offer to Purchase, an "inspection" is defined as an observation of the property which does not include testing of the property other than: - ANS; Leaking carbon monoxide, leaking LP gas, natural gas used as a fuel source. See lines 179-181 of the WB-11 Residential Offer to Purchase. If "time is of the essence" does not apply to a date or deadline, when must performance occur before a breach? - ANS; Reasonable time. See lines 92-93 of the WB- Residential Offer to Purchase. Where in the WB-13 Vacant Land Offer to Purchase is the optional right to cure provision? - ANS; Lines 518- In the WB-14 Residential Condominium Offer to Purchase, on what line does the buyer indicate that there is a storage unit? - ANS; Line 43 of the WB-11 Residential Offer to Purchase.
The party that issues the loan is called the - ANS; Mortgagee After a borrower pays off a loan, what should the borrower expect to be recorded by the lender? - ANS; Satisfaction of mortgage To originate a loan at a rate lower than is being charged on the open market, a buyer most likely - ANS; Discount points. For test purposes, the cost of 1 point = 1% of the loan amount. Fannie Mae, Ginnie Mae, and Freddie Mac are part of the - ANS; Secondary market A borrower is able to originate a loan that is amortized for 30 years; however, the borrower only has five years to pay the loan back. What type of loan did the borrower receive? - ANS; Balloon loan During a land contract, what type of title does the seller hold? What type of title does the buyer hold? - ANS; The seller has legal title and the buyer has equitable. Private mortgage insurance is typically required when a borrower does not have what percentage of the loan for a down payment? - ANS; Less than 20% down payment Are FHA loans guaranteed or insured? - ANS; Insured Provide an example of secondary mortgage fraud. - ANS; A buyer writes an offer for $10,000 over asking price and makes a deal with the seller whereby the seller will return $10,000 to the buyer after closing to address needed repairs. What federal law prohibits the payments of kickbacks? - ANS; Real Estate Settlement Procedures Act (RESPA) What form would a seller use to propose a change in terms of an accepted offer to purchase? - ANS; WB-40 Amendment to Offer to Purchase What form would a licensee use to notify a secondary buyer that the secondary offer was being elevated to primary position? - ANS; WB-41 Notice Relating to Offer to Purchase What is the form a seller would use to negotiate with more than one buyer at the same time? - ANS; WB-46 Multiple Counter-Proposal The seller issues an amendment to the buyer, which the buyer rejects. What is the status of the contract? - ANS; No change. An amendment only changes terms of an offer to purchase if both parties sign it
What is the legal effect of a counter-offer? - ANS; A rejection of an offer and the presentation of a new offer How is a counter-offer numbered? - ANS; Sequentially What form will the parties use to mutually agree to cancel and release each other from an agreement? - ANS; WB-45 Cancellation Agreement & Mutual Release Which party or parties sign the WB-41 Notice Relating to Offer to Purchase? - ANS; The party initiating it Which party is obligated under the WB-24 Option to Purchase? - ANS; The seller must sell if buyer exercises the option. Which form transfers the personal property interest of one person in a real estate transaction? - ANS; WB-25 Bill of Sale Give an example of a bilateral contract. - ANS; Listing contract, offer to purchase, buyer agency Give an example of a unilateral contract - ANS; Option A property is owned by two sellers. The listing agent presented the offer to Seller #1. Seller #1 signed the offer as "Seller #1" and then also signed as "Seller #2." Seller # returned the signed offer to the listing agent who delivered it to the buyer. Is the contract valid? - ANS; No. Seller #2's signature is arguably forged. Seller #1 should sign as Seller #1 and then sign again as Seller #1, Agent of Seller # What are the buyer's remedies against a seller that has breached a contract? - ANS; Buyer remedies, seller breach. Sue for specific performance. Terminate offer and request earnest money to be returned Terminate offer and sue for damages Terminate offer and request return of earnest money and sue for damages According to the terms of the offer to purchase, may a seller keep the buyer's earnest money and sue the buyer for damages - ANS; No, the seller can seek the earnest money or sue for damages but not both. A buyer does not deposit earnest money as specified by the sales contract. What is the status of the sales contract? - ANS; Voidable by the seller By when must client funds be deposited into a firm's trust account? - ANS; 48 hours. If funds are received on a day prior to a holiday or other day when the depository institution is closed, the firm shall deposit the funds within the next 2 business days.
If the parties to a transaction want to hold their earnest money in an interest-bearing account, where the buyer benefits from the interest, who can draft the agreement? - ANS; Anybody but the licensee The interest from an interest bearing real estate trust account is annually remitted to: - ANS; Department of Administration If the firm receives funds that cannot be deposited by the firm, the firm shall: - ANS; If a firm receives funds which cannot be deposited by the firm, the firm shall, no later than one business day after receipt, either forward the funds to the payee, if someone other than the firm or return the funds to the payer. If a licensee receives an item, for example a painting, that cannot be deposited as earnest money, then the licensee - ANS; The parties can use it but the firm cannot hold it.