Ch. 1 - Legal Issues and Risk Management

Question 1

The relationship of their agents and their principals.

Answer 1

agency

Question 2

A person who represents another person in a fiduciary relationship.

Answer 2

agent

Question 3

An agreement between a buyer and a broker for the broker to provide services to a buyer for compensation. The broker may be acting as a single agent, a transaction broker, or a non-representative.

Answer 3

buyer brokerage agreement

Question 4

A residential homeowners association in which membership is a condition of ownership of a unit in a part of a residential development that is authorized to impose a fee that may become a lien on the parcel.

Answer 4

community association

Question 5

A disclosure form that allows a single agent to become a transition broker. The notice must be signed by the principal before the broker can make the change.

Answer 5

Consent to Transition to Transaction Broker Notice

Question 6

A person who works with a sales associate or a broker. While the person could be a principal, the usual definition is that the broker is either a transaction broker or has no brokerage relationship with the person.

Answer 6

customer

Question 7

A sale associate who is appointed by a broker as a single agent for a buyer or a seller in a nonresidential transaction when another sales associate in the firm has been appointed as the single agent for the other party in the transaction. Both buyer and seller must have assets of at least $1 million and agree to the arrangement.

Answer 7

designated sales associate

Question 8

An illegal arrangement whereby the broker tries to represent both the buyer and the seller in the same transaction.

Answer 8

dual agency

Question 9

In real estate, a statement made by a licensee or party in a real estate transaction that is not factual.

Answer 9

false or misleading statement

Question 10

A relationship of trust and confidence between an agent and principal.

Answer 10

fiduciary relationship

Question 11

An amendment to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) that exempts from liability landowners who made reasonable inquiries about hazardous substances before purchasing the property.

Answer 11

innocent purchaser status

Question 12

An important fact that may affect a buyer’s decision to buy or seller’s decision to sell. Licensees must disclose facts that materially affect the value of residential property.

Answer 12

material fact

Question 13

A false or misleading statement made intentionally or unintentionally, or the failure to disclose a material fact.

Answer 13

misrepresentation

Question 14

A disclosure that must be given by a licensee who does not represent a buyer or a seller before entering into an agreement or showing a property.

Answer 14

No Brokerage Relationship Notice

Question 15

(1) The person who enters into a fiduciary relationship with a single-agent licensee. (2) The amount of money remaining due on a mortgage loan.

Answer 15

principal

Question 16

A form designed for disclosure to a buyer of any property defects. The form is normally signed by the seller, and the buyer signs a receipt that the buyer has received the disclosure.

Answer 16

property condition disclosure

Question 17

A colorless, odorless gas occurring from the natural breakdown of uranium in the soil. Many experts believe radon gas to be the second leading cause of lung cancer.

Answer 17

radon gas

Question 18

A broker who represents either the seller or the buyer in a real estate transaction, but not both.

Answer 18

single agent

Question 19

A licensee who has limited representation to the buyer and/or the seller in a transaction. Instead of being an advocate for the buyer or the seller, the licensee is working for the contract.

Answer 19

transaction broker

Question 20

1. A broker need NOT give a brokerage relationship disclosure when the property being shown is a
   a. triplex.
   b. single-family home valued at more than $1 million.
   c. seven-acre tract zoned for agricultural use.
   d. nonresidential property.

Answer 20

d. nonresidential property.

Question 21

2. A principal is legally represented by a
   a. single agent.
   b. dual agent.
   c. transaction agent.
   d. non-representative.

Answer 21

a. single agent.

Question 22

3. Which statement to a prospective buyer is NOT likely to increase a licensee’s liability?
   a. “The title to the property is clear; I checked the courthouse yesterday.”
   b. “I used to be in construction, so I can tell you that the roof is in perfect condition.”
   c. “You should be able to get information from the school board about which school your child would attend if you purchase this home.”
   d. “ You don’t need a home inspection because the house is only five years old.”

Answer 22

c. “You should be able to get information from the school board about which school your child would attend if you purchase this home.”

Question 23

4. A licensee is legally required to disclose to a prospective homebuyer that
   a. there was a recent murder in the house.
   b. the roof occasionally leaks.
   c. the occupant of the property is infected with human immunodeficiency virus.
   d. the former owner was killed when he fell from the roof.

Answer 23

b. the roof occasionally leaks.

Question 24

5. A broker may not legally work with a buyer or seller as a
   a. transaction broker.
   b. single agent.
   c. dual agent.
   d. non-representative.

Answer 24

c. dual agent.

Question 25

6. A principal is responsible for the acts of her a. transaction broker. b. dual agent. c. single agent. d. non-representative.

Answer 25

c. single agent.

Question 26

7. A student failed her sales associate post-licensing course for the second time. What are her options if she wishes to maintain her license? a. She must wait 30 days and pass a different end-of-course exam. b. She must take the 63 hour pre license course for sales associates and pass the course exam and the state exam. c. She must retake at least 45 hours of the sales associate prelicense course and pass a course exam. d. She must retake the course and pass the end-of-course exam.

Answer 26

d. She must retake the course and pass the end-of-course exam.

Question 27

8. Which term is found in the Junk Fax Protection Act? a. Innocent purchaser b. Established Business relationship c. Good-faith estimate of settlement costs d. National register

Answer 27

b. Established Business relationship

Question 28

9. Licensed sales associates working at the seller's single agent brokerage firm a. may represent either the seller or the buyer in a transaction. b. are legally bound to represent the seller. c. may have another principal in the transaction. d. may be transaction brokers for the buyer to ensure limited confidentiality.

Answer 28

b. are legally bound to represent the seller.

Question 29

10. If a broker sells commercial property exclusively, she a. must give the customer a No Brokerage Relationship Notice before showing property. b. may be a single agent, transaction broker, a designated sales associate, or have no brokerage relationship with the customer. c. must give the customer a Single Agent Notice before showing property. d. may not be a single agent.

Answer 29

b. may be a single agent, transaction broker, a designated sales associate, or have no brokerage relationship with the customer.

Question 30

11. In which status does a licensee NOT need to provide a written brokerage relationship disclosure notice? a. Single agent broker. b. Transaction broker. c. Designated sales associate. d. When acting with no brokerage relationship.

Answer 30

b. Transaction broker.

Question 31

12. A broker must disclose known facts materially affect the value of residential property when that broker is a. a licensee with no official brokerage relationship. b. a single agent. c. the transaction broker. d. all of these.

Answer 31

d. all of these.

Question 32

13. A single agent for the seller has a no brokerage relationship with a buyer. The buyer agrees to pay up to the listed price, if necessary, but first wants to submit an offer 10% below that price. The broker should a. tell the seller, "The buyer said he will pay up to the listed price." b. refuse to disclose the statement because of the broker's duty of limited confidentiality. c. suggest that the seller counteroffer, if desired. d. talk to seller, "The buyer is qualified."

Answer 32

a. tell the seller, "The buyer said he will pay up to the listed price."

Question 33

14. For how many years must a broker retain required brokerage relationship disclosures? a. One b. Three c. Four d. Five

Answer 33

d. Five

Question 34

15. Two sales associates work for commercial broker. The broker allows one sales associate to act as a single agent for the buyer and the other sales associate to act as a single agent for the seller. Both the buyer and the seller have assets of more than $1 million and each agrees to this form of representation. The situation describes a a. transaction broker relationship. b. designated sales associate. c. single agency. d. dual agency.

Answer 34

b. designated sales associate.

Question 35

16. A real estate association's conspiracy to set prices violates a. fair housing acts. b. the Americans With Disabilities Act. c. .the do-not-call laws. d. antitrust laws.

Answer 35

d. antitrust laws.

Question 36

17. A man has a capital gain of $197,000 on the sale of his home, which he owned for three years. The sales price was $425,000. Sales costs were $7000, qualified fix-up costs were $1000, and moving costs were $2000. How much must Henry pay in capital gains taxes on this sale if his normal tax rate is 25%? a. $0 b. $39,400 c. $98,500 d. $ 197,000

Answer 36

a. $0

Question 37

18. New concern about the presence of radon gas is the result of the increase in a. radon levels at large factories. b. the number of energy efficient buildings. c. the depletion of the ozone layer. d. Freon in air-condition systems.

Answer 37

b. the number of energy efficient buildings.

Question 38

19. If a broker shows property built before 1978, that fact will require disclosures about a. coastal management zones. b. lead-base paint. c. asbestos poisoning. d. radon gas.

Answer 38

b. lead-base paint.

Question 39

20. To clean innocent purchaser status under the hazardous substance statutes, a purchaser should a. refuse to purchase former gas stations. b. pay for and obtain an environmental audit. c. show that the seller did not reveal any problems. d. ask the real estate agent for property warranty.

Answer 39

b. pay for and obtain an environmental audit.

Question 40

Licensees acting as designated sales associates must give the parties to the transaction a Single Agent Notice Designated Sales Associate Notice True or False

Answer 40

False

Question 41

Licensees may act as designated sales associates in a residential transaction. True or False

Answer 41

False

Question 42

An amendment to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) that exempts from liability landowners who made reasonable inquiries about hazardous substances before purchasing the property.

Answer 42

innocent purchaser status