Chapter 2 Quiz Flashcards by Jonell Curtiss

Which event does NOT terminate an agency relationship?

A. A seller’s death

B. A firm discovers that the market value of the property will not generate a sufficient commission for the firm.

C. A firm finds a ready, willing and able buyer for the seller’s property who subsequently purchases the property and receives title.

D. A seller decides not to sell.

B. An agency agreement terminates at the death of incapacity of the principals, destruction of the property expiration of the term, mutual agreement, breach, operation of law or completion.

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A listing licensee sells a house for $89,000. The listing firm paid on-half of its 7% commission to the cooperating firm. The listing firm pays the listing licensee 40% of the listing firm’s share of the commission. How much did the listing firm pay the listing licensee?

A. $1,156

B. $1,246

C. $1,500

D. $2,000

B. $89,000 X .07 = $6,230. $6,230 X .50 = $3,115. $3,115 X .40 = $1,246 commission.

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XYZ Realty listed a property, and ABC Realty found a buyer. The firms have an agreement to share the commission evenly. What could reduce the listing firm’s commission?

A. The listing firm and the seller agree on reduce the firm’s commission.

B. XYZ did not attend the closing but ABC did.

C. ABC presented the offer directly to the seller with XYZ’s permission.

D. ABC showed the property more than XYZ.

A. The listing contract is between the seller and the listing firm. The listing firm earned the full commission regardless of who procures the buyer or completes the closing details. A seller and the listing firm are the only parties that could agree to reduce the listing firm’s commission.

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A firm offers a 60/40 split to cooperating firms. How much does the listing firm owe to a cooperating firm for a property that sold for $150,000 at 7% commission?

A. $7,200

B. $4,200

C. $5,250

D. $6,300

B. $150,000 X .07 = $10,500 commission paid to the listing firm. $10,500 X .40 = $4,200 of commission received by the selling firm. Commission owed = .07. The listing firm retains .60 of commission. The cooperating firm receives .40 of commission.

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What is a firm doing if it advertises to pay $50.00 for any lead that results in a listing or sale of real estate?

A. Offering the engage in illegal dual compensation

B. Legitimate activity

C. Offering to engage in illegal fee-splitting

D. Offering to engage in illegal multiple representation

C. Wis. Stat. 452.19 No licensee may pay a fee or a commission or any part thereof for performing any act specified in this chapter or as compensation for a referral or as a finder’s fee to any person who is not licensed under this chapter or who is not regularly and lawfully engaged in the real estate brokerage business in another state, a territory or possession of the United States, or a foreign country, unless the person was licensed under this chapter when the commission was earned or when the referral fee arrangement was made. (2) If a licensee is associated with a firm, all fees or commissions and any part thereof for performing any act specified in this chapter and all compensation for a referral or as a finder’s fee shall be paid to the firm.

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After a successful transaction, what are a buyer’s licensee’s duties to the buyer?

A. The licensee must keep the buyer’s confidential information confidential.

B. The licensee must make sure the property is what the buyer expected.

C. The licensee owes no duties after closing.

D. The licensee must file a lawsuit on behalf of the buyer if the buyer is unhappy with the property.

A. A licensee’s responsibility to a client ceases upon termination of the agency relationship. The licensee’s duty of confidentiality survives the transaction.

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A seller lists a property with a firm. The firm finds a buyer who writes an offer at the price and on substantially the same terms as the listing. The firm presents the offer, and the seller rejects it. The seller then terminates the listing before the expiration date. What can the firm do?

A. The firm can sue the buyer for the firm’s commission.

B. The firm can sue the seller for the firm’s commission.

C. The firm can sue the seller for specific performance.

D. The buyer can sue the seller for specific performance.

B. The firm earned a commission according to the terms of the listing contract when the buyer wrote a “mirror image offer,” even if the seller rejects the offer. The firm could not sue the buyer because the firm and the buyer do not have a contract, and the firm could not sue the buyer for specific performance because that is not an available remedy for breach of a personal service contract, such as the listing contract.

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When can a firm take a net listing?

A. The buyer gives permission for the listing firm to pay the buyer’s firm’s commission.

B. The firm discloses it in writing to the seller.

C. A firm cannot take a net listing.

D.A firm makes an independent business decision to take net listings.

C. Net listings are illegal in Wisconsin See Wisconsin. Admin. Code Chapter REEB 24 Conduct and Ethical Practices for Real Estate Licensees.

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What determines the amount a client’s firm will earn in a real estate transaction?

A. The Wisconsin Association of Realtors

B. The agency agreement

C. The U.S. Department of Justice.

D. State Law

B. A firm’s commission is negotiable between the parties. The agency agreement determines the firm’s commission.

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What is the result of a licensee giving a seller a $100 gift certificate after the sale if the licensee and the seller do not disclose the gift certificate?

A. Prohibited self-dealing

B. The unlicensed practice of law

C. Illegal fee-splitting

D. A multiple representation relationship

C. Wis. Stat.452.19: No licensee may pay a fee or a commission or any part thereof for performing any act specified in this chapter or as compensation for a referral or as a finder’s fee to any person who is not licensed under this chapter or who is not regularly and lawfully engaged in the real estate brokerage business in another state, a territory or possession of the United States, or a foreign country, unless the person was licensed under this chapter when the commission was earned or when the referral fee arrangement was made. (2) If a licensee is associated with a firm, all fees or commissions and any part thereof for performing any act specified in this chapter and all compensation for a referral or as a finder’s fee shall be paid to the firm.

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What is a listing contract?

A. A promise to pay the buyer’s closing costs

B. A promise to pay the buyer’s firm’s commission

C. A promise to sell the seller’s property

D. A promise to find a ready, willing, and able buyer

D. A listing contract is a promise by the firm to attempt to to find a ready, willing, and able buyer. It is not a promise to sell the property or pay a buyer’s expenses.

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How can a firm enforce a verbal listing contract?

A. The firm can sue the seller in court for enforcement of the express agency agreement.

B. The firm can collect only the commission that the seller promised verbally.

C. The firm can sue the seller in court for the commission, but the seller will not have to pay.

D. The firm can collect only the money to cover for marketing and advertising expenses from the seller.

C. A Wisconsin court will not enforce a verbal real estate agency contract, which means the firm does not have a remedy to enforce the contract terms with the seller, including payment of the firm’s commission.

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A seller accepts an offer for $190,000 and nets $160,000 after paying the firm’s7% commission and other closing costs. How much did the seller pay in closing costs?

A. $12,800

B. $30,000

C. $13,300

D. $16,700

B. $190,000 sales price - $160,000 net = $30,000 paid in closing costs.

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A seller nets $100,000 from a property. The seller paid the firm 7% commission. What was the sales price of the seller’s property?

A. $107,000

B. $115,524

C. $107,500

D. $107,527

D. $100,000/.93=$107,527

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ABC and XYZ are cooperating firms. XYZ is the listing firm, and ABC is the selling firm. The firms agree to evenly share the commission. When does XYZ earn the commission?

A. When the buyer satisfies a financing contingency.

B. When the seller accepts an enforceable contract for sale.

C. At closing

D. When ABC submits an offer to XYZ.

B. A listing firm earns a commission when the seller accepts an enforceable contract for sale. The seller does not pay the commission until the day of closing or the date set for closing if the transaction does not close.

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The best description of a special agent is someone who has the authority to:

A. Represent a principal in a specific transaction.

B. Act as a power of attorney.

C. Represents a principal in all maters.

D. Sell a property.

A. A special agent is needed who is authorized by principal to perform one particular act or transaction.

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A seller tells a firm that the seller needs to net $120,000 on the sale of the property. If the seller agrees to pay the firm 5% commission, what is the minimum price the seller will accept for the property?

A. $126,000

B. $127,000

C. $125,468

D. $126,316

D. Sale price - 5% = net price. 100% - 5% = 95%. $120,000/.95=$126,316.

A seller gives a listing firm an exclusive right to sell. During the term of the listing, the seller signs another exclusive right to sell listing with a different firm. The first firm finds a buyer, and the transaction closes. To which firm does the seller owe a commission?

A. The seller owes both firms a commission.

B. To the first firm because the seller signed that agency agreement first.

C. To the first firm, which must split it with the second firm.

D. To whichever firm found the buyer.

A. The language in the exclusive right to sell listing contract requires the seller to pay a commission to the firm if the seller enters into an enforceable contract for sale. If the seller has two valid contracts with two firms, the seller owes a commission to each firm.

What is the result of a listing licensee telling a buyer that a property is overpriced in an effort to get the buyer to write an offer?

A. The listing licensee creates a single agency relationship.

B. The listing licensee creates a multiple representation relationship.

C. The buyer creates an implied agency relationship with the seller.

D. The listing licensee creates an express agency relationship.

B. The listing licensee created a multiple representation relationship by providing information and advice to the buyer customer. This could lead a buyer to believe that the listing licensee is representing the buyer’s interests, which creates implied agency between the buyer and the licensee. The listing licensee may not have intended to create an agency relationship but did so by providing agency services to the buyer. The film now has agency relationships with the buyer and the seller, which is multiple representation.

Parties to an agency agreement:

A. Should notify another party of cancellation verbally so that there is no record of the breach.

B. Cannot cancel the agreement without breaching it.

C. Must pay damages for cancelling the contract prior to its stated termination date.

D. May sue a breaching party for damages in the event of a breach.

D. Parties who suffer damages because of another’s breach of contractual obligations can bring a lawsuit to recover damages due to the breach.

A married couple hires a listing firm with an exclusive right to sell listing contract. Two weeks into the listing, buyers write an offer that the sellers accept. They buyers satisfied all of their contingencies but did not close. What are the listing firm’s rights to the commission?

A. The listing firm did not earn a commission because the transaction did not close.

B. The listing firm must sue the buyers for the commission.

C. None because a listing firm does not earn a commission until closing.

D. The listing firm earned a commission because the sellers entered into an enforceable contract for sale.

D. The firm earned a commission even though the transaction did not close.

What should a buyer include when completing a WB-36 Buyer Agency Agreement?

A. The exact description of the property the buyer ends up purchasing.

B. The general description of the property the buyer wants to purchase.

C. The street address of the property the buyer purchases.

D. The legal description of the area where the buyer hopes to find a property.

B. When executing a buyer agency agreement, the parties use a general description of the property because the buyer may not know the street address or legal description of the property that the buyer will purchase.

A firm pays a licensee a monthly salary of $1000 plus 3% commission on all of the licensee’s listings that sell and 2.5% on properties where the licensee is the selling licensee. None of the licensee’s listings sold last month. The firm paid the licensee $4,175 in salary and commission. What was the value of the property the licensee sold?

A $127,000

B. $122,500

C. $105,833

D. $147,000

A. $4,175 - $1,000 = $3,175 commission on sales. $3,175/.025 = $127,000 value of property sold.

A firm pays a licensee a $1,522.50, which is one half of the firms 7% commission on a sale. What was the sale price of the property?

A. $22,500

B. $90,000

C. $45,000

D. $43,500

D. $1,522.50 X 2 = $3045. $3,045/.07 = $43,500

What kind of agency relationship can a buyer and a firm create with a WB-36 Buyer Agency Agreement? A. A federal agency relationship B. A net agency relationship C. A general agency relationship D. An implied special agency relationship

C. A WB-36 Buyer Agency Agreement can create a general or special agency relationship. If the contract terminate when the buyer finds a property, it is a special agency relationship. If it continues after the buyer finds a property,it is a general agency relationship. A written agency agreement is express, not implied. Parties create express agency with words, either written or oral, and create implied agency through a party’s actions.

A firm lists a seller’s home. The seller is not satisfied with the firm’s service and cancels the listing before accepting any offers and before the expiration date of the listing agreement. What can the firm do? A. Sue for specific performance and force the seller to fulfill the terms of the listing. B. Sue the seller for damages due to early termination. C. Sue or a commission if the seller closes during the original term of the listing contract. D. Continue to market the property and present offers to the seller.

B. Agency agreements are personal service contracts, and a court will not award specific performance as a remedy for a breach of a personal service contract. Early termination of an agency agreement without cause is a breach of contract, and the non-breaching party could sue the other party for damages resulting from the breach.

Two cooperating firms evenly split a 7% commission on a sale. The listing firm paid the listing licensee $2,520 the licensee’s 60% share. What was the sale price of the property? A. $90,000 B. $120,000 C. $60,00 D. $30,000

B. $2,520/.6 = $4,200 commission paid to the listing firm. $4,200 X 2 = $8,400 total commission paid. $8,400/.07 = $120,000 sales price.

A firm pays a licensee $3,000, which is 50% of the listing firm’s commission on a $100,000 sale. Which percentage did the seller agree to pay the listing firm in the listing contract? A. 6% B. 8% C. 3% D. 7%

A. $3,000 X 2 = $6,000 total commission. $6,000/$100,000 = .06 (.06 X 100 = 6) 6%

A seller nets $80,000 after paying 7% commission to the listing firm. How much did the seller pay the listing firm? Use whole numbers. A. $7,000 B. $5,601 C. $6,022 D. $3,678

C. The seller received $80,000 after paying the firm a 7% commission. To determine the commission paid, calculate the sales price first. $80,000/.93 = $86,022 sales price. $86,022 X .07 =$6,22 commission paid.

Apportioning commission percentages earned on a sale is: A. Determined according to agreements between licensees. B. Determined by the firms involved in the transaction. C. Illegal fee-splitting. D. Permitted only on in-house sales.

B. Shares of the commission will be determined according to agreements among the firms involved in the transaction.

What does it mean if a party rescinds a contract? A. The party terminate the contract and must pay damages. B. The party cancels the contract and is restored to the position before the contract. C. The party receives court-ordered compensation for damages from breach of contract. D. The party agrees to reveal confidential contract terms to a firm.

B. Rescission means to cancel a contract and restore the parties to their original positions.

A seller enters into a listing contract for one month. The contract states that the seller will pay the listing firm 6% commission only if a named buyer purchases the property. Which kind of listing contract is this? A. One-party B. Net C. Open D. Exclusive right to negotiate

A. When a seller executes a listing contract agreeing to pay a firm a commission only if a named buyer purchases the property, the seller and the firm have a one-party listing contract.

Which of the following is a similarity between an exclusive agency and an exclusive right to sell listing? A. The firm earns a commission if the seller’s house is sold to a buyer. B. The firm earns a commission unless the seller sells the property. C. The firm earns a commission no matter who finds the buyer. D. Each contract employs only one firm to market the property.

D. Both an exclusive agency and an exclusive right to sell listing contract employ a firm to represent the seller in the sale of a property. With an exclusive right to sell listing, the listing firm earns a commission regardless of who procures the buyer. Under an exclusive agency listing, the listing firm earns a commission unless the seller find the buyer.

A listing firm earns a commission: A. According to the terms of the buyer agency agreement. B. When the seller accepts an enforceable contract for sale. C. At closing D. Only on net listings.

B. Commissions are earned when a seller accepts an enforceable contract for sale and will be paid at closing or another time as agreed to by the parties. Net listings are illegal.

Which of the following does a licensee NOT have to do before acting as an agent in a real estate transaction? A. Join the MLS B. Execute a valid agency agreement C. Provide agency disclosure D. Have a valid license

A. There must be a valid agency agreement, agency disclosure, and a valid license.

What does a firm have to do to enforce a commission the firm earned under an agency agreement? A. The firm must hire a lawyer. B. The firm must have a licensed personal assistant. C. The client and the firm must have agreed to the verbal agency relationship. D. The client and the firm must have a written agency agreement.

D. Wis. Stat. § 240.10: “Every contract to pay a commission to a real estate agent or broker or to any other person for selling or buying real estate shall be void unless such contract or note or memorandum thereof describes that real estate, expresses the price for which the same may be sold or purchased, the commission to be paid and the period during which the agent or broker shall procure a buyer or seller, is in writing, and is subscribed by the person agreeing to pay such commission, except that the contract to pay a commission to a person for locating a type of property need not describe the property.”

The Sherman Antitrust Act of 1890: A. States that agency agreements must be in writing because oral agreements cannot be trusted. B. Prohibits price fixing and group boycotts. C. Can only be violated by intentional price fixing and group boycotts. D. Encourages companies to trust one another and set prices accordingly.

B. Actions that violate the Sherman Antitrust Act do not have to be intentional. Behavior even without intent can be enough to constitute price fixing or a group boycott.

A seller lists a property with a firm for three months. One month into the listing contract, the seller sells the home to a friend but does not owe the listing firm a commission. What type of listing contract did the seller and firm have? A. An irregular listing B. An exclusive agency listing C. An exclusive right to sell listing D. A net listing

B. The seller had an exclusive agency listing, which means that the firm earns a commission unless the seller finds the buyer. The seller found the buyer, which means the seller does not owe a commission.

A group of competing firms at a weekly breakfast meeting decided that introducing discount brokerage services tot he market would be bad for business. They agreed among themselves not to charge any less than 7% commission. Is the firm’s agreement legal? A. No, it is price fixing under the Sherman Antitrust Act. B. No, it violates fair housing law. C. Yes, it is price fixing under the Sherman Antitrust Act. D. Yes, it is a group boycott under the Sherman Antitrust Act.

A. The agreement is price fixing, which violates the Sherman Antitrust Act.

A firm sold a property for $79,500. The seller paid the listing firm 6.5% commission. The listing firm will pay the listing licensee 30% of the commission and will pay the selling licensee 25% of the commission. How much did the listing firm pay the listing licensee? A. $1,550 B. $5,168 C. $1292 D. $3,617

A. $9,500 sale price X 6.5% commission = $5,168. $5,168 X .30 = $1,550 listing licensee’s commission.