Broker Contract Law
While previewing a house, the salesperson notices water stains behind the draperies. the owner, when asked, denied there were any water problems.If the salesperson shows the property and fails to mention the water stains,
the salesman is guilty of:
- fraud
- misrepresentation
- nothing, because his fiduciary responsibility is to the owner
- puffery
(Ans- A (material facts) As evidence of leakage or flooding, water stains are material facts that must be disclosed, if known by the salesperson.Because the salesperson knew of the stains and failed to disclose them, his conduct is fraudulent
Broker A shows a house with a faulty roof. when he finds out about the roof, he should tell the buyer/customer?
- yes, it is an agency responsibility
- yes, it is a material fact
- only if he is a dual agent
- only if he has the seller's permission
(Ans- B (material fact) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker
If the property owner tells the broker that his property is structurally sound but later the broker discovers that there are termites on the property, the
broker must:
- inform the seller and all prospective buyers
- contact a pest control company
- encourage the seller to remedy the situation
- all of the above
(Ans- A 1 / 4
all material facts known by a licensee must be disclosed to all parties in a transaction. Termite damage is a material fact however the licensee has no obligation to contact a pest control company or encourage the seller to fix problems (but the can do this
Upon listing a property a broker discovers water problems in the basement.
The broker should inform:
- the seller only if the broker is a seller's agent
- the buyer only if he is a buyer's agent
- both the buyer and the seller regardless of who the broker represents
- no one
(Ans- C
A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. It was obvious the owner had filled in and painted over the crack although the owner advised the sales agent that the seepage problem had been corrected. If the salesperson shows the property without advising potential buyers of the seepage problem, the
salesperson would be guilty of:
- fraud
- misrepresentation
- puffery
- nothing
(Ans- A This is fraud because it is intentional concealment. The licensee is obligated to disclose known material facts about property
An owner lists a house with a broker for $72,000. Two days later the broker brings an offer for $70,000. At this time, which of the following statements is true?
- the broker has found a buyer and earned his commission
- a ready, willing, and able buyer has been found and a commission is due
- a ready willing and able buyer has been found but no commission is due
- none of the above
(Ans- D 2 / 4
In order to earn a commission, the broker must find a ready, willing, and able buyer, on the terms of the seller. The offer was lower than the listed price. while the buyer is ready and willing, there is no evidence that the buyer is financially able, therefore no commission is due.
A property owner, after death of his wife, lists his property with a broker.Two days later he sells the property himself but is not obligated to pay the broker a commission. What type of listing agreement did he most likely sign?
- multiple
- exclusive authorization to sell
- exclusive right to sell
- general
(Ans- D The widower probably signed a general (also called an open) listing which specifies that the listing agent must sell the property for the owner to pay a commission. Exclusive authorization to sell and exclusive right to sell are the same and the broker gets paid regardless of who sells the property. An exclusive agency would also allow the owner to sell and not pay a commission but that is not one of the choices
A broker lists a property. A buyer submits a written offer and the seller accepts it. On the day of scheduled for closing, the seller refuses to sign
any of the papers. The broker is entitled to:
- a full commission because the fully performed
- one-half of the agreed upon commission
- out of pocket expenses only
- nothing until or unless the sale closes
(Ans- A
A listing agreement will automatically terminate:
- if the selling agent changes brokers
- on the date specified on the listing agreement
- if the owner abandons the property
- all of the above 3 / 4
(Ans- B The only true statement is that a listing agreement will terminate on the date specified in the agreement. There are other reasons why a listing would terminate but they are not offered as answers. That the owner abandoned the building is not a reason to terminate a listing, he may still enlist a broker to attempt to sell his abandoned property. However if the BROKER abandoned the listing, the seller would be justified in terminating the listing
Dan and Daisy enter into a buyer/broker agreement. Dan believes that Daisy is in breach. May Dan terminate the contract?
- yes, but Dan waives his right to specific performance
- no unless there is a mutual agreement between Dan and Daisy
- yes, but Dan risks causing a breach himself
- no, so long as Daisy is willing and able to perform
(Ans- C Dan has no right to specific performance because this is a personal service contract. One may terminate a contract without mutual consent regardless of whether the other party is willing and able to perform. However, any time you terminate a contract, you risk a breach- it could turn out that Daisy was not in breach in which case Dan's termination would cause a breach
A property management contract could exist between the property manger
and:
- his or her employees
- the property owner
- the tenants
- both a and b
(Ans- B There is no contract between the property manager and the tenants. Any contract between the property manage and his employees would be an employment contract, not a property management contract
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