Real Estate Law 8th Edition by Robert J. Aalberts – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

CHAPTER 6

THE SEARCH FOR REAL ESTATE

CHAPTER OUTLINE

I The Real Estate Agent

A. Licensing Requirements

B. Penalties for Acting Without a License

II. Listing Agreements

A. Statute of Frauds

Problem 6

B. Types of Listing Agreements

1. Exclusive Right to Sell

Problem 4, 5, 9

2. Exclusive Agency

Problem 6

3. Open Listing

C. Procuring Cause of Sale

D. Broker’s Commission

E. Performance of the Listing Agreement

Blackman De Stefano Real Estate v. Smith, p. 202

Ellsworth Dobbs, Inc. v. Johnson, p. 203

Problem 3

F. Cancellation of the Listing Agreement

Rellinger v. Bremmeyr, p. 204

48© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.III. IV. V. Problems 1, 6

G. Multiple Listing

Problem 7

H. Recent Developments in Antitrust and Other Anti-competition Issues

I. Commercial Listing Services

The Duties of the Broker

A. Authority of the Broker

B. The Undisclosed Principal and the Secret Agent

C. The Broker’s Fiduciary Duty

Transparency 25: Fiduciary Duties

Bazal v. Rhines, Palma and Skogman Realty Co., p. 205

.

Problems 2, 8, 10

D. Buyer Brokering

Saiz v. Horn, p. 207

E. The Broker’s Duty of Disclosure to Buyers

F. The Broker’s Unauthorized Practice of Law

Crutchley v. First Trust and Savings Bank, p. 208

G. The Internet and the Future of the Real Estate Broker

Interstate Land Sales Full Disclosure Act

Discrimination in Selling or Leasing Real Estate

A. Civil Rights Act of 1866

49© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.1. 2. 1. B. Fair Housing Legislation

Fair Housing Council of San Fernando Valley v. Roommates.com, LLC, p. 210

Meyer v. Holley, p, 212

C. State and Local Laws

TEACHING SUGGESTIONS

For a general overview of agency law, including the law relating to independent

contractors and workers’ compensation, see Chapters 33 and 34 in Clarkson, Cross and

Miller, Business Law, 12th ed. 2012.

In covering discrimination, you may want to include redlining and the Equal Credit

Opportunity Act (Chapter 9), restrictive covenants and exclusionary zoning (Chapter 13),

and the landlord’s selection of tenants (Chapter 11).

DISCUSSION OF ETHICAL AND PUBLIC POLICY ISSUES

The discussion on page 179 addresses the ethics of sellers in the treatment of their

brokers. It is common practice when selling residential real estate for brokers to agree to

sell someone’s home only if an exclusive listing agreement exists. One of the primary

reasons that brokers argue for this practice is that sellers can’t be trusted with open listing

or exclusive agency agreements because they may try to by-pass their brokers and deal

directly with buyers who their salespersons and brokers procured. While it’s legal for

sellers to sell the property themselves under these contracts, brokers are still entitled to

their commissions.

Ethically, it may give the greatest good to the greatest number if open listing and

exclusive agency agreements were used more. For example, after the listing is signed, it

is not unusual for someone the seller knows personally to buy the property. With an

exclusive listing agreement the seller must still pay the broker, who may have done

nothing to market the property or to procure this particular buyer. However, with an open

listing or exclusive agency agreement, the buyer and seller might be able to agree to a

lower selling price since no commission would be legally owed. This could benefit all

sellers and buyers, although brokers would lose their commissions. Moreover, brokers

might argue, perhaps correctly, that even if they could trust the seller, they will expend

less effort to market a property if they know the owner can still legally sell it. To

overcome this concern, brokers might raise the rate of commission for these kinds of

contracts, thus lessening the benefit to the seller and causing pain to that party.

However, even with an exclusive listing agreement it is not unusual for a prospective

50© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.3. seller and buyer to wait until the listing expires, typically after 180 days, to make the sale.

In this situation the broker loses the return on his investment in time and money (for

advertising, etc.). If he sues for the commission to prove he was the procuring cause of

the sale, the costs of litigation will be painful for both the seller and the broker. Thus, it

could be argued that, if all parties conducted themselves in good faith, open listing and

exclusive agency agreements might be a more efficient and productive way to sell real

estate in a manner that benefits the greatest number of stakeholders.

2. On page 191 the issue of whether a real estate agent has a moral and/or legal duty to

inform buyers about neighborhood sex offenders is presented. Creating such a duty for

seller’s agents or subagents creates both a legal and ethical quandary for these agents.

From a utilitarian point of view it may be immoral not to inform buyers. For example, if

disclosure occurs and the word spreads about a newly released sex offender, overall

prices could become depressed. The chances of this happening may be lessened by the

fact that this information is posted on websites in many states and so the market has

already responded. However, if an actual sex offense against a neighborhood child does

occur, depending on its severity, it could depress overall prices. The chances of this

happening should also be factored in. Of course the extent of the pain to the child and

family who is victimized is incalculable. The buyer who did not know about the offender

now has a home with a depressed value and may also be concerned about his and/or her

family’s safety. The pleasure is that the agent has gotten a commission she may not

otherwise have gotten had she released the information.

People have a natural right as humans to life and arguably to health and safety.

Regardless of the existence or not of a law, this natural right may impose a duty to

disclose the sex offender so that the families can prevent harm to their children. Certain

states have laws requiring sellers, and by extension, their brokers, to inform buyers of

this. This legal right to the information would also create a moral right for buyers and a

moral duty on brokers. In those states that do not have these specific disclosure laws,

selling agents and subagents do have duties imposed by law to inform buyers of

information that may materially affect the property’s value. Some studies have shown

that the existence of sex offenders depresses values. See for example, Suzanna Hartzell-

Baird, “When Sex Doesn’t Sell: Mitigating the Damaging Effect of Megan’s Law on

Property Values,” 35 Real Estate Law Journal 353 (Winter 2006). Whether this is

enough to be “material” for the creation of the duty, remains to be seen. Of course, a

buyer’s agent would have a fiduciary duty to inform his principal- the buyer- about the

offender particularly if he has children, but even if he does not, due to its potential effects

on the neighborhoods economic and social well-being.

On page 197 there is discussion of the ethics and policy implications surrounding the

practice of blockbusting. Blockbusting, while illegal under the Fair Housing Act of 1968,

can create ethical quandaries. One problem confronted by real estate agents, particularly

where racial prejudice exists, is that a broker or salesperson, such as Bob, must be very

careful in answering questions from prospective buyers. As the ethics problem notes, if

Bob is asked whether his company sold a home to a minority buyer and truthfully

51© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.3. answers “yes,” it could start a panic in the neighborhood. This is what anti-blockbusting

laws attempt to stop. If he lies and says that he doesn’t know, he may prevent or lessen

the potential for blockbusting. Thus, it could be argued that lying may give the greatest

good to the greatest number by preventing a sharp drop in land values caused by panic

selling, as well as lessening racial animosities and preserving the rights of minorities to

live in any neighborhood they chose.

Some deontological ethicists, such as Immanuel Kant, arguably the greatest philosopher

in the last 300 years, would disagree. Kant, in his Categorical Imperative, argued that

there is a universal rule in which everyone should do unto others as they would have

everyone do. Since those Bob is dealing with do not want to be lied to, they would want

all people not to lie, even if the lie would prevent panic selling. Kant repudiated the ideas

of utilitarian ethicists who argued that consequences should be the only focus in

determining moral behavior. However, other deontological ethicists, such as W.D. Ross

argue that some duties outweigh others and should be prioritized. Thus, duties may vary

under the circumstances. Bob may think that the moral duty he owes to his former client,

the African-American family, and to the neighborhood outweighs his duty to tell the truth

to this particular questioner.

On page 201, there is a discussion concerning the ethical and public policy issues

surrounding laws, proposed in some communities, that outlaw the feeding of the

homeless. The homeless are quite often mentally and physically disabled and so are not

welcomed in any neighborhood. They are also not welcomed in public parks because

others don’t want to be around them and they may litter and despoil the area. They may

also attract drug pushers and other undesirables. To keep them away, communities don’t

want them fed in their public parks.

From a utilitarian viewpoint, such a law may be moral. It may bestow the greatest good to

the greatest number – those who are not homeless – who will better enjoy the parks. It

will also require less taxpayer money to maintain the parks and will likely make them

safer. From a pain perspective, however – not feeding those who may find this as the only

place to find food – will be highly painful. If we calculate the degree of pain, which

utilitarian philosophers, such as Jeremy Bentham called a felicific calculus, we may find

that the pain of hunger suffered by a few may outweigh the pleasure of the many using

the park.

From a rights point of view, humans have natural rights to life, and arguably health and

safety. If being fed is the only way a homeless person in the community can live, than

they should have a natural right to seek food there. In the United States, it would be rare

to find a place that doesn’t have a legally created facility or a private charity to help

people who are homeless and hungry. This may also create a right to be fed under the law

and therefore a moral right to be feed. Many homeless people avoid the government

because they are afraid, sometimes caused by irrational thinking due to their mental

illness, that they will lose their freedom. At this point you might want to discuss a better

public policy for dealing with homelessness, presently a very tough problem in this

52© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.country, as a better way to promote this right. You may want to focus on the duties the

government takes on and how they execute the duties they owe to the poor and homeless,

while preserving the property rights and amenities of others.

Lastly, is it fair and just to impose these laws on the homeless? If homeless people and

those who are not homeless, are not considered to be similarly situated in their use of the

park, then it may be fair. However, categorizing some people according to their health

and economic straits as different is a slippery-slope from an ethical point of view. For

example, once we start making such distinctions we could ask should only taxpayers, for

example, have access to a public parks since they’re paying for them ? Should those who

pay higher taxes have preference in what they use and the times of use, such as barbeque

pits and other amenities, than those who pay less taxes? If all people, regardless of their

status as homeless or not, are considered similarly situated, then they should all be

allowed to eat in the park from a fairness and justice perspective.

IMPORTANT CONCEPTS AND RELATIONSHIPS FOR STUDENTS TO KNOW

1. 2. 3. 4. 5. Know the sources of agency law that regulates real estate professionals.

Know the difference between a real estate broker and a real estate salesperson.

Know what a REALTOR® is and how that compares with a real estate licensee.

Be able to compare and contrast between the major kinds of listing agreements.

Know particularly about the exclusive right to sell listing agreements and the reasons why it is used the

most in industry.

6. 7. 8. Know how an open listing works and which competing broker gets the commission.

Know what procuring cause is, when it becomes an issue and generally how it is determined.

Know the four scenarios discussed in the book for determining whether the broker should receive a

commission even if the deal falls through- the Kruger case on page 180, the Retterer case also on page

180, the Ellsworth case on page 203 and the contractual approach normally used today.

9. In a traditional multiple listing service agreement (MLS), know how the broker for the seller (selling

broker) and the broker for the buyer (subagent) divide the commission.

10.Know the antitrust implications of MLS and other broker activities.

11.Be acquainted with the Federal Trade Commission’s ongoing battle with the National Association of

Realtors over sharing listings with brokers who operate virtual office websites and how they settled their

dispute.

12.Be able to distinguish between express, implied and apparent authority and how they apply to real estate

brokers.

13.Know what a real estate broker’s fiduciary duties are and to whom he/she owes these duties.

14.Know the problems associated with subagents and fiduciary duties and how modern disclosure statutes

apply to control these problems.

15.Know the duties a selling broker and subagent has to disclose to prospective buyers about certain

property conditions that materially affect its value.

16.Know about the Fair Housing Act (FHA) of 1968 and what kinds of persons it protects.

17. Be acquainted with the Interstate Land Sales Full Disclosure Act, how it operates and the kinds of

transactions it is trying to protect.

18. Know about steering and blockbusting and other forms of discrimination and how brokers may

become liable for the actions of their salepersons for these activities.

53© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.19. Know in particular, how the FHA of 1968 has affected newer construction to help the disabled.

20. Know about the Americans with Disabilities Act and how it has affected newer construction.

ANSWERS TO TEXT PROBLEMS

1. Mariko may not terminate the agreement. She is not acting in good faith. See McMillan

v. Quincey, 72 S.E. 506 (1911).

2. Trusty, as Green’s agent, owes Green a fiduciary duty. The duty was breached when

Trusty (through its salesperson) persuaded Green to give up $ 100,000 in equity in the old

house for a $40,000 equity interest in the new house. In Brown v. Coates, 253 F.2d 36

(D.C. Cir. 1958), the plaintiffs were awarded actual and punitive damages. The court

noted that although punitive damages are usually not allowed in contract cases, when

“one trained and experienced holds himself out to the public as worthy to be trusted. . . .,

and that trust is intentionally and consciously disregarded and exploited for unwarranted

gain, community protection, as well as that of the victim, warrants the imposition of

punitive damages.

3. Carlos owes a commission to Smith. In Brinkman v. Peel, 260 S.W.2d 448 (1953), the

court observed that the “law is that as between realtors who have nonexclusive listings,

the agent first producing a buyer whose offer meets the seller’s terms has earned his

commission.” This is true even though Carlos must also pay a commission to Jones.

4. Cleon is liable to Chumney because the contract was an “exclusive right to sell”

agreement. Although Cleon argued that the commission was a penalty and unenforceable,

the court, in Chumney v. Stott, 381 P.2d 84 (1963), concluded that his liability was

“essentially in fulfillment of the obligations created by the contract rather than in the

form of liquidated damages for the breach thereof. … It is to be kept firmly in mind that

the courts recognize the rights of parties freely to contract and are extremely reluctant to

do anything which will fail to give full recognition to such rights.” The damages would

be 6% of $120,000, or $7,200.

5. Broadway is not entitled to a commission. The court in Broadway Realty and Trust,

Inc. v. Gould, 665 P.2d 580 (Ariz. 1983), concluded that agreements providing for

payment of the “usual”, “regular”, or “legal rate of’ commission are not specific enough to

satisfy the Statute of Frauds. The language used in the listing agreement in this case is

similar to such language.

6. Flora is not entitled to a commission. The court, in Bartlett v. Keith, 90 N.E.2d 308

(1950), concluded that because this is an exclusive agency agreement, the agent is not

entitled to a commission when the owner finds a buyer.

7. The board’s actions are not legal. The court in Marin County Board of Realtors v.

Palsson, 549 P.2d 833 (1976), ruled that the California anti trust -statute, which is

modeled after the Sherman Act, applied to the board’s activities. While the board’s

54© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.practices were not “per se” violations of the statute, they did present serious

anticompetitive dangers. The “primarily engaged” requirement was found to inflict

especially severe economic detriment on part-timers because it resulted in a denial of

employment with no justification.

8. Decision for the Smalleys. The court in Schepers v. Lautenschlager, 112 .W.2d 767

(1962), noted that it is the duty of a broker “to give his client the fullest information

concerning his transactions and dealings in relation to the property with reference to

which he is employed. A broker cannot, without violating his general duty of good faith,

act for persons having interests adverse to those of his employer, unless he acts with the

consent of his employer given with full knowledge of the facts.” This duty of good faith

places the broker under a legal obligation to make a full, fair, and prompt disclosure to

his employer of all facts within his knowledge. “Thus, it is the duty of a broker who is

employed to sell property at a specified price to inform his principal of the fact that the

property has become of enhanced value since the time when it was placed in his hands for

sale, or, upon hearing that a more advantageous sale or exchange can be made.” A broker

who breaches this duty is liable to his principal for whatever loss the latter may suffer as

a consequence thereof and the broker also forfeits his commission.

9. The Golds owe Rossi $205,000. Larker had authority to accept only $5000. “A real

estate agent is generally a special agent with limited power and is, therefore, in dealing

with land, closely restricted within the terms of his agency.” Gerig v. Russ, 264 P.2d

1045 (1953).

10. This question is designed to encourage discussion about the legal and ethical pitfalls

inherent in the traditional subagency arrangement and why having a buyer’s agent may

lessen these pitfalls. In a traditional subagency situation, Mantecon might be legally and

ethically at fault for informing Jameson of these potential problems since he has a duty, at

least derivatively under the listing contract, to represent the best interests of Sullivan, the

seller. His only legal and ethical duty is to disclose to Jameson problems that may

materially affect the property. This would likely not include the potential for having to

pay higher energy bills and having to remodel a downstairs room someday. Of course,

subagents often inform the prospective buyers of such matters and this information does

influence how much buyers will offer. In the process, subagents may be breaching the

fiduciary duties (both legal and ethical) they owe to the sellers.

Ethically, you might argue that subagency facilitates sales by creating a less adversarial

environment, since no one represents the buyer’s interests. Does this create the greatest

good for the greatest number by creating efficiencies in transacting the sale? It is often

argued that a buyer’s agent creates a more adversarial transactional environment which

may lessen prices.

Is it fair and just for a subagent to treat sellers better than buyers? If you can argue that

sellers and buyers are similarly situated, then they should be afforded the same

information. However, adversarial parties cannot logically be classified as similarly

situated. On the other hand, buyers commonly assume that the subagent is representing

55© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.their interests. Thus, their perception is that they are similarly situated with sellers in

terms of having their interests represented by an agent, including the receipt of pertinent

information about the property they are thinking of buying.

To create a more fair and just environment, buyers should be fully informed of what their

rights are and who is representing their interests. Today, most states require sellers’

brokers to inform potential buyers that they are representing sellers (see page 191). These

disclosure requirements are a good example of positive law created to advance a more

ethical environment in real estate.

Test Bank

ESSAY QUESTIONS

1. Cravaack hired Scott, a real estate broker, to sell her motel. Scott procured

Eichenhorst, a potential purchaser. After lengthy negotiations Cravaack and Eichenhorst

finally agreed to ten s of the sale. However, before the sale could be consummated

Cravaack sought to withdraw from the sale. Scott claims he is entitled to his commission

regardless of whether a sale actually takes place. Is he correct? Why?

2. Fair Elms College (F.E.C.), a private, church-sponsored college, insists on separate

living arrangements for unmarried men and women students. Landlords renting off-

campus housing to F.E.C. students in a nearby city are required to comply with the

college’s prohibition against mingling of the sexes. Mary, a non-student, applied for

housing at a residence occupied by only male students from F.E.D. She was denied

quarters. Does Mary have any legal recourse? Why?

3. Barringer signed a real estate listing agreement with American Property Services for

the sale of certain property. The agreement provided that American would have the

exclusive right to sell Barringer’s property for the term of the agreement. A few months

before the agreement was to terminate, Barringer personally negotiated and sold the

property covered by the listing agreement. American claims that Barringer owes it the

agreed-upon commission. Is American correct? Why?

4. Pomanowski, a licensed New Jersey real estate broker, was a member of the

Monmouth County Board of Realtors. He terminated his membership in the board due to

a disagreement with the philosophy of conduct and operation of the organization. One of

the services provided board members was the use of a multiple-listing service for a fee.

As a non-member Pomanowski now will not be permitted to use the multiple-listing

service. He objects to his exclusion and files suit claiming the board is violating anti-trust

law. Should Pomanowski prevail? Why?

5. Archie has decided to sell his house. He lists the house with Edith, a local real estate

broker, and signs a listing agreement. The agreement states that Edith is the exclusive

agent and is to receive a 7% commission. Edith finds a buyer, a contract of sale is signed

56© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.with no mention of financing, but the buyer cannot complete the purchase because of

inadequate financing. Is Edith entitled to a commission? Why? Assuming that Archie is

liable for a commission, what method(s) could Archie use to avoid liability in the future?

TRUE-FALSE QUESTIONS

6. In most states, licensed real estate brokers and salespersons must also be members of

the National Association of Realtors. FALSE

7. In most cases, an unlicensed real estate broker may collect a commission earned on the

sale of real estate, regardless of who makes the sale, under an “exclusive right to sell”

agreement. FALSE

8. Language such as “a commission is to be paid to the broker whether the purchaser is

secured by the broker or by any person other than the seller” creates an “exclusive right to

sell” listing agreement. FALSE

9. In some states a person may broker a sale of property not as an agent with fiduciary

duties, but as a transactional broker who simply “assists” a particularly party and is not a

fiduciary to that party. TRUE

10. Under the traditional rule, a broker earns a commission under a listing agreement

whenever he procures a buyer who is “ready, willing and able” to purchase the real estate,

even if the seller refuses to sign a contract with the buyer. TRUE

11. A seller of real estate may cancel at any time a listing agreement that is to be in effect

for a specified time, if the broker has given consideration. FALSE

12. Traditionally, the broker whose client bought property listed by another broker, was

considered a subagent of the seller, not the agent of the buyer. TRUE

13. Competing brokers A and B meet for lunch and decide to set commissions at 6

percent for a two month period. This activity would be illegal per se under antitrust law.

TRUE

14. The Federal Trade Commission has ruled that the National Association of Realtors®

is violating antitrust law when it excludes brokers who operate virtual office websites

from giving their clients property listings. TRUE

15. Generally, a broker has implied authority to both advertise the house and to accept

money from the buyer. FALSE

16. As a general rule, an agent will be held personally liable for contracts negotiated on

behalf of a principal. FALSE

17. Under a buyer-broker arrangement, a buyer may not leave her agent for another

57© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.21. 22. 23. buyer agent if she signs an exclusive agency contract without being liable for a

commission if the broker finds her a property to buy. TRUE

18. Only licensed real estate brokers can advertise homes on the World Wide Web since

this information can be accessed by potential buyers in interstate commerce. FALSE

19. The Civil Rights Act of 1866 is the most comprehensive legislation in terms of types

of discrimination prohibited in selling or leasing real estate. FALSE

20. Under the U.S Supreme Court’s ruling in Meyer v. Holley, brokers are still strictly

and personally liable when their agents violate the Fair Housing Act of 1968. FALSE

MULTIPLE CHOICE QUESTIONS

(Answers in boldface are correct)

Rick signed a listing agreement with Paul, a real estate agent. The agreement stated that if

Rick or anyone acting on his behalf should sell his property, Paul would still be entitled

to his commission. This type of an agreement is a(n):

(a) exclusive right to sell.

(b) open listing.

(c) exclusive agency.

(d) none of the above.

(e) two of the above.

A listing agreement providing a real estate agent with an exclusive right to sell property

also contains a “no deal, no commission clause.” If a potential purchaser is unable to

obtain financing to complete the purchase after signing a contract:

(a) the agent is entitled to a full commission from the seller.

(b) the agent is not entitled to a commission from the seller.

(c) the agent is entitled to a partial commission from the seller.

(d) the agent is entitled to the “earnest money” paid to the seller.

Rob and Kim entered into an oral agreement whereby Rob promises to pay Kim a

commission if Kim produces a ready, willing, and able purchaser of Rob’s property.

Before any performance by Kim, the agreement is:

58© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.(a) an enforceable contract.

(b) an illegal contract.

(c) not an enforceable contract.

(d) none of the above.

24. b

Kelsey, a seller, signs two open listing agreements with two brokers, Ryan and Nicole.

Ryan is the first to find Marissa a potential buyer, who agrees to buy the property if a

suitable closing date can be worked out. Without Ryan’s knowledge, Nicole later strikes

a deal with Marissa to close earlier and persuades her to sign the contract to buy Kelsey’s

home. In this situation the commission would go to:

(a) Ryan.

(b) Nicole

(c) Ryan and Nicole would split it 50/50.

(d) Neither

25. Which of the following agents can be held personally liable to third parties for contracts

negotiated on behalf of an undisclosed principal?

(a) General agents.

(b) Special agents.

(c) Secret agents.

c (d) Implied agents.

26. Broker A has a listing agreement with the seller. Broker B has found a buyer for the

property, but he is not the buyer’s broker. Assuming that both brokers are subject to an

MLS agreement:

(a) Broker B is a subagent of the seller.

59© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.27. 28. 29. (b) Broker B, in many states, might have to disclose to the buyer that he is not

acting on behalf of the buyer as his agent.

(c) Broker B might owe the buyer a duty to disclose material facts about the

property’s value.

(d) All of the above.

(e) None of the above.

Under which of the following types of authority can a real estate broker bind her

principal?

(a) Express.

(b) Implied.

(c) Apparent.

(d) Two of the above (a and b).

(e) All of the above.

The 1968 Fair Housing Act and its 1988 amendments prohibit discrimination based on

all the following reasons except:

(a) sex.

(b) race.

(c) disability.

(d) family income.

(e) color.

The 1968 Fair Housing Act prohibits discrimination in the following situations:

(a) A denial of the use of real estate services.

(b) Discrimination in the terms or conditions for buying or renting housing.

60© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.30. (c) A denial that housing is available for inspection, sale or rent when it really is

available.

(d) All of the above.

(e) a and b only.

Jeff, a real estate agent, sells a home to a black couple in a predominately white

community. After the sale, he goes to the neighbors and encourages them to sell their

homes. He tells them that if they do not, their home values will go down substantially

because of the area’s imminent transition into a black neighborhood. Jeff is engaged in

what illegal practice?

(a) Steering.

(b)Testing.

(c) Blockbusting

(d)NIMBY (Not In My Backyard).

(e) None of these.

1. 2. ANSWERS TO INSTRUCTOR’S MANUAL QUESTIONS

ESSAY ANSWERS

The Court held that Scott was entitled to his commission. Unless the broker’s

contract provides otherwise, “the right to compensation on the part of a broker

who has procured a person able, ready and willing to purchase the property on the

terms specified by the employer is not lost by a failure of completion of the

transaction because of the default of the employer or his refusal to go through

with the deal.” Cravaack could not withdraw her offer after it was accepted.

Eichenhorst’s ability and willingness to buy was all that was necessary for Scott to

earn his commission. See Scott v. Cravaack, 372 N.E.2d 1375 (1977).

In a similar situation, the U.S. Justice Department threatened to sue Brigham

Young University and 36 landlords near the Provo, Utah campus for violating the

Fair Housing Act. A religious institution has a special position under federal law

which allows it to segregate on the basis of sex. However, this case presents a

situation where a religious institution’s right to enforce its religious and moral

teachings affects the rights of non-students under federal law. The issue has not

yet been resolved by the courts.

61© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.3. 4. 5. The court held Barringer liable for the payment of the commission to American.

Barringer had argued American did nothing to earn the commission since he had

sold his own property. The court rejected Barringer’s argument; the agreement

explicitly allowed American the exclusive right to sell and it was entitled to a

commission if the property was sold during the term of the agreement, regardless

of who sold it. See American Property Services v. Barringer, 256 N.W.2d 887

(1977).

The court held that the Monmouth County Board of Realtors violated the state’s

antitrust statute. The membership requirement for the use of the multiple-listing

service was found to be an unreasonable restraint of trade. The court found that

there was no reasonable justification for requiring board membership before the

multiple-listing services could be used. Moreover, the payment of dues was

unrelated to the actual cost of the listing services, which indicated that exclusion

of non-members was aimed at eliminating competition. See Pornanowski v.

Monmouth County Board of Realtors, 377 A.2d 791 (1977).

Under the rule discussed in the Retterer v. Bender case on page 180, Edith would

be entitled to her commission. Under Retterer the broker is not required to find a

ready, willing and able buyer for Archie’s house, just find a purchaser who signs a

contract of sale. To avoid paying the commission, Archie should have included a

“no deal, no commission” clause in the listing agreement. Some states have

rejected the Retterer rationale and state that the seller is only liable for a

commission based upon the buyer’s actual ability to close. See Ellsworth Dobbs

v. Johnson on p. 203.

62© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.