rep ch.7

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rep ch.7
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2011-10-04 14:49:19
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rep ch.7
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  1. 1. A broker received a $50,000 deposit on a selling price of $400,000. However, the buyer breached the contract, and the seller claimed that the buyer had forfeited the deposit. In this situation:
    A. the seller may not retain any of the deposit
    B. the seller may retain no more than 3% of the purchase price as liquidated damages
    C. the seller could deduct any actual damages caused by the breach from the deposit
    D. the seller may retain the entire deposit
    • Answer: B
    • Explanation: Assuming that the buyer and seller signed a liquidated damages provision in the deposit receipt, the buyer's breach of contract entitles the seller to keep no more than 3% of a residential property's sale price as liquidated damages.
  2. 2. Which is the best definition of "rent"?
    A. A contract between tenant and landlord
    B. Consideration paid for a leasehold interest in real property
    C. Consideration that validates any real estate contract
    D. The fee paid for a license to use real property
    • Question #2
    • Answer: B
    • Explanation: Rent is the consideration that makes a lease a valid contract. Rent refers specifically to a leasehold interest, not a license.
  3. 3. Which of the following statements concerning listings is true?
    A. Both husband and wife must sign a listing agreement to sell community property
    B. Net listings are strictly illegal in California
    C. Exclusive listings may be no longer than 100 days
    D. An exclusive listing may be only one day
    • Answer: D
    • Explanation: The length of the listing period is determined by agreement between the broker and the seller. There is no minimum or maximum length, so long as the length is determined in advance.
  4. 4. A one-year lease:
    A. must be in writing to be enforceable
    B. must be signed by landlord and tenant
    C. may be surrendered by landlord and tenant after six months
    D. may be unilaterally rescinded after six months
    • Answer: C
    • Explanation: Surrender may be used to terminate the lease at any point before it expires, so long as the landlord and tenant agree. A lease cannot be rescinded, but it can be surrendered by mutual consent of landlord and tenant. A one-year lease needs to be signed only by the landlord, and does not need to be in writing (although a lease of more than one year needs to be in writing).
  5. 5. The usual listing contract will authorize a broker to:
    A. find a purchaser and accept the buyer's offer on behalf of the seller
    B. guarantee to a prospective buyer that the seller will accept his offer
    C. deed the property over to the buyer
    D. find a buyer and accept a deposit with the offer to purchase
    • Answer: D
    • Explanation: A typical listing agreement only authorizes the broker to find a buyer and accept the buyer's deposit. The seller would need to execute a power of attorney for the broker to be able to accept an offer or convey the title to the property.
  6. 6. There are limits placed on the size of the security deposit that can be required on a residential unit. The limits are based on:
    A. the length of term of the lease
    B. whether the unit is furnished or unfurnished
    C. the square footage of the rental unit
    D. Both A and B
    • Answer: D
    • Explanation: State law requires a maximum security deposit of two months’ rent for an unfurnished unit and three months’ rent for a furnished unit. If the lease term is six months or more, though, the security deposit may be equal to six months’ rent or more.
  7. 7. A tenant with a net lease would pay a proportionate share of all of the following EXCEPT:
    A. property taxes
    B. insurance
    C. leasing commissions
    D. janitorial expenses
    • Answer: C
    • Explanation: In a net lease, the tenant will assume partial or total responsibility for paying for property taxes, insurance, utilities, and maintenance expenses.
  8. 8. When a contingency clause is used in a purchase agreement, which of the following information should be included?
    A. Nature of the contingency
    B. Duration of the contingency
    C. Conditions for removal of the contingency
    D. All of the above
    • Answer: D
    • Explanation: A contingency clause should always describe what the parties must do to fulfill the contingency, and how long they have to fulfill the contingency. It should also describe how notice of fulfillment should be made, whether the contingency can be waived, and the rights of the parties if the contingency isn’t fulfilled.
  9. 9. A landlord sued a tenant for breaching the terms of the lease by moving out. The tenant responded that the landlord had failed to respond to plumbing problems that left the unit uninhabitable. Which of the following would occur?
    A. The tenant would be awarded punitive damages
    B. The landlord would be entitled to the remainder of the rent due during the lease term
    C. The tenant would be able to avoid further liability because of the landlord's breach of the warranty of habitability
    D. The lease would not terminate, but the tenant would be able to make the repairs himself and demand reimbursement from the landlord
    • Answer: C
    • Explanation: If a landlord breaches the implied warranty of habitability by failing to respond to notice of maintenance problems that cause unsafe or unsanitary conditions, the tenant may terminate the lease and move out with further obligations to pay rent. The tenant would not be entitled to damages, since it is the landlord who is suing the tenant in this case.
  10. 10. If there is a 30 or 60-day safety clause in a listing agreement, which of the following is true?
    A. The agent is owed a commission if the property sells during the safety period
    B. The agent must provide a list of the people he worked with and if the seller sells to any of those people during the safety period, she owes the agent a commission
    C. The seller may “bump” a contingent offer in favor of an offer that contains no contingencies
    D. The agent is entitled to liquidated damages if the buyer and seller reach an agreement but then withdraw from the sale
    • Answer: B
    • Explanation: Many safety clauses require the broker to keep a list of the potential buyers that he had contact with during the listing period. This enables the seller to know whether the safety clause will require payment of a commission if the property is sold to a particular person during the safety period.
  11. 11. Which one of the following is an illegal act for a real estate broker in California?
    A. Using a net listing if the amount of commission is disclosed
    B. Claiming a commission on an exclusive listing that had no specified termination date
    C. Collecting a commission after the termination date on an exclusive listing has passed
    D. Selling his own property and claiming a commission for income tax purposes
    • Answer: B
    • Explanation: A broker in California who does not include a termination date in an exclusive listing agreement will be subject to disciplinary action.
  12. 12. What clause allows a broker to collect a commission even after the listing period has expired?
    A. Protection clause
    B. Habendum clause
    C. Acceleration clause
    D. Bump clause
    • Question #12
    • Answer: A
    • Explanation: A protection or safety clause provides that a broker may receive a commission if a property sells during a period that follows the termination of a listing agreement. This prevents a seller from avoiding a commission by waiting until after a listing has expired before accepting an offer.
  13. 13. A sublease is:
    A. not allowed to be longer than one year
    B. the same as an assignment
    C. a transfer of an entire leasehold
    D. a transfer of less than an entire leasehold
    • Question #13
    • Answer: D
    • Explanation: A sublease transfers possession of a leasehold for less than the entire remaining term of a lease; the sublessor is still holder of the lease and primarily liable for rent.
  14. 14. How is the maximum commission rate a broker may charge established?
    A. It is set by the local multiple listing service
    B. It is mandated by the state Real Estate Law
    C. It must be within limits prescribed by real estate professional associations' ethical codes
    D. It is set by agreement between principal and broker
    • Question #14
    • Answer: D
    • Explanation: There are no legal limits on commission rates. They are determined by agreement between the broker and the principal.
  15. 15. Brokers Frank and Dean both took open listings on the same property. Frank shows the property to a prospective buyer, who decides not to buy it. One week later, Dean shows the same property to the same buyer, who decides to purchase the property. Who receives the commission?
    A. Frank receives entire commission
    B. Dean receives entire commission
    C. Frank and Dean split commission
    D. Frank and Dean each receive a full commission
    • Question #15
    • Answer: B
    • Explanation: Even though Frank already showed the property to the buyer, Dean was the one who negotiated and secured the offer and acceptance. Therefore, Dean is the procuring cause and receives the commission.

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