CHAPTER 12
REAL ESTATE BROKERAGE AND LISTING CONTRACTS
Test Problems
1. A down payment deposit from a potential buyer must be held in:
2. One of the most effective ways that salespersons or brokers can distinguish
themselves as a preferred agent in a particular specialization of real estate
brokerage is to:
3. A broker, acting as the agent of a seller, must deal honestly and fairly with whom?
4. Real estate salespersons can lose their licenses for:
5. The state real estate commission is responsible for:
6. Real estate brokers are paid commissions primarily for
7. Traditionally, a real estate broker is what type of agent for his or her principal?
8. The sub agency relationship that traditionally has characterized multiple listing
services (MLS) has tended to result in the wide-spread danger of:
9. How are commission rates charged by real estate brokers determined?
10. According to most listing contracts, a broker has earned a commission when
c. The broker finds a buyer who is ready, willing, and able to buy on the terms
Study Questions
1. Ted Richardson owns a large industrial building in your city that he wishes to sell.
As a real estate broker, you would be delighted to obtain the listing on this
property. You have worked with Richardson on two other transactions in which he
was the buyer; therefore, you approach Richardson to request that he consider
listing his property with you. Richardson agrees to do so, but indicates that he will
not give you an exclusive right of sale listing, because he wants to retain the right
to sell the property himself without owing a real estate commission. He will,
however, give you an exclusive agency listing.
a. What should you do? Should you accept such a listing from Richardson?
b. Are there any provisions that you would propose including in the listing
contract to give yourself some protection?
Solution:
a. The exclusive agency listing is infrequently used and provides less
protection to the broker than an exclusive right of sale listing. This
b. As the broker, I would always prefer an exclusive right of sale listing, so
that I would receive a commission regardless of who sold the property.
2. You are a real estate salesperson working for Good Earth, Realtors, Inc. You
receive 50 percent of all commissions received by the firm (net of MLS fees) for
which you were either the listing agent or the selling agent. The firm receives 40
percent of commissions for sales of properties it lists and 45 percent of
commissions for sales of properties it sells in cooperation with other firms.
Fifteen percent of all commissions for properties sold through the multiple listing
service must be paid to the MLS. If you are both the listing and selling agent in a
transaction, you receive 60 percent of the firm’s proceeds. If you are either the
listing agent or the selling agent for a transaction in which another member of
Good Earth is the selling agent or the listing agent, your split remains the same as
when another firm cooperates in the transaction. Recently, you were the selling
agent for a property that sold for $127,250. Another salesperson associated with
Good Earth had listed the property two months previously for $135,000. The
property was in the MLS, and the commission rate was 6.0 percent.
a. How much in total commission, net of the MLS fee, will your firm
receive?
b. What will be your split of the commission?
Solution:
a. The firm will receive $6,489.75 ( 127,250*.06*.85)
3. If you owned your own real estate brokerage firm, how could you establish a
niche in the market for your firm? In other words, how could you set your firm
apart from other brokerage firms, and how could you create a unique image for
your firm?
Solution: Developing a specialization is crucial. One option is to specialize by
property type, serving sellers and buyers of commercial, industrial, residential,
agricultural, office, or recreational properties. Another option is to limit my
4. Explain why there occurred numerous experimental or innovative approaches to
residential real estate brokerage in the United States in the years following 2000.
Solution: Three forces converged to prompt changes in the residential real estate
brokerage industry after 2000. First, the legal issue of unintended dual agency
had swept through the industry prompting changes in disclosure laws and
conventional MLS subagency relationships. This gave impetus to the rise of
5. A friend of yours, Cindy Malvern, is moving to your town to begin a new job.
Cindy has decided to buy a condominium, and because you are taking a real estate
course, she asks you how to proceed.
You first “Google” condominiums for your city and notice that a
number of existing condominiums are for sale. Most of them are
advertised by brokers, but some are advertised by the owners. You also notice ads
by some local builders for new condominiums. You ask Cindy whether she prefers
to buy a previously owned condominium or a new one. She says she doesn’t
know; it depends on the condominium, the location, the price, and so on.
Next, using Google once more, you find a list of local area real estate brokers.
You have heard of three or four of the firms, but you have had no direct contact or
dealings with any of them.
a. How would you advise Cindy to proceed? Should she call a real estate
brokerage firm? Why or why not?
b. If Cindy decides to call a real estate broker, how should she select the
broker? What criteria should she use?
c. If Cindy decides to work through a real estate broker, can she look at new
condominiums for sale by builders? If she buys a new condominium while
working with a broker, would she or the builder have to pay a commission
to the broker?
Solution:
a. First, Cindy might be advised to do some reading on the nature and
experience of condo living as compared to traditional home ownership.
She could read, for example, How to Buy a Condominium or Townhouse,
b. Potential customers usually choose a brokerage firm based on reputation
in the community, personal acquaintance with the broker or a salesperson,
c. Cindy can look at new condominiums for sale by builders. Any sales
commission arrangement will be dictated by the seller and the agent.
6. You decide to open a real estate office in your community, but you know you
would face stiff competition from established firms. You believe that one method
Solution: Such a minimal commission is too low in relation to the
service provided and to the costs borne by brokerage firm. The
broker provides training, o,ce space, telephones, and secretarial
support so the salesperson can produce listings and sales.
