Real Estate Salesperson Exam (National Portion) Brokerage Agreements and Risk Management Summary

In an exclusive right-to-sell listing, the broker earns the commission if the property sells during the term, even if the owner finds the buyer. It is the most common listing type.

Wrong choices

• Exclusive agency listing: Under exclusive agency, the owner owes no commission if the owner sells it alone.
• Open listing: An open listing pays only the broker who brings the buyer.
• Net listing: A net listing describes how the commission is figured, not who earns it.

Commingling is mixing money that belongs to others with the licensee's own money. Earnest money must go into the broker's escrow (trust) account as state law requires. Spending it is conversion, which is even more serious.

Wrong choices

• Conversion: Conversion is using the client's money for personal purposes; this question describes mixing.
• Steering: Steering is a fair housing violation.
• Puffing: Puffing is exaggerated sales talk.

Under federal antitrust law (Sherman Act), competing brokers may not agree on commission rates (price fixing), divide markets (market allocation), or agree to boycott another broker (group boycott). Commissions are always negotiable between broker and client.

Wrong choices

• Fair housing laws: Fair housing laws concern discrimination.
• RESPA: RESPA concerns settlement services and kickbacks.
• The Statute of Frauds: The Statute of Frauds requires certain contracts to be in writing.

With an exclusive agency listing, one broker is the only agent, but the owner keeps the right to sell the property alone without paying a commission.

Wrong choices

• Earns the full commission: That would be true under an exclusive right-to-sell listing.
• Earns half the commission: There is no automatic half commission.
• Can sue to stop the sale: The seller kept the right to sell alone.

Licensees must not give legal advice or draft legal documents; that is the unauthorized practice of law. Licensees should stay within their expertise and recommend an attorney, inspector, or other expert when needed.

Wrong choices

• Explain the legal meaning of the restriction: Interpreting legal documents can be the unauthorized practice of law.
• Say it is probably fine so the sale can close: Guessing could be misrepresentation.
• Rewrite the deed restriction for the buyer: Licensees cannot draft legal documents like deeds.

In a net listing, the seller names the amount they want to receive and the broker keeps anything above it. This tempts the broker to set a low net price, a conflict of interest, so many states prohibit or limit it.

Wrong choices

• It never sets a listing price: A net listing sets a net amount; the conflict is the problem.
• It cannot be put in writing: Net listings can be written; that is not the problem.
• It always pays the broker less: It can pay the broker much more than a normal commission.

Errors and omissions insurance covers claims that a licensee made a careless mistake or left something out while providing services. It usually does not cover intentional fraud.

Wrong choices

• Fire damage to a client's home: That is covered by the owner's hazard insurance.
• Losses from intentional fraud: E&O insurance generally does not cover intentional wrongdoing.
• Defects in a buyer's title: Title insurance covers title defects.

Federal Do Not Call rules limit telemarketing calls. Before cold calling, licensees must check the national registry and the company's own list, and honor requests not to be called.

Wrong choices

• The local tax rolls: Tax rolls do not show whether a number may be called.
• The MLS sold data: MLS data does not show calling permission.
• Only the state's sex offender registry: That registry has nothing to do with calling rules.

Under vicarious liability, a broker may be liable for the acts of salespersons and employees done within the scope of their work. That is why brokers must supervise their licensees.

Wrong choices

• Caveat emptor: Caveat emptor means "let the buyer beware."
• Commingling: Commingling is mixing funds.
• Novation: Novation replaces a contract or party.

For IRS purposes, a real estate salesperson can be a statutory nonemployee (independent contractor) when the salesperson is licensed, substantially all pay is based on sales (commission) rather than hours worked, and a written contract says they will not be treated as an employee for federal tax purposes. The broker does not withhold taxes.

Wrong choices

• The broker sets the salesperson's exact daily work hours: Controlling hours suggests an employee relationship.
• The salesperson is paid an hourly wage: Independent contractors are usually paid by commission, not by the hour.
• The broker must provide employee health insurance: Independent contractors are not given employee benefits.