Real Estate Concepts & Legal Aspects

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Questions and Answers

What is the typical commission for a buyer's agent in a real estate transaction?

3% (correct)

What is the typical term for an exclusive right to sell agreement?

3 months

24 months

6 months (correct)

12 months

What is the primary purpose of ACRIS?

To assist in finding property boundaries

To facilitate the transfer of property ownership

To provide information on property taxes

To track the history of property ownership (correct)

What is the typical compensation fee for a rental agent?

10-15% of the annual rent (D) Signup and view all the answers

What should a real estate agent do if a client refuses to sign the Disclosure Form?

Document the refusal and continue with the showing (A) Signup and view all the answers

What is the legal requirement regarding the signing of the Disclosure Form?

It must be signed at the first substantive meeting with the client (C) Signup and view all the answers

Which of the following is a characteristic of independent contractors in the real estate industry in New York State?

They pay taxes on their commissions in arrears (A) Signup and view all the answers

What is the legal precedence if both a contract to purchase and an offer to rent are presented simultaneously?

The contract to purchase takes precedence (A) Signup and view all the answers

A buyer's agent is responsible for disclosing which of the following to their client?

The crime rate in the area. (B), The school district of the property. (D) Signup and view all the answers

What information is typically required on a seller's agent disclosure form?

The property's condition, including potential issues. (A) Signup and view all the answers

What is the primary purpose of a dual agency disclosure form?

To inform the buyer and seller of the agent's representation and potential conflicts of interest. (C) Signup and view all the answers

Which of the following is NOT a factor to consider when negotiating a brokerage agreement?

The agent's experience level. (D) Signup and view all the answers

What document is required for a buyer to secure financing?

A pre-approval letter from the lender. (D) Signup and view all the answers

What is a potential benefit of working with a global brokerage firm?

Access to a wider network of clients and properties. (D) Signup and view all the answers

What does the term "dual agency" refer to?

When an agent represents both the buyer and seller in a single transaction. (A) Signup and view all the answers

Under what circumstances can a broker take a leave of absence?

Not allowed under any circumstances. (D) Signup and view all the answers

What is a non-competition clause in a brokerage agreement?

A restriction on the agent's ability to work for a competing brokerage within a specific time frame. (D) Signup and view all the answers

Which of the following circumstances would likely lead to a termination of an agency relationship?

The agent fails to disclose a material fact about a property. (D) Signup and view all the answers

What is the significance of an agent keeping detailed records of correspondence and disclosures?

To avoid potential legal disputes. (C) Signup and view all the answers

What is the purpose of a lead paint disclosure form?

To inform buyers about the potential presence of lead paint in older homes. (C) Signup and view all the answers

What is a potential benefit of an agent referring a client to another brokerage?

They can leverage their network within the industry. (A), They can receive a referral bonus, even if the client doesn't purchase a house. (D) Signup and view all the answers

Which of the following is a key consideration when choosing a broker to work for?

The broker's experience level. (B), The broker's marketing and advertising strategy. (D) Signup and view all the answers

What is the significance of the "agreement time frame" in a brokerage agreement?

Outlines the length of time the agent is obligated to represent the broker. (D) Signup and view all the answers

What is the purpose of an amendment to an independent salesperson agreement?

To add new terms or modify existing ones. (A) Signup and view all the answers

Study Notes

Reasonable Care

Reasonable care is the degree of caution and concern for safety that an ordinarily prudent and rational person would exercise in a given circumstance.
It's a subjective test of negligence, determining if a person failed to exercise reasonable care.

Tie-in Arrangement

A tie-in arrangement is a contract where one transaction depends on another.
The arrangement can be recommended but not forced.

Vicarious Liability

Vicarious liability occurs when one party is held partially responsible for the unlawful actions of a third party.

For Sale by Owner (FSBO)

FSBO transactions typically involve no commission paid to an agent.

Real Estate Commissions

Real estate commission for a buyer's agent is often 3% of the sale price.

Exclusive Right to Sell Agreements

Typical term length for an exclusive right to sell agreement is six months.
No automatic renewal clause is typically included in these agreements.
All property owners must be listed on the agreement.

ACRIS (NYC)

ACRIS (Assessment & City Records Information System) website provides access to tax block maps. [www.a836-acris.nyc.gov]
Rental compensation for properties differs from typical home commissions, typically 10-15% of the annual rent income.

Contract Precedence (Purchase vs. Rent)

In cases of concurrent purchase and rental contracts, the purchase contract takes precedence, eliminating the associated rental fee.

Disclosure Forms

Disclosure forms must be signed at the initial substantive meeting with the seller.
This is to protect the client. If they refuse to sign, document the time, date, name, and continue the showing/meeting. An affidavit outlining this refusal must be filled out.

Real Estate Agents in NYS

Real estate agents in New York State are considered independent contractors.

Independent Contractor vs. Employee

Key differentiators between independent contractors and employees (for real estate agents) include:
- Instructions and training
- Set work hours
- Job location
- Work order specifics
- Work expenses
- Work tools

Independent Contractor Rights/Responsibilities

Income tax on commissions is typically paid in arrears.
No set working hours.
No specific job location.
Can be employed with another company/employer, but not two different brokers.
Agents cover their own work expenses.
Brokers cannot control an agent's work activities.
Either party can terminate the relationship.

Termination of Agency

Agency relationships can be terminated due to:
- Failed agency terms.
- Completion of the agency's purpose.
- By law.

Confidential Information (Seller's Agent Perspective)

The following details do not need to be disclosed to potential buyers:
- School zones.
- Traffic flow.
- Ease of transportation.
- Reasons for sale by seller.

Buyer's Agent Responsibilities

Buyer's agents should investigate details not disclosed by the seller's agent.
Research essential information: school districts, crime rates, etc.
Assess the client's financial situation and mortgage eligibility.
Check for lawsuits or funding issues related to the property/building.

Client Financial Verification

For self-employed clients, ensure financing is feasible.
Verify buyer qualifications include pre-approval and financial property/building checks.
Review building assessments
Understand pending or impending litigations.

Agent Record Keeping

Agents must maintain records.
- Buyer's agent records include disclosure forms, affidavits, property showings, prospective listings, correspondence, offers/negotiations, financial documents/applications, and contracts.
- Seller's agent records include potential purchasers, disclosure forms, purchaser budgets, and correspondence (printed emails).

Disclosures for Sellers

Agents must disclose lead paint disclosures (for pre-1978 buildings).
Property condition assessments are required (mold, foundation issues, termites, etc.).

Agent Disclosure Forms

Used when representing buyers, sellers, or in dual situations.
The client must sign the disclosure form. Agent signs their name and brokerage.
First substantive meeting is when the form is signed.
Affidavit for cases of refusal to sign.

Dual Agency Disclosure Forms

Required for dual agency situations.
Separate forms for buyer/seller are needed.
Client options include declining dual agency or continuing as customers (no fiduciary duties).

Broker Responsibilities

Brokers are legally required to be present or available, supervising agents.

Independent Contractor Status Maintenance

Maintaining independent contractor status does not require broker presence; only that they are present/reachable.
Losing independent contractor status happens if one quits the brokerage.

Broker Allowable Practices

Offering bonuses to salespersons (e.g., commission or referral bonus).
Brokers may offer bonuses on top of commissions or referral bonuses.

Salesperson Brokerage Changes

Potential for bonuses when referring buyers/sellers to a different brokerage or when selling property through a different brokerage.

Brokerage Agreement Negotiation

Key areas for negotiating brokerage agreements:
- Commission structure.
- Time frame of agreement.
- Early termination clauses.
- Non-compete clauses.
- Agreement modification capabilities.

Choosing a Brokerage

Factors to consider: Global vs. local brokerage.

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Description

Explore essential real estate concepts such as reasonable care, tie-in arrangements, and vicarious liability. This quiz covers various aspects of real estate transactions including FSBO practices and commission structures. Test your knowledge of exclusive rights to sell agreements and related regulations.