ARIZONA REAL ESTATE ETHICS: Comprehensive Final Exam Study Guide

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1 ARIZONA REAL ESTATE ETHICS: Comprehensive Final Exam Study Guide To find the applicable content within the course: Click the "TABLE OF CONTENTS" button in the upper right corner. Then click on the applicable chapter (at the top center of the screen). Then click on the applicable TOPIC. 1. A verbal contract for the sale of real estate is perfectly legal. However, in most states, it is not enforceable because of the. Therefore, in order to protect the best interests of our clients, it is ETHICAL that we get all contracts in writing. a. state's Constitution. b. law of Agency. c. Statute of Frauds. d. disclosure laws. 2. Agent Michelle represented a buyer in the showing of a home. The owners of the home are away for a six-month vacation when Michelle shows their home, which is listed with another brokerage. To alleviate the risk of pipes freezing and breaking during the cold winter months, the owners had turned off the water to the home. The buyer wants to inspect the plumbing in the home, and asked Michelle to turn the water on at the main. Michelle turned the water on, the buyer inspected the plumbing, and the buyers and Michelle left the premises and forgot to turn off the water to the home. Which Article or Standard of Practice was violated if any? a. Standard of Practice 12-7 b. Standard of Practice 11-3 c. Article 10 d. None of the above. The Broker should address such issues with a brokerage policy.

2 3. Price Fixing is the practice of setting prices for products or services rather than letting competition in the open market establish those laws. It is a violation of the Sherman Anti-Trust Act when a brokerage establishes an office policy of a minimum 6% listing commission rate. a. True. A brokerage cannot establish a policy of a minimum or maximum listing commission rate. b. False. A brokerage can establish an internal policy regarding a minimum listing commission rate. c. True. According to the Sherman Anti-Trust Act, the minimum allowable listing commission rate is 7%. d. False. A broker can do whatever he/she wants. He/she is the business owner. 4. The REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) provides that buyers must have the right to select their own providers of settlement services. If you are a listing agent, and your seller demands that you usher the buyers to a certain escrow company, what should you do? a. The escrow company is the buyer's choice. Let the buyer choose. b. You should inform the buyers that the sellers prefer a certain escrow company and encourage the buyer to choose the preferred escrow company. c. If the buyer chooses the wrong escrow company, it will blow the deal. Don't give the buyer a choice. d. Cancel the listing. The seller is demanding that you violate a Federal Regulation. 5. The REALTOR Code of Ethics requires that a REALTOR treat all parties fairly and honestly. When a REALTOR represents one party in a transaction, and the other party is unrepresented, the REALTOR. a. must protect the unrepresented party's best interests as well as the client's best interests b. has no obligation to disclose. Disclosure of material facts has nothing to do with fairness and honesty c. still has an obligation to fully disclose all known material facts to the unrepresented party d. should cancel the transaction because the other party is not represented 6. Article 2 of the REALTOR Code of Ethics states that REALTORS are NOT responsible for disclosure of latent defects. Therefore, a REALTOR who knows about a latent defect. a. is not obligated to disclose the defect b. is obligated to disclose the defect, because if the REALTOR knows about the defect, then it is no longer latent. It is a known defect c. should not admit to knowing about the latent defect d. save the deal by pretending not to know about the latent defect, so that no disclosure is required

3 7. Article 12 requires all REALTORS to write advertising so as to clearly convey the message in the advertising and to back up what is conveyed. Therefore, since a personal watercraft (Jet Ski, Waverunner or Sea Doo) is technically a recreational vehicle,. a. it is perfectly ethical to advertise R.V. parking, if there's enough room in the front yard to park a personal watercraft b. it is perfectly ethical to advertise the (verified) square footage of the parking area c. it is unethical to advertise (verified) square footage d. it is perfectly ethical to market the personal watercraft on the MLS 8. A listing agent who is a REALTOR has exhausted all possibilities to deal through the buyer's agent, and unbeknownst to the buyer's agent, and for the good of the transaction, contacts the buyer to discuss the transaction. Is this agent acting ethically? a. Yes. The listing agent should contact the buyer and see if the buyer will hire the listing agent and fire the buyer's agent. b. No. The listing agent should NEVER contact a buyer, unless the listing agent is also the buyer's agent. c. Yes. The most important responsibility of a real estate agent is to protect the best interests of his client. If the contact was made for the good of the transaction, and The REALTOR has TRULY exhausted all possibilities to deal with the buyer's agent, this action is ethical. However, the REALTOR may be subject to an ethics complaint, where the REALTOR will be asked to prove that he/she exhausted all possibilities to deal through the buyer's agent, as well as justify the direct contact. d. No. It is not in the best interests of the seller for the listing agent to make contact with the buyer and discuss the transaction, even if all possibilities to deal through the buyer's agent have been exhausted. 9. will take precedence as the estimation of market value for a piece of property. a. a competitive Market Analysis that is performed by a real estate salesperson b. a licensed and certified real estate appraiser's opinion of market value c. the seller's accountant's opinion of market value d. a competitive Market Analysis that is performed by a real estate broker 10. According to Standard of Practice 16-4, REALTORS shall not solicit a listing which is currently listed exclusively with another broker. However, if the listing broker, when asked by the REALTOR, refuses to disclose the expiration date and nature of such listing; The REALTOR. a. may take a listing to become effective upon expiration of any existing exclusive listing b. may contact the owner to secure such information and may discuss the terms upon which the REALTOR might take a future listing c. Both a and b d. Neither a or b

4 11. Even if an offer has been accepted, and an escrow opened, it is ethical for a listing broker to leave the subject property on the market, however, according to the REALTOR Code of Ethics, the listing broker is not obligated to actively or aggressively market the property. If the listing broker chooses to leave the subject property on the market and accept backup offers, the listing broker must. a. disclose to prospective buyers, the existence of an accepted offer b. not disclose to prospective buyers, the existence of an accepted offer c. immediately cancel the first escrow, if a backup offer is accepted d. None of the above. It is not ethical for a listing broker to leave the subject property on the market if an offer has been accepted and escrow opened. 12. When giving advice about a property or a property's value, a REALTOR must make full disclosure. This means that the REALTOR must competently and honestly evaluate the property's value, and advise the seller as to a fair list price. If the seller wants to list at a higher price, the REALTOR Code of Ethics requires that the REALTOR. a. accept the listing, and do what the seller instructs b. refuse the listing c. make a judgment call regarding whether or not to accept the listing, but if the REALTOR accepts the listing, the REALTOR must obey all lawful instructions of the seller, which might mean listing at a price higher than fair market value d. advertise that the seller has over-priced the property 13. A REALTOR who holds a broker's license is more obligated to uphold the REALTOR Code of Ethics than a REALTOR who holds a salesperson's license. a. True. A broker has more knowledge, and is therefore more obligated to be ethical. b. False. REALTORS are REALTORS. No distinction is made in the Code of Ethics about levels of licensure. c. True. REALTOR arbitration committees impose higher fines and penalties to brokers. d. False. REALTORS are not obligated to the REALTOR Code of Ethics, they are only obligated to uphold the law. 14. A REALTOR who is called upon to make a decision may well have no actual conflict of interest, but if it appears to observers that he/she does have a conflict of interest, the REALTOR is ethically obligated to. a. ignore the decision and hope it goes away b. cancel any and all transactions associated with the decision c. make the decision anyway, even though the REALTORS reputation may suffer d. find another qualified party to make that decision

5 15. For the protection of all parties, REALTORS shall use reasonable care to ensure that documents pertaining to the purchase, sale, or lease of real estate are kept current through the use of. a. frequent phone calls to update all parties b. written extensions or amendments c. verbal extensions or amendments d. facilitation of buyer and seller contact with each other, and interpretation of client needs 16. When a REALTOR is the agent of both the buyer and the seller, that REALTOR is. a. obligated to protect only the seller's interests, because the REALTOR was a listing agent before he/she was a buyer's agent b. obligated to protect only the buyer's interests, because the buyer bears the financial burden c. obligated to be fair and honest to all parties to the transaction d. None of the above. REALTORS are strongly discouraged from being the agent of both the buyer and the seller 17. In one of the case studies in this course, a REALTOR who represented the buyer contacted the seller directly, with the permission of the listing agent. Did the buyer's agent, when she directly contacted the seller, interfere with the agency relationship between the listing agent and his seller? a. Yes, because she presented an offer to the sellers in the absence of the listing agent. b. If she did not advise the sellers regarding whether or not they should accept the offer, she did not interfere with the listing agent's agency relationship with his sellers. c. When a buyer's agent has any contact with a seller in a transaction, regardless of the purpose of the contact, it is a violation of the agency relationship between the listing agent and the seller. d. The buyer's agent did not interfere with or violate the listing agent's agency relationship, but the listing agent acted unethically by not being available 24/ The REALTOR's obligation to be fair and honest to is a higher standard than most industries uphold. Attorneys are not obligated to be 'fair' to the opposing side. Car Dealers are not obligated in this way, but a REALTOR must be fair and honest to. a. the opposing side only b. only the seller c. all parties to the transaction, no matter who the REALTOR represents d. only the party who is the source of compensation 19. The REALTOR Code of Ethics is divided into three main categories: Duties to, Duties to Client, and Duties to Community. a. Self b. REALTORS c. Property d. Profits

6 20. Only REALTORS who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have 'sold' the property. Prior to closing, a cooperating broker may post a 'sold' sign only if. a. the cooperating broker has the consent of the Listing broker b. the 'sold' sign contains the words, 'Cooperating Broker' c. the 'sold' sign is a contrasting color to the listing sign and is conspicuously displayed d. the 'sold' sign contains the REALTOR logo ' 21. When entering into listing contracts, REALTORS must advise sellers/landlords of. a. the REALTOR's company policies regarding cooperation and the amount of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities b. the fact that buyer/tenant agents or brokers, even if compensated by listing brokers, or by sellers/landlords may represent the interests of buyers/tenants c. any potential for listing brokers to act as disclosed dual agents, e.g. buyer/tenant agents d. all of the above 22. When entering into buyer agency contracts, REALTORS must advise buyers of. a. the REALTOR's company policies regarding cooperation b. the stupidity of purchasing real estate in these troubled times c. the exact appraised value of the subject property before the buyer agency agreement is signed d. the most profitable properties to flip 23. REALTORS shall cooperate with other brokers except when cooperation is. a. not profitable for the REALTOR b. not a good political move for the REALTOR c. not in the client's best interests d. with another broker who has a negative social history with the REALTOR 24. REALTORS shall not engage in activities that constitute the unauthorized practice of law and shall recommend that be obtained when the interest of any party to the transaction requires it. a. a non-realtor to act as listing agent b. legal counsel c. a member of the clergy d. all of the above

7 25. When involved in the sale or lease of a residence, REALTORS shall not volunteer information regarding the racial, religious or ethnic composition of any neighborhood nor shall they engage in any activity which may result in panic selling, however, REALTORS may provide. a. detailed information about the religious backgrounds of property owners, only if the REALTOR asks the prospective buyer's permission to provide such information, and only if the information will in fact, make the buyer happy b. information about racial backgrounds of property owners if the disclosure of information does not result in panic selling c. specific detailed information about the targets of hate crimes in the area d. demographic information

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