California Real Estate Salesperson Exam Practice - Question 64

Question

Which of the following acts by a real estate broker would not be a violation of the real estate law?

Selections

A. Taking a net listing

B. Failure to put a definite termination date in an exclusive listing

C. Failure to give a copy of the contract to the person who signed it at the time they sign

D. Taking an option on a property and collecting a commission on that option 

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Answer: A

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5 Keys Summary

• Taking a Net Listing is generally not a violation of Real Estate Law in California, provided the broker adheres strictly to disclosure rules.

• To avoid a violation, the broker must provide the seller with a full disclosure of all material facts, including the property's value and the precise amount of compensation (profit) the broker will receive from the sale, and obtain consent.

• Conversely, the failure to put a definite termination date in an exclusive listing agreement is explicitly listed as a grounds for disciplinary action against a broker's license.

• Failure to deliver a copy of the contract to the person signing it at the time it is signed is a direct violation of the Real Estate Law.

• A broker taking an option on a property while listing it (listing-option) and collecting a commission or profit requires full disclosure of the profit amount and written consent from the principal before the option is exercised; failure to do so constitutes a secret profit violation.

Explanations

Taking a net listing is generally legal in California, provided the broker adheres to strict disclosure requirements. The law mandates that the broker fully disclose in writing the selling price, the seller's expected net price, and the broker's compensation amount before accepting any offer. As long as these disclosures are made and consent is obtained, a net listing itself is not a violation.

The other options represent clear violations of real estate law:

D. Taking an option on a property and collecting a commission on that option (without proper disclosure and consent) is a violation. While "listing with an option" is legal in California, an agent must make full disclosure of all material facts to the seller, including any potential profit the agent stands to make by exercising the option and selling the property to a third party, and must obtain the seller's written approval before exercising the option. Failing to do so, especially by making a "secret profit," is a serious breach of fiduciary duty and a violation.

B. Failure to put a definite termination date in an exclusive listing is a violation. Exclusive listing agreements, such as "Exclusive Authorization and Right to Sell" or "Exclusive Agency," must include a specific termination date to be valid and to avoid disciplinary action from the Department of Real Estate (DRE).

C. Failure to give a copy of the contract to the person who signed it at the time they sign is a violation. Brokers are legally required to provide copies of all signed documents to the parties who signed them immediately upon signing.

Concepts Definitions

Net Listing: A listing agreement where the broker's commission is the amount by which the sale price exceeds a specified net amount desired by the seller. It requires full disclosure to be legal in California.

Exclusive Listing: A contract that grants a single real estate broker the right to sell a property, typically for a specified period. Examples include "Exclusive Authorization and Right to Sell" and "Exclusive Agency" listings.

Termination Date: A mandatory end date for exclusive listing agreements.

Option (on property): A contract that gives one party (the optionee) the right, but not the obligation, to purchase a property at a specified price within a certain time period [principlesLS, 226]. When an agent takes an option on a property they are listing, it requires specific disclosures and consent from the principal to avoid conflicts of interest and violations.

Disclosure: The act of revealing all known material facts relevant to a transaction to all parties involved, especially by an agent to their principal.