Practice of Real Estate and Contracts

An exclusive right to sell listing pays the broker a commission if the property sells during the term regardless of who procures the buyer, offering the greatest protection.

In an open listing only the broker who procures the buyer earns a commission, and the owner may sell personally without owing a commission.

A net listing lets the broker keep any amount above the seller's stated net price and is permitted only with full disclosure of the selling price and commission.

Under the statute of frauds, contracts for the sale of real property must be in writing and signed by the party to be charged to be enforceable.

A valid contract requires capable parties, mutual consent, lawful object, and sufficient consideration.

A counteroffer rejects the original offer and creates a new offer; an option gives the optionee a right, but not the obligation, to buy within a set time and price.

A broker must place trust funds into a neutral escrow, a trust account, or the principal's hands not later than three business days after receipt, and never commingle them.

Using client trust funds for personal or business expenses is commingling and conversion, a serious violation subject to DRE discipline.

Licensees must deal honestly with all parties; making false statements about a competing listing is unethical and possibly fraudulent.

Leasing property and collecting rents for others for compensation are licensed activities, so a property manager generally must be a licensee or work under a broker.

California prohibits nonrefundable residential security deposits; all deposits must be refundable subject to lawful deductions and statutory caps.

Property management agreements should be in writing and define the manager's duties and compensation.

Commission equals the sale price times the commission rate; splits between listing and selling sides and between broker and salesperson are set by agreement.

Proration divides shared expenses like taxes and dues between buyer and seller by the closing date, often using a 360-day year and $10 per day per $3,600 annual figure as an example.

Area of a rectangle equals length times width, one acre equals 43,560 square feet, and profit or loss percentages are figured on the original cost.