Law of Agency
Who is NOT usually the principal in a real estate transaction? An agent A tenant A landlord A buyer
An agent
Which of the following is obligated by law to furnish a Seller's Disclosure Notice? A builder of a new home A bank that has acquired the property by foreclosure An investor An attorney handling an estate
An investor
Only a _______ may technically enter into an agency relationship with the buyer or seller. Licensed salesperson Landlord Broker Private owner
Broker
Which of the following professionals does TREC NOT regulate? Building contractors Real estate brokers and salespersons Easement/right-of-way agents Real estate inspectors
Building contractors
A listing term ended last week. The agency relationship has been terminated by _______. Revocation Renunciation Expiration Mutual agreement
Expiration
If a potential buyer asks the agent if the former owner of the property died from AIDS the agent should: Tell the truth Say they do not know Explain that any answer to them may be a violation of federal law Tell the buyer that is confidential and refuse to answer
Explain that any answer to them may be a violation of federal law
Buyer D decides to end his or her agency relationship with Agent D. All of the following statements are true EXCEPT: Buyer D must wait for their agency relationship to expire. Buyer D must give Agent D written notice of the revocation. If Buyer D has breached the terms of the buyer representation agreement, he or she may be liable for damages to Agent D. Buyer D may fire Agent D at any time.
If Buyer D has breached the terms of the buyer representation agreement, he or she may be liable for damages to Agent D.
If a buyer assumes that a salesperson represents his or her interests because of the salesperson's actions, an agency relationship might be formed. This is called: Implied agency Oral agreement Express agreement Ratification
Implied agency
Which TREC form meets the requirement for the written statement about agency law? Information About Brokerage Services form Seller's Disclosure Notice Agency Disclosure Information form Information About Agency form
Information About Brokerage Services form
The duty of reasonable care includes which two components? Confidentiality and accounting Agency disclosure and integrity Loyalty and obedience Integrity and competency
Integrity and competency
The _________ makes all decisions and signs all documents. The agent cannot bind the principal
Principle
Which of the following services could be done for both buyer clients and third party buyers? Tell the buyer that the property is overpriced. Disclose material defects about the property. Discuss the seller's motivation. Point out the quality of the neighborhood.
Disclose material defects about the property.
An intermediary might also be similar to a: Single agent Cooperating agent Dual agent in other states Subagent
Dual agent in other states
When a license holder acts as a broker or salesperson, he or she must uphold all of the following duties to third parties EXCEPT: Duty of honest and fair dealing Duty of confidentiality Duty of accounting Duty of agency disclosure
Duty of confidentiality
Before taking a listing the agent should _______. Measure the house Put up a sign Educate the seller about the probable sales price Run an ad in a newspaper
Educate the seller about the probable sales price
Express agency agreements can be _______. Oral only In writing only Ratification Either written or oral
Either written or oral
If a principal appoints an agent and the agent accepts, an agency relationship has been formed by: Implied agreement Ratification Express agreement Blatant agreement
Express Agreement An express agreement can be oral or in writing --
A broker can be found guilty of a violation of the license act for which of the following practices? Performing a market analysis on a property that does not meet the seller's expectations on the value Disclosing to a buyer customer that the seller's property has a leaky roof Writing up an offer on seller client's property with a buyer customer Acting as both broker and principal without knowledge and consent of all parties involved in the transaction
Acting as both broker and principal without knowledge and consent of all parties involved in the transaction
Real Estate license holders sometimes decide to represent family or friends without charging them a fee. Should their broker be concerned about liability? Since there is no fee, there is no real risk for the agent or their broker. Agents should have all terms and expectations in writing to limit their liabilities. A court would not hold an agent liable when they were just trying to help. The broker will not need to be concerned.
Agents should have all terms and expectations in writing to limit their liabilities.
Risk management tools include _______. Having a safety policy regarding meeting clients for the first time. Having E &O insurance Documenting everything All of the above
All of the above
What does the warranty of authority rule establish? An agent has no tort liability if all parties give written consent. A principal is not liable for the actions of the agent unless the principal is aware of or participates in a misrepresentation or concealment. An agent cannot be held liable if the principal cannot fulfill the terms of the agreement with the third party. The third party has no liability in a purchase and sale transaction.
An agent cannot be held liable if the principal cannot fulfill the terms of the agreement with the third party.
All of the following statements are true about intermediaries EXCEPT: An intermediary must fully represent the interests of both parties. To act as an intermediary, the broker must obtain the written consent of both parties. A salesperson cannot act as an intermediary. The intermediary agent must not disclose confidential information about one party to the other.
An intermediary must fully represent the interests of both parties.
Which of the following statements are true about fiduciary duties? The license holder owes fiduciary duties to all parties. Fiduciary duties are owed by the individual in a position of trust to another individual, meaning that the agent owes these duties to the principal. Fiduciary duties are not the law of agency; they are simply ethical or moral obligations. Fiduciary duties are not described in the Texas Real Estate License Act or the Rules of the Texas Real Estate Commission.
Fiduciary duties are owed by the individual in a position of trust to another individual, meaning that the agent owes these duties to the principal.
What is the maximum penalty for an individual under the Sherman Antitrust Act? Fines up to $50,000 and three years of imprisonment Only fines up to $100,000 Fines up to $100,000 and three years of imprisonment Fines up to $75,000
Fines up to $100,000 and three years of imprisonment
For how long must a licensee retain a documentary record of each deposit or withdrawal from a trust account? Three years Four years Five years Six years
Four years
How long does a purchaser have to file a law suit against the agent and/or seller? Four years from the date of the transaction Five years from the date of discovery of the problem Four years from the date of discovery of the problem None of the above
Four years from the date of discovery of the problem
How long does the client have to file a TREC complaint? Four years from the date of the transaction Three years from the date of the transaction Four years from the date of the discovery of the problem None of the above
Four years from the date of the discovery of the problem
Ana is a new salesperson and she's just successfully closed her first sale. She is excited to get her first commission check. Where will it come from? The buyer The escrow agent The seller Her sponsoring broker
Her sponsoring broker
An important consideration when looking for listings is _______. The property on a corner lot? The seller's motivation. How long the seller has owned the property? Does the property have a pool?
How long the seller has owned the property?
What determines if a person is an employee or an independent contractor? The broker's office policy IRS guidelines Common law Tradition
IRS guidelines
When handling the funds of a client or a third party, the licensee must: Have the title company or another escrow agent hold the funds in an escrow account. Keep careful records of any funds placed in the licensee's personal accounts. Keep the money in a trust account that is separate from the licensee's personal or business accounts. Withdraw all operating expenses directly from the trust account.
Keep the money in a trust account that is separate from the licensee's personal or business accounts.
What is tort liability? Liability for personal injuries or damage to property Liability for an intentional or negligent wrongdoing or a breach of duty Liability for deceptive trade practices Liability for employee law violations
Liability for an intentional or negligent wrongdoing or a breach of duty
When a principal agrees to an action performed by an agent that is outside the scope of the agent's authority, it is said to be an agency created by which of the following? Express agreement Implied agreement Ratification Written agreement
Ratification
An agent has suddenly become very busy and has decided to hire an assistant. The agent does not know the company policy regarding hiring an assistant. Where should the agent begin to research what the company's policy is regarding hiring assistants? The other agents in the office. Read more about it on google. Read about it in the office manual and then discuss with broker if possible. Read an article in last month's TAR magazine regarding hiring assistants.
Read about it in the office manual and then discuss with broker if possible.
A person may not maintain an action to collect compensation for an act as a broker or salesperson that is performed in this state unless the person alleges and proves all of the following EXCEPT: The person was a licensed broker or salesperson or an attorney licensed in Texas at the time the act was commenced. The agreement to pay is in writing and signed by the party against whom the action is brought. The license holder is a member of the Texas Association of REALTORS®. The license holder gave the written notice regarding getting an abstract or a title policy to the buyer.
The license holder gave the written notice regarding getting an abstract or a title policy to the buyer.
According to IRS guidelines which of the follow do not fit the description of an independent contractor? The company usually has a procedures manual that includes suggested procedures. The supervising broker divides commissions based upon time spent in the office and outside referrals. The licensee is paid from commissions, not from a salary. The licensee pays his or her own business expenses, including license fees.
The licensee is paid from commissions, not from a salary.
Which of the following statements is TRUE? The principal is the customer and the third party is the client. The third party is the client and the agent works with the principal. The agent works for the client and is employed by the customer. The principal is the client and the third party is the customer.
The principal is the client and the third party is the customer.
Salesperson D disclosed to a potential buyer that the property had structural defects in the foundation. The buyer asked the salesperson for an opinion on the severity of the defects and the salesperson declined to answer. Instead, the salesperson gave the buyer a list of professionals who could inspect it. Which of the following is TRUE? The salesperson should have been able to answer the question. The buyer should hire another agent the will answer the questions. The salesperson did the right thing. If the salesperson did not know he should have asked a foundation company for help.
The salesperson did the right thing.
In which year did the National Association of REALTORS® create the Code of Ethics for the real estate industry?
1913
In which year was the Deceptive Trade Practices Act (DTPA) established? 1973 1962 1957 1971
1973
Lead Based Paint Disclosure would be required if the property were built before _______. 1967 1978 1983 1977
1978
A corporation found guilty of a violation of the Sherman Anti-Trust Act is subject to _______. A fine of $1,000,000 A fine of $100,000 A fine of $1,000 Nothing
A fine of $1,000,000
As defined in the Texas Real Estate License Act, what is a sub-agent? A license holder who represents a principal through cooperation with the principal's broker and who is not sponsored by or associated with the principal's broker. A license holder who procures a buyer for a property through a multiple listing service and cooperates with the listing agent. An associated licensee who is appointed by the supervising broker to represent the supervising broker's principal. A license holder who represents both the buyer and the seller in the transaction.
A license holder who represents a principal through cooperation with the principal's broker and who is not sponsored by or associated with the principal's broker.
Which of the following has to be disclosed to potential buyers? A murder/suicide that has taken place on the property. A seller that died in the home of cancer. A seller that died in the home from AIDS. All of the above
A murder/suicide that has taken place on the property.
Which of the following statements is TRUE? A written agency agreement is generally considered the safest way to enter into an agency relationship. All agency agreements must be in writing. Agency relationships can be formed only by a principal expressly appointing an agent. Oral agreements are held to different rules than written agreements.
A written agency agreement is generally considered the safest way to enter into an agency relationship.
Which of the following statements about written agency agreements is TRUE? A written agreement is the only valid way to create an agency relationship. A written agency agreement that includes a written compensation agreement helps to ensure that the agent is eligible for compensation. The written agreement is the only way that an agent will be held to the duties of an agent. Real estate agents use the TREC listing agreement form to create an agency relationship between the licensee and the buyer.
A written agency agreement that includes a written compensation agreement helps to ensure that the agent is eligible for compensation.
All of the following are possible benefits of a multiple listing service EXCEPT: Agents benefit because the comprehensive list of properties in a particular area is useful in creating comparative market analyses. Sellers benefit from the fact that many agents have access to all listings. Buyers benefit from the large selection of properties available. Agents benefit because the multiple listing service guarantees relationships of sub-agency for all cooperating agents.
Agents benefit because the multiple listing service guarantees relationships of sub-agency for all cooperating agents.
In addition to his or her own actions, the broker also is generally responsible for the actions of: His or her principals His or her associated licensees 00The third party All parties involved in a transaction
All parties involved in a transaction
Two Brokers decided it only made sense to them for each to focus on different market areas. Broker A agreed to only work in the north part of the city and broker B agreed to only work in the southern part of the city. They each told their agents which section of the city was theirs. Were they in violation of any laws? Price fixing Allocations of customers or markets Boycotting Nothing, they have a right to make that decision
Allocations of customers or markets
Which of the following statements about deceptive trade practices is TRUE? Violations under the Texas Deceptive Trade Practices Act are limited to those that are explicitly spelled out in the act. Sellers of property who hire licensees to represent their interests are not considered consumers under the Texas Deceptive Trade Practices Act. Although an individual could not lose his or her real estate license under the Texas Deceptive Trade Practices Act, some deceptive practices under the act are also violations of the Texas Real Estate License Act.
Although an individual could not lose his or her real estate license under the Texas Deceptive Trade Practices Act, some deceptive practices under the act are also violations of the Texas Real Estate License Act.
When an agent commits a tort, the principal could be legally freed from the obligation to pay commission, which is called: Prevarication Equivocation Evasion Avoidance
Avoidance
What should an agent do to prevent implied, unintended agency? Disclose agency relationships to all potential customers upon initial contact. Disclose agency relationships after the party makes an offer on a property. It is safe to assume that the parties understand who the agent represents, so no disclosure is necessary. Disclose agency relationships at the closing of the transaction.
Disclose agency relationships to all potential customers upon initial contact.
Agency relationships are also generally _______ relationships. Fiduciary Universal Specific Conceptual
Fiduciary
Which duty does an agent owe to all parties? Loyalty Obedience Honesty and fair dealing Accounting
Honesty and fair dealing
Time Spent: 02 h 14 m CORRECT A(n) _______ arises when a party assumes consent to the relationship based solely upon inferences formed from communication with the other party. Implied agency relationship Express agency agreement Invalid agency relationship Listing agreement
Implied agency relationship
In Texas, an agent representing both parties in a transaction must act as a(n) _______. Seller's agent Buyer's agent Intermediary Universal agent
Intermediary
Which of the following things is NOT a general duty of a broker or salesperson? Honest and fair dealing Loyalty to all parties Accounting Agency disclosure
Loyalty to all parties
A single agency brokerage _______. Only represents sellers Only represents buyers Never has a customer Never does an intermediary transaction
Never does an intermediary transaction
A builder wanted to pay an agent directly for bringing in a buyer. Is this permitted under the License Act? Yes, we have to follow the consumer's wishes. Yes, as long as the salesperson tells the broker about the transaction. No, salespersons can only receive money from their broker. No, all commissions must be paid at the title company.
No, salespersons can only receive money from their broker.
All of the following are duties that the principal owes the agent EXCEPT: Compensation Information Obedience Availability
Obedience
In an agency relationship, the _______ authorizes the agent to represent his or her interests. General agent Third party Principal
PRinciple
Which of the following actions might help a real estate license holder prevent lawsuits under the Texas Deceptive Trade Practices Act? Personally inspecting the property Stating his or her own opinions of the property Having all parties sign lawsuit waivers Practicing vigilant disclosures
Practicing vigilant disclosures
A broker can have four positions in an agency relationship, which include all of the following EXCEPT: Tertiary agent Buyer's or seller's agent Sub-agent Intermediary
Tertiary agent
Most lawsuits brought against Texas real estate professionals are under the: Texas Deceptive Trade Practices Act Texas Real Estate License Act Rules of the Texas Real Estate Commission Sherman Antitrust Act
Texas Deceptive Trade Practices Act
The act of receiving a commission payment does NOT require which of the following things? That the licensee was actively licensed when the commission agreement was executed. That the commission agreement was in writing. That the licensee advised the buyer to have the abstract examined by an attorney. That the licensee be actively licensed at the time the commission is paid.
That the licensee be actively licensed at the time the commission is paid.
Every buyer that calls for information regarding a company listing should be told _______. That is a well-priced property. Yes, our company is representing that seller. The activity on that property is wonderful. How soon can you come in?
Yes, our company is representing that seller.
MLS provides a method by which brokers learn about other brokers listings. If one of these selling brokers sells an MLS property does their share of the commission have any protection? Yes, the listing brokers offer in MLS becomes a contractual agreement between brokers. No protection but most listing brokers keep their promises. No, the selling broker should be paid by the buyer. No.
Yes, the listing brokers offer in MLS becomes a contractual agreement between brokers.
In addition to avoidance, the outcomes of tort liability include all of the following EXCEPT: Condescension Professional sanctions Rescission Legal recourse
Condescension
Seller A and Agent A mutually decide to end their agency relationship. Which duties does the agent continue to owe the seller? Good faith and reasonable care Confidentiality and accounting Confidentiality and good faith Good faith and accounting
Confidentiality and accounting
TREC's primary mission is to protect which of the following people? The real estate licensee employed by a broker The broker who employs real estate licensees Consumers of real estate services Real estate developers
Consumers of real estate services
A Seller calls a friend of hers who is a REALTOR®. The seller has her home listed with another real estate company. She tells her friend that she is unhappy with her agent. The REALTOR® should: Tell her friend how to terminate the listing with the other broker. Tell her friend to call the other agent and/or the other broker and tell them her concerns. Tell her friend she cannot help her while she is under contract with another broker. Both B and C are correct.
Both B and C are correct.
When you meet with an unrepresented buyer or seller for the first time to discuss a specific parcel of real estate, you must _______. Shake hands Ask them only to speak English Present the Information about Brokerage Service form Tell them how long you have been licensed
Present the Information about Brokerage Service form
Which of the following statement is TRUE? Having a policy manual is not necessary for a brokerage office. The Texas Real Estate Commission mandates that the broker must have a brokerage policy manual. The Texas Real Estate Commission suggests that the broker should have a brokerage policy manual. Since most agents are independent contractors a policy manual is not needed.
The Texas Real Estate Commission mandates that the broker must have a brokerage policy manual.
Broker and Seller agree orally to enter into an agency relationship. Broker promises to represent Seller's interests, and Seller promises to give Broker 4.5% commission from the sale of the house. All of the following statements are true EXCEPT: The agency relationship is valid. This agreement is not binding on the seller. Broker will be held to the duties of an agent. Seller will be held to their promise of commission.
The agency relationship is valid.
When an agent talks to a prospective buyer for the first time about a company listing the agent must tell the prospective buyer _______. To have a good day They can show them the property later today The agent's company is representing the seller of this property The buyer must get pre-qualified before looking at property
The agent's company is representing the seller of this property
In order for a licensee to maintain an action to recover a commission, which of the following conditions must be met? The licensee has only a verbal agreement with the seller to pay the commission. The agreement or promise to pay is in writing. Only that the licensee is actively licensed with TREC. Only that the commission provision is included in the purchase contract.
The agreement or promise to pay is in writing.
The listing agreement usually creates an agency relationship between: The broker and the buyer The buyer and the seller The broker and the seller The broker and the salesperson
The broker and the seller
The only requirement for the formation of an agency relationship is: The consent of the third party A written listing agreement An express agreement The consent of the agent and the principal
The consent of the agent and the principal
An example of extinction (destruction) of subject matter is: The principal becomes bankrupt. The agent fulfills the terms of the agreement. The relationship reaches its expiration date. The house involved in the transaction burns down.
The house involved in the transaction burns down.
TREC requires that the licensee must advise the buyer in writing that the buyer should either have the abstract to the title examined by a lawyer or he or she should be provided with or obtain a title insurance policy. When must the licensee fulfill this obligation? When the buyer signs a purchase and sale offer Upon initial contact with a potential buyer Upon substantive dialogue with a potential buyer When a buyer signs a buyer representation agreement
When the buyer signs a purchase and sale offer
Which of the following agreement BEST ensures that an agent will be entitled to compensation in a transaction? Oral agreement with seller Written agreement with the party paying the commission Oral agreement with buyer None of the above
Written agreement with the party paying the commission
In order to place a "For Sale" sign on an owner's property, the agent must obtain which of the following things? Oral consent of the seller Oral consent from his supervising broker Written consent from the owner Written consent from his supervising broker
Written consent from the owner
Who should develop an agency policy for a real estate company? Each individual agent The sponsoring broker TREC An Association of REALTORS®
The sponsoring broker
The duty of honesty and fair dealing would require which of the following actions from a broker or salesperson? Conveying accurate information about material facts to all parties Disclosing the principal's confidential information to the third party Acting in the best interests of all parties Disclosing all information about deaths on a property
Conveying accurate information about material facts to all parties
Licensee A shows a property to a potential buyer who asks for the licensee's opinion of an estimate for some repairs. Licensee A represents the seller of this property. How should Licensee A respond? To act in her client's best interest, Licensee A should tell the buyer that the repairs probably would not be expensive. Licensee A should refrain from stating any opinion and should advise the buyer to seek an estimate from a professional in that field. Licensee A could give her honest opinion but should tell the buyer that she is only giving an opinion. Under the duty of reasonable care, Licensee A is expected to have some knowledge of these matters, so she should be able to give a reasonable estimate.
Licensee A should refrain from stating any opinion and should advise the buyer to seek an estimate from a professional in that field.
TREC can suspend or revoke a real estate license or take other disciplinary action if a licensee commits any of the following actions EXCEPT: Makes a material misrepresentation to a potential buyer concerning a significant defect known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property Receives compensation from more than one party to a real estate transaction with the consent and full knowledge of all parties to the transaction Fails or refuses to provide, on request, a copy of a document relating to a real estate transaction to a person who signed the document Induces or attempts to induce a party to a contract of sale or lease to break the contract for the purpose of substituting a new contract
Receives compensation from more than one party to a real estate transaction with the consent and full knowledge of all parties to the transaction
When an agent decides to leave an agency relationship, it is said to be termination of the agency relationship by _______. Revocation Mutual agreement Fulfillment of purpose Renunciation
Renunciation
The _______ is required by the Texas Property Code. Seller's disclosure of property condition TREC seller's disclosure form TAR seller's disclosure form None of the above
Seller's disclosure of property condition
In the relationship with a buyer or a seller, a real estate agent is usually a: General agent Universal agent Primary agent Special agent
Special agent
Which of the following situations illustrates the agent breaching a duty to the client? The seller has already received one promising offer on the property. The agent receives another offer, but it's much lower, so the agent does not give the offer to the seller. A potential buyer asks the agent if she thinks the seller will accept lower offers. The agent represents the seller and declines to comment. The agent represents the buyer and learns of information about the seller that may affect the transaction. She immediately passes this information on to the client. The agent, representing the seller, withholds confidential information from the buyer to further the seller's interests.
The seller has already received one promising offer on the property. The agent receives another offer, but it's much lower, so the agent does not give the offer to the seller.
Salesperson B represents Seller A. When conducting a tour of the property, Salesperson B notices that the first-floor ceiling is dripping in a corner of a closet, probably from a leaky pipe. He asks Seller A about the drip, and Seller A insists that there is no problem. Seller A does not include any statements about leaky pipes or plumbing problems on the Seller's Disclosure Form. Salesperson B decides that since Seller A insists that there is no problem, he has no obligation as the agent to disclose the drip to potential buyers. Buyer C purchases the property, and after the transaction closes, she notices the drip, which she eventually learns is the result of a broken pipe. She then sends a letter of impending lawsuit to the office of Salesperson B. Which party or parties are probably liable in this situation? The seller only The salesperson and his supervising broker only The seller and the salesperson only The seller, the salesperson, and the salesperson's supervising broker
The seller, the salesperson, and the salesperson's supervising broker
TREC has primary goals, which include all of the following EXCEPT: To ensure that license applicants meet the legal requirements To assist license holders with the daily operations of their businesses To enforce the laws and rules of the commission To assist and protect consumers of real estate services, thereby fostering economic growth in Texas
To assist license holders with the daily operations of their businesses
What is the purpose of the Rules of the Texas Real Estate Commission? To set forth all rules and statutes that govern the real estate profession To list all prohibited practices and violations for licensed real estate professionals To expand upon and interpret the Texas Real Estate License Act To outline the methods that TREC must follow
To expand upon and interpret the Texas Real Estate License Act
Which of the following things may an intermediary do for the parties in a transaction? Disclose to the buyer that the seller will accept less than listing price without written permission. Disclose to the seller that the buyer is willing to offer more than asking price without written permission. Treat all parties honestly. Disclose confidential information to either party without the consent of the party affected by the information.
Treat all parties honestly.
When an agent fails to follow the rules of intermediary, while allowing two parties in a transaction to believe they are both being represented in the transaction it is _______. Undisclosed Dual agency Double exposure Double agent Duality
Undisclosed Dual agency
The IABS form must be given to all _______. Clients Buyers Sellers Unrepresented customers
Unrepresented customers
Under the duty of agency disclosure, when must a licensee give an individual the written statement of agency law? Upon initial contact At the open house Before the transaction closes Upon first substantive dialogue
Upon first substantive dialogue
Which of the following services would a buyer's agent NOT provide to the buyer? Use the market analysis performed for the seller to influence buyer's offering price. Show the buyer suitable properties. Prepare a market analysis on property strictly for the buyer. Maintain confidentiality for the buyer.
Use the market analysis performed for the seller to influence buyer's offering price.