Ch.1 Quiz -Rockwell

Which of the following is not a common law method of creating an agency relationship? a. by express agreement b. by necessity c. by ratification d. by estoppel

b. by necessity Explanation: An agency relationship may be created by express agreement, ratification, or estoppel.

In a real estate transaction, the law requires which persons to inspect the property and disclose any latent defects they observe? a. buyer b. seller c. listing agent and selling agent d. listing agent only

c. listing agent and selling agent Explanation: The listing agent and any cooperating agents must conduct a visual inspection of the property and disclose observed conditions to prospective buyers.

Disclosure of and consent to a dual agency: a. are not required in a transaction where both agents work for the same broker b. must occur only after the parties sign the purchase agreement c. must be in writing d. allow the agent to promote the interest of one party over that of another party

c. must be in writing Explanation: Dual agency is legal in California only if it is disclosed and consented to in writing.

You represent the seller. Which of the following could not be considered confidential information? a. the sellers are divorcing and need a quick sale b. the seller has already made an offer on another house c. the basement is subject to flooding during winter rains d. the seller is facing bankruptcy

c. the basement is subject to flooding during winter rains Explanation: If the basement floods, this is a latent defect that must be disclosed, even if the seller asked that you keep that information confidential.

You represent the seller in a transaction. You receive a low-ball offer from a buyer that you represented several years ago when he was selling a property. You know that he is wealthy and will be able to afford the full amount. You may: a. tell the seller, since it's in her best interest b. not tell the seller, unless you receive both parties' consent to dual agency c. not tell the seller, since you continue to owe the duty of confidentiality d. tell the seller if the statute of limitations has run out on your agency agreement with the buyer

c. not tell the seller, since you continue to owe the duty of confidentiality Explanation: The duty of confidentiality survives the end of an agency relationship, especially if you encounter your former principal on the opposing side of a new transaction.

At which point in a transaction should you disclose your agency status? a. at closing b. when a party asks who you represent c. after the parties sign the purchase agreement d. as soon as practicable

d. as soon as practicable Explanation: You must disclose your agency status to each party as soon as practicable. The agency relationships must also be confirmed with an agency confirmations statement.

Services a seller's agent may lawfully provide to a buyer include all of the following EXCEPT: a. Providing advice regarding an amount to offer the sellers b. Disclosing pertinent information about the property and neighborhood c. Helping the buyer secure financing d. Presenting the buyer's offer to the seller

a. Providing advice regarding an amount to offer the sellers Explanation: A seller's agent may help the buyer fill out a purchase offer form and present it to the sellers, but must always act in the seller's best interest, and so should not give the buyers negotiating suggestions.

Which of the following would be considered a material fact that an agent would be compelled to disclose? a. The roof leaks during rainy weather b. The house was the site of a suicide five years ago c. The house was once rented by gang members d. The house was once the headquarters for a doomsday cult

a. The roof leaks during rainy weather Explanation: An agent must disclose latent defects that would not be discovered through ordinary inspection, such as a leaking roof. It is not material if the house was the site of a crime, gang activity, or political or religious activity.

Which of the following would not be an example of dual agency? a. an agent represents a seller whom the agent represented as a buyer a decade ago b. an agent represents both parties in a transaction with their written consent c. both the buyer's and seller's agents represent the same broker d. a seller's agent provides advice to potential buyers, creating the impression that he was acting in the buyers' best interest

a. an agent represents a seller whom the agent represented as a buyer a decade ago Explanation: An agent may represent the same person in successive transactions without a dual agency being formed. Dual agency may be created by written agreement or an agent's inadvertent actions.

A dual agent owes the duty of loyalty to: a. both parties b. neither party c. whichever party she began working with first d. the seller

a. both parties Explanation: A dual agent owes the duty of loyalty to both parties. For instance, a dual agent will not be allowed to disclose either party's confidences to the other party.

All of the following are potential benefits of buyer's agency, EXCEPT: a. duty of reasonable care and skill b. access to more properties c. objective advice on properties d. help with negotiation

a. duty of reasonable care and skill Explanation: All parties are entitled to the duty of reasonable care and skill from all licensees, regardless of whom they represent.

Which of the following is the customary method through which a buyer's agent may be compensated? a. Hourly rate b. Commission split with listing agent c. Flat fee paid by buyer d. Percentage of sales price, paid by buyer

b. Commission split with listing agent Explanation: In most cases, a buyer's agent will be paid through a commission split, in which the buyer's agent receives a portion of the commission paid to the listing agent. All of the other options are allowable, but commonly used only if buying a property not listed with an MLS.

A clause in a listing agreement states that any member of an MLS who attempts to find a buyer for a listed property is a cooperating agent, rather than an agent for the seller. This is a/an: a. unilateral offer of subagency b. offer of cooperation c. dual agency agreement d. agency by implication

b. offer of cooperation Explanation: Under an offer of cooperation, other agents from an MLS are considered cooperating agents rather than agents of the seller.

An agent receives an offer of $350,000 on a property that she has listed for $355,000. When she is about to present the offer to the sellers, another offer comes in for $300,000. She should: a. present the lower offer only if the sellers reject the higher offer b. present both offers at the same time c. present the higher offer only after the sellers reject the lower offer d. discard the lower offer, as it is clearly frivolous

b. present both offers at the same time Explanation: An agent must present all offers to the principal in a timely manner, even offers that the seller is likely to reject.

In a dual agency, the duty of loyalty requires the agent to: a. disclose the negotiating positions of the parties b. take no action that is harmful to either party's interest c. disclose all confidential information to both parties d. choose which party's interest is the most important

b. take no action that is harmful to either party's interest Explanation: Because of the difficulty of being loyal to parties with conflicting interests, a dual agent may not disclose confidential information about the parties. Instead, the agent must refrain from taking action that is detrimental to either party's interest.

Which of the following is not a duty owed to every party in a transaction? a. Reasonable care and skill b. Honesty and good faith c. Confidentiality d. Agency disclosure

c. Confidentiality Explanation: An agent owes the duty of confidentiality only to his or her principal.

In which of the following real estate transactions would a principal not be vicariously liable for the actions of her agent? a. a principal instructed an agent not to mention a latent defect b. a principal learned that an agent had not revealed a latent defect, and approved the agent's actions after the fact c. an agent arranged a sale of a property without revealing latent defects, from which the seller profited d. an agent commingled the principal's trust funds with the agent's own money

d. an agent commingled the principal's trust funds with the agent's own money Explanation: A principal may be vicariously liable for harm caused to other parties by the principal's agent. Vicarious liability may apply even if the principal did not authorize or approve of the agent's actions.

A person who has been authorized by another person to represent that person in a transaction is a/an: a. agent b. principle c. fiduciary d. both A and C

d. both A and C Explanation: A person who represents another in a transaction is an agent. Because of the position of trust that an agent is in, an agent is also considered to be a fiduciary.

A real estate licensee who introduces the buyer and seller to each other, but does not represent either party in the transaction, would be a: a. dual agent b. subagent c. cooperating agent d. finder

d. finder Explanation: A finder or middleman does not represent either party in a transaction. He or she merely arranges an introduction between the parties.

At an open house the listing agent begins giving advice to a prospective buyer regarding how much to offer for the house, without explaining that she is a representative of the sellers. Which of the following statements is NOT true? a. the agent is not acting in accordance with her agency status b. the agent is acting as an undisclosed dual agent c. the agent has breached fiduciary duties to both parties d. the agent has not violated any duties, because she is not performing real estate services for the buyers

d. the agent has not violated any duties, because she is not performing real estate services for the buyers Explanation: The agent has become an undisclosed dual agent, and then breached duties of loyalty to each party.