Chapter 4 Quizzes and Tests
Q: An agent informs a buyer that a provision in a contract is very commonplace. After explaining the clause, the agent assures the buyer that the clause does not mean anything significant. If something goes wrong with the transaction, the agent could be liable for (9375)
A: practicing law without a license. [CORRECT] Explain: An agent should not act or speak outside the agent's area of expertise. A customer may rely on anything an agent says, and the agent will be held accountable. For example, an agent represents that a property will appreciate. The buyer interprets this as expert investment advice and buys the property. If the property does not appreciate, the buyer may hold the agent liable.
Q: An owner agrees to pay a broker for procuring a tenant unless it is the owner who finds the tenant. This is an example of a(n) (8316)
A: exclusive agency agreement. [CORRECT]
Q: An owner agrees to pay a broker for procuring a tenant unless it is the owner who finds the tenant. This is an example of a(n) (9353)
A: exclusive agency agreement. [CORRECT] Explain: An exclusive agency listing authorizes a single broker to sell the property and earn a commission, but leaves the owner the right to sell the property without the broker's assistance, in which case no commission is owed.
Q: From an agent's point of view, the most desirable form of listing agreement is a(n) (9351)
A: exclusive right to sell. [CORRECT] Explain: The exclusive right to sell listing, or "exclusive," gives the agent the most control over the property and the greatest likelihood of being compensated for his or her marketing efforts.
Q: The type of listing that assures a broker of compensation for procuring a customer, regardless of the procuring party, is a(n) (8315)
A: exclusive right-to sell agreement. [CORRECT]
Q: An agent owes customers several duties. These may be best described as (8191)
A: fairness, care, and honesty. [CORRECT]
Q: A principal empowers an agent to conduct the ongoing activities of one of her business enterprises. This is an example of (8184)
A: general agency. [CORRECT]
Q: Audrey wants to take a vacation. To do so, she authorizes an agent to conduct the operations of one of her business enterprises. The kind of agency she has established is (9357)
A: general. [CORRECT] Explain: In a general agency, the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts.
Q: An agent fails to discover flood marks on the walls in the basement of a property. The agent sells the property, and the buyer later sues the agent for failing to mention the problem. In this case, the agent (8192)
A: has an exposure to a charge of negligent misrepresentation. [CORRECT]
Q: An owner's agent is showing a buyer an apartment building. The buyer notices water stains on the ceiling, and informs the agent. The agent's best course of action is to (8190)
A: inform the seller. [CORRECT]
Q: A broker is hired to procure a customer for a client. In order to earn compensation, the agent must procure a customer who (8321)
A: is ready, willing, and able to transact. [CORRECT]
Q: The degree of authority granted by a residential brokerage listing agreement generally allows the agent to (9376)
A: market, sell and show the property. [CORRECT] Explain: Special agency limits the scope of the broker's authority to specific activities, generally those which generate customers and catalyze the transaction. A special agency agreement usually does not authorize a broker to obligate the client to a contract as a principal party. Normally, principals do not delegate the authority to negotiate price to an agent in a residential transaction.
Q: To be valid, a listing agreement (8314)
A: may be oral or written. [CORRECT]
Q: An agent is operating as a disclosed dual agent on a transaction. In this case, the agent (8196)
A: may not represent one party's interests to the detriment of the other. [CORRECT]
Q: A property owner agrees to pay a broker a commission, provided the owner receives a minimum amount of proceeds from the sale at closing. This is an example of a(n) (8318)
A: net listing. [CORRECT]
Q: A property owner agrees to pay a broker an open-ended commission as the difference between the sale price and a net amount, provided the owner receives a minimum amount of proceeds from the sale at closing. This is an example of a(n) (9374)
A: net listing. [CORRECT] Explain: A net listing is one in which an owner sets a minimum acceptable amount to be received from the transaction and allows the broker to have any amount received in excess as a commission, assuming the broker has earned a commission according to the other terms of the agreement.
Q: A landlord promises to compensate a broker for procuring a tenant, provided the broker is the procuring cause. This is an example of a(n) (8317)
A: open listing. [CORRECT]
Q: A landlord promises to compensate a broker for procuring a tenant, provided the broker is the procuring cause. This is an example of a(n) (9370)
A: open rental listing. [CORRECT] Explain: An open listing is a non-exclusive authorization to sell or lease a property. The owner may offer such agreements to any number of brokers in the marketplace. With an open listing, the broker who is the first to perform under the terms of the listing is the sole party entitled to a commission.
Q: An agent informs a buyer that a clause in a contract is standard language. After explaining the clause, the agent assures the buyer that the clause does not mean anything significant. If something goes wrong with the transaction, the agent could be liable for (8193)
A: practicing law without a license. [CORRECT]
Q: Which of the following is a dual agency situation? (9359)
A: One agent represents both sides in a transaction. [CORRECT] Explain: Dual agency means representing both principal parties to a transaction. The agent represents both buyer and seller or tenant and owner.
Q: What is a multiple listing? (9371)
A: A listing that is entered in a multiple listing service to enable cooperation with member brokers. [CORRECT] Explain: Though not a distinct type of listing agreement, multiple listing is a significant feature of brokerage practice. Multiple listing is an authorization to enter a listing in a multiple listing service.
Q: A salesperson, without an oral or written listing agreement, brings potential buyers to the seller. The seller says, "You can bring me buyers if you want, but I'm not paying you a commission." The salesperson then continues to direct buyers to the property. Which of the following is true about this situation? (9355)
A: An implied agency may have been created, with obligations to perform for both seller and agent. [CORRECT] Explain: Clients and agents may also create an implied agency listing based on substantive actions rather than on an express agreement. For example, if a seller allows a broker to undertake certain activities toward effecting a transaction without a specific authorization, but with full knowledge and consent, an implied agency may have been created.
Q: An agency relationship may be involuntarily terminated for which of the following reasons? (9341)
A: Condemnation of the property. [CORRECT] Explain: An agency relationship may terminate contrary to the wishes of the parties by reason of: death or incapacity of either party; abandonment by the agent; condemnation or destruction of the property; renunciation; breach; bankruptcy; or revocation of the agent's license.
Q: An agency relationship may be involuntarily terminated for which of the following reasons? (8187)
A: Death or incapacity of the agent [CORRECT]
Q: When a broker enters into a listing agreement, the broker has agreed to accept which of the following? (9345)
A: Fiduciary and contractual obligations with the client. [CORRECT] Explain: A listing agreement establishes an agency relationship between agent and client that commits the agent to the full complement of fiduciary duties to the client in fulfilling the agreement.
Q: If an agent has an exclusive listing to sell a property, and the property is then taken by eminent domain, what is the status of the listing? (9373)
A: It may be terminated against the agent's will. [CORRECT] Explain: A listing may terminate on grounds of: performance; infeasibility; mutual agreement; revocation; abandonment; breach; lapse of time; invalidity of the contract; incapacitation of either party; destruction of the property; or, in this case; involuntary title transfer.
Q: The amount of a real estate broker's commission is (8324)
A: established through negotiation with clients. [CORRECT]
Q: An agent enters into a listing agreement with a homeseller, but then becomes too busy to professionally fulfill the terms of the agreement. To solve the dilemma, the agent assigns the agreement to another licensee in the office. Which of the following is true about this situation? (9346)
A: The agent cannot assign the listing agreement. [CORRECT] Explain: Since a listing agreement is a personal service contract, it is not assignable. In particular, a broker cannot assign a listing to another broker.
Q: A principal discloses that she would sell a property for $150,000. During the listing period, the house is marketed for $180,000. No offers come in, and the listing expires. Two weeks later, the agent grumbles to a customer that the seller would have sold for less than the listed price. Which of the following is true? (8188)
A: The agent has violated the duty of confidentiality. [CORRECT]
Q: In which of the following contact situations would a seller's agent be expected to disclose his agency relationships? (9340)
A: The agent is showing the client's property to a prospective buyer. [CORRECT] Explain: Agency disclosure must occur upon "substantive contact" between the listing agent and a customer. Examples of substantive contact include: showing the prospect a property; eliciting confidential information from a prospect regarding needs, motivation, or financial qualification; and executing a contractual offer to sell or lease.
Q: One of the parties to an agency relationship defaults, and the agreement terminates. Which of the following is true? (9363)
A: The defaulting party may have a financial consequence. [CORRECT] Explain: Involuntary termination of the relationship may create legal and financial liability for a party who defaults or cancels. For example, a client may renounce an agreement but then be held liable for the agent's expenses or commission.
Q: Which of the following is true of the connection between compensation and the agency relationship? (9362)
A: The relationship is independent of any compensation arrangement. [CORRECT] Explain: It is important to understand that the agency relationship does not require compensation or any form of consideration. Nor does compensation define an agency relationship: a party other than the principal may compensate the agent.
Q: A multiple listing authorization gives a broker what authority? (8320)
A: To list the owner's property in a multiple listing service. [CORRECT]
Q: A multiple listing authorization gives a broker what authority? (9349)
A: To list the owner's property in a multiple listing service. [CORRECT] Explain: A multiple listing is not a distinct listing contract but rather a provision in an exclusive listing authorizing the broker to place the listing into a multiple listing service. A multiple listing service is an organization of member brokers who agree to cooperate in the sale of properties listed by other brokers in exchange for a share of the broker's resulting commission.
Q: When must a listing agent disclose his or her agency relationship to prospective tenants or buyers? (9369)
A: Whenever substantive contact is made beyond casual conversation. [CORRECT] Explain: A listing agent must disclose in writing to a buyer or tenant that the agent represents the owner in the transaction. This disclosure must occur before or at the first "substantive contact" with the customer prospect.
Q: A subagent is the agent of (9367)
A: a broker who has an agency relationship with a client. [CORRECT] Explain: In a subagency, a broker or licensed salesperson works as the agent of a broker who is the agent of a client. Subagents might include a cooperating licensed broker, that broker's licensed salespeople, and the listing broker's licensed salespeople, all of whom agree to work for the listing broker on behalf of the client.
Q: Agent Bob, who works for Broker Bill, obtains an owner listing to lease a building. Bill's other agent, Sue, locates a tenant for Bob's listing. In the absence of any arrangement to the contrary, Broker Bill in this instance is (8195)
A: a dual agent. [CORRECT]
Q: Implied agency arises when (8186)
A: a party creates an agency relationship outside of an express agreement. [CORRECT]
Q: Implied agency arises when (9368)
A: a party creates an agency relationship outside of an express agreement. [CORRECT] Explain: An agency relationship can arise by implication, intentionally or unintentionally. Implication means that the parties act as if there were an agreement. For example, if an agent promises a buyer to do everything possible to find a property at the lowest possible price, and the buyer accepts the proposition, there may be an implied agency relationship even though there is no specific agreement.
Q: An outside broker locates a seller for a buyer representative's client. In this instance, the outside broker is acting as (8194)
A: a subagent. [CORRECT]
Q: An agent's performance of due diligence concerning a listing can best be described as (8323)
A: ascertaining the facts about the client and the property at the onset of the listing period. [CORRECT]
Q: The standard of care and competence that a principal can expect from an agent is generally that which is (9379)
A: comparable to that of other practitioners in the area. [CORRECT] Explain: The agent is hired to do a job, and is therefore expected to do it with diligence and reasonable competence. Competence is generally defined as a "standard of practice" equal to the level of real estate marketing skills and knowledge of other practitioners in the area.
Q: One of the agent's fiduciary duties that continues even after a listing agreement expires is (9364)
A: confidentiality. [CORRECT] Explain: The confidentiality standard is one of the duties that extends beyond the termination of the listing: at no time in the future may the agent disclose confidential information.
Q: The duties of a transaction broker or facilitator include (9366)
A: disclosing material facts that affect the value of the property to both parties. [CORRECT] Explain: In the role of facilitator, the broker's only fiduciary duties and standards of conduct are those of accounting; skill, care, and diligence; honesty and fair dealing; and disclosure to both parties of all material facts in residential sale transactions affecting the property's value. Some states do not allow for this form of relationship in a real estate transaction.
Q: The duties of an agent acting as a facilitator are most similar to those of a (8197)
A: dual agent. [CORRECT]
Q: Among the fiduciary duties imposed on a real estate agent is the requirement to (9360)
A: present all offers to the principal regardless of their amount. [CORRECT] Explain: A conventional listing agreement does not authorize an agent to obligate the client to contracts, and it does not allow the agent to conceal offers to buy, sell, or lease coming from a customer or another agent. Further, since a client relies on a broker's representations, a broker must exercise care not to offer advice outside of his or her field of expertise.
Q: The meaning and import of the agency relationship should be disclosed to the client (8198)
A: prior to completing a listing agreement. [CORRECT]
Q: The meaning and salient characteristics of the agency relationship should be disclosed to the client (9343)
A: prior to completing a listing agreement. [CORRECT] Explain: An agent who intends to represent a seller or owner must disclose the import of the proposed agency relationship in writing before the listing agreement is executed.
Q: In an agency relationship, the principal is required to (8183)
A: provide sufficient information for the agent to complete the agent's tasks. [CORRECT]
Q: One of the most important actions an owner's agent is authorized to perform under an exclusive listing agreement is (8322)
A: showing the property. [CORRECT]
Q: A property seller empowers an agent to market and sell a property on his behalf. This is an example of (8185)
A: special agency. [CORRECT]
Q: A property seller empowers an agent to market and sell a property on his behalf. The kind of agency represented is (9358)
A: special. [CORRECT] Explain: Under a special agency agreement, the principal delegates authority to conduct a specific activity, after which the agency relationship terminates. In most cases, the special agent may not bind the principal to a contract. Real estate brokerage is commonly based on a special agency.
Q: A "protection period" clause in an exclusive listing provides that (8326)
A: the agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing's expiration. [CORRECT]
Q: A principal instructs an agent to market a property only to families on the north side of town. The agent refuses to comply. In this case, (8189)
A: the agent has not violated fiduciary duty. [CORRECT]
Q: A principal instructs an agent to market a property only to families on the west side of the university campus. The agent refuses to comply. In this case, (9356)
A: the agent has not violated fiduciary duty. [CORRECT] Explain: Since it is illegal to refuse to show buyers the property based on where the buyers live, the agent has not violated fiduciary duty. The duty of obedience only applies to legal activities.
Q: A client suddenly decides to revoke an exclusive right-to-sell listing midway through the listing term. The reason stated: the client did not like the agent. In this case, (8325)
A: the client may be liable for a commission and marketing expenses. [CORRECT]
Q: The most significant difference between an owner representation agreement and a buyer representation agreement is (8319)
A: the client. [CORRECT]
Q: In the context of agency law, the legal difference between an owner representation agreement and a buyer representation agreement is (9348)
A: the client. [CORRECT] Explain: Generally, buyer and tenant representation agreements are subject to the same laws and regulations as those applying to owner listings. The only difference is the client and his or her transaction expectations.
Q: The essence of the agency relationship between an agent and a principal can best be described as a relationship of (8182)
A: trust, confidence, and good faith. [CORRECT]
Q: A transaction broker should disclose his or her agency relationship to the transaction principals (8201)
A: upon first substantive contact. [CORRECT]
Q: A tenant representative should disclose his or her agency relationship to the owner's agent (8200)
A: upon initial contact. [CORRECT]
Q: A buyer agent or tenant representative should disclose his or her agency relationship to the owner's agent (9354)
A: upon initial contact. [CORRECT] Explain: A buyer agent must disclose the agency relationship to the seller or seller's agent on first contact. Substantive contact is assumed to occur immediately in this circumstance.
Q: Owner agents must disclose their agency relationship to tenants or buyers (8199)
A: whenever substantive contact is made. [CORRECT]