LAW OF AGENCY PRACTICE TEST
A listing broker and seller agree to a 5% commission on the sale of a $500,000 house. The listing broker agrees to evenly split the commission with the buyer's broker. How much will the buyer's sales agent earn if their brokerage split is: broker 40 / agent 60?
$7,500
All of the below are true of exclusive buyer agency EXCEPT:
ALL CHOICES ARE CORRECT (Agency can be terminated by expiration of the agency agreement, renunciation, revocation, mutual agreement, death or incapacity of the broker or the principal, destruction of the property, or fulfillment of purpose.)
Agency can be terminated by:
ALL CHOICES ARE CORRECT (destruction of the property, a principal firing their agent & abandonment by the broker)
Which one of these scenarios depicts a sales agent violating the duty of loyalty?
Agent Brad was showing his client's home to a potential buyer. He gave the buyer advice about making an offer.
Agent Analicia receives an offer on her client's house for $150,000. Her client has told Analicia, in writing, to reject any offer lower than $160,000. Analicia rejects the offer without telling her client about it. Evaluate Analicia's decision.
Analicia made the right decision. She is following her client's written request.
All of the below are examples of limited dual representation EXCEPT:
Broker Alicia gives full fiduciary duties to both buyer and seller.
Which of the following statements is TRUE?
Brokers are responsible for everything for sponsored agents do in regard to real estate.
Buyer Denise wants to end her agency relationship with Agent Danny. All of the following statements are true EXCEPT:
Buyer Denise must wait for their agency relationship to expire.
Agent Clark is working with seller Jean to sell her property. Agent Clark used to go to college with Buyer agent Sally. Clark and Sally meet up for lunch one day, and Clark tells Sally his seller is willing to accept less than the listed price. What is TRUE of this situation?
Clark has violated his duty of loyalty and confidentiality to his client
Completion of the Notice of Intermediary is needed in which of the following examples?
Delores is representing a buyer who is going to make an offer on a property listed by another agent in her office.
George's buyer client has decided to make an offer on a property that is listed by George's brokerage firm. George's broker's agency policy says he will become an intermediary representative with an appointment to help the buyer. What further action must George take before proceeding?
George must ensure he has written authorization from both buyer and seller to enter an intermediary relationship.
John is an unlicensed real estate assistant. His boss, Broker Ben, is out of town. John holds an open house on Ben's behalf. Evaluate John's actions.
It is a violation of TREC's rules for an unlicensed assistant to hold an open house.
All of the following is true about implied agency EXCEPT:
It is when a principal explicitly instructs the broker/agent to act on their behalf.
All of the following is true about the IABS Notice EXCEPT:
It must be provided to buyer prospects at an open house.
Lacy is a seller's agent. She has found a buyer for her client's property. She helps the buyer obtain financing. Evaluate Lacy's assistance to the buyer.
Lacy can help a buyer with the process of obtaining financing. This furthers her client's interest of selling their property.
The Real Estate License Act has two separate disclosure requirements. What are they?
License holders must disclose representation of agency upon first contract, and they must provide the IABS Notice upon "substantive" discussion.
Buyer Bill buys a home without the broker with whom he is contracted (Broker Matt). Matt decides to pursue payment of commission. For Matt to sue for collection of commission, all of the conditions must be met EXCEPT:
Matt must not be an independent contractor.
Which of these is TRUE regarding net listings?
Net listings may only be used when required by a knowledgeable client.
A buyer told an agent orally that if the agent help her find a home, she would pay 7% commission. They looked at new homes, for-sale-by-owner homes, and homes from the MLS. The buyer bought a home. Then she refused to pay the agent, saying the agent did not do enough. Can the agent sue?
No, agents cannot sue for commission without a written, signed promise to pay them.
If a broker is in an intermediary transaction with appointments, is it permitted for the buyer's appointee to tell the seller that the buyer will go up on their offer price?
No, that is considered confidential information.
Mikayla, an agent, advises a client about the validity of a title. Can she do this?
No, this is the unauthorized practice of law.
An agent is cleaning up his office. He finds contracts from three years ago. He wants to throw them away to make room for new files. Can he?
No. TREC requires that records such as contracts be kept for a minimum of four years.
Blake is a broker. He is the listing agent for Derek's house. They sell the house to Whitney (Blake does not represent Whitney). Blake owes ______ to Derek and ________ to Whitney.
OLDCAR; honesty and fairness
Jill commits a license violation, and her license is suspended. Who suspends it?
TREC
Who enforces TRELA, including by disciplining salespersons and brokers?
TREC
All of the following are examples of listing agreements EXCEPT:
TREC Listing
An agent verbally advertises new flooring in a property he is attempting to sell, even though he never actually asked if the flooring was new. Months after a purchase, the new owner reveals stick-on tiles were placed on the existing floor, and no new floor was put in. What is TRUE in this situation?
The agent could be found guilty of misrepresentation and could lose his license
Which of the following most accurately describes an agent's relationship with the parties to a transaction?
The agent works with the third party and for the client
Broker Bhindi provides her client with a buyer's representation agreement. What is TRUE about the agreement?
The agreement can be the contract provided by the Texas Association of REALTORS (TAR) OR the brokerage's own version of the contract.
What happens in a real estate transaction if the seller does not provide the Seller's Disclosure Notice before signing the contract
The buyer is allowed to terminate the contract for any reason within seven days after receiving the notice or before closing (whichever is earlier).
All of the below are true of exclusive buyer agency EXCEPT: It clearly spells out the duties and expectations of both the buyer and the seller.
The buyer is free to work with other agents as they please.
According to IRS guidelines, which of the following does not fit the description of an independent contractor?
The license holder has their schedule set by the supervising broker, who has rules on when the license holder must be at the office.
All of the following are true about open listings EXCEPT:
The seller must inform the listing broker when the property goes under contract.
All of the following are true about in-house transactions EXCEPT:
They are illegal in Texas.
Why are agency disclosure laws important?
They disclose who works for whom (i.e., buyer or seller), and what each kind of agent does.
A buyer's agent knows that Property A will bring the agent a higher commission than Property B. However, Property B is best for their principal. What should they advise?
They should advise their principal to purchase Property B because of fiduciary duty.
What is the Buyer Representation Agreement?
This agreement between buyer and broker outlines the responsibilites of each party in the transaction.
What is the difference between laws and ethics?
While laws dictate the bear minimum level of acceptance behavior, ethics dictate what is considered acceptable at a higher level
Bernard wants to file a claim against his former broker under the DTPA. The alleged violation happened on June 5, 2015 (which is the same day Bernard found out about the alleged violation). He intends to file the claim on April 3, 2017. Can he file a claim?
Yes, Bernard is within the statue of limitations for filing a claim under the DTPA.
Donald, a sales agent, tells a potential buyer that if they purchase the house within the next week, his broker will throw in a 10% discount. Donald knows that it's very doubtful that his broker would do this. Did Donald commit a license violation?
Yes, Donald made a false promise likely to influence a person to enter into an agreement, which is a license violation.
Broker Dennis decides that before an open house for Client Joe's house, there should be landscaping work done. Joe's out of the country on business, and Dennis can't reach him. Dennis gets the landscaping work done. Does Joe have to reimburse him?
Yes, Joe has to reimburse Dennis, since this is an expense incurred on Joe's behalf.
Broker Phil is acting as an intermediary in a transaction. He knows that the owner will accept $10,000 less than the asking price if he has to. Can Phil tell the buyer?
Yes, Phil can disclose the information to the buyer, but only if the owner has authorized him in writing to do so.
A listing agent did not tell a prospective buyer that the home has had repeated problems with mold. Did the agent do anything wrong?
Yes, it is misrepresentation by omission and is not fair to the buyer.
A real estate brokerage advertises that they will list property for a low commission. Later, the seller finds out that he advertised low commission is contingent upon the seller signing a 12-month listing and agreeing to do all of the showings themselves. Is the brokerage guilty of a violation?
Yes, they are guilty of misrepresentation
Your company is listing the property you are showing. Should you make an oral or written agreement with the buyer?
You should make a written agreement.
An intermediary might also be referred to as:
a broker representing both parties in a transaction
A report prepared for a seller-client looks at comparable properties that have sold in the last six months and what they sold for, listings that failed to sell and their prices, and how many homes are for sale in the area now and many months of inventory that represents. What is this report?
a comparative marketing analysis
In Texas, it is illegal to be:
a dual agent
What is arbitration?
a forum where parties and counsel present their positions before an impartial third party who renders a specific award
What is mediation?
a resolution procudire where an impartial person is used to facilitiate communication between parties and to promote reconciliation of settlement
Mike is a broker at the 456 Realty Firm. He shows a potential buyer a property. Mike does not represent the buyer. The ABC Realty Corporation is the listing brokerage, and Mike is showing the listing with their consent. What is Mark?
a subagent
An agent is helping their seller-client prepare to list the property. While reviewing the property condition with the owner, the agent discovers there is a foundation problem that may not be obvious at first. The seller does not wish to disclose this issue. The agent should:
advise the client that the information must be included
When Texas buyers, sellers, landlords, and tenants seek the professional services of Texas license holders to represent their interests in real estate transactions, they are seeking a(n) ______ relationship with those Texas license holders.
agency
Samantha is an agent who is working as an independent contractor. She must sign:
any legally crafted Independent Contractor Agreemement
When is the best time for Broker Bob to disclose whom he represents to a party in a proposed real estate transaction?
at first contact
When should a broker give a client the Information About Brokerage Services Notice?
at the first substantive dialogue or communication
The _______ and ________ are responsible for negotiating the sales price of a house.
buyer; seller
All of the below are a type of agency relationship EXCEPT:
client
Recently, Broker Elizabeth and client Lucky terminated their agency relationship. What duties does Elizabeth still owe Lucky after termination?
confidentiality and accounting
Primarily, who does TREC assist and protect?
consumers of real estate services
The duty of honesty and fair dealing would require which of the following actions from a broker or sales agent?
conveying accurate information about material facts to all parties
Lora, a license holder, represented Jess, a seller seeking to sell his home. Lora showed the home to several prospective buyers. After some time, Lora and Jess accepted Sara's offer for his house. Sara's agent, Pat, negotiated on Sara's behalf. Sara is Lora's:
customer
What is one way that a listing agent can exercise their duty of honesty to a buyer non-client?
disclosing known problems with the property
If a supervising broker requires agents to be at the office certain for hours and attend all company meetings, the agents should most likely be classified as:
employees
Frida is about to sign a listing agreement on her house. You are her agent. You should do all of the following EXCEPT:
encourage Frida to allow you to represent buyers, as well
Sarah is Audrey's client. Sarah calls Audrey and tells her that she can show her home next weekend to an interested potential buyer. What is this an example of?
express authority
Which of these is the best example of stigmatized property?
home where a notorious convicted murder once lived
The broker's office manual may want to address all of the following EXCEPT:
how to be a dual agent
Ashley is house-hunting and finds a home she likes being sold by the owner. Now that Ashley is interested, neither she nor the owner knows what to do next. Ashley asks her friend Bill, a real estate agent. He advises her and helps her with documents for no fee. What type of relationship has formed?
implied agency
Chloe is a broker. She has written consent from both buyer and seller to appoint agents to work with and advise each client. Chloe is a(n):
intermediary
Jed, a broker, represents both the buyer and the seller in a transaction. He is acting as a(n):
intermediary
Broker José and his client, Alice, agree that they want their agency relationship to end. What is this called?
mutual rescission
Which type of listing allows the license holder to obtain any amount over the seller's minimum price as commission?
net listing
What would NOT be included in a listing agreement between a seller and broker?
preferred ethnicity of any potential buyer
Of the below, what is the BEST way for an agent to protect themselves against a DTPA lawsuit?
providing written disclosures of property conditions
It is the duty of the agent to:
put a client's interest above that of their own
According to TREC's Canons of Professional Ethics and Conduct, what categories are protected from discrimination?
race, color, religion, sex, national origin, ancestry, familial status, and disability
All of the following are prohibited by the Fair Housing Act EXCEPT:
refusing to negotiate for housing with a minor
An agent has decided to terminate an agency relationship. This is called:
renunciation
The fiduciary duties which agents owe to all clients include all the following EXCEPT:
responsibility
What does a general agency relationship give a sales agent the power to do?
sign a listing agreement on behalf of their broker
Shelly is a license holder. She shows a listing to Emma, who is interested in buying a home. The listing is owned by Francine, a broker. Shelly is not affiliated with Francine, and she does not represent Emma. Shelly is Francine's:
subagent
Your friend Lisa calls you up and complains about the service she is getting from her listing agent. "I just can't sell my house!" she wails. She asks if you can start looking around for possible buyers, just as a friendly favor. What should you do?
tell Lisa that you cannot help her while she is under contract with another broker
Broker Nick no longer represents client Josephine. What is Nick allowed to disclose about Josephine's house, now that he no longer represents her?
that Josephine's house is located in the Brooks Oaks Neighborhood and is 10 years old
Broker Bitsy is getting ready for a listing appointment with a seller. What four forms should she bring with her to the appointment?
the IABS form, a broker's agency disclosure form, a Seller's Disclosure Notice, and a listing agreement
What act protects consumers against breaches of warranty?
the Texas Deceptive Trade Practices Act
According to the IRS, sales agents can be considered independent contractors if:
the agent has a license, earnings are based on sales (not hours), and taxes are not withheld from earnings
In a general agency relationship between a broker and a sales agent, who is responsible for the sales agent's behavior?
the broker
New Sales Agent Kayla is reading a document which spells out the scope of her authorized activity as an agent. It also includes information about fees, how to represent clients, and office policies. What is she reading?
the brokerage's policy manual
If a seller fails to give the buyer a Seller's Disclosure Notice before signing the contract, what consequences could they face?
the buyer can terminate the contract
Sales Agent Buffy signs a listing agreement with Seller Willow. Who is responsible and beholden for Buffy's actions?
the buyer can terminate the contract
Which of these facts about a potentially stigmatized property would a sales agent be required to report to buyers?
the former owner was murdered on the premises
A key difference between an agent working as an employee and one working as an independent contractor is:
the level of control the broker has over the agent's actions
Which of the following MUST an agent disclose to a potential buyer of a house?
the murder of a middle-aged women which occurred on the property
What is something that does NOT need to be held in confidence by an agent after agency termination?
the original listing price
Who can a sales agent accept compensation or a commission from?
their supervising broker only
Broker Misha has performed a brokerage service for Phil with legal accountability. What is TRUE?
they only have an agency relationship if consent and control are also present.
TREC's primary goals include all of the following EXCEPT:
to assist license holders with the daily operations of their businesses
What is one way that a seller can ensure they're disclosing at least the minimum required by the Texas Property Code?
use the Seller's Disclosure Notice
Once upon a time, Lisa was Broker Ella's client. After a series of unfortunate events, Lisa and Ella ended up in court, where Lisa disputed Ella's commission. What is Ella's best protection in this scenario?
written agreement
