Laws of Agency
A listing will automatically terminate: Select one: A. If the listing broker goes bankrupt B. On the date specified in the listing agreement C. If the seller dies prior to receiving an offer from a ready, willing, and able buyer D. All of the above
(law, definition, & nature of agency relationships) A listing terminates if either the agent or the principal dies or goes bankrupt. Listings also terminate when they expire. The correct answer is: All of the above
Under contract as a property manager, the broker is: Select one: A. A special agent B. A fiduciary C. A general agent D. Both B and C
(law, definition, & nature of agency relationships) A property management contract is an agency agreement between the property owner (principal) and the property manager (agent). Thus, the broker is a fiduciary in this situation. In addition, the relationship is usually a general agency--the broker is authorized to perform any and all acts associated with a specific service (property management). The correct answer is: Both B and C
A special agency empowers the agent to perform: Select one: A. A specific act B. Any act required C. Any legal act D. Related acts
(law, definition, & nature of agency relationships) A special agency authorizes the agent to do one act and one act only. In the case of a broker/seller agency, the broker is empowered to do only one thing--to find a buyer for the property. The correct answer is: A specific ac
Tom lists his home with Salesman Gary, with the provision that the house not be shown if he is not at home. Tom leaves town on Monday for a two week business trip. On Tuesday, Jose and Maria (a minority couple) contact Gary to see Tom's house. Gary refuses to show the house. In this situation, which of the following statements is true? Select one: A. The couple should file a discrimination suit against Tom, the owner of the property B. The couple should complain to Gary's broker and demand to be shown the property C. The couple should sue Tom, Gary, and the broker for refusing to deal with them in violation of Fair Housing Laws D. Gary's refusal to show the property satisfies his fiduciary duty to Tom
(agency duties) This is not a violation. The only way this would constitute a Fair Housing violation is if Gary were to instead show the property to a non-minority party while Tom is out of town (which would also violate his fiduciary duty to Tom). The correct answer is: Gary's refusal to show the property satisfies his fiduciary duty to Tom
Which of the following actions would be a violation of anti-trust laws? Select one: A. Two brokers agree to only market their services in specific areas of the community B. Jim, a broker, advertises that his firm will only represent buyers C. An independent broker refuses to join the local Association of Realtors D. A firm has some salespersons working as independent contractors and others working as employees
Your answer is incorrect. (commission and fees) When brokers agree to limit marketing efforts to a particular area, or agree to charge the same commission rates, that is classified as conspiracy. Such actions are a violation of antitrust laws. The correct answer is: Two brokers agree to only market their services in specific areas of the community
Bill, a broker with XYZ Realty, sells a property listed by Gene, an independent broker. In this transaction, what is the relationship between Bill and Gene? a. Bill is the agent; Gene is the principal b. Bill is the trustee; Gene is the trustor c. Bill is the sub-agent; Gene is the agent d. either a or c could be correct
a. Bill is the agent; Gene is the principal Pay close attention to what the question asks—the status of the relationship between Gene and Bill, not the relationship between Gene, Bill, and the seller. Gene is Broker Bill's principal and Broker Bill is his agent. Regarding the relationship between the two brokers and the seller, Gene is the agent of the seller and Bill is the subagent of the seller (Bill is NOT the subagent of Gene).
The 1988 Amendment to the Federal Fair Housing Act, Title VIII, declared it unlawful to discriminate: 1. against households with children under 18 years of age 2. on the basis of age 3. because of sexual preference 4. on the basis of the gender
1. against households with children under 18 years of age Explanation: The 1988 Amendment extended protection to families. The 1968 law, not the 1988 Amendment, addressed the issue of gender. The Federal law does not prohibit discrimination on the basis of age. However, some state laws (like Virginia) do prohibit discrimination on the basis of age (elderliness).
When does an open listing terminate? Select one: A. In a reasonable time B. If the property is destroyed by fire C. When the property is sold D. All of the above
(common types of agency agreements) An open listing may terminate in a reasonable time if there is no definite termination date (local custom). Any agency agreement is also terminated by destruction or disposition of the subject of employment. The correct answer is: All of the above
Brokers may only assist buyers if: Select one: A. There is a written agreement B. There is a formal representation C. There is an agency relationship D. There is consent
(common types of agency agreements) Brokers may assist buyers with or without a written agreement, formal representation, or an agency relationship. However, there must be some sort of consent (implicit or explicit). The correct answer is: There is consent
Which of the following circumstances will not terminate an agency by operation of law? Select one: A. Destruction of the property B. Discharge of the broker by the principal C. Death of the principal D. Death of the broker
law, definition, & nature of agency relationships) Discharge of the broker (revocation by the principal) is termination by act of the parties, not by operation of law. The correct answer is: Discharge of the broker by the principal
Which of the following choices would terminate a buyer-broker agreement? Select one: A. Abandonment B. Time C. Agreement D. All of the above
(common types of agency agreements) Abandonment by the broker, lapse of the specified time, and mutual agreement by parties all terminate a buyer-broker agreement. The correct answer is: All of the above
A person engaged to act in place of another by contractual agreement is: Select one: A. A principal B. An agent C. An attorney-in-fact D. Either B or C
(law, definition, & nature of agency relationships) The question could describe the precursor to either an agency relationship or a power of attorney. The correct answer is: Either B or C
The relationship between a broker and client is most accurately described as: Select one: A. A trustee relationship B. A trustor relationship C. A confidential relationship D. A fiduciary relationship
(agency duties) A broker and client have an agency relationship, which carries fiduciary duties. The correct answer is: A fiduciary relationship
A buyer's broker presents an offer on a property listed by another broker. Proper agency disclosures have been made. Prior to acceptance, the listing broker discovers a zoning change that will affect the value of the property. He tells the buyer and the offer is withdrawn. Which of the following statements is correct? Select one: A. The listing broker has violated his fiduciary relationship with the seller B. The listing broker has exercised due care and loyalty to his principal C. The buyer may not withdraw his offer D. Disclosure of this information violates state licensing regulations
(agency duties) A listing broker has duty to disclose adverse material facts to the buyer. This zoning change is material because it will significantly impact the value of the property. Disclosure of material facts is not a violation loyalty or due care. The seller's agent is avoiding a violation of the law. The correct answer is: The listing broker has exercised due care and loyalty to his principal
Which of the following facts MUST a broker disclose to his seller? Select one: A. Minorities are buying homes in a neighborhood where the seller wants to later buy property B. A prospective buyer intends to violate deed restrictions that run with the land C. A prospective purchaser (who asked the seller to hold a purchase money mortgage) has a history of bad credit D. A prospective purchaser is a member of a particular minority race
(agency duties) As a fiduciary duty, the broker must inform his client of the buyer's bad credit history (since this could impact the sale). The broker is prohibited from mentioning the purchaser's race due to the Fair Housing Act. The correct answer is: A prospective purchaser (who asked the seller to hold a purchase money mortgage) has a history of bad credit
When must a licensee disclose agency relationships? Select one: A. When a prospective buyer asks for information about a particular property B. As soon as a prospective buyer enters the broker's office C. Any time prior to preparing an offer to purchase D. When the licensee has substantive discussions about specific property
(agency duties) In general, state laws require that agency be disclosed when the licensee has substantive discussions about a specific property. The correct answer is: When the licensee has substantive discussions about specific property
Seller Smith signs a listing with Broker Jones to sell a parcel of land for $65,000. While Smith is out of the country, the Mayor announces a development plan that will include Smith's land (causing it to double in value). Jones sells the property for $65,000 without telling Smith about the development. Has Jones breached his fiduciary duties? Select one: A. No, because Jones did not buy the property himself B. No, assuming he fulfilled all the requirements of the listing agreement C. Yes, because Jones did not increase the list price D. Yes, but only because the information is material
(agency duties) The agent (broker) must keep the principal (seller) informed of all material information pertaining to the property. The correct answer is: Yes, but only because the information is material
The listing broker discovers that a property's value has been adversely affected by proposed construction of a new power plant. She must: Select one: A. Inform the seller B. Inform the buyer C. Inform the lender D. Both A and B
(agency duties) The broker must inform the parties of this material fact. The correct answer is: Both A and B
A broker executes a listing agreement with her client. The broker subsequently learns that the property is in foreclosure. Which of the following choices is the broker's best course of action? Select one: A. Sell the property before the foreclosure is completed B. Advise all prospective buyers of the pending foreclosure C. Rescind the listing D. Buy the property quickly
(agency duties) The broker owes fiduciary duties to her client, which include the duty to keep her client's financial position confidential. The broker cannot disclose the pending foreclosure without consent because it might weaken the seller's bargaining position. The broker also has a duty to disclose material information to prospective buyers. However, a pending foreclosure is not material if the broker finds a buyer in time--it does not impact the property in any physical way or diminish ownership rights for future owners. If the broker can't sell the property before the foreclosure goes through, the seller no longer has any property to sell. Meanwhile, there is no basis for the broker to rescind the listing agreement and the she risks violating a fiduciary duty in purchasing the property herself. Therefore, the best response is for the broker to sell the property before the foreclosure is complete. This satisfies her duty under the listing agreement. The correct answer is: Sell the property before the foreclosure is completed
In a real estate transaction, which of the following facts MUST an agent disclose to his principal? Select one: A. That a minority is moving into the area B. The average commission C. That the buyer intends to violate deed restrictions D. That the buyer has had previous credit problems
(agency duties) The only answer choice that must be disclosed is the buyer's credit problems. This is true because the buyer's credit problems could impact the sale (ability to qualify for a loan). The correct answer is: That the buyer has had previous credit problems
An owner is listing his rental property with a broker. Based on past experience, the owner thinks that females cause less damage. He therefore tells the broker that he only wants to rent to females. What should the broker do? Select one: A. Advise the owner that this restriction is illegal B. Follow the owner's instruction in order to protect the client's interest C. Accepting the listing and give preferential treatment to female applicants D. Follow the owner's instruction because of the fiduciary relationship
(agency duties) What the owner is asking is illegal. If the broker accepts the listing, he would be in violation of the law. The broker is not under any fiduciary obligation to obey the illegal instructions of the principal (owner). The correct answer is: Advise the owner that this restriction is illegal
A real estate salesperson may legally accept extra commission on a difficult sale from: Select one: A. An appreciative seller B. A thankful buyer C. Her broker D. The mortgage lender
(commission and fees) A licensed salesperson may accept compensation for an act of real estate brokerage from her employing broker (and NO ONE ELSE). The correct answer is: Her broker
The commission received by a broker who is a member of a multiple listing service is: Select one: A. Set by the MLS B. Set by the realty board C. Negotiated between broker and seller D. Negotiated between buyer and seller
(commission and fees) Commission rates are ALWAYS negotiated between the broker and the seller. No group can set a specific commission rate, and any attempt to do so would be a violation of antitrust laws. The correct answer is: Negotiated between broker and seller
Broker Lynch has an exclusive listing to sell Jones' hardware store for a $4,500 commission. He took another exclusive listing to sell Brown's grocery store for a $5,000 commission. With the consent of Jones and Brown, Lynch arranges an exchange of these two stores. How much will Lynch make from this exchange? Select one: A. $4,500 B. $5,000 C. $9,500 D. No commission, because an exchange is not a sale
(commission and fees) In real estate brokerage, an exchange of two or more properties results in the sale of all properties involved, and commissions are paid as stated in the listing. The correct answer is: $9,500
A seller agrees to split all commission between the brokerage firm and his unlicensed brother. This agreement is: Select one: A. Permissible, as long as the brother had contractual competency B. Permissible, so long as the seller agrees C. Impermissible, unless the brother is licensed D. Impermissible, unless approved by the local board of Realtor
(commission and fees) Only real estate licensees (or people that are specifically exempt from licensing) may receive compensation for a real estate transaction. State regulations address this issue specifically, but as a general rule, payment to an unlicensed person is illegal. The correct answer is: Impermissible, unless the brother is licensed
Susan has a listing agreement with Tom to sell his house and an adjoining lot. Susan sells Tom's house to Pete. Before closing, Susan also negotiates a valid option contract with Pete for Tom's adjoining lot, which is listed at $150,000. When will Susan earn her commission on the adjoining lot? Select one: A. When the sale on the home closes B. When the option period expires C. Upon Tom's acceptance of Pete's offer of the option D. None of the above
(commission and fees) Susan earns a commission if she produces a ready, willing, and able buyer to the agreed upon terms. Since Pete may choose not to exercise his option on the adjoining property, he does not meet that definition of a ready, willing, and able buyer. Therefore, Tom is not obligated to pay a commission for the adjacent lot at this point. If the option period expires and he still hasn't exercised the option, then Susan will not receive a commission for the lot. The sale of the home is additional information that has nothing to do with the option contract for the adjoining lot. The correct answer is: None of the above
A property is listed at $68,000. A full price offer is made without contingencies. In this situation, which of the following statements is correct? Select one: A. The seller must accept the offer B. The seller is not obligated to pay the commission C. The seller may refuse to sell D. The seller would be in violation of the Fair Housing Law
(commission and fees) Understand that a listing is not an offer, but an invitation for a buyer to submit an offer. Therefore, a buyer cannot accept a seller's listing--she must make an offer. Here, the broker earned his commission because he found a ready, willing, and able buyer on the terms of the seller. Whether he will ever collect is another issue. The correct answer is: The seller may refuse to sell
Which of the following acts does NOT constitute a violation of Federal Anti-Trust Laws? Select one: A. Real estate broker agreeing to charge the same commission rate B. Real estate brokers agreeing to not cooperate with a certain firm C. Lenders charging usurious interest rates D. Establishing territories in which brokers may operate
(commission and fees) Usurious interest rates are controlled by state usury laws, not by Anti-Trust laws. Conspiring to charge the same commission rate, agreeing to only work in specified territories, and agreeing to not cooperate with a certain broker are all examples of Anti-Trust violations. The correct answer is: Lenders charging usurious interest rates
Wally Wells, a licensed salesperson, listed Parcel A under an open listing agreement and Parcel B under an exclusive right-to-sell listing agreement. Both listings expired. Three days later, the two owners exchanged properties. Wally will receive: Select one: A. One commission for the exclusive right-to-sell agreement B. Two commissions because Wally was the procuring cause C. No commission so long as Wally was not the procuring cause D. A split commission
(commission and fees) Wally gets no commission because the listings expired. If the stem of the question had indicated that Wally was involved in the transaction between the two parties during his listing period, then he may have had a cause of action to collect from one or both parties. The correct answer is: No commission so long as Wally was not the procuring cause
Which of the following listing agreements is LEAST likely to specify a commission rate? Select one: A. Open listing B. Net listing C. Exclusive agency D. Exclusive right-to-sell
(common types of agency agreements) A net listing will not show any commission rate. Instead, the seller specifies that she wants to net a certain amount of money from the sale. Anything over and above that amount is the broker's commission. Net listings are illegal in most states. The correct answer is: Net listing
Buyer Billy and Broker Bobby enter into a buyer-broker agreement. Billy grows increasingly suspicious of Bobby's abilities. After two weeks pass without being shown a satisfying property, Billy revokes the agreement. All of the following statements could be true about this action, except: Select one: A. Billy was justified because Bobby was in breach B. Billy was in breach C. Billy owes Bobby for damages D. Bobby could sue for specific performance
(common types of agency agreements) All of the described scenarios could be true under various circumstances, except Bobby cannot require Billy to perform. Specific performance is NEVER a remedy for personal service contracts. The correct answer is: Bobby could sue for specific performance
Mr. Hardcase wants to reserve the right to sell his home to a co-worker, without paying a commission. Which of the following listings would best serve Mr. Hardcase's interests? Select one: A. An exclusive agency B. An exclusive right-to-sell C. A net listing D. None of the above
(common types of agency agreements) An exclusive agency listing would allow the owner to sell the home himself without being liable for a commission. A net listing is illegal in most states. The correct answer is: An exclusive agency
A broker wants to be compensated if anyone else sells his listed property during the listing period. What type of listing should the broker acquire? Select one: A. An exclusive right-to-sell listing B. An open listing C. An exclusive agency listing D. A net listing
(common types of agency agreements) An exclusive-right-to-sell listing means that the broker gets paid, regardless of who sells the property. An exclusive agency means that the broker gets paid if anyone other than the OWNER sells the property. In an open listing, ONLY the person selling the property gets paid. A net listing is illegal in most states. The correct answer is: An exclusive right-to-sell listing
Which of the following listings will permit an owner to sell his property without paying a commission to any broker? Select one: A. Open listing B. Exclusive agency listing C. Exclusive right-to-sell listing D. Both A and B
(common types of agency agreements) An open listing and an exclusive agency listing permit the seller to sell his own property without paying a commission to the listing broker. Meanwhile, an exclusive right-to-sell would require the owner to pay a commission, even if he sells it himself. The correct answer is: Both A and B
In which type of listing is the commission least likely to be expressed in terms of a percentage? Select one: A. Open B. Exclusive agency C. Exclusive right-to-sell D. Net
(common types of agency agreements) In a net listing, the seller stipulates the price he wants to receive for a property, and agrees that the broker may keep any amount above this price as commission. In a true net listing, a commission is not specified. Note that net listings are illegal in most states. The correct answer is: Net
All of the following statements are true of buyer-broker agreements, except: Select one: A. Buyer-broker agreements cannot be assigned B. Buyer-broker agreement terms may be disclosed to customers C. Buyer-broker agreements may be created verbally D. The salesperson is not a party to the agreement
(common types of agency agreements) The client in the buyer-broker agreement is the buyer. The customer for buyer-broker representative is the seller. You must not disclose the agreement terms to the customer (whichever party you are not representing). The correct answer is: Buyer-broker agreement terms may be disclosed to customers
The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is: Select one: A. Exclusive buyer agency agreement B. Exclusive agency buyer agency agreement C. Open buyer agreement D. Exclusive right-to-market agreement
(common types of agency agreements) The exclusive buyer agency agreement is the counterpart to the exclusive right-to-sell listing agreement. Meanwhile, an exclusive agency buyer agency agreement is most similar to the exclusive agency listing agreement. An open buyer agreement is the counterpart to an open listing. Exclusive right-to-market is sometimes seen as a synonym for exclusive right-to-sell. However, that is still a listing and not a buyer-broker agreement. The correct answer is: Exclusive buyer agency agreement
A seller wants to list a property with a broker, but hopes to sell it herself in order to avoid a commission. Which listing agreement should the seller NOT sign? Select one: A. Open listing B. Exclusive agency listing C. Exclusive right-to-sell listing D. General listing
(common types of agency agreements) The seller should avoid signing the exclusive right-to-sell listing. For each of the other options, the seller could avoid paying a commission by selling the property herself. The correct answer is: Exclusive right-to-sell listing
Who represents the buyer in the traditional real estate transaction? Select one: A. Listing broker B. Selling broker C. Selling salesperson D. No one
(common types of agency agreements) Traditionally, no one represents the buyer. The listing broker represents the seller and the selling broker represents the seller as a sub-agent of the listing broker. Accordingly, the selling salesperson represents the seller as a sub-agent as well (through the selling broker, to the listing broker, to the seller). The buyer could be represented if he or she enters into a bona fide buyer-broker agreement. The correct answer is: No one
Under the usual listing agreement, a salesperson can: Select one: A. Accept or reject offers for the seller B. Place a "For Sale" sign on the property C. Deposit earnest money in her escrow account D. Advertise property at lower than the list price
(common types of agency agreements) Under the usual listing agreement, the broker can place a "For Sale" sign on the property (and all advertising must be truthful, not misleading). The listing broker (agent) is accountable to the seller (principal) and the buyer for any monies received from either party. The salesperson cannot deposit earnest money in her own escrow account--it must be deposited in the broker's escrow account. Finally, all offers must be presented in a timely manner, but only the seller can decide whether to accept or reject those terms. The correct answer is: Place a "For Sale" sign on the property
Which type of listing agreement allows the seller to sell his property and NOT have to pay a commission, but assures the broker a commission if anyone else (other than the owner) sells the property? Select one: A. An open listing B. An exclusive agency listing C. A special listing D. An exclusive right-to-sell listing
(common types of agency relationships) In an open listing, only the person who sells the property receives commission. In an exclusive right-to-sell listing, the broker gets commission regardless of who sells the property (even if it's the owner). Special listing is an invalid term. The correct answer is: An exclusive agency listing
A person who enters into a brokerage relationship with a licensee is: Select one: A. A client B. A customer C. A claimant D. Actively engaged
(law, definition, & nature of agency relationships) A client is another name for principal. The customer generally describes the other party to an agreement. The correct answer is: A client
55. Jon is an agent for Betty the Buyer. This relationship could exist by virtue of: Select one: A. An oral agreement B. Judicial action C. Validation D. All of the above
(law, definition, & nature of agency relationships) Agency may be created by express agreement, which may be oral or written. Agency may also be created by estoppel (requires judicial action) and ratification (sanction or validation of the broker's conduct). The correct answer is: All of the above
Ralph is an independent broker. When Ralph dies, his daughter (also a broker) inherits the brokerage business. If she intends to operate the firm and keep her father's listings, it is necessary that she: Select one: A. File legal notice of her intent to assume responsibility for the brokerage business B. Advise the probate court of her intent to assume responsibility for the listing agreements C. Renegotiate Ralph's current listings D. Nothing is required because she is a licensed broker
(law, definition, & nature of agency relationships) All listings in Ralph's name terminate upon his death because a listing is a personal service contract. The fact that his daughter inherits the firm is irrelevant; she must still renegotiate the listings in her own name. While some state licensing laws allow a non-broker to conclude the affairs of a deceased broker (under specified conditions), the listings must still be renegotiated. The correct answer is: Renegotiate Ralph's current listings
Which of the following persons would likely NOT be an agent? Select one: A. A real estate salesperson handling referrals only B. A property manager employed by the owner C. A person working for a multiple listing service D. A person holding a power of attorney
(law, definition, & nature of agency relationships) All of the examples would be agents, except an individual that works for a multiple listing service. That person is an employee of the MLS. However, do not be tricked into believing that just because one is "employed" by another that they must be an employee (and therefore not an agent). Agency creates an employment agreement, but this may or may not be an "employee" relationship as defined by the IRS. The correct answer is: A person working for a multiple listing service
The law of agency can include relationships between principals, agents, and: Select one: A. Sellers B. Buyers C. Third parties D. None of the above
(law, definition, & nature of agency relationships) An agency relationship in real estate can involve principals, agents, and third persons. A third person COULD be a buyer, seller, or escrow agent/trustee. Therefore, "third parties" is the best answer to the question. The correct answer is: Third parties
Salesperson Sam works for Broker Betty. Betty enters into a listing agreement with Cheryl the Seller. Which term best describes these relationships? Select one: A. Subagency B. General agency C. Special agency D. All of the above
(law, definition, & nature of agency relationships) Betty is an agent for Cheryl and they most likely have a special agency relationship (the typical brokerage relationship). If Sam is affiliated with Betty's firm, then he is most likely employed as a general agent. Sam could also be a subagent of Cheryl, although the facts are not clear (we don't know if Betty has assigned Sam to this particular transaction). However, given this possibility, the best answer is all of the above. The correct answer is: All of the above
The relationship most likely to exist between a licensee and the seller is a: Select one: A. Universal agency B. Special agency C. Restricted agency D. None of the above
(law, definition, & nature of agency relationships) Do not assume that "licensee" means "salesperson"; it also includes "broker". The relationship between the broker (licensee) and the seller would be that of a special agency since that is the type of agency created by the usual listing agreement. It is possible that the broker could have additional authority to act for the seller, but that is generally NOT the case. The correct answer is: Special agency
All of the following are examples of dual agency except: Select one: A. Broker representing buyer and seller, with consent of both B. Escrow agents C. Broker representing both buyer and seller, without consent of either D. Two salespersons in a firm represent a different buyer and selle
(law, definition, & nature of agency relationships) Escrow agents are dual agents because they hold money for the benefit of both parties in a transaction. Even if a dual agency is undisclosed, it is still a dual agency (though the contract may be rescinded). However, the situation where two salespersons represent a different buyer and seller for the same broker in a transaction is the definition of a designated agency. The correct answer is: Two salespersons in a firm represent a different buyer and seller
A broker accepts an exclusive right-to-sell listing. However, the property is later sold by another broker. How many brokers could be owed a commission by the principals in this transaction? Select one: A. 0 B. 1 C. 2 D. 3
(law, definition, & nature of agency relationships) In a traditional exclusive right-to-sell transaction, the seller/client agrees to list the property with a single broker and also agrees to pay that broker his commission regardless of who sells the property. Therefore, we know from the question stem that at least one broker will receive a commission (because the property sold). However, if one of the brokers involved represents the buyer, there are now two brokers that COULD receive a commission--one representing the seller and one representing the buyer. The correct answer is: 2
In order for a dual agency to be legal, it must be: Select one: A. Disclosed orally prior to negotiations B. Disclosed in writing and agreed upon prior to negotiations C. Disclosed in writing after negotiations D. None of the above
(law, definition, & nature of agency relationships) In states that permit dual agency, it must be disclosed and agreed upon in writing by all parties prior to negotiations. The correct answer is: Disclosed in writing and agreed upon prior to negotiations
Which of the following situations is an example of dual agency? Select one: A. A broker's undisclosed representation of both buyer and seller B. Two salespersons represent a different buyer and seller in the same transaction C. A salesperson represents both buyer and seller D. Both A and C
(law, definition, & nature of agency relationships) It doesn't matter whether disclosure is made; a dual agency exists where the broker represents both the buyer and the seller. A salesperson who represents both parties in a transaction is an example of dual agent. In the situation, the parties should have an agreement with the salesperson's broker, but the salesperson might have instead created an implied agency by her words or actions. Nevertheless, two salespersons representing a different buyer and seller for the same broker is a designated agency. The correct answer is: Both A and C
Seller Jones gives Martin an exclusive listing to sell his property. Martin is a salesman for Broker Doe. Which of the following statements would best describe the relationships between these parties? Select one: A. Jones has contracted for the services of Martin B. Doe has a fiduciary relationship with Martin C. Martin is the agent of Doe D. Jones is the agent of Doe
(law, definition, & nature of agency relationships) Jones has contracted for the services of Doe (the broker), not Martin (the salesman). Martin (salesperson) has a fiduciary relationship with Doe (his broker). The correct answer is: Martin is the agent of Doe
Broker Bill with XYZ Realty sells a property that was listed by Gene, an independent broker. In this transaction, what is the relationship between Bill and Gene? Select one: A. Bill is the agent; Gene is the principal B. Bill is the trustee; Gene is the trustor C. Bill is the sub-agent; Gene is the agent D. Either A or C could be correct
(law, definition, & nature of agency relationships) Pay close attention to what the question asks--the status of the relationship between Gene and Bill, not the relationship between Gene, Bill, and the seller. Gene is Broker Bill's principal and Broker Bill is his agent. Regarding the relationship between the two brokers and the seller, Gene is the agent of the seller and Bill is the subagent of the seller (Bill is NOT the subagent of Gene). The correct answer is: Bill is the agent; Gene is the principal
Sam Slick lists his home with Clueless Kelly, a broker. Two weeks later, Kelly learns that Sam has a reputation for dishonesty and a bad record with other brokers. Three weeks later, Kelly learns that Sam is speaking to other brokers behind her back. Kelly confronts Sam and terminates the listing. Which party breached the listing agreement? Select one: A. Sam, because he was speaking with other brokers B. Kelly, because she unilaterally terminated the agreement C. Sam, because he terminated the agreement D. None of the above
(law, definition, & nature of agency relationships) Sam has done nothing wrong by merely "speaking with" other brokers. While Kelly may think Sam is in breach, there is no evidence that this is true. If you terminate a contract unilaterally without evidence of an actual breach, you risk being the breaching party. The correct answer is: Kelly, because she unilaterally terminated the agreement
A listing may be revoked by: Select one: A. The seller B. The selling broker C. The salesperson that obtained the listing D. The death of the salesperson
(law, definition, and nature of agency relationships) A listing may be revoked by the client (seller), agent (broker), or by mutual consent of both. The salesperson cannot terminate the listing. The LISTING broker (not the selling broker) may revoke the listing. Watch the wording of these questions! The correct answer is: The seller
38. Which of the following items would NOT be a latent defect that the seller must disclose to the buyer? Select one: A. Termite damage B. Non-functioning furnace C. Seasonal flooding D. Cracked foundation
(material facts) The broker must disclose all adverse material facts that she knows about the physical condition of the property. All of the listed items are latent defects (hidden or not readily discoverable by inspection), except the broken furnace. The broken furnace isn't a latent defect because it is more easily discoverable. The correct answer is: Non-functioning furnace
All of the following are fiduciary duties owed to a client, EXCEPT: 1. to use care in completing form contracts 2. to obey all client instructions 3. to be loyal to the client 4. to be accountable for documents and funds
2. to obey all client instructions Explanation: The fiduciary duties that an agent owes the client/principal include the duty of care, the duty of accounting, and the duty of loyalty. Of the choices presented, the duty "to obey all client instructions" is the best choice because it is too broadly stated. That is, it is not always true. An agent is obligated to obey only LAWFUL client instructions. Following all client instructions could violate other duties (loyalty) and laws if it results in an illegal act or omission.
All of the following are fiduciary duties owed to a client, EXCEPT: 1. to use care in completing form contracts 2. to obey all client instructions 3. to be loyal to the client 4. to be accountable for documents and funds
2. to obey all client instructions The fiduciary duties that an agent owes the client/principal include the duty of care, the duty of accounting, and the duty of loyalty. Of the choices presented, the duty "to obey all client instructions" is the best choice because it is too broadly stated. That is, it is not always true. An agent is obligated to obey only LAWFUL client instructions. Following all client instructions could violate other duties (loyalty) and laws if it results in an illegal act or omission.
A woman offers to buy property listed by her sister (a broker). However, she does not want her sister to tell the seller of their relationship. The sister should: tell the seller that the prospective buyer is a relative let another person buy the property and turn the deed over to the sister sell the property without disclosing the relationship find another listing agent to avoid conflict of interest
tell the seller that the prospective buyer is a relative You must disclose any interest you have in property, such as a family relationship with the buyer.
A general agency empowers the agent to: transact matters of all types for the client transact the client's affairs in a certain business perform only specific acts for the client perform any legal act for the client
transact the client's affairs in a certain business A general agent is authorized to perform any and all acts associated with a specific service. The other choices are either too broad or too narrow.
All of the following are examples of dual agency except: broker representing buyer and seller, with consent of both escrow agents broker representing both buyer and seller, without consent of either two salespersons in a firm represent a different buyer and seller
two salespersons in a firm represent a different buyer and seller Escrow agents are dual agents because they hold money for the benefit of both buyers and sellers. Even if a dual agency is undisclosed, it is still a dual agency (though the contract may be rescinded). However, the situation where two salespersons represent a different buyer and seller for the same broker is the definition of a designated agency.