Real Estate, Chapter 7, Section 6 (Agent's Duties to Principals), Pop Quiz Questions 6.1

Which of the following statements by a seller's agent to a buyer would be a violation of the agent's fiduciary duties to his principal? A. The house has been on the market for four months B. The owner is eager to sell and willing to accept an offer lower than the listing price C. The roof has leaked in especially heavy rains in recent years D. Your earnest money deposit will be returned to you if you aren't able to obtain financing

B. A licensee can't disclose confidential information about the principal without the principal's permission. For a seller's agent, confidential information includes details about the seller's negotiating position. Disclosing such details would violate a seller's agent's duties to his principal both under general agency law and under Washington's real estate agency statute.

A home inspection revealed that black mold is present in a home. What should the buyer's agent tell the buyer? A. That black mold is toxic, and that the buyer should not buy the house B. That mold is commonplace, and can be cleaned up with bleach C. To require the seller to remedy the problem D. To seek expert advice

D. A buyer's agent typically does not have expertise in environmental hazards. The proper step, for matters in a transaction outside the agent's expertise, is to advise the principal to seek expert advice. In this case, that would be a mold remediation specialist.

A buyer's agent has all of the following duties, EXCEPT: A. honesty and good faith towards the seller B. to suggest a reasonable earnest money deposit under the particular circumstances C. to make sure the buyer receives the seller's property condition statement D. to show the buyer properties that will generate the largest brokerage commission

D. The agent's loyalty must be to the buyer; selecting properties to show based on which would generate the largest commission would violate that duty of loyalty.

A real estate agent is helping a young couple buy a home. The husband's sister will be living with them, and the couple would like to take title so that if either the husband or wife died, the remaining spouse and the sister would own the home together. The agent should: A. tell them to consult an attorney B. refer them to another agent who specializes in titles C. suggest they take title as joint tenants D. suggest they take title as tenants in common

A. A real estate agent should never give advice on matters in a transaction that are beyond the agent's expertise. For issues such as how to take title, a lawyer should be involved.

A seller listed her house for $235,000. The listing agent didn't tell the seller that the house was really worth $260,000. If the listing agent purchases the property himself (without telling the seller the true value), he has violated his duty of: A. loyalty B. obedience C. accountability D. expeditiousness

A. The duty of loyalty prohibits an agent from making a secret profit on a transaction.

Agent Sosa has listed a property for a 92-year-old man who is selling his house because health concerns are forcing him to move to a nursing home. Agent Sosa is showing the property to buyers with whom he has a buyer agency agreement. The buyers ask why the owner is selling. Can Agent Sosa disclose this information? A. No, because this is confidential information that could reveal the seller's negotiating position B. No, because the buyers are not entitled to know anything personal about the seller C. Yes, because he is acting as a dual agent D. Yes, because this is a material fact

A. The seller's reasons for selling are confidential, unless the seller has authorized the agent to tell the buyers. Disclosing his reasons for selling could work to the seller's detriment, since they suggest that there's some urgency to his desire to sell the property and move out.

Sally lists her property for sale with Broker Al. Al learns that the property is about to be rezoned to a higher use. He tells Sally he would like to purchase the property himself. She agrees, and the sale closes. Six months later, Al resells the property for a significant profit. This is legal: A. as long as before Sally agreed to the sale, Al informed her of the upcoming zoning change and what it would mean for the property's value B. as long as he disclosed to Sally the profit he made off the resale, after his sale closed C. only if Al shares his profits with Sally D. under no circumstances

A. When Al decided to buy the property for himself, his duty to disclose conflicts of interest and material facts to his principal required him to let Sally know all of the circumstances. If he failed to do so, it was self-dealing and a breach of his duties to his principal.

A licensee can reveal confidential information about his principal: A. under court order or subpoena B. under no circumstances C. when another party asks directly if a certain fact is true D. when acting as a dual agent

A. While a licensee ordinarily has a duty to not disclose confidential information about the principal, it may be disclosed when the licensee is faced with a court order or a subpoena.

A seller complains that the seller's agent is showing other properties to buyers that compete with the seller's property. Which of the following is true? A. Seller's agent is breaching the duty of loyalty to seller B. Seller's agent is not breaching the duty of loyalty C. Seller's agent has created a conflict of interest D. Seller's agent may do so, but only with the seller's express permission

B. A seller's agent has a duty of loyalty to that seller. However, the licensee will most likely have other clients besides that seller. Showing buyers competing properties for sale doesn't in and of itself breach the duty of loyalty to the seller or create a conflict of interest. (The NWMLS listing agreement form specifically authorizes the agent to show competing properties.)

A licensee takes a listing from his sister. He should: A. arrange for a 'straw client' to take his sister's place for legal purposes B. disclose the relationship if acting as a dual agent C. keep the relationship a secret D. not be able to legally take this listing

B. Agents must disclose conflicts of interest to their principal, and a dual agent owes that duty to both seller and buyer. If this licensee is acting as a dual agent, he is required to inform the buyer that the seller is his sister.

A home is listed for $200,000. A prospective buyer tells the listing agent that she may make an offer for $190,000. The listing agent tells her that the seller won't accept anything under $195,000. The buyer offers $195,000 and the seller accepts. Which is correct? A. The listing agent violated her fiduciary duty to the seller by engaging in self-dealing B. The listing agent violated her fiduciary duty to the seller by telling the buyer how low the seller would go C. The listing agent did not violate her fiduciary duty to the seller because that is not information that the seller would expect to remain confidential D. The listing agent fulfilled her fiduciary duty to the seller by facilitating a successful offer and acceptance

B. By telling the buyer that the seller's walk-away price is $195,000, the listing agent divulged information that the seller would expect to remain confidential and, if divulged, works to the seller's detriment. Under general agency law, this is a violation of the agent's fiduciary duties. (It also violates the agent's duties to the principal under Washington's Real Estate Brokerage Relationships Act.)

Which is a list of duties owed to a principal by an agent? A. Loyalty, compensation, reasonable care, accounting B. Loyalty, confidentiality, reasonable care, accounting C. Performance, compensation, reasonable care, indemnification D. Performance, confidentiality, loyalty, indemnification

B. Duties that an agent owes to all parties (including the principal) are reasonable skill and care, honesty and good faith, presenting written communications, disclosure of material facts, accounting, providing an agency law pamphlet, and making an agency disclosure. In addition, an agent owes the principal the duties of loyalty, disclosure of conflicts of interest, confidentiality, advising the principal to obtain expert advice, and good faith and continuous effort. Compensation, indemnification, and performance are not duties an agent owes the principal.

Which of the following questions could a real estate licensee answer, rather than recommending a buyer seek expert advice? A. Does the mold in the attic mean the roof leaks? B. How long has the property been on the market? C. How should I take title? D. Should I have the house inspected for asbestos?

B. The question of how long the property has been on the market can be easily answered by a licensee. The other questions are more appropriate for an attorney or a home inspector.

Carrie owns an apartment building and is discussing marketing strategy with her property manager, Isabel. Isabel suggests that Carrie advertise in the local weekly alternative newspaper, but Carrie refuses to, because it's published by a former business partner with whom she's fallen out. Isabel argues that she's had great results advertising other properties in this publication, but Carrie still refuses. What should Isabel do? A. Advertise in it, because the property manager is an independent contractor and has authority to make low-level administrative decisions B. Advertise in it, to avoid potential discrimination claims C. Not advertise in it, because the property manager is an agent who must obey a principal's instructions D. Not advertise in it, because the property manager, as a special agent, does not have authority to make such decisions

C. A property manager, as an agent, is bound by the duty of loyalty to follow the lawful instructions of a principal, in this case the property's owner.

Which of the following is true regarding a seller's agent? A. She has the authority to lower the listing price of the seller's property B. She is allowed to disclose confidential information about the seller's personal situation if it will help sell the property C. She must comply with the seller's instructions, as long as they are legal D. She can be paid by both parties to the transaction, regardless of their knowledge or approval

C. Agency duties require the seller's agent to follow the seller's instructions, as long as the seller isn't asking the agent to do something illegal.

In a dual agency, which of the following duties can the parties agree with the agent that they will waive? A. The duty to disclose conflicts of interest B. The duty to recommend expert advice on questions outside the agent's knowledge C. The duty to submit additional offers after acceptance has been reached D. The duty to take no action that is detrimental or beneficial to one party over the other

C. Agents have duties to principals that can't be waived, including the duty of loyalty, the duty to disclose conflicts of interest, and the duty to recommend expert advice when necessary. Ordinarily, agents must also disclose all offers, but the agent and parties may agree that no more offers need to be submitted once a sales contract has been formed.

A firm's managing broker requires agents to recommend a particular lender to buyers. However, the managing broker has a financial interest in this lender. What should an agent do about this? A. Avoid any recommendations of lenders to buyers B. Recommend only this lender, as per policy C. Recommend this lender after disclosing the broker's interest, and recommend other lenders as well D. Recommend whatever lender has the best rates

C. It is best for a real estate agent to recommend multiple lenders, so that a buyer can shop around for the best rates (and consider other factors, like quality of services provided). If the licensee or the firm has a financial relationship to the lender, that business relationship should be disclosed.

Which of the following pieces of information must a listing agent convey to a seller? A. A potential buyer confides that she plans to violate zoning restrictions B. A potential buyer is a member of a racial minority C. A potential buyer, who has asked for the seller to take back a purchase money mortgage, has abused her credit in the past D. The neighborhood where the seller plans to move is seeing more minorities moving in

C. This information needs to be disclosed as a material fact, since it affects a party's ability to perform her contractual duties.