Law of Agency Review Questions

The legislation that gave the industry the Intermediary process

Senate Bill 489

Federal legislation that specifically deals with illegal fixing of commission rates

Sherman Anti-Trust Act

Arise out of law

Statutory Defenses

A potential buyer must be provided with the IABS form at the first substantive discussion. (T/F)

T

A variety of seller's disclosure notices comply with the Texas Property Code. (T/F)

T

An agent does not have to disclose whether or not there has been a suicide on the property. (T/F)

T

Brokerage firms' policy manuals should address common problems such as, when to present the IABS form, and when to have a buyer sign a buyer/tenant representation agreement. (T/F)

T

The IABS form is utilized to better inform the potential buyer or seller on agency relationships. (T/F)

T

. A general agent has less authority than a universal agent. a. True b. False

a

. A licensee is not liable for a misrepresentation or a concealment of a material fact made by a party to a real estate transaction if the seller did not disclose it to the agent. a. True b. False

a

3. The duties of the principal to the agent include all of the following, EXCEPT: a. Trust b. Reimbursement c. Performance d. Indemnification

a

7. A buyer's agent: a. Represents the buyer b. Is always the intermediary c. Signs a Seller's Disclosure d. None of the above

a

8. A subagent: a. Is a licensee not associated with the seller's broker b. Must work in the same real estate office as the listing broker c. Must place the interests of the broker first d. Is a licensee that represents the buyer or seller directly

a

A business practice may not be ethical, even if it is legal. a. True b. False

a

A court of law cannot suspend or revoke an agent's license under a DTPA violation. a. True b. False

a

A licensee's advertisement must clearly and conspicuously contain a broker's or company's name. a. True b. False

a

A property manager is a common example of a _________. a. General agent b. Special agent c. Secret agent d. Universal agent

a

According to TRELA, when one firm sells a property listed by another firm to a buyer they are not representing, the selling firm represents the seller in a ______ relationship. a. Subagency b. Contingent c. In-house d. Tense

a

Agents of a brokerage firm all share the same agency duties to all clients of the firm. a. True b. False

a

All listing agreements must have a definite ______ date. a. Termination b. Sell by c. Maturity d. Beginning

a

All sellers have an obligation to disclose any known material defects to a buyer. a. True b. False

a

Deceptive or misleading advertisements may include failing to remove an advertisement about a listing within a reasonable time after it ends. a. True b. False

a

If there is evidence that establishes that a licensee violated TRELA, TREC may revoke or suspend his or her license. a. True b. False

a

Intermediary is a process that makes it possible to bring client buyers and sellers together while at the same time representing their best interests. a. True b. False

a

Intermediary with appointments requires that the broker sponsor at least two agents. a. True b. False

a

Only a broker may earn a commission, and only a broker may sue to collect a commission. a. True b. False

a

Oral listing agreements are allowed in Texas. a. True b. False

a

TREC rules require that most records for brokerage firms be retained for at least ______ years. a. 4 b. 6 c. 10 d. 25

a

The IRS set guidelines determining that a salesperson would be classified as an independent contractor in 1976. a. True b. False

a

The Information About Brokerage Services form is approved by the Texas Real Estate Commission for voluntary use. a. True b. False

a

The shared information from the MLS can be used by agents to prepare a(n) ________. a. Comparative Market Analysis b. Listing Agreement c. Appraisal d. Seller's Disclosure of Property Condition

a

The state of Texas requires that most sellers of residential property provide a(n) _________ to a potential buyer. a. Seller's Disclosure of Condition of Property b. IABS Form c. Listing Agreement d. None of the Above

a

To appoint associates or not in an in-house transaction is at the discretion of the broker. a. True b. False

a

When a broker represents both the buyer and the seller, the broker is an intermediary. a. True b. False

a

The agent working with the buyer

the selling agent

the power to act for the principal in all transactions

universal agency

A broker must have what to act as an intermediary?

written consent

Example of statutory defense for a lawsuit brought about by DTPA

written information obtained from a government record

Which one of the following is NOT a test for specifying that a salesperson is an independent contractor under the Tax Equity and Fiscal Responsibility Act? a. The salesperson must be full-time salary b. The salesperson must be paid on a commission basis c. The salesperson must hold a real estate license d. The salesperson must have a written contract with the broker specifying that he or she is not an employee

a

Who is procuring cause of sale? a. The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract b. The first individual to show a property to a prospective buyer c. The listing agent d. None of the above

a

An exemption to using the IABS form is:

a lease for no more than a year with no sale anticipated

The broker has no duty to inform the client of the intermediary relationship as it is assumed in Texas. a. True b. False

b

The courts consider a broker's oral listing agreement with a client as enforceable against the client. a. True b. False

b

What are the three types of agency? a. Universal, unlimited, general b. General, special, universal c. Unlimited, remote, special d. Special, general, perfect

b

What happens to licensees if their sponsoring broker dies? a. Nothing. The brokerage firm runs as usual. b. The licenses of the agents are placed on inactive status c. The licenses of the agents are revoked d. The licensees must retake the test

b

What type of agency is established when a broker hires an agent? a. Vague agency b. General agency c. Special agency d. Express agency

b

Which type of listing agreement allows for the seller to sell his or her property him or herself without paying a commission even though it is listed with a broker? a. Open listing b. Exclusive agency c. Exclusive right to sell d. Net listing

b

. A(n) _________ is when a brokerage firm sells its own listing a. cooperative sale b. net sale c. in-house sale d. gross sale

c

. All of the following actions by a broker are violation of federal law, EXCEPT: a. Attempting to fix prices b. Limiting competition by assigning market areas c. Negotiating commission rates with clients d. Boycotting discount brokers

c

. Real estate agents owe certain non-fiduciary duties to customers such as: a. Trust b. Advice and opinions c. Honesty and fairness d. Compliance

c

. _________ means that the principal will protect the agent from suffering a loss due to the agent's reliance on information received from the principal. a. Performance b. Trust c. Indemnification d. None of the above

c

A broker has the power to terminate an agency agreement early, a. Without cause b. For personal reasons c. If the principal was not cooperating with the broker's efforts to market the property d. None of the above

c

A broker who acts as an intermediary in a transaction: a. May disclose that the owner will accept a price less than the asking price if he or she feels that it is the right thing to do b. May disclose any confidential information that he or she deems will help sell the property c. Shall treat all parties honestly d. None of the above

c

A buyer is: a. Anyone wanting to view homes b. Someone who wishes to list a home with a broker c. Someone who wants to buy a home and is on a time line to do so d. None of the above

c

A listing is terminated by any of the following, EXCEPT: a. The expiration of the time period stated in the contract b. At any time by mutual agreement c. After exactly one year has passed since the agreement was signed d. Bankruptcy of either party

c

A listing side of a transaction is when... a. The property is sold by a firm other than the listing firm b. The buyer retains the services of a broker c. The seller retains the services of a broker d. None of the above

c

All of the following are included in the Canons of Professional Ethics for real estate licensees, EXCEPT: a. Competency b. Integrity c. Patience d. Consumer Information Form 1-1

c

All of the following elements should be included in a listing agreement, EXCEPT: a. The IABS form b. A beginning date and termination date c. The percentage of the broker's commission which is split with the agent d. Intermediary consent

c

For a broker to represent the owner: a. The broker becomes the buyer's agent by entering into an agreement with the buyer b. The broker's commission is set by TREC c. The broker becomes the owner's agent by entering into an agreement with the owner d. None of the above

c

Real estate licensees who make "cold calls" must comply with the requirements of the ______. before making phone calls. a. Dodd Frank Act b. Texas Real Estate Commission Rules of Ethics c. National Do-Not-Call Registry d. Deceptive Trade Practices and Consumer Protection Act

c

Subagency is: a. When a broker appoints associates to the selling side and the listing side in an inhouse sale b. Outlawed in Texas c. When a licensee not associated with the seller's broker is representing the seller through a cooperative agreement with the seller's broker d. When one agent at a brokerage firm takes over when the listing agent is sick or on vacation

c

The Information About Brokerage Services form should be provided to a potential buyer or seller at the first _______ discussion of a real estate transaction. a. Substantial b. Telephone c. Substantive d. None of the above

c

The agreement that buyers sign, allowing a broker to represent them is called a ______. a. Buyer/Agent Agreement b. Seller's Disclosure c. Buyer/Tenant Representation Agreement d. None of the above

c

The best way to create an agency relationship is to do so, a. By a handshake b. By an oral agreement c. In writing d. After an agreement has been reached between the parties

c

The duties of the agent to the principal can be remembered by using the acronym: a. PETE b. NEWCAR c. OLDCAR d. HOTROD

c

Unlicensed assistants may not: a. Answer real estate office phones b. Schedule appointments c. Receive a commission on a real estate transaction d. Serve as a host at an open house to welcome visitors and distribute fliers

c

When preparing an income tax return, it is important that a real estate agent know that... a. Independent contractors do not have taxable income b. The broker takes all deductions from the agent's checks c. Business expenses are subtracted from income d. None of the above

c

_________ uses adjectives and opinions rather than details or facts and is not considered misrepresentation. a. Phishing b. Commingling c. Puffing d. Pyramiding

c

What determines whether a transaction is to be done under intermediary rules? a. The transaction must be an in-house sale b. Both sides (buyer/seller or landlord/tenant) must be clients c. The broker must have written consent from both parties d. All of the above

d

When the broker is given notice of termination of a listing, the broker must: a. Remove all signs and lockboxes b. Cease all marketing activities c. Remove the listing from websites and other advertising media d. All of the above

d

Which federal law(s) has the greatest impact in the area of illegal price-fixing of commissions a. The Clayton Act b. Megan's Law c. The Sherman Anti-Trust Act d. Both A and C

d

Which of the following events that happened, or is believed to have happened, on a property can "stigmatize" it? a. Suicide on the premises b. Paranormal activity c. Death on the property d. All of the above

d

Which of the following requirements must be satisfied if a broker seeks to enforce payment of a commission? a. The broker must have a valid real estate license b. The broker must have a signed employment agreement with a promise by the client to pay a commission c. The broker must be the procuring cause of sale d. All of the above

d

_______ means that, if a single agent in the firm is working with both buyer and seller, another agent in the firm needs to be brought into the transaction so appointments can be made. a. No intermediary b. Intermediary without appointments c. Cooperative sale d. Intermediary with appointments only

d

An agent may not deceive or defraud a customer

honest dealing

A property is sold by the listing firm

in-house sale

A transaction in which a broker is on both the listing and selling side

in-house sale

Protection against damage or loss

indemnification

Receives a gross check and a 1099-MISC

independent contractor

The real estate agent should employ prudence and caution so as to avoid misrepresentation in any way

integrity

Occurs when a broker appoints associates within a brokerage firm to represent the listing and selling side of a transaction

intermediary with appointments

Occurs when an agent sells his or her own listing, but cannot give advice or negotiate for either party

intermediary without appointments

If a broker dies, what happens to the listing with the seller?

it automatically terminates

Contract with a seller that gives the broker the right to find a purchaser for his or her property

listing agreement

The seller retains the services of a broker

listing side

An assertion or statement by words or conduct that is not in accordance with the facts

misrepresentation

The real estate broker's commission is the difference between the minimum net established by the seller, and the price that the buyer is willing to pay

net listing

The seller can list his or her property with multiple competing brokers

open listing

When actions lead another person to assume that one is an agent, this is known as:

ostensible agency

May be hired to assist a salesperson, but is not required to hold a real estate license

personal assistant

A document that addresses broker and client safety, listing and contract files and licensee obligations

policy and procedure

Setting commission rates between groups of brokers in an area

price fixing

The broker in the broker-salesperson relationship in real estate

principal

Using adjectives and opinions rather than details or facts

puffing

The agent is held to the standards of knowledge, expertise and ethics defined by TRELA

reasonable care

The buyer retains the services of a broker

selling side

Shows the sum of payments received from a salesperson's broker during the tax year

1099-MISC

also known as limited agency

special agency

A brokerage firm that practices Buyer-Agency only has a lot of intermediary transactions. (T/F)

F

A real estate agent does not have any duties to a customer, only a client. (T/F)

F

A seller must always fill out a Seller's Disclosure of Property Condition. (T/F)

F

Agents should always disclose whether or not a previous or current tenant has AIDS or HIV-related illness. (T/F)

F

An intermediary firm represents sellers only. (T/F)

F

In Texas, worker's compensation must be paid for real estate agents by brokers. (T/F)

F

It is illegal in Texas for a broker to be on both the listing and selling side of a transaction. a. True b. False

b

It is legal for a real estate licensee to reveal the national origin and ancestry of a potential purchaser or real property. a. True b. False

b

Licensees must disclose whether or not a former tenant had AIDS or an HIV-related disease to potential buyers. a. True b. False

b

Real estate licensees are rarely sued under an action of the DTPA. a. True b. False

b

Subagency was outlawed by the passage of Senate Bill 489. a. True b. False

b

TREC sets the commission rates between the broker and the broker's client a. True b. False

b

Texas members of the National Association of Realtors® are not regulated by the Texas Real Estate Commission. a. True b. False

b

The Deceptive Trade Practices Act: a. Is a federal law b. Allows an aggrieved consumer to sue a seller of goods for damages if that seller has been deceptive or unfair c. Was passed in 1963 d. All of the Above

b

The IABS should be presented as the buyer is about to write an offer. a. True b. False

b

The Texas Real Estate License Act is the only law impacting third-party obligations in the real estate brokerage business. a. True b. False

b

The best type of listing for a broker is the net listing. a. True b. False

b

Marketing to a specific area or location

geographic farming

A Texas law that was passed in 1973 that allows an aggrieved consumer to sue a seller of goods for damages

Deceptive Trade Practices Act (DTPA)

In Texas, the agent is always responsible for the accuracy of the Seller's Disclosure of Condition of Property. a. True b. False

b

The individual who, through a series of uninterrupted activities, brought about the completion of a contract

Procuring Cause of Sale

Commission rates are not negotiable between parties. a. True b. False

b

a relationship between two parties

agency

established when an agent acts without prior authorization and the principal accepts it

agency by ratification

2. The principal must always remain loyal to the customer. a. True b. False

b

6. A licensee has no duties to a customer. a. True b. False

b

A broker can require a salesperson to work set hours. a. True b. False

b

A buyer/tenant representation agreement creates a _________ agency relationship with the broker. a. Universal b. Special c. General d. None of the above

b

A seller does not have to disclose any stigma that relates to a material defect in the property. a. True b. False

b

According to TREC advertising rules, the definition of advertisement includes all of the following, EXCEPT: a. Radio ads b. Communication from a licensee to his or her client c. Social Networking Sites d. Billboards

b

According to Texas real estate laws, a broker must always appoint associates in an intermediary relationship. a. True b. False

b

All licensees are Realtors®. a. True b. False

b

All personal assistants at real estate offices are required to be licensed by the state. a. True b. False

b

All real estate brokerage firms practice both buyer and seller agency. a. True b. False

b

An agency relationship exists when one person, the _________ acts for, or on the behalf of another person, the _________. a. Client, agent b. Agent, principal c. Principal, agent d. Broker, customer

b

An agent can share confidential information about a client's property once the listing agreement is terminated. a. True b. False

b

Brokers do not need written authorization to advertise on social media. a. True b. False

b

Commingling is legal in the state of Texas. a. True b. False

b

also known as the principal

client

Analysis based on properties that have recently sold that are most similar to the subject property

comparative market analysis (CMA)

The real estate agent should be informed on market conditions affecting the real estate business

competency

A property is sold by a firm other than the listing firm

cooperative sale

A person who receives limited brokerage services without establishing an agency relationship

customer

. The federal law requiring all states to release information to the public about known, convicted sex offenders, when necessary, to protected the public's safety is: a. The Interstate Trade Act b. The Dodd-Frank Act c. Hillary's Law d. Megan's Law

d

5. Agency is: a. The relationship the agent has with the principal b. When the agent acts for, or on behalf of the client c. A fiduciary relationship d. All of the above

d

A written listing agreement provides an agent with _________ authority. a. Implied b. Limited c. Overriding d. Express

d

An agent will receive a _________ to show the sum of the payments received from his/her broker during the tax year. a. W-2 b. W-4 c. 1066-WD40 d. 1099-MISC

d

Competency of a licensee includes, a. Knowing his or her strengths and deficiencies b. Continuing his or her education to improve services to clients c. Being informed on national, state and local developments in the real estate industry d. All of the above

d

Employment and anti-discrimination laws protect which of the following classes? a. Race b. Color c. Genetic information d. All of the above

d

If a broker sells a property on behalf of a seller without a signed listing agreement, the courts will most likely declare the broker is: a. a volunteer b. an agent in a listing agreement that is unenforceable against the seller c. unable to enforce payment of the commission d. all of the above

d

If a real estate brokerage firm practices intermediary, then the firm practices _______. a. Seller agency b. Buyer agency c. Dual agency d. Both a and b

d

In real estate, if a party to a transaction is not being represented by an agent, they are known as a ______. a. Consultant b. Client c. Consumer d. Customer

d

TREC can suspend or revoke an agent's license if the licensee is found guilty of: a. Selling real property under a lottery system b. Acting in the dual capacity of broker and undisclosed principal in a transaction c. Guaranteeing future profits will result from a resale of real property d. All of the Above

d

TRELA requires that TREC assign priorities and investigate complaints using a risk-based approach based on the: a. Degree of potential harm to the consumer b. Overall severity of the allegations and the complaint c. Previous compaint history of the license holder d. All of the above

d

The act of harming another person by making a false statement

defamation

Marketing to a specific set of people sharing many commonalities

demographic farming

Informing the customer of material facts relating to a property

disclosure

A real estate agent must not respond to or facilitate inquiries about or make disclosure which indicates any racial, or religious preference

discriminatory practices

The practice that allows a real estate firm to represent both the buyer and the seller with their written permission

dual agency

Receives a paycheck that is net of deductions for income taxes and other charges

employee

A contract between an insurance company and a broker/licensee

errors and omissions policy

A set of principles or a system of values

ethics

The seller lists the property with only one broker, but can sell it him or herself without paying commission

exclusive agency

authority that comes from specific instructions, either oral or written

express authority

The real estate agent should place no personal interest above that of his/her client

fidelity

based on trust

fiduciary

the right to represent the principal in a particular type of transaction or business

general agency