Unit 15: Agency in Real Estate Quiz

At what time should a Pennsylvania licensee present the Consumer Notice to a prospective homebuyer? A) At the initial interview B) Within three days of closing C) Prior to the buyer makes an offer D) After showing a couple of properties

A) At the initial interview In Pennsylvania, licensees must discuss the Consumer Notice at the initial interview or the first substantive discussion between a licensee and a consumer about the consumer's needs before the licensee provides any services, and before they enter into an agency agreement or agreement of sale.

In the case of real estate agency, who is the individual who is authorized and consents to represent the interest of another? A) Broker of record B) Anyone who enters into an agency agreement C) Salesperson with whom the consumer is working D) Associate broker who manages the office

A) Broker of record In the real estate business, a firm's broker is the agent and shares this responsibility with the licensees who work for the firm.

A real estate licensee was representing a buyer. At their first meeting, the buyer explained that he planned to operate a dog-grooming business out of any house he bought. The licensee did not check the local zoning ordinances to determine in which parts of town such a business could be conducted. Which fiduciary duty did the licensee violate? A) Care B) Accounting C) Loyalty D) Obedience

A) Care A licensee who has been provided specific information by a client has a duty to exercise care while transacting business on behalf of that client. This duty would include determining suitability of the property for the client's intended use.

A licensee lists a residence for $187,000. For various reasons, the owner must sell the house quickly and confides to the licensee that a lower price would probably be acceptable, although the asking price is reasonable. To expedite the sale, the licensee tells a prospective purchaser that the seller will accept up to $5,000 less than the asking price for the property. Based on these facts, which statement is TRUE? A) The disclosure was improper, and possibly illegal, regardless of the motive of the licensee. B) The licensee should have disclosed this information, regardless of its accuracy. C) The licensee should only have disclosed that the seller would reduce the price. D) The licensee has not violated any agency responsibilities to the seller.

A) The disclosure was improper, and possibly illegal, regardless of the motive of the licensee. The broker owes fiduciary duties to the seller-client, including the obligation to work in the seller's best interest and be an advocate for the seller's position. Disclosing the lowest price that the seller would accept would be a violation of the broker's duty to the seller.

Who does the real estate broker represent? A) Whoever hired the broker B) Both the seller and the buyer C) The seller D) The buyer

A) Whoever hired the broker The written agency agreement determines representation; the source of compensation does not.

In addition to the Consumer Notice, the broker of the real estate firm must also establish procedures for disclosing A) company policies regarding dual agency and designated agency. B) the racial composition of the neighborhood. C) the firm's policies for assigning consumers to the licensees based on national origin. D) how the firm's fees are in line with other brokerage firms.

A) company policies regarding dual agency and designated agency. The disclosure process does not end with the Consumer Notice; however, brokers and their licensees may not discuss protected classes or to even hint that their fees are set in cooperation with other brokerages.

In real estate, the relationship between the principal/consumer and agent/broker must be A) consensual. B) synchronized. C) in harmony. D) compatible.

A) consensual. The relationship between the principal and agent must be consensual; that is, the principal delegates authority and the agent consents to act. The parties must agree to form the relationship.

A real estate broker acting as the agent of the seller A) is obligated to render faithful service to the seller. B) can agree to a change in price without the seller's approval. C) can make a profit, if possible, in addition to the commission. D) can accept a commission from the buyer without the seller's approval.

A) is obligated to render faithful service to the seller. As an agent of the seller, the broker owes full fiduciary duties to the principal-seller. Faithful service to the seller when acting as the seller's advocate is of utmost importance under the agent's fiduciary duties to the principal-seller.

The term fiduciary refers to A) the principal-agent relationship. B) the sale of real property. C) principles by which sellers must conduct their business affairs. D) those who authorize another to act on their behalf.

A) the principal-agent relationship. The term fiduciary refers to the nature of the relationship created when the agent is placed in the position of trust and confidence when representing the principal.

A broker may represent both the seller and the buyer when A) both parties have attorneys who authorize the dual representation. B) both parties give informed written consent to such a transaction. C) the buyer and the seller are related. D) the broker holds a state license as a dual agent.

B) both parties give informed written consent to such a transaction. Brokers can provide dual agency only if the buyer and the seller are fully informed and consent in writing to the broker's representation of both parties in the same transaction. The parties must be provided sufficient information to make an intelligent determination about whether or not to agree to the dual representation.

In Pennsylvania, all exclusive contracts for real estate activities must be A) verifiable. B) in writing. C) completed within a stated time frame. D) supervised by an independent third party.

B) in writing. In Pennsylvania, all exclusive contracts of employment must be in writing. Furthermore, the Real Estate Commission's regulations prohibit a licensee from marketing or advertising the sale or lease of real estate or otherwise soliciting prospective buyers without the written authority of the seller or owner (or the owner's agent).

A person who has the authority to enter into contracts concerning all business affairs of another is called A) secret agent. B) special agent. C) general agent. D) attorney.

B) special agent. A general agent represents the principal in a broad range of business matters and has the power to bind the principal to contracts within the scope of the agent's authority.

In Pennsylvania, the broker is providing communication and document preparation services and is assisting both parties in a transaction without advocating for either party. This broker is a A) dual agent. B) transaction licensee. C) designated agent. D) single agent.

B) transaction licensee. A nonagent (also called a transaction licensee, facilitator, coordinator, or contract broker) is not an agent of either party and may not negotiate on behalf of either the buyer or the seller. A nonagent must not disclose confidential information to either party.

What is a transaction licensee obligated to disclose? A) Seller will accept less than the asking price B) Buyer will pay more than the submitted offered price C) Material defects in the property D) Parties will accept different financing terms than those offered

C) Material defects in the property A transaction licensee provides real estate services without having any agency (i.e., fiduciary) relationships with a consumer; however, the transaction broker may only disclose material defects, nothing else.

Which event terminates an agency in a broker-seller relationship? A) The owner abandons the property. B) The broker discovers that the market value of the property is such that an adequate commission will not be earned. C) The owner declares personal bankruptcy. D) The broker appoints other brokers to help sell the property.

C) The owner declares personal bankruptcy. An agency relationship may be terminated in a number of ways. One is by operation of law, such as personal bankruptcy of the principal. The relationship between the seller and the agent-broker terminates and title to the property transfers to a court-appointed receiver.

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of the following is TRUE? A) The buyer should not have been shown a house listed by the broker representing them. B) The broker should refer the buyer to another broker to negotiate the sale. C) The seller and the buyer must be informed and agree to have the broker represent both of them. D) If the listing salesperson and the selling salesperson are two different people, there is no conflict of interest.

C) The seller and the buyer must be informed and agree to have the broker represent both of them. The broker has created an agency relationship with both the buyer and the seller. This dual agency is permitted only after full disclosure and the informed consent of both parties. Informed consent must be in writing in Pennsylvania.

A salesperson representing the seller shows a house to a prospective buyer. The salesperson knows that the house has a wet basement. Which of the following is TRUE? A) Withholding the information protects the confidence of the seller. B) Disclosing the information could create an undisclosed fiduciary relationship with the buyer. C) Withholding the information prevents the buyer from making an informed decision. D) Disclosing the information violates the fiduciary to the seller.

C) Withholding the information prevents the buyer from making an informed decision. The agent is obligated to discover and disclose facts that a reasonable person would feel are important in choosing a course of action, regardless of whether they are favorable or unfavorable to the principal's position. The agent may be held liable for damages for failing to disclose such information.

In a fiduciary relationship, the agent is primarily responsible to the A) lender. B) customer. C) client. D) lending broker.

C) client. In a fiduciary relationship, the primary responsibility of an agent is to protect the interests of the client in a transaction. The agent is morally, ethically, and legally responsible to the client if there is a breach of the fiduciary duties owed to the principal.

A customer may expect all of the following EXCEPT A) reasonable skill and care. B) honesty and fair dealing. C) confidential information. D) disclosure about a physical problem with the property.

C) confidential information. A third party, one not represented by the agent, cannot expect the agent to disclose confidential information about the client. The third party, often called the customer, can expect disclosure about a physical problem with the property, reasonable skill and care, honesty, and fair dealing.

The sellers listed their home with a broker for $190,000. The broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $180,000 and the seller accepts it. In this situation, the broker A) acted properly to obtain a quick offer on the property. B) was unethical, but the sellers did get to sell their property. C) has violated his agency relationship with the seller. D) is expected to encourage such bids for the property.

C) has violated his agency relationship with the seller. Confidentiality is a key element of fiduciary duties. If the principal is the seller, the agent may not reveal such things as willingness to accept less than the listing price or urgency to sell, unless the principal has authorized the disclosure.

A buyer and a seller approach a broker and explain that they have agreed on the sale of the seller's home. They ask the broker to assist them with the rest of the transaction. In Pennsylvania, the broker A) must represent at least one party as a single agent. B) must represent both parties as a dual agent. C) is permitted to act as a transaction broker. D) is not permitted to do this.

C) is permitted to act as a transaction broker. If both the buyer and seller negotiate the sale without representation, a nonagent (transaction broker) is not an agent of either party and solely helps with the necessary paperwork and formalities involved in transferring ownership of real property.

When hired by a management agreement, the broker represents the A) seller. B) buyer. C) owner. D) tenant.

C) owner. The property owner hires a broker through a property management agreement to market, lease, maintain, or manage the owner's property.

The legal relationship between broker and seller is MOST frequently a A) secret agency. B) universal agency. C) special agency. D) general agency.

C) special agency. When a broker is engaged by a seller to represent the seller in the sale of a property, the broker is a special agent. The broker is authorized to represent the seller in one specific act with detailed instructions as specified in a contract.

The buyer is in front of a house for sale, and with a cell phone, calls the listing agent. What disclosures, if any, must the listing agent make to this buyer? A) Although we haven't met, you can trust me with your financial information. B) I cannot tell you anything about the home you are calling on until we meet in person. C) There can be no disclosure until the first substantive meeting. D) Any information that you give me at this time is not considered to be confidential.

D) Any information that you give me at this time is not considered to be confidential. The Pennsylvania law recognizes that from time to time, telephone conversations and email communications can involve substantive discussions before an in-person meeting. If that happens, the caller must be told that this conversation will not be confidential.

Which of the following may obligate a buyer client to owe a fee to the real estate agent? A) Agent takes the buyer to see a property B) Asks for assistance in locating a home to purchase C) Signed the Consumer Notice D) Signed a written agency agreement

D) Signed a written agency agreement The licensee may not expect a fee for representing a buyer unless the buyer has entered into an agency relationship with a written agency agreement. An agent may perform services before an agreement is signed, but the licensee is not entitled to recover a fee in the absence of a signed agreement. The Consumer Notice is not an agency agreement; it simply describes the various relationships available to the consumer.

For how long must a real estate licensee retain a copy of the signed Consumer Notice? A) One year B) Six weeks C) Three years D) Six months

D) Six months The licensee is to retain a copy of the signed/refused acknowledgment for six months and provide the consumer with a copy of the entire disclosure summary.

The broker had a listing with a seller who had a heart attack and is in a coma and is not expected to live. In this situation, what is the status of the listing? A) The seller's heirs are responsible for fulfilling the terms of the listing. B) The listing status has not changed. C) The heirs are obligated to relist with the broker. D) The agency relationship has been terminated.

D) The agency relationship has been terminated Agency, such as a listing agreement, is terminated by the death or incapacity of either party.

In Pennsylvania, what is necessary in order to be compensated? A) Upon an action, such as showing a property to a prospective buyer B) Promise of compensation upon completion of the work C) Recommendation by a previous client D) Written agreement between a real estate licensee and a consumer

D) Written agreement between a real estate licensee and a consumer In Pennsylvania, although a licensee may perform services before an agency agreement is signed, the licensee is not entitled to recover a fee, commission or other valuable consideration without a signed agreement. The source of compensation does not determine agency; in fact, agency can exist even with no compensation.

By Pennsylvania law, all of the following must receive the Consumer Notice EXCEPT A) a tenant is looking for a rental home. B) a couple is selling their home. C) an individual is purchasing a home. D) a corporation is selling the property.

D) a corporation is selling the property. No disclosure notice is required when the transaction is for the sale or lease of commercial property to consumers who are not individuals, such as corporations or other business entities.

A broker did not have enough money in the business account to pay two salespeople, so he wrote two checks out of a trust account. After the next closing, the broker put the money back into the trust account. This an example of A) what needs to be done in the rat race. B) commingling. C) a reasonable business practice. D) conversion.

D) conversion. Conversion is the illegal use of such entrusted money; trust money must be strictly accounted for. Commingling is combining trust and personal funds in the same account.

An errors and omissions insurance policy would most likely offer protection against an allegation of A) antitrust activity. B) not showing the property to Asians. C) fraudulent activity. D) forgetting to turn on the burglar alarm after showing the property.

D) forgetting to turn on the burglar alarm after showing the prop No errors and omissions insurance policy will protect a licensee from a lawsuit or prosecution arising from criminal acts. Insurance companies normally exclude coverage for violation of civil rights and antitrust laws as well.

The broker provided the seed money for developing a property and is now acting as the listing agent. In this situation, the developer A) must go to court to partition the company. B) may revoke the listing agreement if not enough units have sold. C) is entitled to co-list with other real estate brokers. D) may not revoke the listing agreement.

D) may not revoke the listing agreement. The broker holds what is called an agency coupled with an interest, a relationship in which the agent is given an interest in the subject of the agency, such as the property being sold (because the broker has invested in the property). An agency coupled with an interest cannot be revoked by the principal or be terminated upon the principal's death.

A licensee is hired as a buyer's agent by a first-time buyer to help with the purchase of a home. The buyer confides that being approved for a mortgage loan may be complicated by his bankruptcy filing two years ago. The buyer would like to find a seller who will accept an installment sale. In this situation, a correct statement about the licensee's responsibility regarding this information during the presentation of an offer to purchase a property is that the licensee is A) not required to disclose it because the licensee has no agency relationship with the seller. B) required to disclose it under the Fair Credit Registry Act. C) not required to disclose it because the seller might reject the offer. D) required to disclose it because it is a material fact—information important to the seller's evaluation of the offer.

D) required to disclose it because it is a material fact—information important to the seller's evaluation of the offer. Because the buyer is asking for the seller to finance the property, the fact that the buyer has negative financials is useful information for the seller and must be disclosed.

The Consumer Notice must include a discussion of A) the service fees charged by the licensee's firm. B) stigmatized properties. C) of any physical defects in the property. D) the Real Estate Recovery Fund.

D) the Real Estate Recovery Fund. The Pennsylvania law requires that the Consumer Notice provide information about the Real Estate Recovery Fund and provide the reference in the law for complete details.

The agent has visited the prospective sellers three times hoping to list the property. When should the listing agent present the Consumer Notice to these sellers? A) At the time the sellers accept an offer from the buyers B) Before the property is placed in the Multiple Listing Service (MLS) C) The first time the licensee visits the home D) At the time the sellers sign the listing agreement

The answer is the first time the licensee visits the home. In Pennsylvania, licensee must discuss the Consumer Notice at the initial interview or the first substantive discussion between a licensee and a consumer about the consumer's needs.