Chapter 2

Jasmine, a sales associate with Oak Ridge Realty, is contacted by her college roommate, Chelsea, whom she has not seen or spoken to in 12 years. Chelsea's job has just relocated to town, and she wants to purchase a condominium. If Jasmine acts as a subagent of the seller, which statement is TRUE?

The answer is Jasmine may act as a subagent, but only with full disclosure and permission of the seller.

When must a license holder disclose that the license holder represents another party in a real estate transaction?

The answer is at the first contact with a party to the transaction.

When is a license holder required to provide the IABS Notice?

The answer is at the first substantive discussion about a specific property.

The fiduciary duty of confidentiality includes withholding information about all of the following EXCEPT?

The answer is condition of the property.

Thomas is a broker and acts as a property manager for several of Martin's investment properties. The property management agreement typically creates what type of agency relationship between Thomas and Martin?

The answer is general agency with Thomas as the agent and Martin as the client.

An owner of several single-family residential properties hires a licensed real estate broker to manage her properties. The license holder approves all tenants, signs all rental agreements, makes decisions regarding repairs, pays all expenses for the owner, and hires/fires all apartment employees. The relationship between the owner and the property manager is one of

The answer is general agency.

Jennifer acts as a property manager for James by managing several of his investment houses under a written property management agreement. What type of agency relationship do they have?

The answer is general agency.

The relationship between a broker and a sales associate is usually one of

The answer is general agency.

Which classification of agency applies to the agency relationship between a broker and the broker's sponsored sales agents?

The answer is general agency.

What type of agency relationship typically exists between brokers and sponsored sales associates, where sales associates make decisions and conduct transactions on behalf of the sponsoring broker, while the broker assumes significant liability for the agent's actions?

The answer is general agency. In a general agency relationship, the sales license holder, as an agent for the broker, is authorized to conduct an ongoing series of transactions in the name of, and on behalf of, the sponsoring broker. To carry out these duties, sales associates frequently make decisions for and enter their broker into binding agency contracts with clients, thus making the associate a general agent of the broker. [§ 1101.803; 22 TAC § 535.2(a)]

A real estate license holder must NOT

The answer is give legal advice (unless the license holder is also a Texas-licensed attorney).

To provide reasonable care and diligence to a client, a license holder must

The answer is have a basic knowledge of real estate law.

What should an agent do if a client requests an unlawful action?

The answer is inform the client that the request is illegal and refuse to comply. Under no circumstances is an agent allowed to violate the law.

A professional real estate license holder

The answer is knows when it is time to enlist the help of other professionals.

The duty of confidentiality

The answer is never ends unless the principal releases the agent from the duty. The duty of confidentiality is forever unless the principal releases the agent from holding some or all information confidential.

Due to the unique nature of the fiduciary responsibility of obedience, under which circumstances does a license holder have an obligation to follow an unlawful instruction of a client?

The answer is never. If the client requests an unlawful act, the agent should explain that the request is against the law and that all agents are required to adhere strictly to the law. If the client continues to insist upon the illegal act, the agent should withdraw from the transaction.

George is the listing broker for a seller, Ted. Ted has taken some major efforts to conceal foundation defects. George is unaware of the problems with the house. Is George liable if Ted misrepresents the condition of the property?

The answer is no, George is not liable unless he knew of the concealment.

Broker Bob operates an office with five sponsored sales agents. Bob is the agent representing seller Sam on the sale of his ranch. Steve, a sales agent who is sponsored by Bob, overhears a conversation in which Sam says he'd be willing to divide the land into smaller parcels if he does not have a reasonable offer within 90 days. Steve's cousin would like to buy a portion of Bob's land. Can Steve share what he overheard to help the client with an eventual sale?

The answer is no, Steve shares the obligations of loyalty and confidentiality to the broker's client.

Janice is a sales agent working with a customer buyer. Janice is the seller's agent, and the buyer has no agent. During the course of representing the seller, Janice finds out that the house has termites. Assuming that the seller has no direct knowledge of the termite infestation, is the seller liable if Janice misrepresents the condition of the property to the buyers?

The answer is no, because the seller did not know about the condition.

Gail used broker Bob as a buyer's agent when she was interested in buying a townhome last year. She gave up that idea when she realized that she would prefer the privacy of a free-standing home. This year, she is interested in making an offer on a home that Bob has listed. Can Bob reveal what he knows about Gail's exemplary credit history to the seller?

The answer is no, the information was gained through Bob's agency relationship with Gail.

Bailey broker sponsors two sales agents: Jon and Jen. Horace has not yet signed a buyer representation agreement with Bailey to have Bailey and his team help Horace find a new home. What kind of agents are Jon and Jen to Horace?

The answer is none of these. A sales agent/license holder is a general agent of a broker/license holder. Both the broker and the sales agent typically become special agents of any client/principal. A broker and his sponsored sales agents are not agents of the client until an actual expressed agency relationship has been established. Until then, Horace is a customer.

The Information About Brokerage Services Notice is designed to

The answer is reduce the confusion about agency relationships.

As an agent of the broker, sales associates generally do NOT

The answer is reject offers from prospective buyers that are below the listing price.

Which of the following pieces of information is the listing agent on an office building required to disclose to a customer who is interested in the property?

The answer is terms of leases held by current tenants.

Which of the following is an example of general agency?

The answer is the agent's relationship with an owner under a property management agreement.

A brokerage firm sponsors several sales agents and two other brokers are associated with the firm. Each license holder works under an independent contractor agreement with the firm. What type of agency relationship do the broker associates have with the clients of the firm and with the firm itself?

The answer is the broker associates are special agents of the clients and general agents of the brokerage firm.

Once an agency relationship has been established by written agreement, how are the duties of the broker different from the duties of the broker's sponsored sales agents?

The answer is the broker owes the same fiduciary duties as the sponsored sales agents.

Which of the following facts about a buyer-customer must a broker disclose to a client?

The answer is the customer making the offer is a relative.

Which of the following creates the authority of the broker to act on behalf of her seller client in a real estate transaction?

The answer is the listing agreement.

Which of the following statements BEST describes the relationship between a sales agent and a client of a real estate broker in a real estate transaction?

The answer is the sales agent is a special agent of the client.

What is the purpose of the IABS Notice?

The answer is to explain the different ways an agent can represent someone in a real estate transaction.

Which of the following is NOT a category of agency in a real estate transaction in Texas?

The answer is transactional agent.

Joe is a sales agent. He's hosting an open house at a client's property. A potential buyer comes in and inquires about another listing that Joe has. The buyer is represented by another sales agent, but Joe doesn't know this fact. Is Joe required to disclose who he represents to the potential buyer and why?

The answer is yes, Joe must disclose who he represents at the first contact with another party.

Joe is a sales agent. He's hosting an open house at a client's property. A potential buyer comes in and inquires about another listing that Joe has. The buyer is represented by another sales agent, but Joe doesn't know this fact. Is Joe required to provide the IABS Notice to the potential buyer and why?

The answer is yes, the potential buyer asked about a different property other than the open house.