Chapter 8 Quiz

1. In a typical real estate transaction, there is an agency relationship between: A. the seller (principal) and the listing broker (agent) B. the seller (principal) and the buyer (agent) C. the seller (agent) and the buyer (principal) D. the buyer (principal) and the listing broker (agent)

1. A In real estate transactions, the listing broker acts as an agent for the seller, who is the principal.

13. Dual agency is: A. improper unless the buyer pays the agent's commission B. improper unless the buyer is a friend or relative of the agent C. not improper if both agents are paid the same amount D. not improper if both principals give their informed, written consent

13. D Dual agency is legal only if both parties receive a dual agency disclosure and consent in writing.

14. A buyer's agent is most commonly compensated by: A. the buyer, through payment of a commission B. the seller, through a commission split C. the buyer, through payment of a flat fee D. the seller, through payment of a flat fee

14. B A buyer's agent is typically compensated through a commission split, receiving half of the brokerage commission paid by the seller.

15. Broker Lois listed the Mannings' property. The Mannings told her that the roof would leak in heavy rain, but Lois didn't pass that on to Ned, the buyer, since he didn't ask about the roof. If Ned purchases the property, discovers the leak, and then sues for damages: A. he will have no recourse, since it was his duty to inspect the property B. Lois will be liable, but the Mannings will not be liable C. the Mannings will be liable, but they may in turn recover damages from Lois D. the Mannings will be liable, but Lois will not be liable

15. C This situation is an example of vicarious liability. The principals (the Mannings) are liable for the mistakes and misdeeds of their agent (Lois), but the Mannings may sue Lois for the amount they had to pay the third party (Ned).

10. Regardless of which party she's representing, a licensee owes all of the parties a duty of: A. loyalty B. confidentiality C. immediately disclosing all conflicts of interest D. honesty and fair dealing

10. D All agents owe all parties a duty of honesty and fair dealing. Loyalty, confidentiality, and disclosure of conflicts of interest are duties owed only to the agent's principal.

11. A broker who's representing a seller has not been expressly authorized to accept a deposit. Nevertheless, the broker accepts a deposit check from the buyer. In regard to the deposit, the broker is acting as: A. an agent for the seller only B. an agent for the buyer C. an agent for the bank D. an escrow agent

11. B Since the seller didn't authorize the broker to accept a deposit, the broker is acting as the buyer's agent in regard to the deposit.

12. It used to be common for listing agreements to contain a "unilateral offer of subagency" if they were going to be submitted to a multiple listing service. Under the terms of such a listing agreement, a member of the MLS who procured a buyer for the listed property was automatically considered to be a subagent of the: A. listing broker B. selling broker C. seller D. buyer

12. C The "unilateral offer of subagency" meant that the cooperating agent was considered to be an agent of the listing broker, and therefore a subagent of the seller.

16. An agency relationship may terminate: A. only if there is no termination date in the agency agreement B. only if the agent has proven to be incompetent or untrustworthy C. only with the agent's written consent D. with the mutual consent of the parties

16. D The principal and agent may terminate their agency relationship at any time by mutual consent. It may also be terminated unilaterally at any time by either the principal (revocation) or the agent (renunciation).

17. A real estate agent must visually inspect: A. a two-unit residential property that's listed for sale B. all areas of a residential property, even ordinarily inaccessible areas C. the common areas of a condominium D. All of the above

17. A Instead of just relying on the seller's representations, a real estate agent is required to perform a reasonably competent and diligent visual inspection of a residential property with up to four units. The agent does not have to inspect inaccessible areas or condominium common areas.

18. A principal entered into an agency agreement that was to last for a period of three months. Two weeks later, the principal died of natural causes. Which of the following is true? A. The principal's heirs are required to honor the terms of the agency agreement B. The agency continues unless the principal's heirs choose to revoke it C. The agency relationship terminated automatically when the principal died D. The agency terminated as soon as the agent was informed of the principal's death

18. C Agency relationships terminate immediately upon the death or incapacity of either party.

19. Which of the following statements about dual agency is not true? A. Inadvertent dual agency may arise in a situation where the listing broker has had a previous relationship with the buyer B. Dual agency is illegal in California C. Dual agency has an inherent potential for conflict of interest D. Dual agency requires comprehensive disclosure to both parties the agent is representing

19. B Dual agency is not illegal in California, as long as both parties receive a dual agency disclosure and consent in writing.

2. In order to alleviate confusion among buyers and sellers regarding agency representation issues, many states, including California, enacted laws that: A. require agents to disclose which party or parties they are representing in a transaction B. prohibit agents from representing buyers in residential transactions C. require brokers to be licensed as either seller's agents or buyer's agents D. require agents to act as seller's agents if they are members of a multiple listing service

2. A Laws such as California's agency disclosure statute require real estate agents to disclose to the parties in a transaction which party or parties they're representing in that transaction.

20. The owners of an apartment building hire a real estate broker as the property manager. If the owners later sell the building, their agency relationship with the property manager: A. is automatically transferred to the new owner B. terminates due to extinction of the subject matter C. cannot be terminated by the former owners without liability to the property manager D. continues unless terminated by the property manager

20. B When property is sold or destroyed, any agency related to that property is extinguished.

3. When a salesperson works as an independent contractor, it means: A. the salesperson has his own office and deals directly with buyers and sellers B. the salesperson has an associate broker's license C. the salesperson is not accountable to his broker D. None of the above

3. D A real estate salesperson who's an independent contractor sets his own hours, isn't told how to carry out his work, and is compensated by commission instead of salary. Even so, he is still accountable to his broker.

4. A special agent is authorized to: A. do anything that can be lawfully delegated to a representative B. conduct a specific transaction C. handle all of the principal's affairs in one or more areas D. enter into contracts on the principal's behalf

4. B A special agent's authority is limited to a specific activity or transaction. Real estate agents typically are special agents.

5. The most common method of creating a seller agency relationship is: A. payment of a commission B. a written listing agreement C. submitting a listing to a multiple listing service D. words or conduct of the parties indicating an intent to create an agency

5. B Seller agency relationships are usually created through a written listing agreement.

6. Broker Quincy is representing Rebecca in the sale of her house, which is listed for $500,000. Rebecca wants a quick sale, and she tells Quincy that she'd probably be willing to sell the property for as little as $450,000. Quincy tells a prospective buyer that Rebecca would be willing to accept $450,000. The buyer offers $450,000, and Rebecca accepts the offer. Quincy has: A. not violated his fiduciary duties, because he obtained an acceptable offer B. not violated his fiduciary duties, because he acted within the scope of his implied authority C. violated his fiduciary duties by breaching the duty of agency disclosure D. violated his fiduciary duties by breaching the duty of loyalty

6. D Quincy's actions violated his duty of loyalty to Rebecca, since he revealed confidential information to the buyer. That's a violation of his fiduciary duties even if the end result was satisfactory to Rebecca.

7. In an in-house sale: A. the listing is not submitted to the MLS B. the compensation must be paid from the principal directly to the broker's salespeople C. the buyer and seller are brought together by salespeople working for the same broker D. All of the above

7. C In an in-house transaction, the listing salesperson and the selling salesperson both work for the same broker.

8. If a principal gives approval after the fact to unauthorized actions, an agency relationship is established by: A. ratification B. estoppel C. implication D. implied actual authority

8. A Approval of unauthorized actions after the fact is referred to as ratification

9. In California, a dual agent must: A. disclose material facts to both the buyer and the seller, even if those facts are confidential B. keep each party's negotiating position confidential C. avoid giving advice to either party D. submit conflicts between the buyer and the seller to arbitration

9. B A dual agent is obligated to keep each party's negotiating position confidential. One party's confidential information should not be disclosed to the other party unless there's a legal duty to do so (such as the duty to disclose latent defects).