National Topic Tester - Mandated Disclosures

Upon listing a property, a broker discovers mold in the basement. The broker should inform: Select one: A. The seller only if he is a seller's agent B. The buyer only if he is a buyer's agent C. The buyer and the seller, regardless of who he represents D. No one

(agency duties) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker. Agents must disclose material facts to both buyers and sellers. The correct answer is: The buyer and the seller, regardless of who he represents

Which of the following items is NOT a latent defect? Select one: A. Worn carpeting B. Seasonal flooding in the basement C. A foundation crack covered with paneling D. A faulty, but working, heating system

(material facts) A latent defect is one that is not readily noticeable. Worn carpets are obvious, while the other answer choices would probably not be known by mere observation. The correct answer is: Worn carpeting

A property owner tells the broker that his property is structurally sound, but the broker later discovers that there are termites on the property. The broker must: Select one: A. Inform the seller and all prospective buyers B. Contact a pest control company C. Encourage the seller to remedy the problem D. All of the above

(material facts) All material information known by a licensee must be disclosed to all parties in a transaction. Termite damage is material information. However, licensees have no obligation to contact a pest control company, or to encourage the seller to fix problems (although they certainly could do this). The correct answer is: Inform the seller and all prospective buyers

When showing and selling property, a salesperson must: Select one: A. Inform buyers about hidden property defects B. Avoid statements which may deceive the buyer C. Present all offers, even after the seller has already accepted D. All of the above

(material facts) Although a salesperson is an agent of the broker, who is an agent of the principal (seller), the salesperson acts as a fiduciary of the seller as a sub-agent. Therefore, all offers must be presented to the seller. Salespersons and brokers also have certain obligations towards their customers (buyers), and must to inform them of material facts about the property. The correct answer is: All of the above

A salesperson listed a property where a murder recently occurred. If the salesperson shows the property without advising potential buyers of the murders, the salesperson would be guilty of: Select one: A. Fraud B. Misrepresentation C. Puffery D. Nothing

(material facts) The salesperson is not required to disclose occurrences which have no effect on the physical structure, the environment, the property, or its improvements. The correct answer is: Nothing

While previewing a house, the salesperson notices water stains behind the draperies. When asked, the owner denied that there were any water problems. If the salesperson shows the property and fails to mention the water stains, the salesperson is guilty of: Select one: A. Fraud B. Misrepresentation C. Nothing, because his fiduciary responsibility is with the owner D. Puffery

(material facts) Since they are evidence of leakage or flooding, water stains are material facts that must be disclosed if known by the salesperson. Because the salesperson knew of the stains and failed to disclose them, his conduct is fraudulent. The correct answer is: Fraud

Broker Johnson has listed Cheever's property and sells it to Brevard for $75,000. Before closing, Johnson discovers that the property has a serious structural defect. What should Johnson do? Select one: A. Tell Cheever only because he is Cheever's agent B. Tell Brevard only to satisfy his fiduciary duty C. Tell no one if the sales contracts already been executed D. Tell Cheever and Brevard to avoid liability

(material facts) The broker is obligated to reveal all material facts about a property to both parties. The correct answer is: Tell Cheever and Brevard to avoid liability

Broker A shows a house with a faulty roof. When he finds out about the roof, should he tell the buyer/customer? Select one: A. Yes, it is an agency responsibility B. Yes, it is a material fact C. Only if he is a dual agent D. Only if he has the seller's permission

(material facts) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker. The correct answer is: Yes, it is a material fact

Which of the following items is a broker NOT required to disclose to a prospective purchaser? Select one: A. The property is haunted B. The state plans to construct a new highway near the property C. The property is subject to seasonal flooding D. The monthly fee charged by the homeowners' associaton

(material facts) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker. That the property is haunted is an event or occurrence that does not affect the physical or environmental integrity of the property or its improvement (stigmatized property). The correct answer is: The property is haunted

A salesperson took a listing on a property that had a foundation crack due to water seepage. Although the owner told him that the water problem was fixed, it's obvious that the owner only filled in and painted over the crack. If the salesperson shows the property without advising potential buyers of the issue, the salesperson would be guilty of: Select one: A. Fraud B. Misrepresentation C. Puffery D. Nothing

(material facts) This is fraud because it is an intentional concealment. The licensee is obligated to disclose known material facts about property. The correct answer is: Fraud

Broker Marco was showing a tract of land with irregular boundaries. When asked about a boundary, Marco indicated that it ran from the edge of the stone wall to the creek. He knew that this was not exactly accurate, but it was pretty close to the actual line. After the buyer entered into contract, she was shown a survey which reflected the true boundary. Was Marco guilty of misrepresentation? Select one: A. No, verbal statements are not binding B. No, the buyer was responsible for having the property surveyed C. Yes, the broker was responsible for verifying the official records D. Yes, because he knew his statement was not completely accurate.

(need for inspection, obtaining, verifying information) Broker Macro knowingly misrepresented the facts about the boundaries to the buyer. Therefore, he is guilty of misrepresentation or possibly fraud. The correct answer is: Yes, because he knew his statement was not completely accurate.

In the process of taking a listing, a licensee notices a potential water stain in the basement. What should the licensee do? Select one: A. Ignore it, as it is not a latent defect B. Ignore it, if the damage appears to be old C. Ask the owner if there is a leak D. Nothing

(need for inspection, obtaining, verifying information) It is the responsibility of the licensee to determine all material facts about the property. The agent should inquire about the stain in order to determine if there is a problem. Remember that the licensee is required to disclose known material information to prospective buyers. The correct answer is: Ask the owner if there is a leak

In the process of taking a listing, a salesperson notices water stains on the ceiling of one of the rooms. What should the salesperson do? Select one: A. Nothing, because it is not a latent defect B. Nothing, because the stain is old C. Ask the owner if there is a leak D. Decline to list the property

(need for inspection, obtaining, verifying information) The licensee must disclose all material facts about the property. The agent should inquire about the stain in order to determine if there is a problem. Remember that the licensee is required to disclose known material information to prospective buyers. The correct answer is: Ask the owner if there is a leak