REAL ESTATE CONTRACTS AND AGENCY EXAM (7) TEST
You represent a seller as a listing agent. Do you owe any duties to buyer agents?
Yes, the duty to cooperate on showings $
What is the definition of a legally competent party?
omeone who has the legal and mental capacity to enter into a contract $
Which of the following is an example of the duty of reasonable skill and care?
Advising clients to seek expert advice on matters outside of your expertise $
Which of these is an example of agency coupled with interest?
An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots. $
You're holding an open house for Brenda. Walt and Mary walk in and ask for a flyer that gives details about the property. Walt and Mary are now your ______.
Customers $ No agency agreement exists in this scenario, so no client relationship has been created.
rry is holding an open house for a property he's listing. He speaks to several visitors, but none of them discuss making an offer. What are these visitors called?
Customers $ The interaction between Jerry and the open house visitors defines them as customers. Customers aren't represented by the licensee, but are merely interested parties.
What's the role of the mortgage contingency in a sales contract?
Documents the type of and timeline for financing, and outlines what to do if financing falls through $
Which type of agent is an escrow officer?
Limited agent $
Chevy is an optionee. What's his sole responsibility?
Pay the option fee. $
What responsibility does the seller's agent have to the seller?
Seek a sale at the best price at terms acceptable to the seller. $
Ned represents Sofia in the sale of her townhome. Luciana represents Sofia's buyer, Arturo. What is Sofia's relationship to Luciana?
Sofia is Luciana's customer. $ Sofia is Luciana's customer and Ned's client. Arturo is Ned's customer and Luciana's client.
Which of the following situations is an example of a non-agency relationship?
Dutton was previously a licensee. He's selling his home, and he wants Wanda, who's currently licensed, to assist him with the paperwork. $ A non-agent, also referred to as a transaction broker, may assist a customer with ministerial tasks.
Which of the following statements about the fiduciary duty of disclosure is true?
It's owed to other parties, not just to the agent's clients. $
Which of these circumstances does NOT require agent disclosure?
Marty is representing Dwayne in both the sale of his current home and the purchase of his new home. $
Kendra made an offer on Sam's property. Sam rejected Kendra's offer, but made a counter-offer. Kendra is now considering the counter. What role does Kendra have in this scenario?
Offeree $
Irene and Harold are buying a home. Which document will be used for this transaction?
Sales contract $
Lisa is holding an open house for her client, Tim. Several couples stop by. Aarthi and Ram don't interact with Lisa at all. Gina and Reggie talk with Lisa about the property; they're not working with another licensee. Marcus and Marvin stop by and talk with Lisa about the property; they're working with another licensee. Which parties are considered only consumers at this point?
Aarthi and Ram $ Tim is Lisa's client; Gina and Reggie and Marcus and Marvin both talk with Lisa about the property, so could be considered customers. Aarthi and Ram made no contact with Lisa, so are most likely to be termed consumers at this point.
Marge is a licensee in a dual agency transaction with seller Steven and buyer Alda. In which of the following situations can Marge share what she knows with all parties without compromising her duty of loyalty?
Alda tells Marge that she's hired an inspector to perform a property inspection. $ Alda's engagement of an inspector isn't confidential in any way and would be expected by the buyer, so it's not a potential breach of a fiduciary duty for Marge to share that information with the seller.
Buyer Daphne and seller Kurt signed a sales contract with a definite closing date of May 15. Daphne then learned that she needs to move the closing date to June 15. She'll accomplish this with an ________ to the sales contract.
Amendment $
Which one of these is the best example of single agency?
An agent from one firm acts as the agent for the buyer $ The only time single agency exists is when one agent and one firm represent one side of the transaction.
Assuming that dual agency is legal where these scenarios occur, and the licensees' brokerages permit it, which of these situations demonstrates illegal dual agency?
At an open house Tom is holding for his client, Rod, a buyer says she wants to make an offer. She details her situation; Tom waits until she finishes and then suggests that she offer a non-refundable earnest money deposit to strengthen her offer. $
Hank leases 150 acres from Sara and Jesse. He has an option contract attached to his lease, with an option to purchase which can be exercised within the next two years. He just told Jesse that he's ready to purchase the land, and they've negotiated a purchase price and closing date. What kind of contract is this?
Bilateral $
Joan is representing the buyer, Carlton, and Reggie is representing the sellers, Zeb and Teresa Martin. Carlton's Great Aunt Matilda has agreed to pay any portion of Joan's commission the sellers don't cover. Teresa's father, Teddy, has agreed to pay half of the sales commission that will be owed to the listing agent. Which of these statements is true?
Carlton and the Martins are the agents' principals in this transaction. $
One week before closing is scheduled, Zach decides he's changed his mind and refuses to buy Kim's house. Kim sues Zach, and the courts agree that Zach should compensate Kim for the loss of other potential sales while the property was under contract to Zach. What kind of damages are these?
Compensatory damages $ Compensatory damages compensate a party for actual loss based on a contract's value.
Kirby is found to be in breach of contract in the sale of his house to Marta. Kirby's contract doesn't limit Marta's remedies. Which of these remedies is most likely to be awarded by a court?
Compensatory damages $ The specific types of damage awards in contract suits are punitive damages, compensatory (actual) damages, and liquidated damages. Courts rarely award punitive damages.
Which one of these is an example of the doctrine of estoppel?
Corrie shows Marvin several properties and prepares CMAs for each. She assists him in making an offer on one. He becomes difficult to work with, and she then says she's not his agent because they don't have a signed agency agreement. $
Don and Becky realized too late that the contract they signed for the sale of their home didn't include any language about a rent-back if the home they're building isn't ready in time. What can their listing agent do?
Create a contract amendment with the required language. $ Once a contract is signed, the document to use to alter the terms is a contract amendment.
Danielle's friend, Joanna, is an agent. Danielle is considering listing her property and shares the details with Joanna. Joanna creates an MLS listing and places a sign in Danielle's yard. Danielle knows that Joanna will do a good job, so even though she hadn't actually agreed to let Joanna list the property, she permits her to start scheduling showings. Which of these is an example of ratification?
Danielle knows Joanna will do a good job, so she permits Joanna to start scheduling showings. $ Ratification means "affirming something after the fact," so since Danielle permitted Joanna to start scheduling showings, she ratified an unwritten agency agreement between them.
Which one of the following actions is a licensee required to take as a fiduciary duties?
Disclose personal interest and licensed status when buying personal property. $ The fiduciary duty of disclosure requires that licensees disclose any conflict of interest.
Which of these statements about equitable title is true?
Equitable title refers to the borrowers future rights. $
In general, a person in a position of loyalty and trust is a(n) ______.
Fiduciary $
As Tina's agent, Marcus has broad responsibility to handle all the details of a specific transaction. What type of agent is Marcus?
General $ A general agent is responsible for handling all details of a specific transaction. A special or specific agent has limited scope of authority. Most real estate transactions are special agency; property managers, however, often serve as general agents.
Jillian's lease for her apartment has a right of first refusal clause. What kind of obligation does this create for her landlord Kathy?
If Kathy decides to sell, she must offer it to Jillian for purchase first. $
Christy found a property that was For Sale by Owner and made an offer. The seller accepted Christy's offer, but neither of them knew how to proceed. Licensee Zelda helped Christy complete the necessary purchase documents and walked her through the process. What kind of agency exists?
Implied agency $
Christy found a property that was For Sale by Owner and made an offer. The seller accepted Christy's offer, but neither of them knew how to proceed. Licensee Zelda helped Christy complete the necessary purchase documents and walked her through the process. What kind of agency exists?
Implied agency $ Christy and Zelda never signed a formal agency agreement, but through Zelda's actions in her attempt to help Christy, she created an implied agency agreement.
Hannah wasn't able to get the financing to open her boutique, so her mother came on as a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?
Indemnification $ Indemnifying one of the contract parties releases that party from all liability or loss.
Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?
Indemnification clause $ An indemnification clause is a contractual shift of liability and obligations off of a given party.
Which of the following statements about the fiduciary duty of confidentiality is true?
It doesn't extend to material facts relating to the property. $
Jim represents Joel in the sale of Joel's country acreage and house. Jim's business partner, Rolly, informed Jim that he wants to put an offer in to purchase the property, with the intention to subdivide it. Which statement best represents the disclosure requirements regarding this transaction?
Jim must disclose that Rolly is his partner and that Rolly intends to subdivide the property. $ Jim must disclose all material facts of which he has actual knowledge. This includes the conflict of interest presented because Rolly is his business partner, and the fact that Rolly and intends to buy the property and then subdivide it, as that may affect Joel's decision.
John is selling his rental property to Tony. Marcus represents John, and Meredith is working with Tony, though there is no agency relationship between them. In this scenario, who is/are the principal(s) in an agency relationship?
John $ Marcus is John's agent and fiduciary; John is Marcus's client and principal.
Which of the following is an example of sub-agency?
Kayla is a licensee with ABC Realty and lists a property for seller Devon. Maurice is a salesperson with XYZ Realty Group and brings a buyer to the table, but owes fiduciary duties to the seller. $
Kevin listed his house with you but isn't offering a cooperating agent's commission. Ji-eun represents the buyer, Marta, and Marta's parents, Jean and Tom, are paying Ji-eun's commission. On which of these factors is your agency relationship based?
Kevin signed a listing agreement with you. $
Edna leased her house to Joan with a right of first refusal. Edna's cousin, who knows that she needs liquid assets, just offered her $250,000 for the house. What does Joan have to do if she wants to buy the house?
Match the offer on the table. $ With a right of first refusal, the lessee who holds the right has to match the offer on the table in order to purchase the property.
In which of these situations has the licensee compromised the duties of loyalty and disclosure?
Nate didn't tell his client about a conflict of interest related to the sale of the client's property. $ Nate should have disclosed his conflict of interest. He compromises his duty of loyalty to his client by not doing so. Licensees must disclose all material facts to customers and other parties, and all offers must be presented to a seller client. Josie doesn't need to disclose to Rob that he's representing the seller since Rob IS the seller.
Frieda is practicing dual agency and neither party seems to mind, even though she didn't obtain written informed consent. Is this legal?
No. Without informed consent, it's illegal. $ Frieda needs to obtain informed consent in writing in order to practice dual agency legally.
An agency agreement between a buyer and a single agent that allows the buyer to work with other agents is a(n) __________.
Non-exclusive buyer designated agency $ Buyers can work with licensees from the same or a different agency.
Margo is the potential buyer of the property in an option contract. Margo is the ______.
Optionee $
Grant owns a property that's under an option contract. Grant is the _______.
Optionor $
Ovid and Rollie have entered into an installment sales contract on Rollie's property. What's likely true of this situation?
Ovid holds equitable title and Rollie holds legal title. $
Nevina may be creating an implied agency agreement if she does which of these?
Performs a CMA for an acquaintance and provides advice on setting a listing price based on other comparable properties in the area $ Performs a CMA for an acquaintance and provides advice on setting a listing price based on other comparable properties in the area
Madeline works for a single-agency firm. If she wants to represent both the buyer and seller in a transaction, what must she do?
She can't do this at her firm. $ Single agency firms don't allow their licensees to represent opposing sides in a transaction.
Mavis is a buyer's agent working with Blaine, an unrepresented seller. Mavis's buyer, Cintra, makes an offer on Blaine's property. Mavis assists Blaine with the paperwork. What's Mavis's relationship to the parties?
She's an agent to Cintra, and the seller is her customer. $
What is the definition of a legally competent party?
Someone who has the legal and mental capacity to enter into a contract $
When working with a client on a real estate sale, a real estate licensee is usually acting as which type of agent?
Special $
Tennyson represents Micah in the sale of Micah's house. Micah's parents offer to give Tennyson a bonus if the property sells within two weeks. Which of these statements is true?
Tennyson must disclose this compensation to Micah. $ Tennyson may accept this payment through his broker, but he must disclose it to Micah.
Liquidated damages in real estate contracts is often limited to what?
The amount of earnest money paid. $ Most residential real estate contracts limit the amount of liquidated damages to the amount of the earnest money deposit.
In a buyer agency relationship, who does the licensee represent?
The buyer $
Which of these statements about termination of fiduciary duties is true?
The duties of accounting and confidentiality survive termination of the agency agreement. $
Which of the following statements about the number of contingencies in a sales contract is true?
The inclusion of numerous contingencies makes it less likely that the buyer's offer will be accepted. $ While contingencies provide important safeguards, buyers should bear in mind that the inclusion of numerous contingencies makes it less likely that their offer will be accepted, especially in a competitive bidding situation.
Vinnie included a financing contingency in his offer to the seller. The seller accepted his offer. Which of these about the contingency is true?
The purchase contract should specify how the contingency is to be met and what happens if it's not. $
Randy, a licensee, is in a seller agency relationship with Brent, a seller. The buyer is Tim. Who's Randy's client?
The seller (Brent) $ In a seller agency relationship, the seller is the licensee's client, and the buyer is the licensee's customer.
Tom and Jim are neighbors. Jim wants to buy Tom's rental property. In the contract they sign, Jim is identified only as "the neighbor." Which statute or contract element does this violate?
The statute of frauds $ The statute of frauds requires not only that a contract to convey property be in writing, but also that the contract identify the parties to the contract.
Charlie represents Sue, a buyer. Charlie is being paid by Claude, the seller, through his brokerage. What's true about this situation?
This doesn't change the agency relationships. $ You can be paid by someone and not be that person's agent. Compensation doesn't determine agency—the agency relationship agreement does.
What's a good policy that a buyer's agent should employ regarding contingencies?
Use contingencies judiciously to protect the clients and the deal. $
Roger's offer on Trenton's property was accepted. At what point in the transaction does Roger first get equitable title to Trenton's property?
When the contract is accepted $ When Roger's offer was accepted, he received equitable title to the property. He has the right to full ownership when the sales closes (dependent that the equitable title is transferred to the lender as security on the mortgage loan).
Sondra thinks the new business contract she signed with her business partner is valid. Both parties are legally competent, the contract has a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?
Whether consent was voluntary $
Dean and Michael have an oral contract. Dean said he would sell Michael his bike in return for Michael's vinyl album collection. What does the record collection represent?
Consideration $
Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?
Arbitration $
Stacey, a buyer, is working with Rebecca, a licensee, in a state that doesn't recognize or permit implied agency. Rebecca doesn't represent Stacey, however, and is performing only ministerial tasks for her. Which of these statements about this situation is correct?
Stacey is Rebecca's customer. $
Camille, a buyer, wants to change the price already agreed to in a sales contract. She should use a(n) ______.
Amendment $
When offer and acceptance has occurred, both parties enter into ______.
A mutual agreement $
When offer and acceptance has occurred, both parties enter into ______.
A mutual agreement $ If an offer and acceptance have been made, it means the parties have entered into a mutual agreement.
Max has a written agency agreement with Rufus in which Max will receive all of the listings in the subdivision that Rufus purchased (with Max's representation) and is developing. One day when Rufus is visiting the site of the subdivision, a work truck accidentally runs him over and he's seriously injured. Rufus can no longer run the development of the subdivision. What happens to Max's agency coupled with interest?
It's still in place because it doesn't terminate on the death or incompetence of the principal. $
Select the situation that correctly represents a true conflict of fiduciary duties.
Nikki's seller client has instructed her not to present offers that are less than the listing price. This is a conflict of Nikki's duty of disclosure, which requires her to present all offers, and her duty of obedience. $
Rachel is talking with a co-worker, Shawna, about homebuying. Rachel shares some general market trends and talks about the impact of rising interest rates. She notes that the listing price of Shawna's neighbor's house seems lower than it should be, and then they talk about the importance of getting pre-approved for a loan early in the process. Which of her statements might have created an implied agency situation?
The listing price of the neighbor's property $
Which of the following is true regarding the definition of agency?
Agency describes the relationship between the real estate professional and the person or persons being represented $
The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?
Amendment $ A change to an existing sales contract is called an amendment, which changes one or more of the contract's original terms.
oan is representing the buyer, Carlton, and Reggie is representing the sellers, Zeb and Teresa Martin. Carlton's Great Aunt Matilda has agreed to pay any portion of Joan's commission the sellers don't cover. Teresa's father, Teddy, has agreed to pay half of the sales commission that will be owed to the listing agent. Which of these statements is true?
Carlton and the Martins are the agents' principals in this transaction. $
Specifically, what does the fiduciary duty of disclosure relate to?
Conflicts of interest, material facts, and adverse material facts $
The buyer you're working with doesn't want to enter into an agency relationship. However, the buyer begins to rely more and more on your advice and, indeed, implied agency has begun! You could have avoided this issue by providing appropriate disclosures, but now that you've created implied agency, what should you do?
Ratify the implied agreement by getting a signed agency agreement. $ You need to get your implied client to become an actual client. Ratify what's actually going on by signing an agency agreement with the buyer.
ayne was tired of waiting for her subcontractor to get his part of the deal done. The agreed-upon deadlines came and went, and Jayne lost money waiting for the subcontractor to come through. She decided that if the subcontractor wasn't going to honor his commitments, neither was she, so Jayne consulted with her attorney and then terminated the contract. This is an example of ______.
Rescinding the contract unilaterally $
Rhonda is an unrepresented buyer and is purchasing Tony's town home. Gary represents Tony in the sale of his property. What's Rhonda's relationship to Gary?
A customer $ Rhonda is Gary's customer. She's not his client because no agency relationship exists between them.
Camille has a listing for a townhome, and appoints Ivy as her sub-agent. Ivy brings a buyer customer to the transaction, and the buyer purchases Camille's listing. What's true about the agency relationships in this situation?
Ivy is Camille's sub-agent and owes loyalty to the seller. $ The sub-agent (Ivy) works for the seller's agent (Camille) and owes loyalty to the seller.
Which of these situations addresses the fiduciary duty of confidentiality?
Jeanette, a seller's agent, tells the buyer's agent that her client must sell his home because of an illness. The fiduciary duty of confidentiality prohibits licensees from disclosing confidential information about a client, even after the agency relationship ends.
In which of these situations is Ronna's fiduciary duty of reasonable skill and care at odds with her duty of obedience?
Jefferson insists that Ronna interpret the implications of him breaching his contract with a buyer. $
Which of these is an example of a sub-agency relationship?
Morris, who's licensed independently, finds a buyer customer for Greg's listing with Marvel Homes and is obligated to act in the best interest of Marvel Homes' client. $ Sub-agency refers to a licensee from one firm who brings an unrepresented buyer for a property listed by another firm. The sub-agent represents the seller in this situation.
Licensee Kennie Mae's neighbor, Buzz, wants to sell his house but doesn't want to sign an agency agreement. Kennie Mae works with Buzz to list and show the property and negotiate offers. After the property sells, Buzz discovers that Kennie Mae didn't present all offers to him, and he sues Kennie Mae. Kennie Mae claims that because she didn't have an agency agreement with Buzz, she wasn't required to perform all fiduciary duties. What legal principle applies here?
The doctrine of estoppel keeps Kennie Mae from disavowing the agency relationship because she provided agency tasks for Buzz. $
Rachel is talking with a co-worker, Shawna, about homebuying. Rachel shares some general market trends and talks about the impact of rising interest rates. She notes that the listing price of Shawna's neighbor's house seems lower than it should be, and then they talk about the importance of getting pre-approved for a loan early in the process. Which of her statements might have created an implied agency situation?
The listing price of the neighbor's property $ General real estate discussions are safe. However, Shawna may mistake Rachel's comment about the neighbor's list price as an expert's opinion on value. Based on this, Shawna may make an offer, thinking she's getting a deal.