Unit 7 Test
A broker owes a third party (customer) honesty and fairness, as well as other fiduciary responsibilities. True False
False While a broker owes a third party (customer) honesty and fairness, a broker does not owe a third party any fiduciary responsibilities, such as loyalty and obedience.
A listing agent owes what duties to a third-party buyer? A)Honesty, fairness, and disclosure of material facts B)Disclosure of material facts, honesty, and loyalty C)Honesty, confidentiality, and fairness D)Fairness and disclosure of benefits and risks
A A listing agent owes a third party honesty and fairness and must disclose material facts. Agents must disclose benefits and risk to the principal, not to a third party.
A property manager is BEST described as a A)general agent. B)facilitator. C)universal agent. D)special agent.
A A property manager is a general agent of the property owner. The relationship is ongoing and allows the property manager to bind the property owner to leases.
Fraud is the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person. While fraud is illegal, an activity that is legal is opinion statements that exaggerate a property's benefits, which are called A)puffing. B)blue-skying. C)facing the property. D)exaggerating.
A Although puffing is legal and a common practice, it must not constitute a misrepresentation of the property.
Termination of agency may be accomplished by A)all of these. B)destruction or condemnation of the property. C)completion or performance of the purpose of the agency. D)mutual agreement of the parties.
A An agency agreement may be terminated at any time for any of the following reasons: completion or fulfillment of the purpose for which the agency was created; expiration of the terms of the agency; mutual agreement to terminate the agency; breach by one of the parties, by operation of law; destruction or condemnation of the property; and death or incapacity of either party.
Under the common law of agency, a real estate broker owes all of the following duties to the principal EXCEPT A)novation. B)obedience. C)care. D)disclosure.
A An agency relationship is a fiduciary relationship, one of trust and confidence between the broker and the principal. In a fiduciary relationship, the broker, by law, owes the principal the duties of obedience, loyalty, disclosure of information, confidentiality, accounting, and reasonable skill, care, and diligence.
An agent is representing the seller. The agent shows the house to his cousin and she is very interested in buying it. The agent presents his cousin's full price offer to the seller, who eagerly accepts it. Both the seller and the buyer are very happy with the transaction. Which statement is TRUE? A)The agent has violated his fiduciary duties to the seller by failing to disclose his relationship with the buyer and could be subject to disciplinary action. B)The agent has done nothing wrong; he was not required to disclose his relationship with the buyer. C)The seller cannot complain about the agent's actions because the offer was for the full listing price. D)Because both parties are happy with the transaction, it doesn't matter whether the agent disclosed his relationship with the buyer to the seller.
A An important duty of an agent to a principal is the duty of disclosure of information. Facts that an agent for the seller has a duty to disclose to the seller include the identity of the prospective purchasers, including the agent's relationship, if any, to them (such as a relative of the broker being a participating purchaser).
The seller tells the listing agent about a latent defect in the property. The listing agent tells the buyer's agent about the defect, but the buyer's agent does not inform the buyer. Who would most likely be held responsible for the omission in North Carolina? A)The buyer's agent because he should not withhold information from his client B)The listing agent because he has the duty to inform the buyer personally of any latent defects C)The seller because he made no representation on the Residential Property Disclosure form regarding the defect D)The listing firm because the listing firm is liable for all disclosures in a sale transaction
A Another very important duty of an agent to a principal is the duty of disclosure of information. An agent must disclose to the principal any facts that might affect the principal's decision in a transaction. The NCREC has historically interpreted material facts to be disclosed under the Real Estate License Law to include at least facts about the property itself (i.e., significant physical characteristics, such as unpermitted space, a structural defect, or defective mechanical systems).
If a broker's misrepresentation causes loss or financial injury to a buyer customer, which of the following could be found liable? Principal Broker A)Both I and II B)Neither I nor II C)II only D)I only
A Brokers must be careful not to make any misrepresentations or omissions where material facts are concerned. If either party suffers loss because of a broker's misrepresentations, the broker can be held liable for damages.
It is discovered after a sale that the land parcel is 10% smaller than the owner represented it to be. The broker who passed the erroneous information on to the buyer is A)liable if the broker knew or should have known of the discrepancy. B)not liable as long as she only repeated the seller's data. C)not liable if the misrepresentation was unintentional. D)not liable if the buyer actually inspected what she was getting.
A Brokers must be careful not to make any misrepresentations or omissions where material facts are concerned. If either party suffers loss because of a broker's misrepresentations, the broker can be held liable for damages.
The essence of the seminal Edina Realty court case in 1995 was that the buyer said they were the victim of which of these? A)Undisclosed dual agency B)Broker disclosed subagency C)Subagency D)Principal disclosed subagency
A In 1995, the outcome of the Edina Realty case in Minnesota prompted the North Carolina Real Estate Commission (NCREC) to revise its agency rule to require licensees to provide specific agency disclosures in writing to buyers and sellers at first substantial contact. This disclosure was to inform and protect the public, as well as to help North Carolina licensees avoid the type of liability incurred for practicing undisclosed dual agency.
A North Carolina broker with an active listing would be required to disclose to a prospective buyer which of the following as a material fact? A)Streets in the subdivision are privately maintained. B)The previous owner was brutally murdered in the house. C)The owner has HIV. D)A registered sex offender lives next door.
A Streets in a subdivision needing to be privately maintained requires disclosure to a prospective buyer.
This nonagency relationship is NOT allowed in North Carolina. A ____________ is a licensee who assists buyers and sellers in reaching an agreement in a real estate transaction without representing interests of either party. A)facilitator B)subagent C)principal D)fiduciary
A The licensee treats both parties equally as customers.
The listing broker is holding an open house on a listing in which the sellers have told him they are very motivated. Buyers tour the home and are interested in making an offer. The listing broker tells the buyers that if they will write an offer with the listing broker within the week, the broker will get the seller to drop the price by $5,000. In this case, the broker is acting as A)a sellers' agent with an oral buyer representation agreement. B)an undisclosed dual agent. C)a dual agent. D)a designated agent for the sellers and the buyers.
B
A broker is permitted to represent both the seller and the buyer in the same transaction when A)commission is paid by the seller. B)both parties have been informed and agreed (in writing) to the dual representation. C)the broker is a subagent rather than the agent of the seller. D)the broker decides principals will benefit from the dual representation.
B A broker may only act as a dual agent representing both parties in a transaction if the broker has informed each party about the dual representation and has received from each party a written agreement to the broker's acting as a dual agent.
North Carolina describes the customer as the third party for whom some level of service is provided by an agent of another party, but who is NOT represented by A)the fiduciary. B)the agent. C)the broker. D)the governor.
B A customer would have a nonagency relationship under this description.
A firm that represents both the buyer and the seller in the same transaction is A)primarily representing the seller because the seller normally pays the commission. B)a dual agent. C)in violation of license law and Commission Rules unless it has a comprehensive written agency policy. D)a designated agent.
B A dual agent represents both parties in a transaction. North Carolina allows a brokerage firm to engage in dual agency, provided both parties are informed about dual agency and both parties sign agreements permitting the firm to act as a dual agent in the transaction.
The fiduciary relationship between the principal/client and the agent is the description for A)subagency. B)agency. C)agent. D)fiduciary.
B A real estate agent refers to a strictly defined legal relationship. In the real estate industry, it is the relationship a licensee has with buyers and sellers.
An agency relationship may be legally terminated by all of the following means EXCEPT A)the broker secures a ready, willing, and able buyer for the seller's property. B)the broker discovers that list price will not yield an adequate commission. C)the owner dies. D)the owner decides not to sell the house.
B An agency agreement may be terminated at any time for any of the following reasons: completion or fulfillment of the purpose for which the agency was created; expiration of the terms of the agency; mutual agreement to terminate the agency; breach by one of the parties, by operation of law; destruction or condemnation of the property; and death or incapacity of either party.
A real estate agent working for a brokerage firm lists a unit for sale in a condominium building. In this transaction, the agent A)is representing the condominium association. B)is acting on behalf of the brokerage firm, the seller's agent. C)is now personally obligated as the seller's agent. D)must personally find a buyer for the unit in order for the firm to earn a commission.
B An agent working for a brokerage firm who acquires a listing does not own the listing; the listing belongs to the firm. The agent acts on behalf of the brokerage firm, the seller's agent.
Which of the following is NOT considered a material fact? A)A fact about the property itself B)A fact relating to the number of closings the agent has had that year C)A fact relating to the ability of the principals to act D)A fact relating directly to the property
B Another material fact category is facts known to be of specific importance to a party (most likely to be items of special interest to a purchaser's intended use of the property, such as zoning allowing home businesses or covenants allowing multiple pets).
A listing broker must disclose his brokerage relationship with the seller to any unrepresented buyer before A)providing any information about the listing. B)discussing any of the buyer's confidential information. C)discussing anything else. D)showing the buyer a house.
B Disclosure of agency representation must be before the consumer is put at a disadvantage by disclosing confidential information.
The document used to form the relationship between the agent and the principal is A)a facilitations contract. B)a fiduciary agreement. C)an open listing. D)a lease.
B Fiduciary agreements create the representation obligations of agents to principals.
All of the following situations will terminate a listing EXCEPT A)destruction of the listed property. B)death of the individual listing licensee. C)breach by either party. D)mutual agreement of the parties.
B If the individual listing agent dies, the listing would not be terminated because the listing belongs to the brokerage firm rather than to the deceased listing agent.
The law of agency is a common-law concept (law from the judgments and decrees of courts, as opposed to the legislature) though it is being widely replaced or modified by state statute in many jurisdictions. Prior to 1995, North Carolina had chosen to A)completely renovate the common-law concept. B)not alter the common-law concept. C)ignore the common-law concept. D)use the common-law concept for occupations other than real estate.
B In 1995, the Edina Realty case prompted the North Carolina Real Estate Commission (NCREC) to revise its agency rule.
In real estate, which of these is the person who hires and delegates to an agent through a brokerage contract the responsibility for representing that person's best interests ? A)Agent or subagent B)Principal or client C)Lender or loan officer D)Facilitator or transaction broker
B In the real estate business, the principal/client can be the buyer, seller, landlord, or tenant.
If a seller informs a broker that the house is for sale "as is," which of the following would be an appropriate action for the broker? A)The broker advises potential buyers that an "as is" property requires no property disclosures. B)The broker visually inspects the property, sees a water leak in the ceiling, and informs potential buyers about it. C)The broker informs all potential buyers that there is nothing wrong with the property, even though the broker has not inspected it. D)The broker agrees to allow the seller to handle all conversations with potential buyers about the condition of the property.
B Licensees must reveal all material facts they know or reasonably should know.
Which of the following situations is considered a material fact in North Carolina? A)Criminal activity occurred on the property. B)Nearby land is being considered for a landfill. C)House is rumored to be haunted. D)Convicted sexual offender lives in the neighborhood.
B Material facts include facts about the property itself, facts relating directly to the property, facts relating directly to the ability of the parties to complete the transaction, facts of special importance to the party. Death or serious illness of an owner or occupant of a property or the presence of a sexual offender in the area does not constitute a material fact that must be disclosed by brokers in North Carolina.
A seller tells her listing broker that there is termite damage in the framework around the garage door and that her deceased husband did some plumbing and electrical work in the kitchen several years ago without getting a permit. If the broker fails to disclose these facts to a potential buyer and his broker, the listing broker is guilty of A)negligent misrepresentation. B)willful omission. C)willful misrepresentation. D)negligent omission.
B The broker intentionally did not disclose a material fact.
Under North Carolina Real Estate Commission rules, an oral buyer agency agreement A)must be in writing before preparation of the first offer. B)must be reduced to writing before presentation of the first offer. C)should be put in writing immediately after the buyer receives proper disclosure and signs the Working with Real Agents brochure as required by state law. D)must be reduced to writing before acceptance of an offer.
B The written authority for dual agency must be in writing not later than the time that one of the parties represented by the broker makes an offer to purchase, sell, rent, lease, or exchange real estate to another party.
Which agent is defined as "a person who is empowered to do anything the principal could do personally"? A)A general agent B)A universal agent C)A special agent D)A broker agent
B There are virtually no limits to the universal agent's authority to act on behalf of the principal. An unlimited power of attorney would be an example of universal agency.
In North Carolina, the doctrine of caveat emptor A)is overridden by agents' disclosure laws. B)is still intact for property owners in real estate transactions. C)has been completely replaced by case law and consumer protection laws. D)is applicable only if the agent acts as a dual agent.
B Though North Carolina is still considered a caveat emptor state, while buyers should "beware," buyers can trust real estate professionals to be honest and fair in their dealings.
A broker for ABC Realty has listed a home on Ash Street. Another agent at ABC has shown a buyer customer the listing on Ash. The buyer wants to make an offer. Which of the following is TRUE under North Carolina license law? A) ABC Realty is a dual agent. B)If the buyer shares any confidential information with the second agent, that agent is obligated to share the confidential information with the listing broker. C)The agent that showed the house to the buyer is a buyer's agent. D)The broker is a dual agent.
B Under North Carolina agency law, all brokers in the firm become agents of the seller or subagents to the seller. The broker-in-charge may designate one broker to represent the seller and another broker in the same firm to represent the buyer.
A seller hired a local real estate firm to market her property and signed a six-month listing contract with Joe, a broker in the firm. Joe gave the seller, as part of the listing presentation, a list of 100 marketing items he would carry out. One of the items was to hold an open house every week. Joe has held one open house in the six weeks since listing the property and has stopped responding to the seller's phone calls and emails. The seller has decided to list with another firm but was told the current listing must be terminated before an agency creation with a new firm could be formed. In this situation, which of the following is TRUE? A)The seller can leave a voice mail for Joe, advising that the seller has canceled the listing, and then remove Joe's sign and start working with the new company. B)The seller should send a letter of termination to Joe and send a copy to the new firm; the letter will serve as full notice of termination of the original listing. C)The seller should send written notice to the principal broker of Joe's firm stating the seller's intention to terminate the listing because of poor service. D)The seller is obligated to keep the current firm through the six-month listing period; however, the seller can pay the broker less commission because of bad service.
C A listing is an agreement between the broker and the seller. An agency agreement may be terminated at any time for breach of the agreement, such as abandonment by the agent. The seller must contact the listing broker.
Which agent is defined as "is authorized to represent the principal in only one specific act or business transaction, and under limited, detailed instructions with no power to bind the principal"? A)A general agent B)A broker agent C)A special agent D)A universal agent
C A real estate broker is usually a special agent. If hired by a seller, the broker's duty is limited to finding a "ready, willing, and able buyer" for the property. A special agent for a buyer has the limited responsibility of finding a property that fits the buyer's criteria.
In North Carolina, oral buyer agency A)allows the details of the agency arrangement to be delayed until written agency occurs. B)cannot include dual agency options. C)must be nonexclusive and have no expiration date. D)must be reduced to writing before writing an offer to purchase on behalf of the buyer.
C Oral buyer agency is an agency option a firm may use when the consumer is unwilling to commit to a written buyer agency relationship. All oral buyer agency agreements must be nonexclusive. An oral agreement is considered to be of indefinite duration and can be terminated at the will of either party at any time.
Until the 1990s the common traditional view of agency was BEST described by which of these? A)Sellers were not allowed to hire real estate brokerage firms to represent them. Sellers remained customers of all real estate brokerage firms. B)A real estate brokerage firm listed a property for sale and represented the seller. Only the real estate brokerage listing firm was able to find a buyer for the property. C)A real estate brokerage firm listed a property for sale and represented the seller. The listing brokerage firm could find the buyer, or another competing real estate brokerage firm could find the buyer. Regardless of where the buyer came from all real estate brokerage firms represented the seller only, buyers were unrepresented. D)A real estate brokerage firm listed a property for sale and represented the seller. Only a competing real estate brokerage firm could find a buyer for the property.
C A real estate brokerage firm listed a property for sale and represented the seller. The listing brokerage firm could find the buyer, or another competing real estate brokerage firm could find the buyer. Regardless of where the buyer came from all real estate brokerage firms represented the seller only, buyers were unrepresented. When two firms are involved in a transaction, the situation is called a co-brokered transaction or cooperative transaction. Up to the 1990s it was common for all brokerage firms to represent sellers only, even if the cooperating firm was showing the buyer homes and did not know the seller. This type of agency was not only confusing for the agent, it was also confusing for the buyers who thought that the agent showing them homes was representing them.
A buyer-client has instructed the agent to show only properties where the seller is willing to pay the buyer agent's commission. The agent contacts an owner selling property without the assistance of a real estate agent with the hope that the seller would be willing to pay her commission if the buyer decided to purchase the seller's property. In order to comply with North Carolina Real Estate Commission Rules, the agent must do all of the following EXCEPT A)disclose her agency status to the seller at initial contact. B)review the Working with Real Estate Agents brochure with the seller. C)convince the seller to list with her and authorize dual agency. D)obtain permission from her buyer-client in order to receive compensation from the seller.
C A real estate commission may be paid by any party in a transaction if agreed to by the parties. In this situation, the agent may receive her commission from the seller with the buyer-client's permission without having to acquire a listing on the property and creating a dual agency relationship.
A broker lists a property for sale at $100,000 with a 5% commission. The broker obtains a verbal offer to purchase the property from a prospective buyer. The seller indicates to the broker that the offer would be acceptable if submitted in writing. Before it can be put into writing, the buyer withdraws the verbal offer. In this situation, the broker would be entitled to A)sue the buyer for breach of contract. B)a commission of $5,000. C)no commission. D)only a partial commission.
C All real estate transaction documents must be in writing to be enforceable. A verbal offer does not entitle a broker to a commission.
An agent who breaches the fiduciary duties may be subject to all of the following EXCEPT A)a civil lawsuit. B)disciplinary action by the state Real Estate Commission. C)suspension of licensure by the Association of REALTORS®. D)criminal prosecution.
C Any agent who breaches an agent's duties to either the principal or a third party must bear the consequences of that breach. These consequences may include any (or all) of the following: disciplinary action by NCREC, including suspension or revocation of license; civil action in court brought by the injured party; criminal prosecution brought by the district attorney.
A licensee is an actively licensed real estate broker who has a written contract with his firm that specifies that he will not be treated like an employee. The licensee's entire income is from sales commissions rather than from an hourly wage. Based on these facts, the licensee will be treated by the IRS as A)a subagent. B)an employee. C)an independent contractor D)a real estate assistant.
C Associated brokers with an active license may be paid for tax purposes either as a Form W-2 employee or as a Form 1099 independent contractor. This distinction is relevant primarily for tax purposes and is determined by tests set forth by the IRS as to the degree of control exercised by the employer/principal over its employees/agents.
A broker is representing the property seller. An agent at the same firm is representing a buyer. The two agents confer during a sales meeting and discover the compatible needs of the clients. All of the following are true EXCEPT A)the listing agent is being diligent in trying to find a buyer for the seller. B)the second agent has performed his fiduciary duties to the buyer. C)the broker-in-charge must designate two other brokers who did not attend the meeting to represent the clients. D)if the parties have consented to dual agency, the broker-in-charge can allow the two agents to continue their representation in brokering this transaction.
C If a firm practices dual agency and designated dual agency, full written disclosure of this practice should be given to clients and customers at the earliest opportunity. When a firm enters into an agency contract with the seller client or the buyer client, the client must be given an opportunity to indicate in writing which agency relationship he is authorizing.
Single agency occurs when a real estate agent A)has both the listing and the sales sides of a transaction. B)chooses to be a designated dual agent. C)represents only one party in a transaction. D)represents both the buyer and the seller in a transaction.
C In single agency, the agent represents only one party in any single transaction. The real estate agent must provide either fiduciary or statutory duties exclusively to one principal within the transaction (who may be either the buyer or the seller or the landlord or the tenant).
The North Carolina Working with Real Estate Agents brochure must be given A)only to buyers in a real estate transaction. B)to all consumers prior to first substantial contact. C)to all consumers in a sales transaction no later than first substantial contact. D)to property owners upon initial contact.
C No later than first substantial contact with a buyer or seller, an agent must provide the buyer or the seller with a copy of the mandatory NCREC-published brochure Working with Real Estate Agents (WWREA). Brokers must also review the brochure with consumers.
A real estate firm who engages brokers as independent contractors must A)withhold Social Security from all commissions they earn. B)withhold income tax from all commissions they earn. C)still supervise the brokers and remain civilly liable for the brokerage activities of the brokers. D)provide insurance plans offered to firm employees.
C Regardless of whether associated brokers are paid as employees or independent contractors, the real estate company has the right to determine company policy and dictate certain procedures or rules governing how its associated brokers will conduct their brokerage business, because they are engaging in brokerage as agents of the company, which remains liable for its brokers' conduct.
The common law of agency evolved over time, dating back to origins in A)Canada. B)Greece. C)England. D)Massachusetts.
C The concept of agency is described as a principal who authorizes someone else, known as an agent, to conduct certain business on behalf of the principal and thereby bind the principal.
At what point does the North Carolina Real Estate Commission (NCREC) require licensees to provide specific agency disclosures in writing to buyers and sellers in an effort to inform and protect the public? A)At the transaction closing B)After listing or showing a client their first home. C)At first substantial contact D)At least three days prior to closing
C The main reason for the changes was to help North Carolina licensees avoid the type of liability incurred for practicing undisclosed dual agency.
In 1995, the Edina case prompted the North Carolina Real Estate Commission (NCREC) to A)prohibit dual agency. B)require that brokers act as single agents only. C)revise its agency rule to require licensees to provide specific agency disclosures in writing. D)limit liability for brokerage firms who practice dual agency.
C Today's consumers are much more likely to receive information about agency relationships early in their dealings with brokers. They are also likely to have much more choice in whether they are going to be represented or not.
Independent contractors in a brokerage firm must have A)withholding taxes deducted from their commission checks. B)an employer-provided withholding schedule. C)a written employment agreement. D)a flexible schedule.
C Under the qualified real estate agent category in the Internal Revenue Code, three requirements can establish independent contractor status: (1) The individual must have a current real estate license. (2) The individual must have a written contract with the broker containing the following clause: "The salesperson will not be treated as an employee with respect to the services performed by such salesperson as a real estate agent for federal tax purposes." (3) Ninety percent or more of the individual's income as a broker must be based on sales production and not on the number of hours worked.
The North Carolina Residential Property and Owners' Association Disclosure Statement is NOT required on which of the following properties? A)Manufactured home B)Single-family residence C)Vacant lot D)Duplex home
C Vacant land does not require a Residential Property and Owners' Association Disclosure Statement.
Which of these is NOT considered prohibited conduct under North Carolina real estate license law? A)Negligent omission B)Negligent misrepresentation C)Willful permission D)Willful misinterpretation
C Willful omission is the fourth prohibited conduct, which is intentionally failing to disclose a material fact to any party involved in a transaction.
An unlimited power of attorney would be an example of special agency. True False
False An unlimited power of attorney would be an example of universal agency.
The North Carolina Real Estate Commission (NCREC) strongly encourages the BIC of a real estate firm to have a written office policy as to the type(s) of agency the firm will practice. What is a BIC? A)Business-inside-corporation B)Broker-in-change C)Broker-inside-corroboration D)Broker-in-charge
D
The primary function of the NCREC is to license and regulate real estate agents (persons and firms who sell, lease, etc., real estate for others). What does NCREC stand for? A)North Carolina Real Enquiry Commission B)North Carolina Real Entity Company C)North Carolina Real Estate Corporation D)North Carolina Real Estate Commission
D
The term principal is synonymous with the term A)broker. B)seller. C)prospect. D)client.
D
A North Carolina broker wishes to consummate a transaction where he represents neither the buyer nor the seller. This relationship A)is similar to designated dual agency. Bis termed single agency. C)can be lawful if the buyer and seller provide consent in writing. D)is prohibited in North Carolina.
D A facilitator/transaction broker is a real estate licensee who assists buyers and sellers in reaching an agreement in a real estate transaction without representing interests of either party. The licensee treats both parties equally as customers. This nonagency relationship is not allowed in North Carolina.
The legal relationship between broker and seller is usually a A)universal agent. B)general agent. C)dual agent. D)special agent.
D A special agent is authorized to represent the principal in only one specific act or business transaction, and under limited, detailed instructions with no power to bind the principal. A real estate broker is usually a special agent.
Which agent is defined as "may represent the principal in a broad range of matters related to a particular business or activity"? A)A universal agent B)A broker agent C)A special agent D)A general agent
D Brokers usually serve as general agents of their real estate brokerage firms. A more typical example of a general agent would be a property manager hired as a general agent for the landlord in the management of certain properties.
The classification __________________ has the limited responsibility of finding a property for a buyer that fits the buyer's criteria. As this type of agent, the broker cannot bind the principal to any contract. A)broker agent B)universal agent C)general agent D)special agent
D It is important to remember that a special agency relationship provides only limited authority.
Which of the following BEST defines the common law of agency? A)The disclosure requirement by the agent to third parties no later than first substantial contact B)The code of ethics prescribed by the local trade association C)State license law and rules D)Case law establishing the responsibilities of a person who acts for another
D The common law of agency is based on court cases involving the responsibilities of persons who act for others and establishes specific duties that define how agents treat their clients.
A listing broker is A)the buyer's principal. B)the buyer's agent. C)the third party. D)the seller's agent.
D The listing broker is the agent for the seller.
Broker Francine has listed her next-door neighbor Jim's house for sale. Although Jim does not disclose it on the North Carolina Residential Property and Owners' Association Disclosure Statement, Francine knows that his basement floods during the spring rains each year. Jim has repainted and replaced carpet, so he does not see the need to disclose "ancient history." Who is required to disclose this information? A)Neither Jim nor Francine B)Both Jim and Francine C)Jim D)Francine
D The seller is not obligated to disclose known material facts in North Carolina.
While not directly representing third parties, North Carolina requires agents to perform the following three duties: honesty, fairness, and A)accounting. B)loyalty. C)confidentiality. D)disclosure of material facts.
D When dealing with third parties, agents must still comply with North Carolina Real Estate License Law and NCREC rules, including disclosure of material facts relating to a property or a transaction about which the agent has knowledge or should reasonably have acquired knowledge.
The Edina lawsuit had no impact on the traditional view of agency. True False
False The Edina lawsuit eroded the traditional view of agency because it made buyers and agents aware and concerned about whom agents worked for—traditionally, the sellers.
The purpose of the Working with Real Estate Agents disclosure is to create an agency relationship between brokers and consumers. True False
False The purpose of the disclosure is to educate consumers about choice that they can make in regard to their relationship with North Carolina brokers. It is not a contract (as the disclosure language clearly states.)
The term customer is synonymous with the terms principal and client. True False
False A customer is a third party who is not represented by an agent. A principal or client is represented by an agent.
A real estate broker who does not represent either party in a transaction and treats both as customers is called a subagent. True False
False A real estate broker who does not represent either party in a transaction is called a facilitator or transaction broker. A subagent is a broker who is employed by a person already acting as an agent.
Properly licensed brokers can be paid as employees or as independent contracts. True False
True A brokerage firm can pay properly licensed brokers as either employees or independent contractors. The distinction is primarily a tax issue that is resolved by IRS guidelines regarding the degree of control exercised by the brokerage firm.
Agency relationships can end by the fulfillment of the purpose for which the agency was created. True False
True Agency relationships can be terminated when the purpose has been fulfilled. For example, a listing contract is terminated when the listing broker finds a ready, willing, and able buyer for the seller.
Oral buyer agency is a lawful alternative to use when a consumer is unwilling to commit to a written buyer agency agreement. True False
True Brokers may enter into buyer agency with a verbal understanding; however, there are limitations on the practice—for example, all oral buyer agency agreements must be nonexclusive.
Willful misrepresentation is the act of intentionally misinforming any party involved in a transaction about a material fact. True False
True Examples of willful misrepresentation might include knowingly lying to a client about the state of an old roof or grossly minimizing the age of the improvements to a property.
A broker who violates any duties owed to a third party (customer) can be penalized by the North Carolina Real Estate Commission (NCREC). True False
True In addition to bringing a subject to a civil action in court or criminal prosecution brought by a district attorney, a broker can also be disciplined by the NCREC.
In the past, putting a listing into a local multiple listing service (MLS) created a subagency relationship between cooperating brokers. True False
True In the past, when a listing broker submitted the listing to the MLS so that the listing could be shared with other MLS members, those members immediately became subagents of the seller.
Dual agency is a lawful and acceptable practice in North Carolina, provided both parties understand and consent in writing to the practice. True False
True It is lawful to practice dual agency in North Carolina, providing that there is written consent to the practice by the appropriate time.
As a special agent, a broker cannot bind the principal to any contract. True False
True Special agents have only limited authority on behalf of their principals, so they cannot bind their clients to any contracts.
The common law of agency refers to laws from judgments and decrees of courts as opposed to laws created by a legislature. True False
True The common law of agency refers to laws from judgments and decrees of courts as opposed to laws created by a legislature. The concept of agency dates back to the early days of the England.
Employers are liable for withholding payment of Social Security and income taxes for persons who are paid as Form W-2 employees. True False
True While 1099 independent contracts are responsible for reporting their income and paying taxes on their own, an employer is responsible for taking care of reporting and paying taxes for W-2 employees.
A broker who chooses to voluntarily disclose the presence of registered sex offenders is not a violation of the real estate license law. True False
True While a broker does not have to disclose either the presence of sex offenders in an area or the existence of the sex offender registry, it is not a violation if the broker chooses to disclose either.
Agency relationships can be created with a listing contract, property management contract, tenant representation agreement, and by conduct of the parties, among other examples. True False
true Agency relationships can be created by employment agreements (listing contracts, property management contracts, tenant representation agreements, among others), as well as by implied agency (actions of the parties.)
