Level 4: Real Estate Brokerage and Law of Agency

For real estate license holders, who is considered "your principal"? a. client b. customer c. third party d. broker

Client

According to the Texas Real Estate License Act, when must the written statement providing the Information about Brokerage Services be provided? a. first substantive dialogue b. first contact c. first face-to-face meeting d. at open houses

First substantive dialogue

To a client, what is a broker considered to be? a. special agent b. general agent c. universal agent d. supervisory agent

Special agent

At first contact, the license holder who represents a party in a real estate transaction should disclose that representation to the other party to the transaction and to whom else? a. the license holder representing the other party in the transaction b. the lender financing the transaction c. no one beyond the other party to the transaction d. the property inspector if one is utilized

The license holder representing the other party in the transaction

Why should real estate agents refrain from giving legal advice to clients? a. Agents aren't licensed to give legal advice and if they do, they could be held liable. b. Only brokers can give legal advice. c. Legal advice costs extra and should not be included with an agent's normal services. d. It can muddy the agent-client relationship.

agents aren't licensed to give legal advice and if they do, they could be held liable

Which of the following is an example of misrepresentation? a. An agent thinks there are hardwood floors beneath the carpet of a property and implies to the buyer that there are, when in fact, there are not. b. An agent hides the mold condition of a home because they know it would hinder the sale of the home. c. An agent denies that a property he is selling has termites, even though he knows that it does have termites. d. An agent discloses to a buyer that the homes surrounding a property have been selling for over $200,000, when he knows they have not.

an agent thinks there are hardwood floors beneath the carpet of a property and implies to the buyer that there are, when in fact, there are not

When should agency relationships be disclosed? a. at an initial meeting b. by phone only after discussing a buyer's budget c. in a follow-up email after the first meeting d. only in writing

at an initial meeting

When should agency relationships be disclosed? a. at first contact b. after substantive communication c. at closing d. after a buyer makes their offer

at first contact

What is the BEST way to avoid giving misinformation (and consequently, violating the Texas Deceptive Trade Practices-Consumer Protection Act)? a. Cite a source for any information you give a client about a property. b. Ensure you never share hard facts about any property with a client. c. Make sure you know the facts before you share them. d. Only share information with clients verbally, never in writing.

cite a source for any information you give a client about a property

Jamie is an agent representing a seller. She holds an open house to find a buyer for the home. What is she legally required to do? a. disclose that she represents the homeowner b. collect the names of the potential buyers and their agents c. prominently post the asking price of the house d. verify that none of the buyer agents share a brokerage with her

disclose that she represents the homeowner

In an agency relationship, the agent owes the principal the fiduciary duties of loyalty, obedience, accounting, confidentiality, reasonable care, and what else? a. disclosure b. due diligence c. damage control d. discovery

disclosure

How often must a real estate license be renewed? a. every two years b. every four years c. every three years d. every five years

every two years

What is the name given to the duties owed by agents to their clients? a. fiduciary duties b. duties of care c. agency duties d. due diligence duties

fiduciary duties

If a salesperson has no interest in opening their own brokerage, why might they still want to get a broker's license? a. for marketing purposes b. to operate as an agent without a sponsoring broker c. so they no longer have a continuing education requirement d. to save money on license renewal fees

for marketing purposes

After a contract is signed, an agent must deposit escrow funds no later than the close of the: a. second business day b. third business day c. second calendar day d. first Monday

second business day

Which one of the following actions is most likely to be a violation of the Texas Deceptive Trade Practices-Consumer Protection Act? a. Telling a buyer you're not sure if a home had ever flooded when you know for a fact that it had. b. Refusing to answer questions about the condition of a home's HVAC system, and instead referring a buyer to a professional. c. Telling a client, "That's a question for your lawyer." d. Telling a client, "I don't know, let me get back to you on that."

telling a buyer you're not sure if a home had ever flooded when you know for a fact that it had

On a listing sheet, what would a field stating "BC: 3" mean? a. that the brokerage representing the buyer will receive 3% commission b. that the brokerage representing the seller will receive 3% commission c. that the brokerage representing the buyer and the brokerage representing the seller will split 3% commission d. that any subagent to the seller's broker will receive 3% commission

that the brokerage representing the buyer will receive 3% commission

An agent has obtained a buyer representation agreement with a new client. Who owes the client fiduciary duties? a. the broker and all sponsored agents in the brokerage b. only the broker c. only the sponsored agent d. only the broker and the one, personally involved sponsored agent

the broker and all sponsored agents in the brokerage

Brokerage A charges clients a 6% commission, while Brokerage B charges only 5%. Is this legal? Why or why not? a. Yes, brokerages can charge whatever commission they choose. Commissions are negotiable. b. No, 6% is standard across the industry. Undercharging clients creates illegal competition. c. Yes, but only if the supervising brokers at the two agencies discussed it beforehand and agreed that it was appropriate. d. No, commissions for each county are set by TREC and cannot be negotiated or changed.

yes, brokerages can charge whatever commission they choose. Commissions are negotiable

As defined in the Texas Real Estate License Act, what is a subagent? a. A license holder who represents a principal through cooperation with the principal's broker. b. A license holder who procures a buyer for a property through a multiple listing service and cooperates with the listing agent. c. An associated license holder who is appointed by the supervising broker to represent the supervising broker's principal. d. A license holder who represents both the buyer and the seller in the transaction.

A license holder who represents a principal through cooperation with the principal's broker

What do you call a person who is representing someone else in a transaction? a. agent b. subagent c. buyer d. client

Agent

Agency relationships are generally formed between which two people? a. agent and client b. broker and salesperson c. principle and second d. salesperson and agent

Agent and Client

Broker Bob is the intermediary for Buyer B and Seller C. Buyer B comes to Broker Bob requesting advice on negotiations. Which one of the following actions may Broker Bob perform? a. Broker Bob can appoint a sponsored sales agent to the buyer and another to the seller, and the license holders can give advice to the parties. b. Broker Bob can give the buyer advice, as long as he makes certain that advice is in Buyer B's best interests. c. Broker Bob can give the buyer advice, as long as he tells the seller that he gave Buyer B this advice. d. The only option if the parties want advice is to break the intermediary relationship and have both parties obtain their own agents.

Broker Bob can appoint a sponsored sales agent to the buyer and another to the seller, and the license holders can give advice to the parties

Which of these is an example of a general agency relationship? a. broker and sponsored agent b. broker and seller c. agent and seller d. broker and buyer

Broker and sponsored agent

Scenario: Budget Brokerage Blunder? The Story Four months ago, Seller Angela listed a home with Broker Britney's office, Budget Brokerage. The seller and Broker Britney signed a listing agreement, and they agreed to enter into an agency relationship. Broker Britney is a very busy person, and she assigned the task of finding a buyer for this home to Sales Agent Cassie, a new employee. Cassie's Concern Sales Agent Cassie looked over the facts about the property and she noted that the local school district is underfunded and is considered to be one of the worst school districts in the city. She mentioned this to the broker and raised a concern that this information might make it difficult to sell the home. Her broker told her not to worry because Texas law does not require a seller's agent to disclose that sort of information to buyers. Buyer Dean Two weeks later, Buyer Dean walked into the brokerage. Sales Agent Cassie happened to be the only person in the office, and after a brief talk with Buyer Dean, she realized that Seller Angela's property would be perfect for the buyer's needs. They immediately went to look at the property. Sales Agent Cassie mentioned several latent defects in the property, but did not mention the problems with the school district. Sales Agent Cassie also showed the buyer several other properties, but the buyer decided to purchase Seller Angela's home. Closed but Not Over The closing went smoothly with no major concerns. After closing, however, Broker Britney received a letter of an impending lawsuit from Buyer Dean. Apparently, Buyer Dean moved in and immediately discovered negative information about the school district. He is convinced that Sales Agent Cassie and Budget Brokerage misled him by concealing facts.

If the court views Buyer Dean as a customer of Cassie and Budget Brokerage, then his suit will likely not prevail, as the school's poor reputation would not be considered a material fact about the property that needed disclosing to a customer. But if the court views Cassie's interactions with Buyer Dean to constitute implied agency, that changes the level of disclosure due to Buyer Dean as a client, and some legal liability might exist for Cassie and the brokerage. How that relationship is viewed by the court will depend in large part on what type of agency disclosure Cassie gave Buyer Dan before working with him.

An agency relationship is a fiduciary relationship. Which of the following are fiduciary duties and obligations are owed to the principal by the agent? a. loyalty, care, and obedience b. loyalty, accounting, and price competitiveness c. full disclosure, commission, secrecy d. loyalty, kindness, and trust

Loyalty, care, and obedience

Scenario: Lots of Liens It's time for another fun-yet-educational scenario! This one's about a property with too many liens. A lien is a type of security interest granted over a property to secure the payment of a debt or performance of some other obligation. Generally, liens must be cleared before a home can be sold to a new owner. As you read this scenario, ask yourself if the agent's actions are defensible or not under the DTPA. The Cast Meet the cast: Kendra - Buyer 👩 Jamie - Buyer Broker 👦 Langdon - Seller 👱 Mandi - Listing Broker 👩‍ The Story You'll laugh. You'll cry. It will become part of you. Buyer Kendra Makes an Offer Broker Jamie had been representing Buyer Kendra for two months when he finally found a suitable property for her. Buyer Kendra agreed to purchase this property, and presented an offer of $80,000, which was $10,000 less than the listing price. The seller (Seller Langdon) agreed, and they proceeded towards closing. The Deal Falls Apart At closing, however, the transaction fell through. It was discovered that there were several liens on the property, and the property could not be sold. Seller Langdon was aware of the liens but had thought he would be able to clear them before the date of closing. He had kept this information hidden from his broker, Broker Mandi. Buyer Kendra is very upset about this issue and wants to file a lawsuit. So, which party is liable?

Since Seller Langdon was aware of the liens but had kept this information from Broker Mandi, she could not be held liable. She did not intentionally withhold information, so it wasn't fraud, nor is it reasonable to expect her to know about information her own client withheld from her. So, a claim of misrepresentation likely wouldn't apply to Broker Mandi. If anyone is liable for fraud or misrepresentation, the most likely suspect would be Seller Langdon.

Scenario: Broker Arnold's Ad Broker Arnold was advertising his brokerage services in the newspaper while his license was inactive. Broker Arnold has held his license for five years and is working on making it active again. Is Broker Arnold violating any TREC rules by continuing to advertise his brokerage services during the inactive period?

The answer is yes. According to Section 1101.351(b) of the Real Estate License Act: No individual may sell, lease, advertise, or exchange real estate services without an active license. If the license holder is a salesperson, then he or she may only sell, lease, advertise, or exchange real estate while acting under his or her sponsoring broker. If that sponsoring broker's license status is "inactive," then all agents must stop providing real estate services until the broker renews his license.

Scenario: I Know a Guy Ready for a scenario about referrals? I thought you were! The Cast Quinn - Broker 👩 Quinn's Client 👵 The Inspector 👨 Broker Quinn's Fixer Broker Quinn and her client had a contract accepted for the purchase of a single-family home. In order to expedite the inspection process, Broker Quinn strongly recommended an inspector she has worked with in the past, and assured her client that the inspector would provide a thorough and comprehensive home inspection. Broker Quinn also stated that the inspection would include a wood-boring pest inspection.

There is a degree of risk with what Broker Quinn did here. A broker should think hard before steering her client in the direction of any particular service provider since she cannot truly guarantee the quality or effectiveness of the service. The broker can mitigate the risk in providing a referral by offering more than one option for the client and communicating that the client is free to select anyone they choose.

Does misrepresentation require malicious or deceptive intent? a. No, the seller, broker, or agent may be held liable even without it. b. Yes, accidents are not considered misrepresentation. c. Yes, but only for agents. d. No, unless it has to do with repairs.

no, the seller, broker, or agent may be held liable even without it

Which of the following is NOT true regarding a license holder's obligation to disclose a property defect: a. only if the buyer asks b. whether or not the seller is aware of the defect c. if the seller has disclosed the defect in writing d. if the seller has disclosed the defect orally or in writing

only if the buyer asks