National Topic Tester - Laws of Agency

What would NOT terminate an agency agreement by operation of the parties? Select one: A. Mutual consent B. Renunciation C. Revocation D. Expiration of time

(law, definition, & nature of agency relationships) Expiration of time terminates an agency agreement by operation of law, not by action of the parties. The correct answer is: Expiration of time

Seller Jones gives Martin an exclusive listing to sell his property. Martin is a salesman for Broker Doe. Which of the following statements would best describe the relationships between these parties? Select one: A. Jones has contracted for the services of Martin B. Doe has a fiduciary relationship with Martin C. Martin is the agent of Doe D. Jones is the agent of Doe

(law, definition, & nature of agency relationships) Jones has contracted for the services of Doe (the broker), not Martin (the salesman). Martin (salesperson) has a fiduciary relationship with Doe (his broker). The correct answer is: Martin is the agent of Doe

The relationship between a broker and client is most accurately described as: Select one: A. A trustee relationship B. A trustor relationship C. A confidential relationship D. A fiduciary relationship

(agency duties) A broker and client have an agency relationship, which carries fiduciary duties. The correct answer is: A fiduciary relationship

Puckett lives in Tennessee, but owns property in Virginia. She hires Samuels, a broker in Virginia, to sell that property for $75,000. Samuels knows that this property is worth considerably more since the zoning for the property was recently changed to commercial. Samuels buys the property himself and re-sells it two weeks later for $125,000. Which of the following statements is true? Select one: A. Samuels cannot act for someone from Tennessee unless he has a Tennessee real estate license B. This may be unethical, but Puckett got the asking price and therefore suffered no loss C. Samuels can only purchase the property after informing Puckett of the zoning change D. Samuels cannot purchase the property under any circumstances

(agency duties) As an agent of the principal (Puckett), Samuels has a fiduciary relationship to protect his principal's interest. Failure to inform Puckett of the zoning change is a breach of that relationship. The correct answer is: Samuels can only purchase the property after informing Puckett of the zoning change

A seller accepts an offer. Later, the broker receives a second offer for the property. The broker may: Select one: A. Hold the second offer until the first offer closes B. Present the second offer C. Tell the second offeror to "stand by" D. Both B and C

(agency duties) The broker may tell the second offeror to wait for a response, but she must deliver that offer promptly to her client. She cannot wait until the first offer closes because this breaches her fiduciary duty to present all offers. The correct answer is: Both B and C

A buyer requests that a salesperson take a listed property off the market until his wife sees it. May the broker comply? Select one: A. Yes, as long as she sees the property within the next business day B. Yes, if the buyer pays a fee to the brokerage firm C. No, this violates the agency agreement D. No, unless the broker so authorizes the salesperson

(agency duties) This is not a question of may he do it; he CANNOT do it. Only the SELLER can authorize that the property be taken off the market. The correct answer is: No, this violates the agency agreement

A real estate broker wishes to deposit an earnest money check in his business operating account in order to receive a higher interest rate on the purchaser's funds. Is he legally allowed to do this? Select one: A. Yes, if the purchaser receives a comparison of available interest rates B. Yes, if the broker promises to ensure such funds will be available at closing C. No, these funds must be placed in a separate escrow account D. No, the broker cannot guarantee a higher interest rate.

(agency duties) A broker is prohibited from depositing earnest money in the broker's personal or business operating account; this is considered commingling. This money must be deposited in an escrow account by the broker. The correct answer is: No, these funds must be placed in a separate escrow account

Which of the following facts MUST a broker disclose to his seller? Select one: A. Minorities are buying homes in a neighborhood where the seller wants to later buy property B. A prospective buyer intends to violate deed restrictions that run with the land C. A prospective purchaser (who asked the seller to hold a purchase money mortgage) has a history of bad credit D. A prospective purchaser is a member of a particular minority race

(agency duties) As a fiduciary duty, the broker must inform his client of the buyer's bad credit history (since this could impact the sale). The broker is prohibited from mentioning the purchaser's race due to the Fair Housing Act. The correct answer is: A prospective purchaser (who asked the seller to hold a purchase money mortgage) has a history of bad credit

What should a salesperson do with the earnest money deposit she receives from a buyer? Select one: A. Deposit it in her escrow account B. Give it to her broker C. Attach the check to the contract and file it D. Give it to the seller

(agency duties) Earnest money deposits (which are usually tendered by check) should be given to the broker as soon as the buyer's offer is accepted by the seller. Remember that it is the broker, not the salesperson, that must have an escrow account and the salesperson must give any earnest money deposit to her broker. The correct answer is: Give it to her broker

A broker can do which of the following actions? Select one: A. Accept, of behalf of the seller, a promissory note as an earnest money deposit B. Accept, of behalf of the seller, an offer OVER the listed price of the property C. Buy and sell property in his own name D. Represent both buyer and seller, with the permission of the buyer

(agency duties) First, note that the term "accept" in this context means "agree to." A broker may NOT accept (agree to) any terms or conditions contained in an offer. The broker's job is to find a ready, willing, and able buyer. Any and all terms of the offer MUST be accepted (agreed to) by the seller. If a broker is going to represent both buyer and seller, he would need the approval of BOTH parties. However, a broker can sell property in his own name. The correct answer is: Buy and sell property in his own name

A broker takes a listing and the owner later tells him that the roof leaks. Further, the owner states that she will not repair the roof, even if the house is sold at full price. The broker must: Select one: A. Not mention the condition of the roof because of his fiduciary responsibility to the seller B. Advertise the property is being sold "as is" C. Inform any prospective buyer of the condition of the roof D. Both A and B

(agency duties) Material disclosures need not be listed in the initial advertisement. However, even when included, advertising "as is" is not enough to satisfy disclosure requirements. Remember that material information must be specifically disclosed to a prospective buyer (beyond the mere statement that it's being sold "as is"). The correct answer is: Inform any prospective buyer of the condition of the roof

Tom lists his home with Salesman Gary, with the provision that the house not be shown if he is not at home. Tom leaves town on Monday for a two week business trip. On Tuesday, Jose and Maria (a minority couple) contact Gary to see Tom's house. Gary refuses to show the house. In this situation, which of the following statements is true? Select one: A. The couple should file a discrimination suit against Tom, the owner of the property B. The couple should complain to Gary's broker and demand to be shown the property C. The couple should sue Tom, Gary, and the broker for refusing to deal with them in violation of Fair Housing Laws D. Gary's refusal to show the property satisfies his fiduciary duty to Tom

(agency duties) This is not a violation. The only way this would constitute a Fair Housing violation is if Gary were to instead show the property to a non-minority party while Tom is out of town (which would also violate his fiduciary duty to Tom). The correct answer is: Gary's refusal to show the property satisfies his fiduciary duty to Tom

A real estate salesperson may legally accept extra commission on a difficult sale from: Select one: A. An appreciative seller B. A thankful buyer C. Her broker D. The mortgage lender

(commission and fees) A licensed salesperson may accept compensation for an act of real estate brokerage from her employing broker (and NO ONE ELSE). The correct answer is: Her broker

A salesperson wishes to charge a reduced commission to her sister. Where would the salesperson obtain approval for such an arrangement? Select one: A. State Association of Realtors B. Local Association of Realtors C. State Real Estate Commission D. None of the above

(commission and fees) A real estate broker may charge any commission that is agreed upon by all parties to the listing agreement. Therefore, the salesperson would only need the approval of her employing broker to charge a reduced commission to a relative. The correct answer is: None of the above

A seller agrees to split all commission between the brokerage firm and his unlicensed brother. This agreement is: Select one: A. Permissible, as long as the brother had contractual competency B. Permissible, so long as the seller agrees C. Impermissible, unless the brother is licensed D. Impermissible, unless approved by the local board of Realtors

(commission and fees) Only real estate licensees (or people that are specifically exempt from licensing) may receive compensation for a real estate transaction. State regulations address this issue specifically, but as a general rule, payment to an unlicensed person is illegal. The correct answer is: Impermissible, unless the brother is licensed

What is the highest commission rate that a real estate broker may charge for marketing a farm property? Select one: A. 10% B. 15% C. 25% D. None of the above

(commission and fees) The amount of compensation (commission) can be any amount that was agreed upon by all parties to the listing agreement. The correct answer is: None of the above

Wally Wells, a licensed salesperson, listed Parcel A under an open listing agreement and Parcel B under an exclusive right-to-sell listing agreement. Both listings expired. Three days later, the two owners exchanged properties. Wally will receive: Select one: A. One commission for the exclusive right-to-sell agreement B. Two commissions because Wally was the procuring cause C. No commission so long as Wally was not the procuring cause D. A split commission

(commission and fees) Wally gets no commission because the listings expired. If the stem of the question had indicated that Wally was involved in the transaction between the two parties during his listing period, then he may have had a cause of action to collect from one or both parties. The correct answer is: No commission so long as Wally was not the procuring cause

An owner lists a home with a broker for $72,000. Two days later, the broker brings in an offer for $70,000. At this time, which of the following statements is true? Select one: A. The broker had found a buyer and has earned his commission B. A ready and willing buyer has been found and a commission is due C. A ready and willing buyer has been found, but no commission is due D. None of the above

(commission and fees) In order to earn a commission, the broker must find a ready, willing, and able buyer ON THE TERMS OF THE SELLER. The offer was lower than the listed price; therefore, the offer was NOT on the terms of the seller. While the buyer appears to be ready and willing, there is no evidence that the buyer is financially able. Therefore, no commission is due and the best choice is four. The correct answer is: None of the above

A broker lists a property. A buyer submits a written offer and the seller accepts it. On the date scheduled for closing, the seller refuses to sign any of the papers. The broker is entitled to: Select one: A. A full commission because he fully performed B. One-half of the agreed upon commission C. Out of pocket expenses, but only if the client is in breach D. Nothing until the papers are ratified

(commission and fees) The broker fulfilled the agency agreement as soon as he found a ready, willing, and able buyer to purchase the property on terms acceptable to the seller. Both parties agreed to the terms in the offer. Thus, the seller is liable for the full commission. The correct answer is: A full commission because he fully performed

Which of the following actions would be a violation of anti-trust laws? Select one: A. Two brokers agree to only market their services in specific areas of the community B. Jim, a broker, advertises that his firm will only represent buyers C. An independent broker refuses to join the local Association of Realtors D. A firm has some salespersons working as independent contractors and others working as employees

(commission and fees) When brokers agree to limit marketing efforts to a particular area, or agree to charge the same commission rates, that is classified as conspiracy. Such actions are a violation of antitrust laws. The correct answer is: Two brokers agree to only market their services in specific areas of the community

A broker has an exclusive right-to-sell listing, but the seller finds his own buyer while the listing is still in force. The broker is entitled to: Select one: A. A full commission B. Half of the commission C. Reimbursement for out-of-pocket expenses D. No commission, because the owner is the one who sold the house

(common types of agency agreements) An exclusive right-to-sell listing entitles the broker to a full commission, regardless of who sells the property (even if the owner sells it himself). The correct answer is: A full commission

Brokers may only assist buyers if: Select one: A. There is a written agreement B. There is a formal representation C. There is an agency relationship D. There is consent

(common types of agency agreements) Brokers may assist buyers with or without a written agreement, formal representation, or an agency relationship. However, there must be some sort of consent (implicit or explicit). The correct answer is: There is consent

Which of the following statements is true about an open listing? Select one: A. The commission is split between all brokers that have an open listing for the property B. The seller only pays the broker who produces a ready, willing, and able buyer C. No more than two brokers may attempt to sell the property D. If the owner sells the property, she owes a commission to the broker that took the listing first

(common types of agency agreements) In an open listing, a commission is only paid to the broker that sold the property. In addition, an owner may enter into an open listing agreement with any number of brokers. The correct answer is: The seller only pays the broker who produces a ready, willing, and able buyer

How many brokers can be given an open listing? Select one: A. One B. Two C. Three D. As many as the owner chooses

(common types of agency agreements) Many brokers can have an open listing on a property, but only the broker that actually sells the property will be paid. For example, a developer that advertises "brokers welcome" is extending an invitation to any broker to show and sell one of his new homes. The developer must pay a commission to the broker that sells the home in an open listing. The correct answer is: As many as the owner chooses

A salesperson takes a 90 day exclusive right-to-sell listing on April 1st, but moves out of the area on May 15th. His license placed on inactive status on June 1st. This listing would: Select one: A. Remain in effect B. Terminate on May 15th C. Revert to an open listing D. Terminate on June 1st

(common types of agency agreements) The listing is with the broker, not the salesperson. Thus, it will remain valid regardless of the salesperson's residence or licensing status. The correct answer is: Remain in effect

After the death of his wife, a property owner lists his property with a broker. Two days later, the owner sells the property himself, but is NOT obligated to pay a commission to the broker. What type of listing agreement did he most likely sign? Select one: A. Multiple B. Exclusive authorization-to-sell C. Exclusive right-to-sell D. General

(common types of agency agreements) The widower probably signed a general listing (also known as an open listing), which specifies that the listing broker or her salespersons must sell the property in order to earn a commission. Exclusive authorization-to-sell and exclusive right-to-sell are the same. The broker would be paid regardless of who sells the property (even if the owner finds his own buyer). Meanwhile, an exclusive agency would allow the owner to sell and not pay commission, but that was not one of your choices. The correct answer is: General

Broker Sam lists a house and sells it 2 months into the listing period. Sam tries to collect his commission after closing, but the seller refuses and correctly asserts that she has no legal obligation to pay. What type of listing did Sam have? Select one: A. Exclusive agency listing B. Open listing C. Net listing D. Exclusive right-to-sell listing

(common types of agency agreements) With a net listing (which is illegal in most states), the seller specifies the NET amount that he must receive and the broker gets anything over and above that amount. If the property did not give the seller his specified net, then the broker would not be entitled to a commission (even though he sold the property). In all of the other listings, the commission would be due if the broker sold the property. The correct answer is: Net listing

Which of the following listing agreements is LEAST likely to specify a commission rate? Select one: A. Open listing B. Net listing C. Exclusive agency D. Exclusive right-to-sell

(common types of agency agreements) A net listing will not show any commission rate. Instead, the seller specifies that she wants to net a certain amount of money from the sale. Anything over and above that amount is the broker's commission. Net listings are illegal in most states. The correct answer is: Net listing

Casper is selling his house and wants the broadest possible exposure. Therefore, he gives an exclusive right-to-sell listing to Bert, an exclusive agency listing to Gail, and an open listing to Mark. Mark sells the property. Assuming that all of these listings are valid, which of the following statements is true? Select one: A. Mark must split his commission with Bert and Gail B. Casper owes 2 commissions, one to Mark and one to be split between Bert and Gail C. Casper owes 3 commissions D. Only Mark earned a commission

(common types of agency agreements) Bert's listing means that regardless of who sells the property, Bert will still get a commission. Gail's listing means that if anyone other than the owner sells the property, she will get a commission. Mark's listing means that if he sells the property, he gets a commission. Therefore, Casper is obligated to pay 3 full commissions. The correct answer is: Casper owes 3 commissions

Mr. Foster signed a 60 day exclusive right-to-sell listing with Broker Ruotolo. One week later, Foster signed an exclusive agency listing with Broker Gary, who sold the home a few days later. Assuming the agreements are valid, which of the following statements is correct? Select one: A. Foster must only pay Ruotolo B. Foster owes two full commissions C. Foster must only pay Ruotolo, and Ruotolo will split the fee with Gray D. Foster should give Ruotolo and Gray one half of the commission

(common types of agency agreements) By giving an exclusive type listing to two different brokers, Foster has promised each a commission if anyone other than the owner (in the case of exclusive agency only) sells the property. Therefore, Foster owes a full commission to each broker. The correct answer is: Foster owes two full commissions

A salesperson lists a home, but the house burns down prior to receiving an offer. Which of the following statements is true for the situation? Select one: A. The listing remains in effect B. The broker is entitled to a commission based on the listed price C. All advertising must be revised to accurately describe the property D. The listing automatically terminates

(common types of agency agreements) By law, the listing agreement would terminate because the subject in the agency contract (the home) no longer exists. The correct answer is: The listing automatically terminates

Jill lists her property with Broker Joe. After much hard work, it looks as if the property will finally sell. However, Broker Joe files for bankruptcy before the property actually does sell. Jill becomes nervous and seeks to terminate the listing agreement. May Jill terminate the agreement without breaching the contract? Select one: A. No, only Joe may terminate the contract without a breach B. Yes, because she is legally justified C. No, unless Joe is in breach of the terms D. Yes, provided that Joe cannot perform

(common types of agency agreements) If a party to a listing agreement files for bankruptcy, the other person may terminate the agreement without a breach. The listing agreement may also be terminated in the bankruptcy process by operation of law. Note that while a bankruptcy court may extinguish Joe's debt, it will not rescind his liability. The correct answer is: Yes, because she is legally justified

An owner entered into a valid listing agreement. During the agreement period, the seller sells the property himself. The seller is not legally required to pay a commission to any broker. What type of listing agreement did the seller have? Select one: A. An open listing B. An exclusive agency C. An exclusive right-to-sell listing D. Either A or B

(common types of agency agreements) In an open listing, the only person that gets paid is the broker that sells the property. So, if the owner sells the property, no commission is due to anyone. In an exclusive agency, the owner reserves for himself the right to sell the property and NOT pay a commission to the listing broker. In an exclusive right-to-sell listing, the broker gets her commission regardless of who procures the sale (even if the seller finds her own buyer). Therefore, the seller could have either an open listing or an exclusive agency. The correct answer is: Either A or B

If a broker has an exclusive right-to-sell listing, which of the following statements is INCORRECT? Select one: A. There must be a definite termination date in the listing B. All money given to the broker must be accounted for C. The broker may cancel the listing if he chooses D. The broker is legally obligated to sell the property

(common types of agency agreements) The broker is NOT obligated to sell the property. He is only obligated to make a reasonable effort to sell the property. The correct answer is: The broker is legally obligated to sell the property

A listing agreement will automatically terminate: Select one: A. If the selling agent changes brokers B. On the date specified in the listing agreement C. If the owner abandons the property D. All of the above

(common types of agency agreements) The only true statement is that a listing agreement will terminate on the date specified in the agreement. There are other causes that would terminate a listing, but they are not offered as answers. An owner abandoning his property is NOT grounds to terminate a listing--he may still enlist a broker to sell the abandoned property. However, if the broker abandoned the listing, the seller would be justified in terminating the listing. The correct answer is: On the date specified in the listing agreement

Under contract as a property manager, the broker is: Select one: A. A special agent B. A fiduciary C. A general agent D. Both B and C

(law, definition, & nature of agency relationships) A property management contract is an agency agreement between the property owner (principal) and the property manager (agent). Thus, the broker is a fiduciary in this situation. In addition, the relationship is usually a general agency--the broker is authorized to perform any and all acts associated with a specific service (property management). The correct answer is: Both B and C

Under the usual listing agreement, a salesperson can: Select one: A. Accept or reject offers for the seller B. Place a "For Sale" sign on the property C. Deposit earnest money in her escrow account D. Advertise property at lower than the list price

(common types of agency agreements) Under the usual listing agreement, the broker can place a "For Sale" sign on the property (and all advertising must be truthful, not misleading). The listing broker (agent) is accountable to the seller (principal) and the buyer for any monies received from either party. The salesperson cannot deposit earnest money in her own escrow account--it must be deposited in the broker's escrow account. Finally, all offers must be presented in a timely manner, but only the seller can decide whether to accept or reject those terms. The correct answer is: Place a "For Sale" sign on the property

Which type of listing agreement allows the seller to sell his property and NOT have to pay a commission, but assures the broker a commission if anyone else (other than the owner) sells the property? Select one: A. An open listing B. An exclusive agency listing C. A special listing D. An exclusive right-to-sell listing

(common types of agency relationships) In an open listing, only the person who sells the property receives commission. In an exclusive right-to-sell listing, the broker gets commission regardless of who sells the property (even if it's the owner). Special listing is an invalid term. The correct answer is: An exclusive agency listing

Who is an intermediary between a buyer and a seller? Select one: A. Lender B. Mortgage broker C. Real estate broker D. FDIC

(common types of agency relationships) The person who acts as an intermediary between the buyer and the seller is a real estate broker. The broker finds a person that wants to sell property and another person that wants to buy the property. He brings the two together and then collects a fee. The correct answer is: Real estate broker

An escrow account is maintained by a broker for the purpose of: Select one: A. Earning interest for the broker B. Earning interest for the broker's clients C. Disposition of money to the buyer D. Impartial protection of both parties

(deeds) The escrow agent is a neutral third party that owes fiduciary duties to both the buyer and seller. This promotes the impartial protection of both parties. The correct answer is: Impartial protection of both parties

A person who enters into a brokerage relationship with a licensee is: Select one: A. A client B. A customer C. A claimant D. Actively engaged

(law, definition, & nature of agency relationships) A client is another name for principal. The customer generally describes the other party to an agreement. The correct answer is: A client

Mr. Gregory is selling his house and puts a "FOR SALE BY OWNER" sign in the yard. Salesperson Gary calls, identifies himself, and asks for the key to show the property. Mr. Gregory agrees. What would best describe the relationship between Mr. Gregory and Gary? Select one: A. Mr. Gregory is Gary's principal B. Gary is Mr. Gregory's agent C. Gary's broker is the agent of Mr. Gregory for a reasonable time D. No agency relationship exists

(law, definition, & nature of agency relationships) An agency agreement between Gary's BROKER (agent) and Mr. Gregory (principal) exists by implication. Gary did identify himself and the seller agreed to let him show the property. In absence of a specified period of time, the agency would continue for a "reasonable" time. The correct answer is: Gary's broker is the agent of Mr. Gregory for a reasonable time

Jon and Jacob are parties to a valid agency agreement. One day, Jon wakes up and decides that he no longer cares for Jacob's personality. Can Jon terminate the contract? Select one: A. Yes, if Jon is the client B. No, because Jon has an unacceptable reason C. Yes, regardless of whether Jon is the client D. No, because Jon must perform

(law, definition, & nature of agency relationships) For a personal service contract, courts will not enslave someone by ordering specific performance. Jon may or may not be in breach by this action (there is insufficient data to determine that fact). Nevertheless, either party can terminate the agency contract at any time and for any reason. If this termination does result in a breach, Jon may be liable to Jacob for damages. The correct answer is: Yes, regardless of whether Jon is the client

Phil is a salesman working for Broker Joan. Phil takes a listing on January 3rd. The listing is a 60-day exclusive right-to-sell agreement. On February 1st, Phil was killed in an automobile accident. What is the status of the listing? Select one: A. The listing becomes an open listing B. The listing terminates by operation of law C. The listing remains valid D. The seller may now list the property with another salesman working for Broker Joan

(law, definition, & nature of agency relationships) The listing is between the seller and the BROKER (Joan). Phil's death has no affect on the listing. The correct answer is: The listing remains valid

A seller tells a broker that she wants him to sell her house. This agreement is: Select one: A. Express B. Implied C. Not valid unless it's in writing D. Void

(law, definition, & nature of agency relationships) Express conduct (oral or written) creates an agency relationship by express agreement. The correct answer is: Express

Gwen lists her home with Broker Steve under a valid exclusive right-to-sell listing. Steve works diligently to find a buyer for Gwen. After two weeks of focused searching, Steve finally finds a buyer to make an offer. However, when Steve presents the offer to Gwen, he discovers that Gwen also worked with Broker Gerry and sold her home without informing Steve. Steve is furious and demands his commission. Is Steve's listing still active? Select one: A. Yes, because Gwen and Steve had a valid exclusive right-to-sell listing B. No, unless the offer was at or above the list price C. No, because Gerry sold the house D. Yes, assuming that Gwen is in breach

(law, definition, & nature of agency relationships) Make sure you read the question carefully! It question does not ask whether Steve will get his commission; it asks whether the listing is still active. While Steve may have a good case for collecting his commission, the listing agreement terminated by operation of law when the subject of the contract (Gwen's home) was sold. The correct answer is: No, because Gerry sold the house

The relationship that generally exists between a salesperson and a seller is a: Select one: A. Universal agency B. Special agency C. General agency D. None of the above

(law, definition, & nature of agency relationships) Only the broker has entered into agency relationship with the seller. Meanwhile, the salesperson acts as the broker's agent when assigned to a real estate transaction (commonly known as a sub-agency). If the question had asked, the usual relationship between a broker and seller is special agency. It may be possible for a broker to have additional authority, but that is generally NOT the case. The correct answer is: None of the above

A special agency empowers the agent to perform: Select one: A. A specific act B. Any act required C. Any legal act D. Related acts

(law, definition, & nature of agency relationships) A special agency authorizes the agent to do one act and one act only. In the case of a broker/seller agency, the broker is empowered to do only one thing--to find a buyer for the property. The correct answer is: A specific act

The relationship most likely to exist between a licensee and the seller is a: Select one: A. Universal agency B. Special agency C. Restricted agency D. None of the above

(law, definition, & nature of agency relationships) Do not assume that "licensee" means "salesperson"; it also includes "broker". The relationship between the broker (licensee) and the seller would be that of a special agency since that is the type of agency created by the usual listing agreement. It is possible that the broker could have additional authority to act for the seller, but that is generally NOT the case. The correct answer is: Special agency

In order for a dual agency to be legal, it must be: Select one: A. Disclosed orally prior to negotiations B. Disclosed in writing and agreed upon prior to negotiations C. Disclosed in writing after negotiations D. None of the above

(law, definition, & nature of agency relationships) In states that permit dual agency, it must be disclosed and agreed upon in writing by all parties prior to negotiations. The correct answer is: Disclosed in writing and agreed upon prior to negotiations

Henry enters into an exclusive right-to-sell listing agreement with Bob the Broker. The parties agree upon a 6% commission. Bob presents an offer to Henry, which he accepts. At closing, Henry discovers that the customary commission is 3%. Feeling as if he was taken advantage of, Henry refuses to pay Bob any more than a 3% commission. Is the listing still effective? Select one: A. Yes, because Henry breached the agreement B. No, because Bob produced a ready, willing, and able buyer C. Yes, unless a 6% commission is excessive D. No, because Bob violated a fiduciary duty

(law, definition, & nature of agency relationships) Make sure you read the question carefully! This question does not ask whether Bob will get his commission; it asks whether the listing is still in effect. Agency relationships terminate upon completion of the employment objective. In this case, the employment objective is to produce a ready, willing, and able buyer. According to the facts, Broker Bob satisfied his end of the bargain. The correct answer is: No, because Bob produced a ready, willing, and able buyer

Jon lists his home with Paul. Salesperson Rupert finds a ready, willing, and able buyer for Jon's home. This situation could involve all of the following agency relationships except: Select one: A. Single agency B. Dual agency C. Designated agency D. None of the above could be involved

(law, definition, & nature of agency relationships) Paul must be a broker because Jon listed the home with him (listing agreements are between the broker and the seller). However, do not assume that Paul is Salesperson Rupert's broker--he might work for Paul or someone else. Therefore, this situation could be a single agency if Rupert works for another broker or a dual agency if Rupert works for Paul. However, there CANNOT be a designated agency whether or not Rupert works for Paul. This is true because designated agency exists where a broker designates two different licensees to represent the buyer and the seller. Here, we have one broker and one salesperson. The correct answer is: Designated agency

A listing agreement can be terminated by all of the following circumstances, EXCEPT: Select one: A. Mutual consent B. Revocation by the principal C. Death of the salesperson D. Performance of the requested act

(law, definition, & nature of agency relationships) The agency agreement is between the principal and the BROKER, not the salesperson. If the broker finds a buyer and the house sells, the requested act has been performed and the agency relationship ends. However, if either party to the contract dies (the broker or the seller), the contract would terminate by operation of law. Remember that the salesperson is not a party to the contract. The correct answer is: Death of the salesperson

A listing may be revoked by: Select one: A. The seller B. The selling broker C. The salesperson that obtained the listing D. The death of the salesperson

(law, definition, and nature of agency relationships) A listing may be revoked by the client (seller), agent (broker), or by mutual consent of both. The salesperson cannot terminate the listing. The LISTING broker (not the selling broker) may revoke the listing. Watch the wording of these questions! The correct answer is: The seller

Which of the following items would NOT be a latent defect that the seller must disclose to the buyer? Select one: A. Termite damage B. Non-functioning furnace C. Seasonal flooding D. Cracked foundation

(material facts) The broker must disclose all adverse material facts that she knows about the physical condition of the property. All of the listed items are latent defects (hidden or not readily discoverable by inspection), except the broken furnace. The broken furnace isn't a latent defect because it is more easily discoverable. The correct answer is: Non-functioning furnace

A general agency empowers the agent to: Select one: A. transact matters of all types for the client B. transact the client's affairs in a certain business C. perform only specific acts for the client D. perform any legal act for the client

A general agent is authorized to perform any and all acts associated with a specific service. The other choices are either too broad or too narrow. The correct answer is: transact the client's affairs in a certain business

Bill (a broker with XYZ Realty) sells a property listed with Gene (an independent broker). In this transaction, what is the relationship between Bill and Gene? Select one: A. Bill is the agent; Gene is the principal B. Bill is the trustee; Gene is the trustor C. Bill is the sub-agent; Gene is the agent D. either A or C could be correct

Pay close attention to what the question asks--the status of the relationship between Gene and Bill, not the relationship between Gene, Bill, and the seller. Gene is Broker Bill's principal and Broker Bill is his agent. If the question had asked about the relationship between the two brokers and the seller, Gene would be the agent of the seller and Bill would be the subagent of the seller (Bill is NOT the subagent of Gene). The correct answer is: Bill is the agent; Gene is the principal

Ralph is an independent broker. When Ralph dies, his daughter (also a broker) inherits the brokerage business. If she intends to operate the firm and keep her father's listings, it is necessary that she: Select one: A. File legal notice of her intent to assume responsibility for the brokerage business B. Advise the probate court of her intent to assume responsibility for the listing agreements C. Renegotiate Ralph's current listings D. Nothing is required because she is a licensed broker

Ralph is an independent broker. When Ralph dies, his daughter (also a broker) inherits the brokerage (law, definition, & nature of agency relationships) All listings in Ralph's name terminate upon his death because a listing is a personal service contract. The fact that his daughter inherits the firm is irrelevant; she must still renegotiate the listings in her own name. While some state licensing laws allow a non-broker to conclude the affairs of a deceased broker (under specified conditions), the listings must still be renegotiated. The correct answer is: Renegotiate Ralph's current listings

An owner is listing his rental property with a broker. The owner tells the broker that he only wants to rent to females since, based on past experience, they cause less damage. What should the broker do? Select one: A. advise the owner that this restriction is illegal B. follow the owner's instruction because it is his fiduciary duty (to protect the client's interest) C. accept the listing and give preferential treatment to female applicants D. follow the owner's instruction because of the fiduciary relationship

What the owner is asking is illegal. If the broker accepts the listing, he would be in violation of the law. The broker is not under any fiduciary obligation to obey this illegal instruction of the principal (owner). The correct answer is: advise the owner that this restriction is illegal

A woman wants to buy property that is listed with her sister (a broker). However, she does not want her sister to tell the seller about their relationship. The sister should: Select one: A. tell the seller that the prospective buyer is a relative B. let another person buy the property and turn the deed over to the sister C. sell the property without disclosing the relationship D. find another listing agent to avoid a conflict of interest

You must disclose any interest you have in property, like a family relationship with the buyer. The correct answer is: tell the seller that the prospective buyer is a relative

Which of the following circumstances will not terminate an agency by operation of law? Select one: A. Destruction of the property B. Discharge of the broker by the principal C. Death of the principal D. Death of the broker

(law, definition, & nature of agency relationships) Discharge of the broker (revocation by the principal) is termination by act of the parties, not by operation of law. The correct answer is: Discharge of the broker by the principal

Which of the following actions would create an agency relationship? Select one: A. A broker accepts the listing to sell a friend's home and agrees to a reduced commission B. An individual gives written authority for a broker to buy, sell, or exchange his real property for a one year period C. A duplex owner signs a listing agreement which authorizes a broker to market the property for one year D. All of the above

(law, definition, & nature of agency relationships) Each of these creates an agent/client relationship, where the broker is the agent and the other party is the client. The correct answer is: All of the above

Which of the following items is NOT required in an open listing? Select one: A. Signature of the principal B. Definite termination date C. Agreed upon commission or fee D. Description of the property

(common types of agency agreements) An open listing does not require a definite termination date--it will remain in effect for a "reasonable period" of time. However, the other elements are required. The correct answer is: Definite termination date

When does an open listing terminate? Select one: A. In a reasonable time B. If the property is destroyed by fire C. When the property is sold D. All of the above

(common types of agency agreements) An open listing may terminate in a reasonable time if there is no definite termination date (local custom). Any agency agreement is also terminated by destruction or disposition of the subject of employment. The correct answer is: All of the above

In which type of listing is the commission least likely to be expressed in terms of a percentage? Select one: A. Open B. Exclusive agency C. Exclusive right-to-sell D. Net

(common types of agency agreements) In a net listing, the seller stipulates the price he wants to receive for a property, and agrees that the broker may keep any amount above this price as commission. In a true net listing, a commission is not specified. Note that net listings are illegal in most states. The correct answer is: Net

If a broker employs a property manager, the relationship is likely to be: Select one: A. Specific agency B. General agency C. Managerial D. Universal agency

(law, definition, & nature of agency relationships) A property manager is a textbook example of general agency (i.e., a person empowered to do a number of things for the principal). The correct answer is: General agency

All of the following are examples of dual agency except: Select one: A. a broker representing the buyer and seller, with consent from both B. escrow agents C. a broker representing the buyer and seller, without consent from either D. two salespersons representing a different buyer and seller

Escrow agents are dual agents because they hold money for the benefit of the buyer and seller in a transaction. Even when a dual agency is undisclosed, it is still a dual agency, though the contract may be rescinded. However, if two salespersons represent a different buyer and seller in a transaction (for the same broker), that is a designated agency. The correct answer is: two salespersons representing a different buyer and seller

A broker could act as a fiduciary in all of the following functions, EXCEPT: Select one: A. Leasing property B. Selling property C. Appraising property D. All of the above

(agency duties) A broker who was hired by another party (the principal) to lease, sell, or exchange property has an agency relationship. This agency relationship carries certain fiduciary duties. However, an appraisal is a formal estimate or opinion of value provided by an appraiser. Even if a broker is also a licensed appraiser, it would be a violation of the broker's fiduciary duties (conflict of interest) to appraise property that he is listing or selling. Therefore, the best answer is that the broker could not act as a fiduciary appraising property. The correct answer is: Appraising property

A seller contacted three brokers to suggest the list price for his property. Broker A said $78,000, Broker B said $79,000, and Broker C said $91,000. The seller listed with Broker C and the house ended up selling for $76,000. In this situation, Broker C might be guilty of violating which fiduciary duty? Select one: A. Loyalty B. Reasonable care C. Disclosure D. None of the above

(agency duties) Of the fiduciary duties listed, reasonable care is the best description. The agent must exercise care to properly advise and consider the best interests of his client. In doing this, he's expected to act with the same degree of competence that any other reasonable broker would in similar circumstances. Quoting a drastically different (and unrealistic) list price was not in the client's best interest. The correct answer is: Reasonable care

A buyer's broker presents an offer on a property listed by another broker. Proper agency disclosures have been made. Prior to acceptance, the listing broker discovers a zoning change that will affect the value of the property. He tells the buyer and the offer is withdrawn. Which of the following statements is correct? Select one: A. The listing broker has violated his fiduciary relationship with the seller B. The listing broker has exercised due care and loyalty to his principal C. The buyer may not withdraw his offer D. Disclosure of this information violates state licensing regulations

(agency duties) A listing broker has duty to disclose adverse material facts to the buyer. This zoning change is material because it will significantly impact the value of the property. Disclosure of material facts is not a violation loyalty or due care. The seller's agent is avoiding a violation of the law. The correct answer is: The listing broker has exercised due care and loyalty to his principal

Barnwell lists property with Broker Bob, and Bob assigns the transaction to Salesperson Ben. Ben shows the property. He quickly receives an offer and earnest money check from Billy. However, Barnwell cancels the listing agreement two days later, before Ben has time to act. What should Ben do with the earnest money that he received with the offer to purchase? Select one: A. Give it back to Billy B. Give it to Barnwell C. Give it to Bob D. Split it between Bob and Billy

(agency duties) Ben must give all earnest money to his broker (Bob) for deposit into escrow. Broker Bob should then return the deposit to Billy (not Barnwell) because there is an offer, but no acceptance (since Ben didn't have time to present the offer). Therefore, there is no contract between the buyer and seller. The correct answer is: Give it to Bob

Broker Carson lists a home belonging to Brandon. Buyer John, insisting on anonymity, his Salesperson Joan makes an offer using her own name as the prospective buyer. What should Carson do in this situation? Select one: A. Submit the offer to Brandon B. Refuse to submit the offer to Brandon until the name of the undisclosed buyer is given C. Advise Brandon that an undisclosed buyer is involved if he suspects Joan is not the true offeror D. Both A and C

(agency duties) Carson (the agent) must disclose all material facts about the transaction to his principal. Carson must also present all offers. The correct answer is: Both A and C

The zoning commission has proposed a change that would dramatically impact the subject property in a broker's listing agreement. This information: Select one: A. Should be withheld from any prospective buyer B. Must be promptly disclosed to all parties C. Could, at the discretion of the owner, be disclosed to prospective buyers D. Must be promptly disclosed to all parties, but only if the change is approved

(agency duties) Disclosing this information is required because it is "material." The broker must disclose this material information to the seller and any prospective buyer. The correct answer is: Must be promptly disclosed to all parties

Jan accepts Jenny's offer to purchase. Jenny's salesperson delivers the downpayment to Jan's salesperson. Jan's salesperson delivers the funds to her broker, who places the money into escrow. Jan's broker owes a fiduciary duty to: Select one: A. Jan B. Jenny C. Jan and Jenny D. None of the above

(agency duties) Escrow agents owe fiduciary duty to both the buyer and seller. The correct answer is: Jan and Jenny

Agency relationships include all of the following duties, EXCEPT: Select one: A. Obedience B. Notice C. Confidentiality D. Accounting

(agency duties) Fiduciary duties include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care and due diligence. "Notice" is too vague compared to the other options. Therefore, notice is the best answer choice. The correct answer is: Notice

It would NOT be considered commingling of funds if: Select one: A. The broker holds an earnest money check, as requested by the offeror, until acceptance by the offeree B. The broker holds an earnest money check, as requested by the offeror, after acceptance by the offeree C. The broker holds earnest money in his personal account until the offer is accepted or rejected D. The broker holds earnest money in his brokerage operating account because the deal is going to be all cash

(agency duties) Holding a check at the request of the offeror (buyer) until acceptance by the offeree (seller) is a normal practice and is NOT commingling. Once the offer is accepted, the money must be immediately placed in the escrow account. The broker NEVER puts money that belongs to others in his personal or brokerage account. The correct answer is: The broker holds an earnest money check, as requested by the offeror, until acceptance by the offeree

Two salespersons have been assigned as designated agents in a real estate transaction. The seller requests that her agent, Anne, not mention the mold issue in the bathroom since she wants to sell her house quickly. At an office meeting, Anne tells her broker that the seller might accept a lower price because of the issue. In this situation: Select one: A. The broker may tell the buyer that the seller wants to sell her house quickly B. The broker may tell the buyer that the seller is willing to accept a lower offer C. The broker may tell the buyer about the mold problem in the bathroom D. The broker may not tell any information that was mentioned in confidence to the buyer

(agency duties) In a designated agency, the broker serves as a dual agent between the parties. Anne may tell this information to her broker, but the broker may not relay confidential information to the other party or designated agent unless required by law or if the client consents in writing. Nevertheless, mold is a material fact that the broker must disclose by law, despite the seller's request for confidentiality. The correct answer is: The broker may tell the buyer about the mold problem in the bathroom

When must a licensee disclose agency relationships? Select one: A. When a prospective buyer asks for information about a particular property B. As soon as a prospective buyer enters the broker's office C. Any time prior to preparing an offer to purchase D. When the licensee has substantive discussions about specific property

(agency duties) In general, state laws require that agency be disclosed when the licensee has substantive discussions about a specific property. The correct answer is: When the licensee has substantive discussions about specific property

A listing broker is showing property near a toxic waste dump. The broker does not tell a prospective buyer about the dump. By withholding this information, the broker is negligent in his fiduciary duty of: Select one: A. Obedience B. Loyalty C. Accounting D. None of the above

(agency duties) This is material information, which the broker must disclose to a customer. However, the listed fiduciary duties are owed to the client, not the customer. Therefore, none of the available choices is a good answer to the question. The correct answer is: None of the above

Seller Smith signs a listing with Broker Jones to sell a parcel of land for $65,000. While Smith is out of the country, the Mayor announces a development plan that will include Smith's land (causing it to double in value). Jones sells the property for $65,000 without telling Smith about the development. Has Jones breached his fiduciary duties? Select one: A. No, because Jones did not buy the property himself B. No, assuming he fulfilled all the requirements of the listing agreement C. Yes, because Jones did not increase the list price D. Yes, but only because the information is material

(agency duties) The agent (broker) must keep the principal (seller) informed of all material information pertaining to the property. The correct answer is: Yes, but only because the information is material

Seller Corcoran is in very poor health and cannot work on his farm anymore. Corcoran's broker discloses this fact to prospective buyers. Has the broker done anything wrong? Select one: A. No, because it is a material fact B. No, so long as the farm sells at or above the list price C. Yes, because it is contrary to Corcoran's interest D. Yes, because Corcoran's status is protected by Federal Fair Housing Laws

(agency duties) The broker is precluded from discussing Corcoran's health with prospective buyers without Corcoran's permission. Doing so is contrary to his client's best interests because it might weaken Corcoran's bargaining position. The seller's health is not a material fact related to the property, nor is it covered under Federal Fair Housing Laws. The correct answer is: Yes, because it is contrary to Corcoran's interest

A broker represents a buyer. While showing a property to his client, the broker learns something that might influence the sale. Nevertheless, the broker may NOT disclose which of the following items to his client? Select one: A. That the current owner has HIV B. That the seller is in poor financial condition C. That the seller will not accept an offer based on VA financing D. The broker is unrestricted because he represents the buyer

(agency duties) The broker is the buyer's agent and owes fiduciary duties to his client. As such, he must keep the buyer reasonably informed about material information that can be legally disclosed. The seller's financial position is material to the buyer's negotiation with the seller, and may impact the offer amount. Restrictions on what the seller might accept are also material (ex. no VA financing). Generally, information or events that do not physically affect the property or future ownership rights (stigmatizing events) need not be disclosed. However, the broker is restricted by law and cannot disclose the seller's HIV status due to Fair Housing AND federal privacy laws. The correct answer is: That the current owner has HIV

The listing broker discovers that a property's value has been adversely affected by proposed construction of a new power plant. She must: Select one: A. Inform the seller B. Inform the buyer C. Inform the lender D. Both A and B

(agency duties) The broker must inform the parties of this material fact. The correct answer is: Both A and B

A broker executes a listing agreement with her client. The broker subsequently learns that the property is in foreclosure. Which of the following choices is the broker's best course of action? Select one: A. Sell the property before the foreclosure is completed B. Advise all prospective buyers of the pending foreclosure C. Rescind the listing D. Buy the property quickly

(agency duties) The broker owes fiduciary duties to her client, which include the duty to keep her client's financial position confidential. The broker cannot disclose the pending foreclosure without consent because it might weaken the seller's bargaining position. The broker also has a duty to disclose material information to prospective buyers. However, a pending foreclosure is not material if the broker finds a buyer in time--it does not impact the property in any physical way or diminish ownership rights for future owners. If the broker can't sell the property before the foreclosure goes through, the seller no longer has any property to sell. Meanwhile, there is no basis for the broker to rescind the listing agreement and the she risks violating a fiduciary duty in purchasing the property herself. Therefore, the best response is for the broker to sell the property before the foreclosure is complete. This satisfies her duty under the listing agreement. The correct answer is: Sell the property before the foreclosure is completed

In a real estate transaction, which of the following facts MUST an agent disclose to his principal? Select one: A. That a minority is moving into the area B. The average commission C. That the buyer intends to violate deed restrictions D. That the buyer has had previous credit problems

(agency duties) The only answer choice that must be disclosed is the buyer's credit problems. This is true because the buyer's credit problems could impact the sale (ability to qualify for a loan). The correct answer is: That the buyer has had previous credit problems

A salesperson receives an earnest money deposit check on Monday while working with Broker Allen. On Friday, the salesperson goes to work for Broker Bob. If the salesperson still has the earnest money deposit check on Friday, what should be done with it? Select one: A. It should be immediately given to Broker Allen B. It should be immediately given to Broker Bob C. It should be immediately given to the seller D. It should be immediately given to the buyer

(agency duties) The salesperson should give the earnest money deposit to Broker Allen because she was Allen's agent at the time the deposit was received. The fact that the salesperson goes to work for another broker has no bearing on the deal. The correct answer is: It should be immediately given to Broker Allen

A broker shows one of her listings to a prospective buyer. The broker knows that the listed property borders a toxic waste dump, as identified by the EPA. The broker should: Select one: A. Keep the information confidential because disclosure would violate a fiduciary duty B. Keep the information confidential because the event occurred off-site C. Disclose the information because it is material D. Disclose the information, but only if asked

(agency duties) This is a controversial issue, and therefore a difficult question. Traditionally, things outside the boundaries of a property aren't considered as "material information" that would require disclosure. However, the risks posed by toxic dumps are likely to physically impact the neighboring properties (odor, nuisance, migration of toxins, contamination of ground water, etc.), as well as the health of persons in close proximity. An increasing number of courts have ruled that a broker's failure to disclose the presence of a known (and close) toxic waste dump is a concealment of a material fact (therefore, a fraudulent act). As such, the best answer is that the broker should disclose the presence of the toxic waste dump because the information is material. The correct answer is: Disclose the information because it is material

A seller lists her house with a broker for $189,500. The seller tells the broker that if necessary, she will accept $185,000. What may the broker do when showing the property to prospective buyers? Select one: A. Say that the seller will accept a few thousand less B. Suggest that the buyer should make an offer for $185,500 C. Advise the buyer that the seller is flexible D. Disclose what the seller will accept, with the seller's permission

(agency duties) To do any of the suggested actions violates the agency relationship, unless the broker was told to disclose only what the seller will accept. If the seller agrees, the broker could disclose the seller's willingness to accept a lower price. However, the facts in this situation do not indicate the seller's consent to such a disclosure. The correct answer is: Disclose what the seller will accept, with the seller's permission

Which of the following items is the listing agent NOT required to disclose? Select one: A. To the seller: that the potential buyer is having financial problems B. To the seller: that the state plans to build a new highway near the property C. To the buyer: that they property is subject to seasonal flooding D. To the buyer: that the seller is going through a divorce

(agency duties) As agent or sub-agent, you have a duty of confidentiality to the principal. You must disclose a customer's financial information if you know about it and it could impact the transaction. You must also disclose the other items, except for the fact that a seller is going through a divorce--this could weaken the seller's bargaining position and violate your duty of confidentiality. The correct answer is: To the buyer: that the seller is going through a divorce

Seller Chaney rejects three offers, all of which were $2,500 below the list price. Broker Rudy receives a fourth offer which is also $2,500 below the list price. What should Rudy do? Select one: A. Reject the offer in accordance with his duty of due diligence B. As Chaney's agent, inform the prospective buyers that the offer is rejected C. Give Chaney another offer that she is sure to reject D. Either B or C

(agency duties) Rudy is the agent of the seller (principal), so she must act in the seller's best interest in order to get the property sold. Rudy must present the offer immediately, even if Chaney has previously rejected offers of the same amount. The broker must submit all offers, but it is ALWAYS the seller's decision on whether to accept. The correct answer is: Give Chaney another offer that she is sure to reject

Two brokers agree to charge the same commission rate on all property listed by their offices. Such an action: Select one: A. Is common practice B. Violates Anti-Trust laws C. Violates both RESPA and Regulation Z D. Violates the Fair Housing Law

(commission and fees) This is a violation of Anti-Trust laws. You should never discuss commission rates with your competitors. The correct answer is: Violates Anti-Trust laws

A person engaged to act in place of another by contractual agreement is: Select one: A. A principal B. An agent C. An attorney-in-fact D. Either B or C

(law, definition, & nature of agency relationships) The question could describe the precursor to either an agency relationship or a power of attorney. The correct answer is: Either B or C

Salesperson Lynch found a home for a buyer, who agreed to pay a commission for this service. After closing, Lynch will receive his commission from: Select one: A. The seller B. The buyer C. The buyer and seller, equally D. His broker

(commission and fees) A salesperson may ONLY receive commission from his or her employing broker. The correct answer is: His broker

Randy buys a house, using a VA loan to finance the purchase. The listing broker and selling broker split the commission at a 75/25 ratio. If the Department of Veteran's Affairs learns about the arrangement between the brokers, what will they do? Select one: A. Suspend the licenses of both brokers B. Revoke the licenses of both brokers C. Force both to refund the commission D. Nothing

(commission and fees) Brokers very often divide commissions on cooperative sales. This is perfectly legal and ethical. The VA has no authority to take disciplinary action against licensed real estate professionals. The correct answer is: Nothing

The commission received by a broker who is a member of a multiple listing service is: Select one: A. Set by the MLS B. Set by the realty board C. Negotiated between broker and seller D. Negotiated between buyer and seller

(commission and fees) Commission rates are ALWAYS negotiated between the broker and the seller. No group can set a specific commission rate, and any attempt to do so would be a violation of antitrust laws. The correct answer is: Negotiated between broker and seller

Broker Lynch has an exclusive listing to sell Jones' hardware store for a $4,500 commission. He took another exclusive listing to sell Brown's grocery store for a $5,000 commission. With the consent of Jones and Brown, Lynch arranges an exchange of these two stores. How much will Lynch make from this exchange? Select one: A. $4,500 B. $5,000 C. $9,500 D. No commission, because an exchange is not a sale

(commission and fees) In real estate brokerage, an exchange of two or more properties results in the sale of all properties involved, and commissions are paid as stated in the listing. The correct answer is: $9,500

Two brothers own separate real estate companies, but agree to divide their received commissions equally. Broker A pays for three-fourths of the advertising costs and finds the buyer. Broker B pays for one-fourth of the advertising costs. If the total commission on the sale is $4,500, how much does Broker B receive? Select one: A. $1,125 B. $2,250 C. $4,500 D. None of the above

(commission and fees) Since the brokers agree to divide the commission equally, each gets $2,250 despite their individual expenses. Do not be fooled into making this question more complicated than it is. The correct answer is: $2,250

Susan has a listing agreement with Tom to sell his house and an adjoining lot. Susan sells Tom's house to Pete. Before closing, Susan also negotiates a valid option contract with Pete for Tom's adjoining lot, which is listed at $150,000. When will Susan earn her commission on the adjoining lot? Select one: A. When the sale on the home closes B. When the option period expires C. Upon Tom's acceptance of Pete's offer of the option D. None of the above

(commission and fees) Susan earns a commission if she produces a ready, willing, and able buyer to the agreed upon terms. Since Pete may choose not to exercise his option on the adjoining property, he does not meet that definition of a ready, willing, and able buyer. Therefore, Tom is not obligated to pay a commission for the adjacent lot at this point. If the option period expires and he still hasn't exercised the option, then Susan will not receive a commission for the lot. The sale of the home is additional information that has nothing to do with the option contract for the adjoining lot. The correct answer is: None of the above

Two brokers agree that they will charge the same commission rate on all property listed by their offices. Such an action: Select one: A. Is common practice B. Is in violation of anti-trust laws C. Is prohibited by RESPA D. Both B and C

(commission and fees) This action is in direct violation of anti-trust laws. You should never discuss commission rates with another licensee. The correct answer is: Is in violation of anti-trust laws

A property is listed at $68,000. A full price offer is made without contingencies. In this situation, which of the following statements is correct? Select one: A. The seller must accept the offer B. The seller is not obligated to pay the commission C. The seller may refuse to sell D. The seller would be in violation of the Fair Housing Law

(commission and fees) Understand that a listing is not an offer, but an invitation for a buyer to submit an offer. Therefore, a buyer cannot accept a seller's listing--she must make an offer. Here, the broker earned his commission because he found a ready, willing, and able buyer on the terms of the seller. Whether he will ever collect is another issue. The correct answer is: The seller may refuse to sell

Which of the following acts does NOT constitute a violation of Federal Anti-Trust Laws? Select one: A. Real estate broker agreeing to charge the same commission rate B. Real estate brokers agreeing to not cooperate with a certain firm C. Lenders charging usurious interest rates D. Establishing territories in which brokers may operate

(commission and fees) Usurious interest rates are controlled by state usury laws, not by Anti-Trust laws. Conspiring to charge the same commission rate, agreeing to only work in specified territories, and agreeing to not cooperate with a certain broker are all examples of Anti-Trust violations. The correct answer is: Lenders charging usurious interest rates

When does a broker earn commission? Select one: A. When the listing is taken B. When the purchaser signs the title insurance policy C. When closing is complete and title passes D. When the offer to purchase has been signed and accepted by the seller

(commissions and fees) The broker EARNS a commission when the broker brings a ready, willing, and able buyer to purchase on the seller's terms. The broker is PAID when the deal closes and title is transferred. The correct answer is: When the offer to purchase has been signed and accepted by the seller

Which of the following choices would terminate a buyer-broker agreement? Select one: A. Abandonment B. Time C. Agreement D. All of the above

(common types of agency agreements) Abandonment by the broker, lapse of the specified time, and mutual agreement by parties all terminate a buyer-broker agreement. The correct answer is: All of the above

Buyer Billy and Broker Bobby enter into a buyer-broker agreement. Billy grows increasingly suspicious of Bobby's abilities. After two weeks pass without being shown a satisfying property, Billy revokes the agreement. All of the following statements could be true about this action, except: Select one: A. Billy was justified because Bobby was in breach B. Billy was in breach C. Billy owes Bobby for damages D. Bobby could sue for specific performance

(common types of agency agreements) All of the described scenarios could be true under various circumstances, except Bobby cannot require Billy to perform. Specific performance is NEVER a remedy for personal service contracts. The correct answer is: Bobby could sue for specific performance

A buyer-broker agreement should address which of the following items? Select one: A. Commission B. Time C. Obligations D. All of the above

(common types of agency agreements) All of the listed items should be addressed in a buyer-broker agreement. The correct answer is: All of the above

Mr. Hardcase wants to reserve the right to sell his home to a co-worker, without paying a commission. Which of the following listings would best serve Mr. Hardcase's interests? Select one: A. An exclusive agency B. An exclusive right-to-sell C. A net listing D. None of the above

(common types of agency agreements) An exclusive agency listing would allow the owner to sell the home himself without being liable for a commission. A net listing is illegal in most states. The correct answer is: An exclusive agency

A broker wants to be compensated if anyone else sells his listed property during the listing period. What type of listing should the broker acquire? Select one: A. An exclusive right-to-sell listing B. An open listing C. An exclusive agency listing D. A net listing

(common types of agency agreements) An exclusive-right-to-sell listing means that the broker gets paid, regardless of who sells the property. An exclusive agency means that the broker gets paid if anyone other than the OWNER sells the property. In an open listing, ONLY the person selling the property gets paid. A net listing is illegal in most states. The correct answer is: An exclusive right-to-sell listing

Which of the following listings will permit an owner to sell his property without paying a commission to any broker? Select one: A. Open listing B. Exclusive agency listing C. Exclusive right-to-sell listing D. Both A and B

(common types of agency agreements) An open listing and an exclusive agency listing permit the seller to sell his own property without paying a commission to the listing broker. Meanwhile, an exclusive right-to-sell would require the owner to pay a commission, even if he sells it himself. The correct answer is: Both A and B

Cheryl and Chris enter into a buyer-broker agreement. They specify that the agreement will last for a two week period. At the end of two weeks, Chris informs Cheryl that the agreement is no longer binding. Chris is: Select one: A. Correct, so long as the agreement was written B. Incorrect, because the agreement is valid for a reasonable amount of time C. Correct, regardless of whether Chris informed Cheryl D. Incorrect, unless Cheryl agrees

(common types of agency agreements) Buyer-broker and other personal service contracts may be oral. Such agreements are valid for a "reasonable" amount of time if no expiration was specified, but the question mentions an agreed upon expiration date. As such, Cheryl need not agree at the end of the two weeks. She already gave approval by entering into a contract with those specified terms. Therefore, regardless of whether Chris informs Cheryl, the agreement automatically expires at the end of the stated duration. The correct answer is: Correct, regardless of whether Chris informed Cheryl

Smith dies and his real property is sold. What determines the amount of commission paid to the broker who handles the sale? Select one: A. The state real estate board B. The local bar association C. The listing agreement D. The State Association of Realtors

(common types of agency agreements) Commission is determined by the listing contract signed by the parties to the transaction (broker and seller). In this case, the seller would be the executor or administrator of the estate. The correct answer is: The listing agreement

Dan and Daisy enter into a buyer-broker agreement. Dan believes that Daisy is in breach. May Dan terminate the contract? Select one: A. Yes, but Dan waives his right to specific performance B. No, unless there is a mutual agreement between Dan and Daisy C. Yes, but Dan risks causing a breach himself D. No, so long as Daisy is willing and able to perform

(common types of agency agreements) Dan has no right to specific performance because this is a personal service contract. One may terminate a contract with or without mutual consent (regardless of whether the other party is willing and able to perform). However, any time you terminate a contract, you risk a breach. If Daisy wasn't actually in breach, Dan's termination would be a breach of the contract. The correct answer is: Yes, but Dan risks causing a breach himself

Seller Pruitt signed an exclusive right-to-sell listing with Broker Cook. The listing includes a 7% commission and a clause which states that this agreement is in effect until the house is sold. Is this legal? Select one: A. No, because the commission was over 6% B. No, because the term is potentially indefinite C. Yes, if it is a multiple listing D. Yes, assuming all other elements are satisfied

(common types of agency agreements) Exclusive listings must have a definite termination date. If the house does not sell, the agreement could exist forever. The correct answer is: No, because the term is potentially indefinite

A broker obtains an open listing on a piece of property. In order to collect a commission on the sale, he must prove which of the following details? Select one: A. He was licensed at the time of the sale B. He was engaged by the owner at the time of the sale C. He was the procuring cause of the sale D. All of the above

(common types of agency agreements) In order to receive a commission, the broker must be able to prove that he was licensed as a real estate agent, had a listing with the seller in question (was engaged by the owner), and was the procuring cause of the sale (his effort brought about the desired result). Under an OPEN listing, the only person that gets paid is the person that procured the buyer. The correct answer is: All of the above

Susan and Sally enter into a buyer-broker agreement. However, Sally subsequently falls on hard times. Susan gets nervous and terminates the agreement. Is Susan in breach? Select one: A. Yes, if Sally is the broker B. No, so long as Sally takes no action C. No, if Sally filed for bankruptcy D. Yes, if both parties agreed

(common types of agency agreements) It makes no difference whether Sally is the broker or the buyer, or whether Susan takes action (a breach is a breach, even where it is not penalized). However, the contract may be terminated by operation of law when a party dies (no breach), suffers from insanity (no breach), or enters into bankruptcy (may result in a breach). In case of bankruptcy, the other party (Susan) may pre-emptively terminate the agreement without a breach. The correct answer is: No, if Sally filed for bankruptcy

If an owner gives a listing to more than one broker, it would most likely be which type of listing? Select one: A. Net listing B. Open listing C. Exclusive agency D. Exclusive right-to-sell listing

(common types of agency agreements) Note that an open listing is also known as a general listing. If more than one listing is given, it would most likely be this type of listing. The correct answer is: Open listing

A listing agreement must contain all of the following pieces of information EXCEPT: Select one: A. The signature of the owner of the property B. The percentage of commission or fee C. An expiration date D. The proceeds due to the seller from the sale

(common types of agency agreements) Of the choices presented, the only item NOT required in a listing agreement is the amount due to the seller from the sale. The amount due to the seller is unknown until the time of the final sales contract. The correct answer is: The proceeds due to the seller from the sale

The relationship between a seller and a listing broker is that of a(n): Select one: A. Seller and purchaser B. Principal and agent C. Agent and subagent D. Optionor and optionee

(common types of agency agreements) Principal is another term for client. Only the broker has an agency relationship with the seller. The salesperson has an agency relationship with the broker and subagency with the seller. The correct answer is: Principal and agent

A seller entered into a valid contract with a buyer. Afterwards, the seller realized that his broker is also representing that buyer. The seller has a right to: Select one: A. Cancel the contract without obligation to either buyer or broker B. Cancel the contract, but only with written permission from the buyer C. Cancel the contract, but with liability to the broker for any expenses D. The contract is valid and must be executed as agreed

(common types of agency agreements) Representing both the buyer and seller without prior knowledge and approval is a breach of the listing agreement. In this situation, the seller may: cancel the sales contract without obligation; or accept the contract, but refuse to pay the broker because the broker's actions would amount to misrepresentation. The correct answer is: Cancel the contract without obligation to either buyer or broker

If a salesperson lists a property, she CANNOT be: Select one: A. A dual agent B. Only a buyer's agent C. Only a seller's agent D. An agent for the buyer and seller

(common types of agency agreements) The agent COULD represent the buyer and seller (if all parties consent). This is the definition of dual agency. The listing agent could choose to represent ONLY the seller, but the agent who takes a listing cannot be ONLY a buyer's agent. The correct answer is: Only a buyer's agent

All of the following statements are true of buyer-broker agreements, except: Select one: A. Buyer-broker agreements cannot be assigned B. Buyer-broker agreement terms may be disclosed to customers C. Buyer-broker agreements may be created verbally D. The salesperson is not a party to the agreement

(common types of agency agreements) The client in the buyer-broker agreement is the buyer. The customer for buyer-broker representative is the seller. You must not disclose the agreement terms to the customer (whichever party you are not representing). The correct answer is: Buyer-broker agreement terms may be disclosed to customers

The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is: Select one: A. Exclusive buyer agency agreement B. Exclusive agency buyer agency agreement C. Open buyer agreement D. Exclusive right-to-market agreement

(common types of agency agreements) The exclusive buyer agency agreement is the counterpart to the exclusive right-to-sell listing agreement. Meanwhile, an exclusive agency buyer agency agreement is most similar to the exclusive agency listing agreement. An open buyer agreement is the counterpart to an open listing. Exclusive right-to-market is sometimes seen as a synonym for exclusive right-to-sell. However, that is still a listing and not a buyer-broker agreement. The correct answer is: Exclusive buyer agency agreement

Broker John and Buyer Jenny enter into an exclusive buyer agreement. However, Jenny finds a suitable property on her own. After Jenny purchases the property, John demands his commission. Must Jenny pay John a commission? Select one: A. Yes, because John took steps to find a suitable property for Jenny B. Yes, so long as Jenny purchased property similar to the one described in the agreement C. No, because Jenny found the property on her own D. No, because John failed to find a property before Jenny

(common types of agency agreements) The exclusive buyer agreement obligates the buyer to compensate the agent if the buyer purchases property similar to that which was described in the contract. Under an exclusive buyer agreement, the agent is compensated regardless of whether the buyer discovers the property on her own or through another agent. This is the counterpart to the exclusive right-to-sell listing. We do not know whether John took sufficient steps to find property for Jenny, but it is irrelevant that Jenny found the property on her own if the property is similar to the one described in the agreement. The correct answer is: Yes, so long as Jenny purchased property similar to the one described in the agreement

A seller wants to list a property with a broker, but hopes to sell it herself in order to avoid a commission. Which listing agreement should the seller NOT sign? Select one: A. Open listing B. Exclusive agency listing C. Exclusive right-to-sell listing D. General listing

(common types of agency agreements) The seller should avoid signing the exclusive right-to-sell listing. For each of the other options, the seller could avoid paying a commission by selling the property herself. The correct answer is: Exclusive right-to-sell listing

Salesperson Kelly takes a 90 day exclusive listing to sell Murphy's home. Three weeks later, Kelly moves out of the area and puts her license on inactive status. Which of the following statements is true about the listing? Select one: A. The exclusive listing becomes an open listing B. The listing remains effective C. The listing is voidable by Murphy D. The listing is automatically terminated

(common types of agency agreements) This listing is a contract between the seller (Murphy) and his broker, NOT between the seller and salesperson (Kelly). Therefore, the listing remains in force. The correct answer is: The listing remains effective

By virtue of a signed listing agreement, the broker will generally have authority to do all of the following actions without the seller's consent, EXCEPT: Select one: A. Use the services of another broker B. Use the services of the salespersons in his own brokerage firm C. Use the MLS to market the property D. Bind the seller to a full price offer

(common types of agency agreements) Through the listing agreement, the seller employs the broker to produce a ready, willing, and able buyer in exchange for a commission. The broker may use the services of other brokers or his own salespersons in order to accomplish this act without the consent of the seller. However, as a general rule, the broker cannot accept or reject any offer (even if it's a full price offer). The decision to accept or reject an offer always remains with the client. The correct answer is: Bind the seller to a full price offer

Who represents the buyer in the traditional real estate transaction? Select one: A. Listing broker B. Selling broker C. Selling salesperson D. No one

(common types of agency agreements) Traditionally, no one represents the buyer. The listing broker represents the seller and the selling broker represents the seller as a sub-agent of the listing broker. Accordingly, the selling salesperson represents the seller as a sub-agent as well (through the selling broker, to the listing broker, to the seller). The buyer could be represented if he or she enters into a bona fide buyer-broker agreement. The correct answer is: No one

A listing will automatically terminate: Select one: A. If the listing broker goes bankrupt B. On the date specified in the listing agreement C. If the seller dies prior to receiving an offer from a ready, willing, and able buyer D. All of the above

(law, definition, & nature of agency relationships) A listing terminates if either the agent or the principal dies or goes bankrupt. Listings also terminate when they expire. The correct answer is: All of the above

Harry hires David to be his buyer-broker. However, a few days later, Harry spots a property for sale while driving home from work. He falls in love with the property and makes the purchase without David's assistance. Two days later, David demands a commission. Is Harry required to pay a commission to David? Select one: A. Yes, because the agreement was in force when Harry bought the property B. Yes, so long as there is an exclusive agency buyer agreement C. No, because David was the procuring cause in the sale D. No, so long as the agreement was not an exclusive buyer agreement

(common types of agency agreements) Knowing that the agreement was in force is not specific enough to answer the question. If the agreement was an exclusive agency buyer agreement, Harry would not be obligated to pay. However, if it was an exclusive buyer agreement, Harry would be obligated to pay even though David was not the procuring cause. Therefore, Harry is not obligated pay David so long as the agreement was not an exclusive buyer agreement. The correct answer is: No, so long as the agreement was not an exclusive buyer agreement

A general agency empowers the agent to: Select one: A. Transact matters of all types for the client B. Transact the client's affairs in a certain business C. Perform only specific acts for the client D. Perform any legal act for the client

(law, definition, & nature of agency relationships) A general agent is authorized to perform any and all acts associated with a specific service. The other choices are either too broad or too narrow. The correct answer is: Transact the client's affairs in a certain business

A salesperson could be described as a "general" agent in his relationship with: Select one: A. The general public B. The broker C. The seller D. The buyer

(law, definition, & nature of agency relationships) A general agent is someone that may perform many different acts for his principal, so long as it is confined to a specific area of operation. A salesperson performs many different acts (confined to real estate transactions) for his principal (broker), like listing property, selling property, and managing property. The correct answer is: The broker

All of the following circumstances will automatically terminate a listing broker's agency agreement, EXCEPT: Select one: A. Bankruptcy of a principal B. Destruction of the property C. Condemnation of the property D. Unilateral action

(law, definition, & nature of agency relationships) A listing is automatically terminated by law upon bankruptcy or death of either party (principal or agent), or by the destruction or disposition of the property (including condemnation). Acting unilaterally to terminate the listing would be the act of one party, not an operation of law. The correct answer is: Unilateral action

A sales agent obtains an exclusive right-to-sell listing. What is the sales agent's relationship with the broker and the seller? Select one: A. Agent of both the seller and broker B. Agent of the seller and sub-agent of the broker C. Agent of the broker and sub-agent of the seller D. Employee of the broker and agent to the seller

(law, definition, & nature of agency relationships) A sales agent is an agent to his or her employing broker. Agency also exists between the seller and the broker. The salesperson is an agent of an agent (broker) and is therefore a sub-agent of the seller. The correct answer is: Agent of the broker and sub-agent of the seller

Jon is an agent for Betty the Buyer. This relationship could exist by virtue of: Select one: A. An oral agreement B. Judicial action C. Validation D. All of the above

(law, definition, & nature of agency relationships) Agency may be created by express agreement, which may be oral or written. Agency may also be created by estoppel (requires judicial action) and ratification (sanction or validation of the broker's conduct). The correct answer is: All of the above

Which of the following persons would likely NOT be an agent? Select one: A. A real estate salesperson handling referrals only B. A property manager employed by the owner C. A person working for a multiple listing service D. A person holding a power of attorney

(law, definition, & nature of agency relationships) All of the examples would be agents, except an individual that works for a multiple listing service. That person is an employee of the MLS. However, do not be tricked into believing that just because one is "employed" by another that they must be an employee (and therefore not an agent). Agency creates an employment agreement, but this may or may not be an "employee" relationship as defined by the IRS. The correct answer is: A person working for a multiple listing service

An agency relationship between seller and broker may be terminated by: Select one: A. Mutual consent B. Renunciation of the agreement by the broker C. Expiration of the agreement D. Any of the above

(law, definition, & nature of agency relationships) All of the listed choices are recognized means of terminating an agency agreement (although some may or may not result in a breach). The correct answer is: Any of the above

The law of agency can include relationships between principals, agents, and: Select one: A. Sellers B. Buyers C. Third parties D. None of the above

(law, definition, & nature of agency relationships) An agency relationship in real estate can involve principals, agents, and third persons. A third person COULD be a buyer, seller, or escrow agent/trustee. Therefore, "third parties" is the best answer to the question. The correct answer is: Third parties

A buyer-broker agreement may arise by all of the following means, except: Select one: A. Express agreement B. Ostensible agreement C. Custom D. None of the above are valid

(law, definition, & nature of agency relationships) An agency relationship with a buyer may be created by all of the methods identified, except by custom. While custom can be used to establish a relationship, it is generally a means to establish an agency relationship with the seller, not the buyer. The correct answer is: Custom

he legal relationship between broker and seller is generally: Select one: A. Special agency B. General agency C. Universal agency D. None of the above

(law, definition, & nature of agency relationships) As a general rule, a listing agreement between the seller and the broker is a special or specific agency. The agent (broker) is authorized to do one act and one act only (sell property). Depending on the wording, a listing agreement could create something other than a special agency. The correct answer is: Special agency

A broker accepts an exclusive right-to-sell listing. However, the property is later sold by another broker. How many brokers could be owed a commission by the principals in this transaction? Select one: A. 0 B. 1 C. 2 D. 3

(law, definition, & nature of agency relationships) In a traditional exclusive right-to-sell transaction, the seller/client agrees to list the property with a single broker and also agrees to pay that broker his commission regardless of who sells the property. Therefore, we know from the question stem that at least one broker will receive a commission (because the property sold). However, if one of the brokers involved represents the buyer, there are now two brokers that COULD receive a commission--one representing the seller and one representing the buyer. The correct answer is: 2

Which of the following situations is an example of dual agency? Select one: A. A broker's undisclosed representation of both buyer and seller B. Two salespersons represent a different buyer and seller in the same transaction C. A salesperson represents both buyer and seller D. Both A and C

(law, definition, & nature of agency relationships) It doesn't matter whether disclosure is made; a dual agency exists where the broker represents both the buyer and the seller. A salesperson who represents both parties in a transaction is an example of dual agent. In the situation, the parties should have an agreement with the salesperson's broker, but the salesperson might have instead created an implied agency by her words or actions. Nevertheless, two salespersons representing a different buyer and seller for the same broker is a designated agency. The correct answer is: Both A and C

Which circumstance would terminate an agency by operation of law? Select one: A. Mutual agreement B. Unilateral rescission C. Bankruptcy of the seller D. Abandonment by the broker

(law, definition, & nature of agency relationships) Of the listed choices, bankruptcy is the only method to terminate by operation of law. The other choices describe termination by act of the parties. The correct answer is: Bankruptcy of the seller

Sam Slick lists his home with Clueless Kelly, a broker. Two weeks later, Kelly learns that Sam has a reputation for dishonesty and a bad record with other brokers. Three weeks later, Kelly learns that Sam is speaking to other brokers behind her back. Kelly confronts Sam and terminates the listing. Which party breached the listing agreement? Select one: A. Sam, because he was speaking with other brokers B. Kelly, because she unilaterally terminated the agreement C. Sam, because he terminated the agreement D. None of the above

(law, definition, & nature of agency relationships) Sam has done nothing wrong by merely "speaking with" other brokers. While Kelly may think Sam is in breach, there is no evidence that this is true. If you terminate a contract unilaterally without evidence of an actual breach, you risk being the breaching party. The correct answer is: Kelly, because she unilaterally terminated the agreement

Salesperson Sam works for Broker Betty. Betty enters into a listing agreement with Cheryl the Seller. Which term best describes these relationships? Select one: A. Subagency B. General agency C. Special agency D. All of the above

(law, definition, & nature of agency relationships) Betty is an agent for Cheryl and they most likely have a special agency relationship (the typical brokerage relationship). If Sam is affiliated with Betty's firm, then he is most likely employed as a general agent. Sam could also be a subagent of Cheryl, although the facts are not clear (we don't know if Betty has assigned Sam to this particular transaction). However, given this possibility, the best answer is all of the above. The correct answer is: All of the above

What is the agency relationship between cooperating brokers (listing broker and selling broker) who are members of the MLS? Select one: A. Co-brokers B. The cooperating broker could be a sub-agent to the seller C. The listing broker is principal, and the selling broker is the agent of the listing broker D. None of the above

(law, definition, & nature of agency relationships) Notice that the question asks for the agency relationship between the listing broker and the selling broker. It does NOT ask for the relationship of the selling broker to the seller. In this situation, note that the listing broker is the principal and the cooperating broker (selling broker) is the agent of the listing broker. The correct answer is: The listing broker is principal, and the selling broker is the agent of the listing broker

A property management contract could exist between the property manager and: Select one: A. His or her employees B. The property owner C. The tenants D. Both A and B

(law, definition, & nature of agency relationships) There is no contract between the manager and the tenants. Any contract that might exist between the manager and his employees would be an employment contract, NOT a property management contract. The correct answer is: The property owner

A selling broker is showing a parcel of property and tells the prospective buyer: "In my expert opinion, this property is the best for you." This statement could be interpreted as: Select one: A. Universal agency B. Special agency C. Implied agency D. General agency

(law, definition, & nature of agency relationships) This could create an implied agency, which might result in an undisclosed dual agency. Remember that a selling broker (cooperating broker) acts as a subagent of the listing broker. Therefore, unless proper consent was given, he should avoid letting the buyer think that he's working on anyone other than the seller's behalf. The correct answer is: Implied agency

A salesperson represents the: Select one: A. Buyer B. Seller C. Listing broker D. Either A or B

(law, definition, & nature of agency relationships) You may have been told that everyone represents the seller. However, the salesperson is in fact only a sub-agent to the seller THROUGH the broker. The sales agent directly represents the broker. Though arguably unfair, this type of question illustrates just how difficult/tricky exam questions can be. The correct answer is: Listing broker

Wilma lists her house with Broker Fred under an exclusive right-to-sell agreement. Fred later abandons the listing. Which of the following statements is true about this situation? Select one: A. Wilma must maintain the listing with Fred until the expiration date B. Wilma may terminate the listing C. Wilma must wait 90 days before she can list the property with another broker D. Wilma must file a notice of abandonment

(law, definition, & nature of agency relationships) Abandonment by the agent terminates the listing automatically. No action is required by Wilma. The correct answer is: Wilma may terminate the listing

Barry, a salesperson with XYZ Realty, lists a property. Helen, also a salesperson with XYZ, presents an offer from her client which is accepted. In this situation, which of the following statements would best describe the position of the XYZ Broker? Select one: A. The broker is only an agent for the buyer B. The broker is only an agent for the seller C. The broker has violated a fiduciary duty D. The broker is an agent for both the buyer and the seller

(law, definition, & nature of agency relationships) The broker is agent of the seller by virtue of Barry's listing. The Broker is also the agent of the buyer by the fact that the buyer is Helen's CLIENT. Therefore, the broker is a dual agent. All agency agreements are with the broker, NOT the salespersons that procured the listing. The broker would violate a fiduciary duty if he/she failed to obtain consent from both the buyer and seller. However, there is insufficient information to determine whether such a failure occurred. Therefore, the best choice is that the broker is an agent for both. The correct answer is: The broker is an agent for both the buyer and the seller

A buyer's broker presented an offer on property listed by another broker. Proper agency disclosures have been made. Prior to offer and acceptance, the selling broker learns of a zoning change that will affect the value of the property. The selling broker tells his client and the offer is withdrawn. Which of the following statements is correct? Select one: A. the selling broker has violated his fiduciary relationship with the seller B. the selling broker has exercised due care and loyalty to his principal C. the buyer may not withdraw his offer D. disclosure of this information violates state licensing regulations

The broker has a fiduciary duty to disclose material facts. The zoning change is material because it will significantly impact the value of the property. The selling broker upholds the duties of loyalty and due care by avoiding a violation of law. The correct answer is: the selling broker has exercised due care and loyalty to his principal

All of the following are fiduciary duties owed to a client, EXCEPT: Select one: A. to use care in filling out contract forms B. to obey all client instructions C. to be loyal to the client D. to be accountable for documents and funds

The fiduciary duties that an agent owes the client/principal include the duty of care, the duty of accounting, and the duty of loyalty. Of the choices presented, the duty "to obey all client instructions" is the best choice because it is too broadly stated. That is, it is not always true. An agent is only obligated to obey LAWFUL client instructions. Following all client instructions could violate other duties (loyalty) or even the law if it results in an illegal act or omission. The correct answer is: to obey all client instructions