Section 7: Real Estate Agency - quiz

23. A licensee has a duty to investigate: A. only those things that the licensee has specifically agreed to investigate B. and verify all information passed on by the seller C. only those latent defects the seller is aware of D. None of the above

Correct Answer: A Explanation: A licensee has no duty of independent investigation and verification, other than those items the agent has specifically agreed to investigate.

6. A buyer's agent asks the listing agent for copies of the water and sewer bills for the listed property. The listing agent: A. must obtain copies from the seller and give them to the buyer's agent B. is not obligated to pass along this information C. must give this information only if its accuracy can be verified D. should obtain this information directly from the utilities

Correct Answer: A Explanation: A listing agent is obligated to disclose any material facts regarding the subject property. Since the utility bills may reveal information that would have a negative effect on the property's value, the agent should disclose the utility bills.

29. A real estate broker who has taken a listing discovers that the dining room ceiling is discolored, possibly because of a leaky roof. What should he do? A. Disclose the potential problem to prospective purchasers B. Say nothing to the buyer because of his duty of loyalty to the seller C. Disclose the roof problem to the seller, but not the buyers D. Withdraw from the listing

Correct Answer: A Explanation: An agent must disclose any latent defects to prospective buyers. Evidence of a leaking roof would be considered a latent defect.

30. Which of the following is always true regarding an independent contractor? A. No federal income tax is withheld from an independent contractor's commissions B. A brokerage doesn't have to provide workers' compensation insurance for an independent contractor C. An independent contractor is entitled to paid vacation time D. An independent contractor must attend all brokerage sales meetings

Correct Answer: A Explanation: An independent contractor is paid without having any money withheld for taxes. Generally, an independent contractor is not closely supervised by an employer, and is free to structure his own work schedule.

14. If a principal gives approval after the fact to unauthorized actions, an agency relationship is established by: A. ratification B. estoppel C. implication D. implied actual authority

Correct Answer: A Explanation: Approval of unauthorized actions after the fact is referred to as ratification.

28. The pamphlet on agency law: A. must be given to parties before a written agreement is signed B. must be given to the seller before completing the Seller Disclosure Form C. must be available at open houses D. is not relevant in commercial transactions

Correct Answer: A Explanation: Each party must receive the agency law pamphlet before either party signs an agency agreement, signs an offer, consents to a dual agency, or waives any agency rights, whichever of these events comes first.

22. If a licensee chooses to act as a non-agent in a transaction, the licensee: A. still owes general duties of disclosure, reasonable care, and accounting to both parties B. owes no duties to either party C. can withhold material facts from either party D. does not really need a real estate license at all

Correct Answer: A Explanation: Even when acting as a non-agent, a licensee owes general duties to all parties. These include honesty and good faith, reasonable care and skill, presenting all written communications, disclosure of material facts, and accounting.

2. In order to alleviate confusion among buyers and sellers regarding agency representation issues, many states, including Washington, enacted laws that: A. require agents to disclose to the parties which party they are representing in the transaction B. prohibit agents from representing buyers in residential transactions C. require designated brokers to be licensed as either seller's agents or buyer's agents D. require agents to act as seller's agents if they are members of a multiple listing service

Correct Answer: A Explanation: Laws such as Washington's real estate agency law require real estate agents to disclose which party or parties they represent in a transaction.

1. In a typical real estate transaction, there is an agency relationship between the: A. seller (principal) and listing brokerage (agent) B. seller (principal) and buyer (agent) C. seller (agent) and buyer (principal) D. buyer (principal) and listing brokerage (agent)

Correct Answer: A Explanation: Typically, the listing brokerage acts as an agent for the seller, who is the principal.

21. A buyer's agent is most commonly compensated by the: A. buyer, through payment of a commission B. seller, through a commission split C. buyer, through payment of a flat fee D. seller, through payment of a flat fee

Correct Answer: B Explanation: A buyer's agent typically receives half of the seller's commission, through a commission split.

4. A special agent is authorized to: A. do anything that can be lawfully delegated to a representative B. conduct a specific transaction C. handle all of the principal's affairs in one or more areas D. enter into contracts on the principal's behalf

Correct Answer: B Explanation: A special agent's authority is limited to a specific activity or transaction. Real estate agents are typically special agents.

15. A buyer asks the buyer's agent to write an offer on terms that don't match the listing agreement. The buyer's agent refuses to write the offer and then, in writing, unilaterally terminates the agency relationship with the buyer. The buyer's agent is: A. subject to disciplinary action B. permitted to unilaterally terminate the agency relationship C. allowed to terminate the agency, but must write the offer first D. not permitted to write such an offer

Correct Answer: B Explanation: An agent may unilaterally renounce an agency relationship. The agent may still be liable for any damages resulting from the breach, however.

16. Under Washington's real estate agency law, the Brokerage Relationships Act, if a third party provides information to the agent: A. the agent must not disclose the information to the principal B. the principal is deemed to know the information only if the agent actually discloses it to the principal C. it is not necessary for the agent to disclose the information to the principal D. the agent should withdraw from the transaction

Correct Answer: B Explanation: Because the imputed knowledge rule does not apply in Washington to real estate transactions, the principal is not assumed to have knowledge of information known by the agent unless she is actually told by the agent. An agent does not owe third parties any duty of confidentiality or loyalty, but does owe those duties to his principal.

24. Which of the following statements about dual agency is false? A. Dual agency is created automatically in an in-house transaction B. Dual agency is illegal in Washington C. Dual agency is widely discouraged because of the inherent potential for conflict of interest D. Dual agency requires comprehensive disclosure to both parties the agent is representing

Correct Answer: B Explanation: Dual agency is not illegal in Washington, although both parties must receive a dual agency disclosure and consent in writing.

13. The owners of an apartment building hire a real estate brokerage as the property manager. If the owners later sell the building, their agency relationship with the property manager: A. is automatically transferred to the new owner B. terminates due to extinction of the subject matter C. can be terminated by the former owners without liability to the property manager D. continues unless terminated by the property manager

Correct Answer: B Explanation: If the property in question is sold or destroyed, any agency related to that property is extinguished.

5. The most common method for creating a seller agency relationship is: A. payment of a commission B. a written listing agreement C. submitting a listing to a multiple listing service D. words or conduct of the parties indicating an intent to create an agency

Correct Answer: B Explanation: Seller agency relationships are usually created through a written listing agreement.

9. Harrison, who works for Yates Realty, obtains a listing for a property and submits it to the multiple listing service. Baker, who also works for the Yates firm, finds a buyer for the property. In this situation: A. Baker would be considered the seller's agent B. the designated broker for Yates Realty is a dual agent, because it is an in-house sale C. Baker must be careful not to give the buyer advice, such as suggesting how much to offer for the property D. Baker would be considered a dual agent

Correct Answer: B Explanation: The designated broker for Yates Realty is a dual agent, since both Harrison and Baker work for the Yates firm. Baker is only acting as a buyer's agent.

19. A principal entered into an agency agreement that was to last for a period of three months. Two weeks later, the principal died of natural causes. Which of the following is true? A. The principal's heirs must honor the terms of the agency agreement B. The agency continues unless the principal's heirs choose to revoke it C. The agency relationship terminated automatically when the principal died D. The agency terminated as soon as the agent was informed of the principal's death

Correct Answer: C Explanation: Agency relationships always terminate immediately upon the death, incapacity, or bankruptcy of either party.

18. A cooperating agent is: A. always the listing agent B. always the buyer's agent C. any agent representing a party in the transaction D. a licensee acting as a nonagent

Correct Answer: C Explanation: Cooperating agents are members of the listing firm's MLS (and the members of any other MLS that is participating in the transaction).

27. The most likely evidence of environmental contamination on a property would be: A. cracked stucco on the house exterior B. old cans in the house's pantry C. discolored soil and dying plants in the back yard D. old furniture stored in a shed

Correct Answer: C Explanation: Discolored soil and dying plants would be a likely indicator of environmental contamination, such as a leaking underground storage tank.

11. A seller's agent may disclose confidential information about her client: A. under no circumstances B. upon formal written demand by the buyer's agent C. under court order or subpoena D. if such disclosure complies with MLS rules

Correct Answer: C Explanation: If a court orders disclosure of confidential information, the agent must do it; otherwise, she would be in contempt of court.

12. In an in-house sale: A. the listing is not submitted to the MLS B. the compensation must be paid from the principal directly to the brokerage's agents C. the buyer and seller are brought together by agents working for the same brokerage D. All of the above

Correct Answer: C Explanation: In an in-house transaction, both the listing agent and selling agent work for the same brokerage. The designated broker acts as a dual agent.

26. If a couple asks a broker how they should take title to property they are purchasing, the broker should tell them: A. joint tenancy B. tenancy by the entirety C. community property D. to consult an attorney

Correct Answer: D Explanation: A licensee should never give legal advice, and telling someone how to take title is legal advice.

25. In a listing agreement, who is the principal? A. Designated broker B. Buyer C. Broker D. Seller

Correct Answer: D Explanation: A listing agreement creates an agency relationship between a seller (the principal) and a designated broker (the agent).

8. A real estate broker is: A. the principal of a subagent B. a subagent of a third party C. the agent of a buyer D. the agent of his designated broker

Correct Answer: D Explanation: A real estate broker is an agent of his designated broker.

10. A licensee owes to all parties, regardless of whom the licensee represents, the duty of: A. loyalty B. confidentiality C. immediately disclosing all conflicts of interest D. reasonable care and skill

Correct Answer: D Explanation: All agents owe all parties the duty of reasonable care and skill. The duties of loyalty, confidentiality, and disclosure of conflicts of interest are owed only to the agent's principal.

3. When an agent works as an independent contractor, it means: A. the agent has her own office, and deals directly with buyers and sellers B. the agent has a managing broker's license C. the agent is not accountable to a designated broker D. None of the above

Correct Answer: D Explanation: An independent contractor sets her own hours, is not directly supervised, and is compensated by commission instead of salary. While an independent contractor has some freedom in how she performs her job, she is still accountable to her employer.

20. Dual agency is: A. improper unless the buyer pays the agent's commission B. improper unless the buyer is a friend or relative of the agent C. not improper if both agents are paid the same amount D. not improper if both principals give their informed, written consent

Correct Answer: D Explanation: Dual agency is legal only if both parties receive a dual agency disclosure and consent in writing.

7. The seller tells the agent to sell his property as is. The agent learns of a major hidden defect. What should she do? A. Say nothing, since the sale is as is B. Don't bring it up unless asked C. Cancel the listing D. Tell prospective buyers about the defect

Correct Answer: D Explanation: If the defect would not be observable on casual inspection of the property, it is called a latent defect and must be disclosed to any prospective purchaser.

17. An agency relationship may terminate: A. only if there is no termination date in the agency agreement B. only if the agent has proven to be incompetent or untrustworthy C. only with the agent's written consent D. with the mutual consent of the parties

Correct Answer: D Explanation: The parties may mutually agree at any time to terminate an agency. It may also be terminated through the revocation of the principal or the renunciation of the agent.