The Basics of Agency Obligations
A broker owes what duties to a third party or customer?
A broker owes a customer fairness, honesty, and disclosure of material facts.
All of the following are true
A broker's duty to discover and disclose material facts includes what the broker knows and what they should have known. The standard in gauging a broker's conduct is what would an ordinary, reasonable, prudent broker have done or known in similar circumstances. The doctrine of caveat emptor allows a property owner to say nothing about the property condition.
Property Defects for both Brokers
A buyer agent may reasonably rely on the representations a listing agent makes when marketing the property unless there is a "red flag." A listing agent has a heavier burden/duty to discover and disclose latent (hidden) property defects than a buyer's agent does. Both listing agents and buyer agents should discover and disclose patent (obvious) property defects.
A broker must disclose their agency status at INITIAL contact with a consumer or broker in which of the following situations?
A buyer agent upon contacting the seller or listing agent directly. The only disclosure of agency status that occurs at initial contact is when a buyer agent directly contacts the seller/listing agent.
Which of the following statements is FALSE?
A company may be civilly liable for the actions of its affiliated licensees under agency law. A company has no civil liability for its affiliated licensees' actions because they are paid as independent contractors. <<< A broker-in-charge will be included in a Letter of Inquiry filed against a provisional broker. A broker-in-charge may not be involved in a Letter of Inquiry filed against an affiliated full broker.
Written agency agreements for brokerage services generally are between:
A consumer as the principal and the real estate company as the agent.
All of the following are true EXCEPT:
A listing agent has a higher duty to discover and disclose material facts because they have greater access to the property and information from the seller. A broker who relies solely on what their client tells them does so at their peril. Buyer agents also have a duty to discover and disclose, but may normally rely on listing agents' representations unless there are "red flags," Buyer agents may reasonably rely on a listing company's representations unless there is a "red flag." Buyer agents can rely on the listing company's representations and have no duty to discover and disclose. <<<
An exclusive agent
A real estate company whose policy is that it represents only the buyer or seller in a transaction is acting as:
Who of the following is NOT guilty of misrepresentation?
A seller who checks "no rep" on a mandatory property disclosure document even though he knows there is a problem with that feature.
An actively licensed real estate broker has a written contract with a company stating that he will not be treated as an employee for federal income tax purposes. The licensee's entire income is from sales commissions rather than an hourly wage. While the licensee probably will be treated by the IRS much like an independent contractor, technically the licensee is:
A statutory non-employee. Another word for 1099 / indep. contractor.
Which of the following comments by an unrepresented buyer to a listing agent should be considered first substantial contact?
"I need to be under contract by the end of this month." <<< "I just love western NC and all of the recreational opportunities it affords." "I really would like to have a 2-car, if not 3-car, garage." "I hope to buy in the next 3-6 months."
A broker at a listing presentation is explaining the services his company offers and has not yet provided the Working with Real Estate Agents brochure to the seller. Which of the following comments by the seller would cross the boundary of first substantial contact?
"What is your company's fee schedule and marketing practices." "What is the difference between exclusive agency and exclusive right to sell?" "You MUST List at This Price only" "What would you recommend as a listing price?" <<<
OLD CAR
- Obedience - Loyalty - Disclosure - Confidentiality - Accountability - Reasonable Care
All of the following are true concerning the Commission's agency rule EXCEPT:
All agency agreements in brokerage transactions must be express from the outset. A broker may work with a buyer or tenant under an oral buyer agency agreement for a period of time, but it must be in writing before an offer is presented. Agency agreements with owners must be in writing before any brokerage services are provided. The agency agreement with the owner must be in writing prior to presentment of any offer. <<<
An agent must obey what instructions from their principal?
All lawful instructions.
Brokers must provide consumers the Working with Real Estate Agents brochure in:
All real estate sales transactions.
All of the following may lead to an express or implied agency agreement EXCEPT:
An express agreement between the principal and agent authorizing the agent to act on the principal's behalf. The agent begins to advise the consumer and negotiate on their behalf. Compensation to the agent must be paid by the principal. < The broker begins gathering confidential information about the consumer.
A municipality has publicized plans to build an outer beltway and has proposed five alternate routes impacting different neighborhoods, but no final decision has been made. Which of the following is true?
Any broker listing property potentially impacted by any of the proposed routes must disclose that possibility.
An agent's disclosure duties to their principal are limited to:
Disclosing any information the agent knows that may influence their principal's decision.
Agent always has to discover and disclose material facts
If the seller advertises that the property is being sold "As Is," then the public is on notice and the listing broker has no duty to discover and disclose any issues.
What is an "omission" and who may be guilty?
It is a failure to speak when there is a duty to disclose and only brokers may be guilty of omission.
The definition of "material fact" includes all of the following:
Matters impacting or affecting the property. Information about a principal's inability to perform his/her contractual obligations. Matters known to be of particular importance to a prospective party.
When showing an unrepresented buyer one of the company's listings, the buyer tells the listing agent that they want to run a business out of their home. The listing agent:
Must tell the buyer that their desired use may not be permitted and the buyer should investigate further.
Which of the following directives from their principal must an agent obey?
Not to rent the property to undergraduate college students.
The Unfair and Deceptive Practices Act prohibits misrepresentations, omissions of material fact, and misleading advertising in a trade or business and applies to:
Real estate brokers.
A buyer asks a broker to show him a property listed with another company that is offering compensation only to buyer agents. The broker provides the agency brochure and explains the options, but the buyer rejects any form of buyer agency, and the listing company won't authorize seller-subagency. What is the broker's best course of action?
Refer the buyer to the listing company and negotiate a referral fee.
Seller selling "As is"
Regardless of what disclosures a seller does or does not make, a listing broker must always disclose all material facts that they know or should have known. While sellers may be able to hide behind a "Sold As Is" disclaimer, listing brokers cannot. A seller who advertises a residential property for sale "As Is" must still provide the property disclosure statement unless they fall in one of the limited exemptions.
Real estate companies may work with consumers under which of the following agency options?
Representing only the property owner. Representing only the buyer or tenant. Representing both parties as a dual agent. All of the above. <<<
Which of the following is NOT a material fact?
That a portion of the property is in a flood zone. That the seller owns the property lien-free. <<< That the property previously had synthetic stucco (EIFS). That there is a gravesite on the property.
All of the following are true about the Unfair and Deceptive Practices Act EXCEPT:
The Act applies to real estate brokers and all sellers. < The Act allows an injured party who wins a lawsuit to receive treble damages. The injured party, if successful, may receive an award of their attorney fees. The Act only applies to sellers who are regularly in the business of selling real estate. The Act only applies to sellers who are regularly in the business of selling real estate.
In any agency relationship, who serves whom and whose interests are primary?
The agent serves the principal whose interests are paramount.
Before a broker may work with a buyer, the broker must perform all of the following to comply with REC rules
The broker must have provided and reviewed the Working with Real Estate Agents brochure and obtained the buyer's signature, if possible. The broker and buyer must decide whether and how they will work together. The buyer agency agreement may be oral initially, if permitted by company policy. The buyer agency agreement does NOT have be in writing before the broker may show the buyer any properties. ALL ARE TRUE
Before a broker may work with a buyer, the broker must perform all of the following to comply with REC rules EXCEPT:
The broker must have provided and reviewed the Working with Real Estate Agents brochure and obtained the buyer's signature, if possible. The broker and buyer must decide whether and how they will work together. The buyer agency agreement may be oral initially, if permitted by company policy. The buyer agency agreement must be in writing before the broker may show the buyer any properties. <<<
Before a broker may represent a seller, the broker must have all of the following to comply with REC rules EXCEPT:
The broker must have provided and reviewed the Working with Real Estate Agents brochure and obtained the seller's signature, if possible. The broker may have an oral listing agreement with the seller for not more than 10 days. <<< The agency agreement with the seller must be in writing before the broker may provide any brokerage services. The written agency agreement should be signed by both the seller and the agent.
A broker has a current buyer-client who wants to see a property formerly listed by the broker, but now listed by a different company. According to the NCREC, what should the broker disclose to their buyer-client about the seller?
The broker should tell their buyer-client anything they know about the seller that may influence or affect the buyer's decision. The fiduciary duties owed in a current agency relationship supersede the duties due a former client in a terminated relationship.
The Commission's agency rule requires all of the following items to be in a written agency agreement EXCEPT:
The brokerage commission to be paid to the company and affiliated broker. <<< The names of the parties to the agency agreement. Language that the broker will not discriminate based on fair housing protected classes. A definite expiration date on which the agency agreement will terminate.
A broker acting as a buyer agent under a written buyer agency agreement knows the following about their buyer-client. Which is a material fact?
The buyer loses their job two weeks before settlement. The buyer's financial condition and needs are confidential information, but the buyer's loss of employment directly impacts the buyers' ability to close and is a material fact.
A broker knows that a city recently decided to extend water and sewer lines to a subdivision that has been plagued with poor water quality. The broker has a buyer who is interested in purchasing a property in the subdivision. What are the buyer agent's obligations when dealing with an unrepresented seller?
The buyer-agent must disclose to the seller that city water and sewer will soon be available. Brokers must disclose material facts.
All of the following are TRUE regarding the Working With Real Estate Agents brochure, EXCEPT:
The consumer is not required to sign the brochure. If the first substantial contact is by phone, the brochure must be orally explained and a copy provided within 3 calendar days. The brochure must be given in all sales transactions at first substantial contact. The brochure's use is mandatory in all real estate transactions, residential or commercial. <<<
A provisional broker at her first listing presentation notices some cracks in the foundation wall during the walk-through, but doesn't ask her seller about them and says nothing in agent remarks. Seller checks "no representation" on the property disclosure form. Who may be guilty of omission?
The listing agent was aware of a potential problem, yet failed to inquire further or say anything to prospective buyers.
Seller hires listing company and on the property disclosure statement says that the property is connected to city water and sewer. The seller knows that she has city water and that city sewer is available, but she never connected and is still on septic. Listing agent makes no attempt to verify and advertises property as having city water and sewer. Who is guilty of misrepresentation?
The seller is guilty of willful misrepresentation and the listing agent is guilty of negligent misrepresentation.
Minimally, how many parties are there in an agency relationship and what are they called under agency law?
There must be at least two parties, one is the agent and the other is the principal.
Caveat Emptor
buyer beware The doctrine of caveat emptor allows a property owner to say nothing about the property condition.