Agency

Question 1

12. A real estate professional sells property listed by another brokerage firm in the multiple listing service. The real estate professional has been working with the buyer for many months but does not have an agency contract with him. This real estate professional has fiduciary obligations to
    a. the buyer.
    b. the seller.
    c. no one.
    d. the public.

Answer 1

12. b. The answer is the seller. Buyers can easily assume that when they contact a real estate professional to show the buyers property, the licensee becomes their agent, even though under a listing contract the licensee may legally represent the seller.

Question 2

25. An applicant for a real estate license passes the Alabama license exam. What additional steps must be completed to obtain an original license?
    a. Complete 30-hours of post-license education within 12 months.
    b. Complete 30-hours of post-license education within 9 months.
    c. Find a broker willing to assume responsibility for the licensee.
    d. None of these must be done.

Answer 2

25. a. The answer is complete 30-hours of post-license education within 12 months. It is not necessary to find a broker, because the licensee can maintain the individual’s license on inactive status, without a broker.

Question 3

28. Under what conditions may a salesperson adver¬tise a property under the salesperson’s name and NOT the broker’s name?
    a. When a broker’s policy allows salespeople to advertise in their own name
    b. When the salesperson owns the property
    c. Upon special permission from the Real Estate Commission
    d. If the earnest money and transaction are run through the broker’s accounts

Answer 3

28. b. The answer is when the salesperson owns the property. Licensees are permitted to advertise personally owned property in their own name. If a licensee is selling as a for sale by owner and disclosure is made of the license status, the broker’s name is not necessary.

Question 4

36. Before writing up an offer to purchase for a buyer, a licensee must fill out which of the fol¬lowing forms?
    a. Independent contractor agreement
    b. Advertising allowance
    c. Zoning regulations
    d. Estimated closing cost

Answer 4

36. d. The answer is estimated closing cost. Alabama law requires that an estimated closing cost be given to the purchaser before an offer to purchase is written.

Question 5

42. Which of the following BEST defines the law of agency?
    a. Rules of law that apply to the responsibilities of a person who acts as agent for another
    b. Selling of another’s property by a properly licensed brokerage company
    c. Principles that govern conduct in business
    d. Rules and regulations of the state’s licensing agency

Answer 5

42. a. The answer is rules of law that apply to the responsibilities of a person who acts as agent for another. In the law of agency, an agent is a person authorized to act on behalf of another.

Question 6

43. The agent requests that a second contract be drawn up between the buyer and the seller in order to help the buyer get a larger loan. In this circum¬stance, the parties are
    a. performing a good business practice.
    b. guilty of a fraudulent practice.
    c. guilty of a misdemeanor.
    d. guilty of a felony.

Answer 6

43. b. The answer is guilty of a fraudulent practice. In Alabama, a licensee misrepresenting or failing to disclose to any lender, guaranteeing agency, or any other interested party the true terms of a sale of real estate is guilty of a violation of Alabama license law and may also be sued for civil fraud.

Question 7

51. The relationship between qualifying broker and salesperson can BEST be understood as that of
    a. real estate broker and sub-broker.
    b. employer and employee.
    c. principal and servant.
    d. agent and subagent.

Answer 7

51. d. The answer is agent and subagent. The qualifying broker is the agent of the consumer, and the salesperson is the subagent working under the agent. There is no such thing as a sub-broker. In Alabama, real estate agents are rarely employees. The principal/servant relationship best describes the agency relationship with a buyer/seller, in which the consumer is the principal and the broker is the servant.

Question 8

57. A real estate professional is helping a buyer and a seller fill out a sales contract but is not representing either party. The real estate professional is
    a. a designated broker.
    b. a transactional broker.
    c. a traditional broker.
    d. an unlicensed broker.

Answer 8

57. b. The answer is a transactional broker. In transactional brokerage, a real estate professional facilitates the transaction between a buyer and a seller but does not represent either party and cannot negotiate for either party. A transactional broker must be licensed.

Question 9

62. A purchaser wishes to buy 20 acres of undeveloped land in a rural county. There are no sanitary sewer lines near the property. Who should the purchaser contact in order to conduct due diligence regarding the ability to build a home on the property and anticipated costs of sewage disposal?
    a. The Alabama Department of Environmental Management (ADEM)
    b. The U.S. Army Corps of Engineers
    c. The local county health department
    d. The Alabama Bureau of Residential Water Quality

Answer 9

62. c. The answer is the local county health department. The lack of sanitary sewer will require a septic tank. Septic tank requirements are established by the county health department. ADEM does not concern itself with septic tanks, and the Army Corps of Engineers usually becomes involved only with wetlands issues. There is no such thing as the Alabama Bureau of Residential Water Quality.

Question 10

63. Which of the following must hold a real estate license in Alabama?
    a. An attorney preparing an abstract of title
    b. A local multiple listing service company
    c. Anyone who represents another, for compensation, in listing or selling real property
    d. A public officer performing official duties

Answer 10

63. c. The answer is anyone who represents another, for compensation, in listing or selling real property. In Alabama, a real estate license is required when someone, with the intent or upon the promise of compensation, performs or attempts to perform the services of a licensee, whether as a part of a transaction or as an entire transaction, or represents oneself as a licensee. Public officers performing their official duties are exempt from the license law requirements.

Question 11

81. The licensee represents the buyer. The buyer wants to make a written offer that is 50% below the asking price. How should the agent respond?
    a. Tell the buyer that this is insulting to the seller
    b. Try to get the buyer to come up in price
    c. Refuse to work with a client who is obviously not interested in buying
    d. Promptly write up the offer

Answer 11

81. d. The answer is promptly write up the offer. Even though such an offer may backfire and insult the seller, the agent who represents the buyer must follow the buyer’s instructions (unless they are unlawful).

Question 12

84. Marta is a salesperson representing Kimberly, who is trying to sell her home. Nam Young is a sales¬person representing Jeremy, a buyer in the same transaction. Marta and Nam Young both work for Vickie, their broker. In this situation, Marta is called
    a. an associate broker.
    b. subagent.
    c. single agent.
    d. limited consensual dual agent.

Answer 12

84. d. The answer is limited consensual dual agent. Limited consensual dual agency is created when both seller and buyer give written authority to one broker to represent both of them in the transaction.

Question 13

97. A man’s house has been listed for sale for more than one year and he is very anxious to move into a retirement community. A real estate professional, who is a subagent of the seller, tells a prospective buyer to make a low offer because she is sure that the seller will accept it. Regarding the real estate professional’s conduct, which of the following is FALSE?
    a. She acted appropriately to sell the seller’s property.
    b. Her conduct implies she is representing the buyer.
    c. She violated her fiduciary duty to the seller.

Answer 13

97. c. The answer is she violated her fiduciary duty to the seller. A subagent owes the same fiduciary duties to a principal as an agent and may not compromise a seller’s position.

Question 14

101. All of the following are penalties that the Real Estate Commission can impose EXCEPT
     a. up to six months’ imprisonment.
     b. suspension.
     c. additional education or training.
     d. public reprimand.

Answer 14

101. a. The answer is up to six months’ imprisonment. The Commission cannot send anyone to jail. The Commission can place the licensee on probation, order additional education or training, or issue a public reprimand.

Question 15

111. In the typical property management contract, the real estate broker
     a. is the general agent of the landlord and may not enter binding contracts on the landlord’s behalf.
     b. cannot sign leases on behalf of the landlord.
     c. is the general agent of the landlord and may enter binding contracts on the landlord’s behalf.
     d. is a limited consensual dual agent.

Answer 15

111. c. The answer is the general agent of the landlord and may enter binding contracts on the landlord’s behalf. The concept of limited consensual dual agency has no relevance in property management.

Question 16

112. A broker’s newest sales associate lists a unit in a condominium building for sale. In this transaction, the sales associate
     a. acts on behalf of the broker.
     b. has a direct contractual relationship with the owners of the unit.
     c. acts on behalf of the condominium association.
     d. must personally find a buyer for the unit to obtain a share of the commission.

Answer 16

112. a. The answer is acts on behalf of the broker. The relationship of a sales associate to the employing broker is an agency relationship. The sales associate is the agent of the broker.

Question 17

120. In which of the following situations would a licensee in Alabama be expected to disclose the types of brokerage services that are available?
     a. During an open house with five couples present
     b. Consumer on cell phone talking with agent on cell phone regarding price and number of bedrooms
     c. Agent answering a phone call during office hours and the caller wants to know in which school district the advertised property is located
     d. Before any compromising information is solicited from the consumer by the licensee

Answer 17

120. d. The answer is before any compromising information is solicited from the consumer by the licensee. In Alabama, a licensee must disclose the types of brokerage services available on a written disclosure form that is approved by the AREC before gaining any confidential information.

Question 18

130. A real estate professional specializes in helping both buyers and sellers with the necessary paperwork involved in transferring property. Although not an agent of either party, the real estate professional may not disclose either party’s confidential information to the other. The real estate professional is BEST described as
     a. a buyer’s agent.
     b. a transactional broker.
     c. an independent contractor.
     d. a dual agent.

Answer 18

130. b. The answer is a transactional broker. A real estate professional facilitates transactions and is called— depending on the state’s law—a transaction broker or a facilitator. Some states prohibit brokers from offering such nonagency brokerage.

Question 19

135. The licensee is planning to buy a listed property for the licensee’s own personal portfolio. In this situation, the licensee must
     a. say or do nothing to indicate license status.
     b. notify the Real Estate Commission to obtain permission.
     c. inform the licensee’s broker.
     d. make written disclosure of license status to all parties in the transaction.

Answer 19

135. d. The answer is make written disclosure of license status to all parties in the transaction. The licensee must also inform, in writing, all parties to the real estate

Question 20

139. One salesperson in a firm represents the seller; other agents within the firm are permitted to rep¬resent buyers’ real estate transactions. This form of representation is called
     a. limited consensual dual agency.
     b. single agency.
     c. appointed agency.
     d. transaction brokerage.

Answer 20

139. a. The answer is limited consensual dual agency. Alabama law authorizes the use of limited consensual dual agency, provided the brokerage has a company policy permitting its use. The practice of limited consensual dual agency is illegal without the informed consent of all parties.

Question 21

7. The primary difference between single agency and limited consensual dual agency is
   a. the ability to provide advice and engage in negotiations.
   b. fee splitting arrangements.
   c. whether the buyer or the seller pays the commission.
   d. whether the client is the buyer or the seller.

Answer 21

7. a. The answer is the ability to provide advice and engage in negotiations. In single agency, the licensee has a client to whom she owes fiduciary obligations of advice and negotiation assistance. In limited consensual dual agency, the agent is not allowed to provide advice or negotiation assistance, because that would favor one party over another.

Question 22

11. Which of the following is NOT a seller-required disclosure in Alabama?
    a. Presence of lead-based paint in a residence built before 1978
    b. Prior owner committed suicide in the property
    c. Termite infestation that has weakened most floor and roof supports
    d. Type of agency relationships offered by the real estate company

Answer 22

11. b. The answer is prior owner committed suicide in the property. A suicide is a stigma on the property, but stigma does not have to be disclosed by the seller in Alabama. The other choices are all required disclosures. If the buyer has his own agent and is the client of that agent, and if the buyer’s agent knows of the suicide, the buyer’s agent must disclose to the client. The seller’s agent is under no such obligation to the buyer.

Question 23

13. In Alabama, who is responsible for the real estate activities carried on in a real estate office?
    a. The qualifying broker
    b. The associate broker
    c. The salesperson
    d. The personal assistant

Answer 23

13. a. The answer is the qualifying broker. Qualifying brokers are responsible for the real estate activities performed by the salespeople and associate brokers who are affiliated with them.

Question 24

20. A prospective homebuyer signs a brokerage agreement under which the real estate professional will help this client find a three-bedroom house in the $185,000 to $200,000 price range. A seller comes into the real estate professional’s office and signs a listing agreement in which the real estate professional will act as the seller’s agent to sell a two-bedroom condominium for $170,000. Based on these facts, which statement is TRUE?
    a. The buyer is the real estate professional’s client; the seller is the real estate professional’s customer.
    b. The buyer is the real estate professional’s customer; the seller is the real estate professional’s client.
    c. While both the buyer and the seller are clients, the real estate professional owes the fiduciary duties of an agent only to the seller.
    d. Because both the buyer and the seller are the real estate professional’s clients, the real estate professional owes the fiduciary duties of an agent to both.

Answer 24

20. d. The answer is because both the buyer and the seller are the real estate professional’s clients, the real estate professional owes the fiduciary duties of an agent to both. Both the buyer and the seller are the real estate professional’s clients. The real estate professional thus owes each of them fiduciary duties.

Question 25

29. A real estate professional who represents the seller is showing a house to a prospective buyer-customer. The real estate professional knows that the house has water problems in the basement. Which of the following is TRUE?
    a. Withholding the information properly protects the confidence of the seller.
    b. Withholding the information prevents the buyer from making an informed decision.
    c. Disclosing the information could create a fiduciary relationship with the buyer.
    d. Disclosing the information violates the real estate professional’s fiduciary duty to the seller.

Answer 25

29. b. The answer is withholding the information prevents the buyer from making an informed decision. The duty of disclosure includes relevant information or material facts that the real estate professional knows or should have known, regardless of whether those facts are favorable or unfavorable to the principal’s position.

Question 26

32. The licensee represents the seller. The licensee receives a written offer that is 50% below the asking price. How should the agent respond?
    a. Send the offer back to the other agent telling the buyer to offer more
    b. Promptly present the offer to the seller
    c. Call the seller and advise the seller to ignore the offer
    d. Refuse to present such an insulting offer

Answer 26

32. b. The answer is promptly present the offer to the seller. The seller must make the decision to accept or reject the offer.

Question 27

33. The duties that an agent owes to a client are established by
    a. the Real Estate Consumer Agency Disclosure Act.
    b. common law.
    c. the agent’s broker.
    d. the agent’s client.

Answer 27

33. a. The answer is the Real Estate Consumer Agency Disclosure Act. The Real Estate Consumer Agency Disclosure Act, better known in Alabama as RECAD, became law October 1, 1996. The Alabama agency law establishes the duties that an agent owes to a client, whether buyer, seller, tenant, or landlord.

Question 28

34. What duties are owed to real estate customers in Alabama?
    a. Good faith, loyalty, and fidelity
    b. Promote the best interests of the customer
    c. Honesty, good faith, reasonable skill and care, and accounting
    d. None of these

Answer 28

34. c. The answer is honesty, good faith, reasonable skill and care, and accounting. The other listed duties are owed to clients, who are represented by the agent in a fiduciary capacity.

Question 29

64. A real estate professional shows properties listed for sale with her company to a prospective buyer. The buyer has refused buyer representation. The buyer is the real estate professional’s
    a. customer.
    b. client.
    c. principal.
    d. fiduciary.

Answer 29

64. a. The answer is customer. The third party or nonrepresented consumer for whom some level of service is provided is a customer and is entitled to fairness and honesty.

Question 30

70. A buyer’s agent is aware that a murder was committed in a home and that home is reputed to have paranormal activity. Must this information be disclosed to a client?
    a. Yes, known stigmas must be disclosed by all Alabama licensees.
    b. No, this does not affect health or safety, so there is no need to disclose.
    c. No, there is no scientific proof supporting the existence of ghosts.
    d. Yes, known stigmas must be disclosed by a buyer’s agent to a client.

Answer 30

70. d. The answer is yes, known stigmas must be disclosed by a buyer’s agent to a client. That is because the buyer’s agent has a fiduciary responsibility to the client and must disclose all information that could affect the buyer’s purchase decision.

Question 31

72. Your client wishes to purchase a beach house for his large extended family. You find one that is only 900 square feet, but it is located on a double lot. You estimate construction costs to expand the house to 3,000 square feet. Should you recommend that your client make an offer that will result in acquisition costs and expansion costs significantly less than the completed value of the house?
    a. No, because a larger commission will be earned if he buys a home that is already the size he wants
    b. Yes, assuming your construction costs are accurate
    c. Yes, assuming there are no restrictive covenants limiting the size of houses
    d. No, because he might not be able to obtain permits for the expansion

Answer 31

72. d. The answer is no, because he might not be able to obtain permits for the expansion. You need more information before making a recommendation. Because this is a beach house, relevant authorities will have to approve the expansion and the site work necessary for the expansion. Without that approval, your client might not be able to enlarge the house, at any price.

Question 32

85. A salesperson presents on offer on behalf of her client, who is also her son. The offer is 10% below the salesperson’s estimate of the fair market value of the property. What disclosures, if any, must be made in the offer?
    a. The son is related to the salesperson
    b. The offer is a below-market offer
    c. The son is related to the salesperson and the offer is a below-market offer
    d. None of these

Answer 32

85. a. The answer is the son is related to the salesperson. Licensees must disclose their own status as a licensee when buying or selling real estate and must also disclose their relationship to a buyer or seller who is a family member.

Question 33

86. A person passes the real estate license exam but has no desire to immediately begin selling real estate. Which of the following is most likely TRUE?
    a. The temporary license will be issued on active status.
    b. The original license will be issued on inactive status.
    c. The licensee must find a broker willing to accept the license.
    d. The temporary license will be issued on inactive status.

Answer 33

86. d. The answer is the temporary license will be issued on inactive status. This allows the licensee to maintain the license, be exempt from continuing education responsibilities, and have the option to activate the license fairly quickly if desired.

Question 34

92. A real estate professional who is the agent of the buyer should do which of the following?
    a. Advise the buyer if the listing price of the seller’s house is unrealistic
    b. Disclose to the seller that the buyer is a member of a protected class
    c. Disclose to the seller the maximum price the buyer is willing to pay
    d. Present to the seller only offers that are acceptable

Answer 34

92. a. The answer is advise the buyer if the listing price of the seller’s house is unrealistic. As part of the fiduciary duties owed a principal, an agent for the buyer should disclose to the buyer if the property is overpriced.

Question 35

95. A German citizen is a resident alien lawfully residing in Alabama. She wishes to obtain a real estate license. Which of the following is TRUE?
    a. She must meet the same requirements as an Alabama citizen.
    b. In addition to all other licensing requirements, she must have been a resident alien for at least 24 of the last 60 months.
    c. In addition to all other requirements, she must pay an additional fee for a German background check.
    d. She must be a citizen of the United States to apply for a real estate license.

Answer 35

95. a. The answer is she must meet the same requirements as an Alabama citizen. Resident aliens lawfully residing in the state are treated the same as citizens for purposes of obtaining a real estate license, except they are required to provide proof of legal residency.

Question 36

105. A buyer’s agent wishes to make a full-price offer for a property. Rumor is that there is high interest in the property, and multiple offers will probably be presented in the very near future. The agent does not want to become involved in a bidding war. How can she increase the likelihood that her offer will be accepted?
     a. Insist that the listing agent present the offer to the seller immediately
     b. Include a very short expiration date on the offer, such as 24 hours
     c. Show the property as pending under contract on the MLS
     d. Include a “sudden death” clause in the offer

Answer 36

105. b. The answer is include a very short expiration date on her offer, such as 24 hours. All written offers must be presented to the seller as soon as received. If a buyer wants to get a signed contract before someone else submits a better offer, then the buyer wants to motivate the seller to sign the offer as quickly as possible. Putting a short deadline of 24 hours is one way to speed the seller’s decision making. Only the listing agent can make changes on MLS, and there is no such thing as a “sudden death” clause in real estate transactions.

Question 37

131. A real estate professional is selling a home to a buyer and told her that the foundation was “solid as a rock” when he knew for a fact that it was slowly sinking into the landfill on which it was built. Now that the sale is completed, which of the following is LEAST likely to happen to the real estate professional?
     a. Revocation of his license for failure to disclose a material fact
     b. Being charged with intentional misrepresentation
     c. Suit to recover money damages experienced by the buyer due to basement leakage
     d. Successful defense against all charges based on loyalty to his client-seller

Answer 37

131. d. The answer is successful defense against all charges based on loyalty to his client-seller. The duty of disclosure includes relevant information or material facts that the real estate professional knows or should have known, regardless of whether those facts are favorable or unfavorable to the principal’s position.

Question 38

133. An associate broker lists her brother’s home for sale. Approximately twice a year, the rainfall is sufficient to overload the gutters. Water sheets off the roof, saturates the ground, and pools in the basement to a depth of approximately two inches. When a buyer asks about water problems, the broker responds that there are none. The parties sign a purchase contract, which contains language saying the property is sold “as-is.” What liability does the associate broker have?
     a. Civil or criminal fraud
     b. No liability, because Alabama is a caveat emptor state for used properties
     c. Disciplinary action by AREC for misrepresentation when selling for self or for family members
     d. No liability, because the broker owed her brother the duty of confidentiality

Answer 38

133. c. The answer is disciplinary action by AREC for misrepresentation when selling for self or family members. If the same question involved a non-family member as the seller, there would be no liability because of the “as-is” clause. Because it was a family member, there is liability.

Question 39

16. Jeff and Susan enter a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the couple the property. Without having the couple sign a written buyer agency contract, the salesperson drives Jeff and Susan to the house, and even recommends that before they buy the house they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created a(n)
    a. express agency relationship with the buyers.
    b. implied agency relationship with the buyers.
    c. general agency relationship with the buyers.
    d. universal agency relationship with the buyers.

Answer 39

16. b. The answer is implied agency contract with the buyers. The salesperson has unintentionally created an agency relationship with the buyers. There is no formal oral or written agency contract with the buyers. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.

Question 40

17. An unlicensed support person may do which of the following?
    a. Show property when the licensee is out of town
    b. Make cold calls trying to locate listing prospects
    c. Staff a booth at a home show
    d. Attend an open house with a licensee, but only for purposes of safety or disability-related assistance to the licensee

Answer 40

17. d. The answer is attend an open house with a licensee, but only for purposes of safety or disability-related assistance to the licensee. An unlicensed person may not independently show property, make cold calls to the public, or staff a home show booth.

Question 41

27. A salesperson verbally agrees to represent a homeowner couple as clients in the sale of their principal residence. An agent in the same real estate office shows the home to a buyer, who presents a written offer. The listing agent is called
    a. a single agent.
    b. a transaction agent.
    c. the principal.
    d. a limited consensual dual agent.

Answer 41

27. b. The answer is a transaction agent. Before a listing agreement is signed, the licensee cannot act as the agent for the owner. The listing agent can only act as a transaction agent.

Question 42

33. When should written agency disclosure be provided to a consumer?
    a. Immediately
    b. At the time of contract execution
    c. Within 24 hours of first contact with the consumer
    d. As soon as reasonably possible and before asking for any potential confidential information

Answer 42

33. d. The answer is as soon as reasonably possible and before asking for any potential confidential information. This makes the consumer aware of different agency choices available before disclosing too much.

Question 43

34. The listing agent is most often
    a. a dual agent.
    b. a special agent.
    c. a general agent.
    d. either a special or a general agent, but almost never a dual agent.

Answer 43

34. b. The answer is a special agent. Real estate brokerage agents are special agents, having only the ability to expose a property to the marketplace, show it, and negotiate. The listing agent does not have the ability to bind the seller to a contract. General agents, on the other hand, have the ability to bind their principals. A property manager is usually a general agent and may sign leases on behalf of the landlord, in addition to other commitments.

Question 44

45. You are the listing agent for a property under contract. After expiration of the inspection contingency period, the buyer sends you notice of contract cancellation and demands a full refund of the earnest money because you failed to disclose the known presence of asbestos floor tiles under the vinyl flooring in the game room. You should advise your client,
    a. “You had no duty to disclose this. You can agree to cancellation or not, but are under no obligation to do so.”
    b. “You had a duty to disclose. I recommend allowing cancellation.”
    c. “You had a duty to disclose. I recommend allowing cancellation but requiring a full release before we refund the earnest money.”
    d. “You had a duty to disclose and should allow contract cancellation, but you will still owe me the full commission for presenting a ready, willing, and able buyer.”

Answer 44

45. a. The answer is “You had no duty to disclose this. You can agree to cancellation or not, but you are under no obligation to do so.” In this situation, the seller had no duty to disclose the presence of the asbestos tiles.

Question 45

48. In which of the following situations is RECAD disclosure NOT required?
    a. A corporation buys a single-family residence.
    b. An individual buys a single-family residence.
    c. An individual buys an office building.
    d. None of these; disclosure is required in all situations.

Answer 45

48. a. The answer is a corporation buys a single-family residence. RECAD disclosures are required any time an individual buys or sells real estate. The character of the real estate—residential or commercial—does not matter. However, the identity of the buyer/seller—individual or artificial entity—does matter.

Question 46

50. A new real estate agent in town does not know very many local inhabitants. In order to build up her business, she targets owners of properties that have been listed for sale for more than 12 months. She assumes the reason for the failure to sell must be some fault of the listing agent. She tells each owner they have a right to expect better service and the legal grounds they can use to cancel their listing agreements with their current agents. This practice is
    a. a public service assisting under-represented homeowners.
    b. an illegal interference with a contractual relationship.
    c. legal because a listing agreement may be cancelled at will by the consumer after the first six months.
    d. unethical but legal.

Answer 46

50. b. The answer is an illegal interference with a contractual relationship. Consumers can cancel listing agreements and choose another agent to represent them. They might owe two separate commissions as a result, but that sometimes happens. What is illegal is to take any action to persuade a consumer to cancel a listing agreement.

Question 47

52. A real estate professional is a licensed real estate salesperson who has a written contract with his broker that specifies that he will not be treated as an employee. The real estate professional’s entire income is from sales commissions rather than an hourly wage. Based on these facts, the real estate professional will be treated by the IRS as
    a. a real estate assistant.
    b. an employee.
    c. a subagent.
    d. self-employed.

Answer 47

52. d. The answer is self-employed. The real estate professional meets the IRS’s three requirements to be treated as a qualified real estate agent, and thus self-employed, which are that the real estate professional (1) is a real estate licensee, (2) has a written agreement with the broker indicating the licensee will not be treated as an employee by broker contributions to Social Security or the withholding of income taxes, and (3) earns a substantial portion of income from the firm in commissions, not wages.

Question 48

86. What type of arrangement is established when a broker helps a buyer and a seller with paperwork but does not represent either party?
    a. A transactional brokerage
    b. Prohibited in all states as a broker must always represent one party
    c. Dual agency
    d. Designated agency

Answer 48

86. a. The answer is transactional brokerage. When a broker does not represent either party in a transaction and acts as a facilitator or nonagent, the arrangement is known as transactional brokerage and is legal in some states. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. Designated agency exists when a broker acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent.

Question 49

93. The estimated net sheet for a residential real estate transaction must be prepared by the
    a. listing and selling agent for her own customer or client.
    b. listing agent.
    c. selling agent.
    d. title company.

Answer 49

93. a. The answer is Listing and selling agent for her own customer or client. Buyers and sellers must be given a net sheet before they sign an offer, acceptance, or counteroffer.

Question 50

98. Stuart, a salesperson representing a buyer, is told that the buyer plans to operate a pet grooming business out of any house he buys. Stuart does tell the buyer to verify local zoning ordinances to determine in which parts of town such a business can be conducted. Which duty does Stuart violate?
    a. Obedience
    b. Care
    c. Loyalty
    d. Disclosure

Answer 50

98. b. The answer is care. A salesperson must use his or her skills and knowledge to protect the client’s interests in purchasing. In this case the salesperson should have told the buyer to verify local zoning ordinances that might prohibit a buyer conducting a business from a home. All salespersons and broker’s owe this duty and the disclosure of material facts to the consumer. An agent would owe obedience and loyalty to the principal.

Question 51

110. A licensed real estate salesperson from another state may apply for an Alabama real estate license after completing a
     a. six-clock-hour reciprocal salesperson license course.
     b. credit and background check.
     c. 90-day internship under an Alabama broker.
     d. 60 clock-hour pre-license course.

Answer 51

110. a. The answer is six-clock-hour reciprocal salesperson course. A licensed real estate salesperson from another state may apply for an Alabama real estate license after completing a six-clock-hour reciprocal salesperson license course.

Question 52

114. Two sales associates working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make an informed decision about the first offer. Which of the following is TRUE?
     a. The broker has no authority to withhold any offers from the seller.
     b. The broker’s actions are permissible provided the commission is split between the two sales associates.
     c. After the first offer was received, the broker should have told the sales associates that no additional offers would be accepted until the seller decided on the offer.
     d. The broker was smart to protect the seller from getting into a negotiating battle over two offers.

Answer 52

114. a. The answer is the broker has no authority to withhold any offers from the seller. It is the agent’s (broker’s) duty to keep the principal informed of all facts or information that could affect a transaction. An agent for the seller has a duty to disclose all offers.

Question 53

120. A licensee facing disciplinary charges for not disclosing dual agency wishes the presence of his attorney at all hearings. This is
     a. not allowed because the charges are open-and-shut, and only punishment is an issue.
     b. allowed, but only if the attorney is related to the licensee.
     c. allowed.
     d. not allowed because no hearing is allowed for this type of charge.

Answer 53

120. c. The answer is allowed. The licensee is allowed an attorney at all phases of a disciplinary proceeding.

Question 54

121. A property manager is hired to manage a property while the owner is overseas for two years. The property manager is
     a. a general agent.
     b. a special agent.
     c. a universal agent.
     d. an attorney-in-fact.

Answer 54

121. a. The answer is a general agent. A property manager usually represents the principal in a broad range of matters and is usually considered a general agent.

Question 55

124. Which of the following best defines common law concepts, such as agency?
     a. It is a legal doctrine that is formed from common sense and usual practices.
     b. It is enacted by legislatures and other governing bodies.
     c. It may not be superseded by statutory law.
     d. It is part of a body of law established by tradition and court decisions.

Answer 55

124. d. The answer is it is part of a body of law established by tradition and court decisions. The law of agency is law from judgments and decrees as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers.

Question 56

135. Emily is a listing broker. After she takes a listing of a residence, the owner specifies that he will not sell his home to any family that is not of the same Asian background as the seller. Emily should do which of the following?
     a. Advertise the property exclusively in Asian language newspapers.
     b. Abide by the principal’s directions despite the fact that they conflict with the fair housing laws.
     c. Explain to the owner that his instruction violates federal law and that the broker cannot comply with it.
     d. Require that the owner sign a separate legal document stating the additional instruction as an amendment to the listing agreement.

Answer 56

135. c. The answer is explain to the owner that his instruction violates federal law and that the broker cannot comply with it. The situation places the broker in the position of either violating the fiduciary duty of obedience or violating the federal Fair Housing Act. To avoid breaking the law, the broker must end the agency agreement if the owner insists on the discriminatory instruction. The broker may not advertise the property exclusively in foreign-language newspapers, and a legal document signed by the owner does not exempt the broker from following fair housing laws.