Agency Relationship & Broker Responsibilities

Question 1

the legal relationship resulting from an agreement that the agent is authorized by a
principal to perform certain acts on behalf of the principal in dealing with a third party.
The fiduciary relationship between the principal and the agent in which the agent represents the
principal in a transaction.

Answer 1

Agency

Question 2

one who engages the professional advice and services of a licensee as his agent. the principal in a real estate transaction who is being represented by an agent.

Answer 2

Client

Question 3

a person who is not being represented by a licensee but for whom the licensee is
performing ministerial acts. the third party, that is, the party in the transaction whom the agent does not represent. May be represented by a separate agent.

Answer 3

Customer

Question 4

acts that a licensee may perform for a
person that are informative in nature.

Answer 4

Ministerial acts

Question 5

Responding to phone inquiries by persons as to the availability and pricing of brokerage services.
 Responding to phone inquiries from a person concerning the price or location of property.
 Conducting an open house and responding to questions about the property from a person.
 Setting an appointment to view property.
 Responding to questions from persons walking into a licensee’s office concerning brokerage services
offered or particular properties.
 Accompanying an appraiser, inspector, contractor, or similar third party on a visit to a property.
 Describing a property or the property’s condition in response to a person’s inquiry.
 Completing business or factual information for a person represented by another licensee on an offer
or contract to purchase.
 Showing a person through a property being sold by an owner on his or her own behalf.
 Referral to another broker or service provider.

Answer 5

Examples of Ministerial Acts

Question 6

the individual who is authorized and consents to represents the interests of another person. The
sales associate is a representative of the sponsoring broker. The broker shares the responsibility to the
client with the sales agent.

Answer 6

Agent

Question 7

the agent of an agent. The agent is the subagent of the broker. A selling agent may be a
subagent of the listing broker.

Answer 7

Subagent

Question 8

the party who hires the agent, normally the buyer or the seller or the landlord or tenant. Person delegates to the agent the responsibility of representing the person’s interests.

Answer 8

Principal

Question 9

the broker who finds the buyer

Answer 9

Co-operating Broker

Question 10

someone who assists the buyer and seller, or landlord and tenant, in a transaction without
representing either party, also known as a facilitator. What a broker is sometimes considered a when
assisting a customer.

Answer 10

Nonagent

Question 11

The agent represents only one of the parties to a transaction. The agent gives advice to
the client and owes fiduciary duties to the client only.

Answer 11

Single Agency

Question 12

An agent works ____ a client giving ________, and _______ a customer giving only _____________________.

Answer 12

FOR
ADVICE
WITH
INFORMATION

Question 13

The relationship between agent and principal is governed by a body of laws and customs known as ___ ___ __ ______. Legally, agency is said to exist whenever a principal contracts with an agent to act on
his behalf. There are three types of agency

Answer 13

THE LAW OF AGENCY

Question 14

authorizes an agent to handle matters of all types for the principal. This type of
agency requires a power of attorney. A court appointed guardian would be an example.

Answer 14

Universal Agency

Question 15

authorizes an agent to transact a broad range of matters concerning a specific area
of business for the principal, for example, managing several investment rental properties. A property manager is an example.

Answer 15

General Agency

Question 16

authorizes an agent to perform a specific act or to handle a specific business matter
for the principal, for example, finding a buyer for a specific piece of property. What a real estate broker is usually. Does not have the power to bind the principal to a contract.

Answer 16

Special Agency

Question 17

based on a formal agreement between the parties in which the parties express (either written or oral) the establishment of an agency and state the terms and conditions, for example, a listing agreement. A listing agreement is an express agreement between a real estate broker and a seller in which the seller hires the broker to find a buyer/tenant for his property.

Answer 17

Express Agency

Question 18

An express agency relationship can also be created between a broker and a buyer and is known as a _____ ______________ _________.

Answer 18

Buyer Representation Agreement

Question 19

occurs when the parties act in such a way as to indicate that they have agreed to an
agency. Also occurs when the parties behave as though there is an agency agreement.
Agency can be created inadvertently or accidentally, without intention, by the parties’ actions. The
licensee may be held liable for his or her actions if it can be shown that an agency existed. The licensee may also be denied compensation because there was no written agreement as required by law.

Answer 19

Implied Agency

Question 20

The principal-agent relationship is a ________ ____________, that is, a relationship based on trust and confidence. Can also be formed by the principal giving power of attorney to the
agent.

Answer 20

Fiduciary Relationship

Question 21

_____ __ ________ is a document that gives another person the power to act on one’s behalf.

Answer 21

Power of attorney

Question 22

The person to whom power of attorney is given is called an ________-__-____.

Answer 22

Attorney-in-fact

Question 23

The broker obeys all the legitimate instructions of the principal, for example, when he may show the property. The agent must represent the client in good faith to the best of his abilities at all times.
However, the agent may NOT obey the client when the instructions are illegal or unethical.
Example of breach: If your seller client asked for no open house, you would breach that duty if you went ahead and advertised an open house.

Answer 23

Obedience

Question 24

The broker is faithful to his principal and works for no other interested party without the principal’s knowledge or permission. The agent must put the client’s interests above his own and must be careful to avoid situations that might involve a conflict of interest.
For example, Broker Jones has listed Smith’s property. A third party offers Broker Jones $1,000 to persuade Smith to lower his price by $3,000. If Broker Jones accepts this offer without the informed
consent of Smith, he is in violation of the fiduciary relationship.
Example of breach: If your seller client set a price below market value and you bought it at that price rather than advising him to raise the price, you would be disloyal.

Answer 24

Loyalty

Question 25

The agent must disclose any relevant information to the client that might affect the
transaction. The duty of disclosure involves disclosure of material facts as well as non-material information. The seller’s agent is required by law to disclose any material defects in the property even
though such disclosure may seem to violate the duty of loyalty to the client. Any information obtained by
the seller’s agent as to the buyer’s ability to qualify for the loan or complete the sale should be disclosed
to the seller by the seller’s agent

Answer 25

Disclosure

Question 26

The agent is bound to keep any personal information which the client discloses to him confidential, for example, that the client is getting a divorce and must sell quickly. Even if the agency relationship is terminated, the fiduciary duty is never terminated and extends beyond the agency relationship.
Confidential information can only be disclosed to others if:
 The client permits the disclosure by word or conduct.
 The disclosure is required by law or would reveal serious defect.
 The information becomes public from a source other than the licensee.
Example of breach: If a seller client confides to you that he is desperate to sell because he is
getting a divorce and being transferred, you would breach that confidence by sharing it with anyone.

Answer 26

Confidentiality

Question 27

The broker is strictly accountable for any of the principal’s assets coming into his hands and must take care to handle them responsibly. For example, using a client’s deposit for personal
needs would be a violation. ____________ these funds with the broker’s personal or business funds is illegal. __________ is the practice of using commingled funds as the broker’s own money.
Example of breach: You receive a deposit from a client with a purchase offer. Rather than put it into an escrow account, you commingle it with the general operating funds of your real estate agency.

Answer 27

Accountability
Commingling
Conversion

Question 28

The broker is always mindful of the principal’s interests and concerns, for example,
acting to secure the highest possible price for his client’s property.
Example of breach: As a seller’s agent you fail to ask a buyer’s mortgage ability and accept an
offer contingent upon obtaining a mortgage. Or, as a buyer’s agent you fail to look into the mortgage ability of a home for the offered price. The broker must notify the principal within a reasonable period of time of any information he may receive concerning his property or interests. For example, a client tells a broker that he wants to sell his house for $40,000. The broker knows that the house is really worth $60,000, but does not inform the client. The real estate business is a service industry, and emphasis
should be on service to the client and to the public.

Answer 28

Reasonable Care

Question 29

Duties Owed to the Customer: The duties owed to the customer, the person you do not represent, by the agent are those of _______ and ____________.

Answer 29

Honesty
Truthfulness

Question 30

An ______ _______ ____ __ ________ is an agency relationship in which the agent is given an interest in the subject of the agency, such as the property being sold. An ______ _______ ____ __ ________ is a non-revocable agency. An ______ _______ ____ __ ________ cannot be revoked by the principal alone and is not terminated upon the death of the principal.

Answer 30

agency coupled with an interest

Question 31

A __________ ______ is a person authorized by the broker to act as the agent of a specific principal. This agent is the only agent in the company who has fiduciary responsibilities to the principal. This makes other agents in the company free to act as agents for the other party in a transaction. Therefore, two
salespersons from the same company can represent different parties in the same transaction. However,
in this situation the broker may be considered a dual agent and disclosure is required. In Louisiana, if you
have the listing you represent the seller. If someone else sponsored by the same broker shows the house, they represent the buyer and does not constitute a dual agency. In Mississippi, it would be
considered dual agency.

Answer 31

designated agency

Question 32

______ ______ is one in which the agent represents only one party in any single transaction, and only owes fiduciary duties to that party, whether it is the buyer or the seller.

Answer 32

Single Agency

Question 33

______ __ _________: When a seller contracts with a broker to market the seller’s property, the broker becomes an agent of the seller and the seller is said to be the client or principal of the broker. A fiduciary relationship is established.

Answer 33

Seller as Principal

Question 34

_____ __ _________: When a buyer contracts with a broker to find and purchase property, the buyer is the principal or client of the broker, and the broker is the agent of the buyer. The seller becomes the customer. There is a fiduciary relationship between the broker and the buyer.

Answer 34

Buyer as Principal

Question 35

______/_____ ____________: An agency relationship also exists between the sponsoring broker and the sales associate. The associate is authorized to represent the broker in real estate transactions and owes
the same fiduciary duties to the broker as to the client. The broker is therefore a principal of the sales associate.

Answer 35

Broker/Agent Relationship

Question 36

____________ are general agents of the broker, and therefore owe fiduciary duties to the broker. Because the broker is an agent of the principal, and the ___________ is an agent of the broker, & is considered a subagent of the principal. A co-operating broker may also be a subagent of a listing broker.

Answer 36

Salespersons

Question 37

While the broker is an independent businessman, the salesperson is not. He works only under the supervision of a sponsoring broker, and only at those tasks to which he has been assigned. The salesperson may function either as an ________ or as an ___________ __________ of the broker. As an
employee, the salesperson may work on a commission basis or a salaried basis.

Answer 37

employee
independent contractor

Question 38

In Louisiana, the law states that, unless there is a written agreement to the contrary, the agent represents the person he is with. An ______ __________ ________ must be signed by the client and the agent at the first substantive contact. “Substantive contact” means that point in any conversation where confidential information is solicited or received. This includes any specific financial qualifications of the consumer or the motives or objectives in which the consumer may divulge any confidential, personal, or financial information, which, if disclosed to the other party to the transaction, could harm the party’s bargaining position. This includes any electronic contact, electronic mail, or any other form of electronic
transmission.)

Answer 38

agency disclosure brochure

Question 39

___________ _____ ______: representing two principals to a transaction without the knowledge and consent of both. It is usually illegal & may occur unintentionally by either carelessness or misunderstanding. Giving the customer any specific advice on
how much to offer can lead him to believe that the agent is representing his interests and acting as his agent, thereby creating an implied agency.

Answer 39

Undisclosed dual agency

Question 40

_________ ____ ______: Representing both the buyer and the seller in the same transaction with the informed consent of both. Disclosure minimizes the risk to the broker and alerts the clients to the
inherent dangers in dual representation. In a dual agency transaction the duties of disclosure and confidentiality may be limited or compromised.

Answer 40

Disclosed dual agency

Question 41

 death or incapacity of either party
 destruction or condemnation (expropriation) of the property
 expiration of the terms of the agency
 by mutual agreement
 renunciation by the agent or revocation by the principal
 bankruptcy of the principal
 fulfillment of the purpose for which the agency was created

Answer 41

Termination of Agency

Question 42

An agent must fully disclose to a prospective buyer all pertinent material facts and defects that he knows
to be present in the property that he is showing. When representing the seller, the agent should inform his
principal of the importance of disclosing any defects in the property he is offering for sale. A ______ ______ is a hidden structural defect that would not be discovered by ordinary inspection. Failing to disclose a
known defect is a violation of the fiduciary relationship. He may also be liable for damages.
The common law doctrine of ______ ______ means “let the buyer beware” and was the rule in the past.

Answer 42

latent defect
caveat emptor

Question 43

_______ ___ is a federal law which establishes a statewide registry containing information on sex offenders. Many states require real estate agents to provide buyers and lessees with the website which provides information on sex offenders and where they live. The website, www.fbi.gov/scamssafety/registry provides access to every state’s offender registry.

Answer 43

Megan’s Law

Question 44

A _______ _________ is the way in which the sellers of property furnish the real estate brokers and salespeople with their inventory. It is also an employment contract, that is,
employment of the broker by the principal to find a ready, willing and able buyer for his property. The listing agreement forms a special agency relationship between the broker and seller in that it authorizes the broker to represent the principal’s property for sale, solicit offers and submit the offers to the principal.

Answer 44

listing agreement

Question 45

____ _______: The seller retains the right to employ as many brokers as he wants to try to sell his property, but is only obligated to pay a commission to the one who actually finds a ready, willing and able
buyer. If the seller sells his property himself, he is not obligated to pay a commission.

Answer 45

Open listing

Question 46

_________ ______: Only one broker is hired to act as the exclusive agent of the principal. The seller, however, can still sell his property himself and not pay a commission to the broker.

Answer 46

Exclusive agency

Question 47

_________ _____ __ ____: Only one broker is hired as the agent in this type of listing agreement and he is given the exclusive right to sell the property. Regardless of who actually sells the property, the seller
must pay the broker a commission. This is the most common and popular type of listing agreement for
brokers and sellers alike.

Answer 47

Exclusive right to sell

Question 48

_________ _____ ______ _________: The buyer engages a single licensee to search for a suitable
property, and the licensee is entitled to compensation no matter who finds the property, including the buyer.

Answer 48

Exclusive buyer agency agreement

Question 49

_________-______ _____ ______ _________: The buyer engages the licensee to search for a
suitable property and that licensee is entitled to compensation if anyone other than the buyer finds a
suitable property.

Answer 49

Exclusive-agency buyer agency agreement

Question 50

____ _____ ______ _________: This agreement is nonexclusive and allows the buyer to employ an
unlimited number of brokers. The buyer compensates only the broker who actually locates the property
purchased.

Answer 50

Open buyer agency agreement

Question 51

When several brokers become involved in a sale, there is sometimes a question as to which of them has
found the buyer, that is, which has initiated the sale. In a real estate transaction, the _________ _____ is considered to be the person whose actions are the primary reason for a sale taking
place. Courts have generally considered the one who actually secures the buyer’s signature on the sales
contract to be the _________ _____. Multiple listing services, on the other hand, sometimes regard the first agent to show the property to the eventual buyer as the _________ _____. Once a seller accepts a ready,
willing, and able buyer, the broker is entitled to a commission. Ready, willing, and able, means a buyer who is prepared to buy on the seller’s terms and has the means.

Answer 51

Procuring Cause

Question 52

The broker’s compensation for a sale generally takes the form of a __________. It is a
percentage of the total sales price of a property, usually paid by the principal to the broker after the sale has been made. They are always negotiable. The exact rate, generally specified
in the listing agreement, is determined by mutual agreement. No local boards or government agencies may set rates. In fact, the United States DO J forbids any form of collusion among brokers or real estate boards in the fixing of commission rates of price fixing. The amount of a
broker’s compensation is found by multiplying the sales price by the percentage charged. If there is a listing broker and a selling broker, the commission is usually shared between the
two brokers. When shared between the listing broker and the selling broker, this is
known as broker cooperation and the selling broker is known as the cooperating broker. All payments of any kind to an agent must be made through the sponsoring broker; this includes gifts or fees for
services in addition to the compensation. Compensation does not determine agency! The licensee does not necessarily represent the person who is paying. Any written agency agreement should state how the licensee is to be compensated, whether the agent is representing the buyer or the seller.
Any fees paid to an agent for services must be paid to the broker and disclosed to all parties to the transaction.

Answer 52

Commission

Question 53

Giving false information about a property, whether intentionally or unintentionally is _________________. If damage results of any type, the agent may be held liable.

Answer 53

Misrepresentation

Question 54

_____ is the intentional
misrepresentation of a material fact. This includes making false statements and withholding pertinent information.

Answer 54

Fraud

Question 55

_________ _________________ occurs when the agent should have known that a statement
about a material fact was false. Ignorance is no excuse.

Answer 55

Negligent misrepresentation

Question 56

_________ ________ occurs when the agent accidentally fails to perform some act, such as delivering a counteroffer.

Answer 56

Negligent omission

Question 57

_______ is exaggerating a
property’s benefits such as views or landscaping. It is always an opinion. An example, would be the statement, “This is the most beautiful house in the city!”

Answer 57

Puffing

Question 58

To qualify as an independent contractor in the eyes of the Internal Revenue Service the agent must be ________, must have a _______ _________ with the broker specifying that the licensee is an independent
contractor, and at least __% of his income must be based on sales commissions.

Answer 58

licensed
written agreement
90

Question 59

__________ __ _____________ _______, which can render properties not salable, may be required. Licensees should consult local authorities responsible for environmental regulation whenever toxic waste, contaminated soil or water, nearby chemical or nuclear facilities, radon, asbestos, lead-based paint or
other health hazards are involved.

Answer 59

Disclosure of environmental hazards

Question 60

_____________ of asbestos is often safer than removal.

Answer 60

Encapsulation

Question 61

_____ is a colorless and odorless radioactive gas that is produced by the natural decay of other
radioactive substances. It can occur anywhere, but some areas are known to have unusually high amounts. When trapped in buildings in high concentration, it can cause serious health problems. It is
often found in the soil and can enter buildings through the basement or flooring and become trapped in
the building if there is poor ventilation.

Answer 61

Radon

Question 62

____ _____ _____ was used before 1978 and is often found in older houses. It was banned in 1978
because of the danger of lead poisoning from peeling or flaking paint that small children may put in their mouths. Lead from paint or other sources can result in damage to the brain, nervous system, kidneys and blood. The results range from mental retardation to death. Purchasers must be informed
of the dangers and its possible presence in houses built before 1978.

Answer 62

Lead Based Paint
*The lead based paint disclosure addendum allows for buyers to waive a lead-based paint inspection.

Question 63

________ is a naturally occurring material that was once widely used in building materials because it is fire-resistant and has some insulating properties. It was a component of thousands of building materials found that were used in construction of residential structures. Because it is also relatively inexpensive, insulation, siding and roofing were very popular for residences and public
buildings such as schools.

Answer 63

Asbestos

Question 64

_________ is the method by which an environmental hazard is reduced.

Answer 64

Abatement

Question 65

Although not a hazard, land that is classified as “________” should also be disclosed as such to any prospective buyer.

Answer 65

wetlands

Question 66

Agent Annie knows that a house she recently listed was built on a landfill. Other houses in the neighborhood have had foundation problems. Annie notices an uneven area in the floor and cracks along
the corner of one wall. What are Annie’s obligations in this situation?
a. She should not mention this to prospective buyers because she owes a fiduciary duty to the seller and doing so might compromise the sale of the property.
b. She is required by law to disclose any material defects to prospective buyer.

Answer 66

B. She is required by law to disclose any material defects to prospective buyer.

Question 67

When showing an average house to a potential buyer, the agent describes it as gorgeous and the best
house in the neighborhood. What is this an example of?
a. intentional misrepresentation
b. puffing

Answer 67

B. Puffing

Question 68

Broker Bill lists a house on Easy Street. A prospective buyer, Polly, that Bill has been working with sees the sign and tells Bill she wants to make an offer. Polly is on a tight budget and asks Bill for advice on a likely price range. What are broker Bill’s responsibilities to the seller and to the buyer. What is Bill’s best course of action?
a. Bill should take this opportunity to suggest a price to the buyer because not doing so might cause the
seller to lose the sale.
b. Bill represents the seller and cannot offer advice to the buyer without compromising the seller’s position and risking becoming an undisclosed dual agent.

Answer 68

b. Bill represents the seller and cannot offer advice to the buyer without compromising the seller’s position and risking becoming an undisclosed dual agent.

Question 69

Nancy tells her neighbor Bob, who is a real estate agent, that she is thinking about selling her house. Bob mentions the house to several buyers that he is working with and one of them immediately makes an offer
on the house. Bob presents the offer to Nancy and she accepts. No formal agency agreement was entered into. What is Bob’s relationship with the buyer and the seller?
a. Bob cannot expect a commission on the sale because he did not have a listing agreement with the
seller.
b. By accepting the offer presented by Bob, the seller has created an implied agency relationship. However, any commission must be stated in the contract.

Answer 69

b. By accepting the offer presented by Bob, the seller has created an implied agency relationship. However, any commission must be stated in the contract.

Question 70

A seller tells the listing agent that he does not want his house shown to any minorities. Under the fiduciary duty of obedience, is the agent required to follow the seller’s instructions?
a. Yes.
b. No, because to do so would be a violation of the Fair Housing law

Answer 70

b. No, because to do so would be a violation of the Fair Housing law

Question 71

Bonnie Buyer submits an offer for $150,000 through Agent Annie on a property listed by Agent Al. The seller counters at $152,000. Bonnie accepts the counteroffer in the presence of Annie only. One hour later Al delivers to Betty a written revocation of the counteroffer, and the seller accepts an offer of
$155,000 from another buyer. Is the seller obligated to sell to Bonnie?
a. Yes, always.
b. No, (except for Louisiana). In the other 49 states an offer is revocable until it is accepted by the seller.
In Louisiana, an offer is irrevocable until it is rejected by the seller, or the time expires.

Answer 71

b. No, (except for Louisiana). In the other 49 states an offer is revocable until it is accepted by the seller.
In Louisiana, an offer is irrevocable until it is rejected by the seller, or the time expires.

Question 72

1. An owner agrees to pay a commission if his property is sold but doesn’t want to sign a listing
   agreement. What type of contract is this?
   a. express b. implied
   c. written d. illegal

Answer 72

express

Question 73

An agent tells a prospective buyer that a problem with the foundation has been corrected knowing that it has not. This would be an example of:
a. puffing b. mistake of fact
c. misrepresentation d. following the owners instructions

Answer 73

misrepresentation

Question 74

Which of the following is an agent required to disclose to a potential buyer?
a. a person was murdered in the house.
b. a person living in the house has AIDS.
c. the property has been burglarized several times.
d. the property has contains asbestos insulation.

Answer 74

d. the property has contains asbestos insulation.

Question 75

A vendor wants to give you, the agent, a gift for services. What should you do?
a. Accept it.
b. Not accept it.
c. Tell your broker.
d. Accept it, but disclose to the buyer.

Answer 75

c. Tell your broker

Question 76

A protection clause in a listing agreement allows for:
a. a 30 day extension on the listing if the property has not sold at the end of the contract term.
b. 2 weeks for the listing agent to sell without competition from other brokers.
c. payment of the commission if the buyer was secured by the broker even if the sale takes place after the expiration of the contract.
d. a six month minimum listing.

Answer 76

c. payment of the commission if the buyer was secured by the broker even if the sale takes place after the expiration of the contract.

Question 77

Under subagency, or common law agency, a salesperson working for the seller with a cooperating broker has a fiduciary relationship to all EXCEPT:
a. the seller b. the buyer
c. the cooperating broker d. the listing broker

Answer 77

b. the buyer

Question 78

An agent showing trust and confidentiality to the client is an example of what type of relationship?
a. brokerage b. fiduciary
c. customer d. special

Answer 78

b. fiduciary

Question 79

All of the following are example of agency relationship EXCEPT:
a. listing agreement b. purchase agreement
c. property management agreement d. broker/salesperson agreement

Answer 79

b. purchase agreement

Question 80

Which duty is easiest to perform as a dual agent?
a. obedience b. disclosure
c. loyalty d. care

Answer 80

b. disclosure