Chapter 7

Question 1

Agent

Answer 1

A person authorized by another to act on his or her behalf.

Question 2

Apparent Authority

Answer 2

A fact situation that creates the appearance of an agent’s authority.

Question 3

Breach of Duty

Answer 3

The failure to fulfill an agent’s duty to his or her principal. This includes disloyalty; disobedience; lack of skill, care, and diligence; and failure to either properly disclose information or to accurately account for funds.

Question 4

Buyer Agency Agreement

Answer 4

A contract in which a buyer engages an agent to act on the buyer’s behalf in purchasing a property.

Question 5

Cavet Emptor

Answer 5

Literally “let the buyer beware.” Does not relieve agent’s obligation of disclosing material facts.

Question 6

Civil Penalty

Answer 6

Payment or redress for a private civil wrong imposed by a civil, not a criminal, proceeding.

Question 7

Client

Answer 7

The principal, to whom the agent owes fiduciary duties.

Question 8

Customer

Answer 8

The “third party” in a transaction; the agent works with the customer but not for him.

Question 9

Disclosure of Information

Answer 9

The prompt and total communication to the principal by the agent of any information that is material to the transaction for which the agency was created.

Question 10

Dual Agency Agreement

Answer 10

Representing two parties at the same time or in the same transaction. This practice is illegal unless all parties are properly informed and consent to the agency.

Question 11

Employment Authority

Answer 11

A document or contract giving a real estate agent the right to act for a principal with certain specific guidelines in a real estate contract (i.e., a listing contract or a buyer’s agency contract).

Question 12

Estoppel

Answer 12

The prevention of a person from making a statement contrary to a previous statement.

Question 13

Express Agency

Answer 13

Any oral or written agreement establishing a trust relationship between a principal and agent.

Question 14

Facilitator/Transactional Broker - STATE EXAM

Answer 14

Not allowed in North Carolina but is used in some other states. This is a type of “nonagency” relationship in which the licensee assists buyers and seller in a transaction but does not actually represent either party. It involves essentially treating each party as a customer rather than a client. The disclosure of material facts is still required.

Question 15

Fiduciary

Answer 15

A fiduciary relationship is based on trust. Agency is automatically considered a relationship based on trust as one party, the agent, is entrusted to represent the best interest of the principal client (another name for the principal or the person that the agent represents).

Question 16

First Substantial Contact

Answer 16

A flexible standard that typically occurs when an agent and a prospective buyer discuss in any detail the buyer’s interest in purchasing property.

Question 17

General Agency

Answer 17

Full authority over one particular field of business or aspect of personal affairs of the principal (e.g., a property manager managing an apartment complex for the owner).

Question 18

Implied Authority

Answer 18

Implied authority is based on custom and may very well be the result of an expressed agreement. For example, an agent may have just listed a real-estate-owned property (i.e., foreclosure) to sell for the bank. The bank’s agreement with the broker states the broker is to maintain the property and do whatever is reasonably necessary to secure the premises. Even though the contract did not specifically state what those necessary steps might be, the agent is allowed to do whatever is reasonable to accomplish those tasks.

Question 19

Loyalty

Answer 19

An absolute duty of an agent to a principal to serve the best interest of the principal.

Question 20

Misdemeanor

Answer 20

A criminal violation punishable by a fine and/or imprisonment. It is not considered as severe an offense as a felony.

Question 21

Negligent Misrepresentation

Answer 21

An unintended misrepresentation of a material fact that the party did not make knowingly but should have known the truth by exercising due skill, care, and diligence.

Question 22

Negligent Omission

Answer 22

An unintended failure to communicate a known material fact. An unintended failure to communicate unknown material fact by a person responsible for disclosing it because this person did not exercise the due skill, care, and diligence that would have revealed the fact.

Question 23

Omission

Answer 23

The failure to disclose information.

Question 24

Principal

Answer 24

In the law of agency, one who appoints an agent to represent him or her. The amount of money on which interest is either owed or received.

Question 25

Special or limited agency

Answer 25

Limited authority to act on behalf of the principal, such as created by a listing.

Question 26

Subagent

Answer 26

A person appointed by an agent to assist in performing some or all of the tasks of the agency.

Question 27

Third Party

Answer 27

The person or party in a transaction other than the principal and his or her agent. In a subagency relationship, the buyer is a third party; in a buyer’s agency relationship, the seller is the third party.

Question 28

Facilitator/Transactional Broker

Answer 28

Not allowed in North Carolina but is used in some other states. This is a type of “nonagency” relationship in which the licensee assists buyers and seller in a transaction but does not actually represent either party. It involves essentially treating each party as a customer rather than a client. The disclosure of material facts is still required.

Question 29

Universal Agency

Answer 29

Complete authority over all activity of the principal. May be created by an unlimited power of attorney.

Question 30

Willful Misrepresentation

Answer 30

A deliberate false statement concerning a material fact by one who knows the true fact and is responsible for disclosing it.

Question 31

Willful Omission

Answer 31

A deliberate failure to inform a party of a known material fact when one has an obligation to that party to relay all material facts.