CHapter 9 Flashcards
An individual who is authorized and consents to represent the interests of another person is
a. a customer.
b. a principal.
c. an agent.
d. a facilitator.
c. an agent.
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c. The agent is hired by the principal. The customer or facilitator is a third party.
A broker represents a seller but is currently working with a buyer to find a home. Assuming that no statute has replaced the traditional common law of agency, which of these correctly identifies the parties in this relationship?
a. The broker is the buyer’s agent; the seller is the broker’s client.
b. The buyer is the broker’s client; the seller is the broker’s principal.
c. The seller is the broker’s customer; the buyer is the broker’s client.
d. The broker is the seller’s agent; the buyer is the broker’s customer.
d. The broker is the seller’s agent; the buyer is the broker’s customer.
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d. Watch the terminology: The broker is working FOR (representing) the seller and is working WITH the buyer (a customer) to find a home.
The agent’s obligation to use skill and expertise on behalf of the principal arises under which of these common-law duties?
a. Care
b. Obedience
c. Loyalty
d. Disclosure
a. Care
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a. CARE requires skill and expertise; OBEDIENCE requires following lawful instructions; LOYALTY is putting the client’s interests above the agent’s; and DISCLOSURE refers to material defects of the property.
An agent representing the seller has a duty to disclose to the principal all of these EXCEPT
a. offers that are ridiculously low.
b. the buyer’s financial ability to offer a higher price.
c. the agent’s advertising budget.
d. the buyer’s intention to resell the property for a profit.
the agent’s advertising budget.
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c. The seller’s (special) agent must present all offers and any facts about the buyers that would assist the seller in making a decision, including the fact that the buyer intends to resell the property. There is no requirement that the agent disclose an advertising budget.
A broker has an agency agreement to represent the seller of a house. The agreement’s expiration date is June 10. On May 5, the house is struck by lightning and burns to the ground. The seller, overwhelmed by grief, dies. Based on these facts, which of these is TRUE?
a. The agency agreement was terminated by the fire, although the seller’s death also would have done so.
b. The agency agreement was not terminated until the seller’s death.
c. If the house had not been destroyed by the fire, the seller’s death would not have terminated the agreement; the broker would become the broker for the seller’s estate.
d. Only the mutual agreement of the parties can terminate a valid agency agreement before its expiration date.
a. The agency agreement was terminated by the fire, although the seller’s death also would have done so.
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An agency agreement may be terminated by either destruction of the property or death of either party. In this case, destruction of the property occurred first.
A person who is designated by the principal in a broad range of matters related to a particular transaction or activity is a
a. facilitator.
b. special agent.
c. designated agent.
d. general agent.
d. general agent.
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d. A “special agent” is given limited authority for a limited time. A “general agent” is given broad authority in a specific circumstance; a property manager is typically a general agent for the owner as are most real estate sales associates for the employing broker.
A real estate broker signed an agency agreement with a seller. The asking price for the seller’s house was $499,000. A few days later, the broker met a prospective buyer who was interested in buying a home in the $480,000 to $510,000 price range. The broker agreed to help the buyer locate such a property and to represent the buyer in negotiating a favorable purchase price. Based on these facts, which of these statements is TRUE?
a. The broker’s relationships and the buyer and seller are separate issues, and no dual agency question arises.
b. The seller is the broker’s client, and the buyer is the broker’s customer; there is no dual agency problem.
c. The broker has created a potential undisclosed dual agency problem and should disclose the relationships to both parties before showing the seller’s home to the buyer.
d. The broker has created a dual agency problem and should immediately terminate the agreement with either the buyer or seller.
c. The broker has created a potential undisclosed dual agency problem and should disclose the relationships to both parties before showing the seller’s home to the buyer.
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c. The broker is representing the seller and now is at least implying representation of the buyer in locating a property; hence, there are two clients. If the broker intends to show the seller’s property, the broker must disclose the relationship with both clients, gain their agreement to a dual agency, and only then proceed.
A broker is showing a house to a prospective buyer. The broker points out the rustic charm of the sagging front porch and refers to a weed-choked backyard as a delightful garden. The broker is engaging in
a. intentional misrepresentation.
b. negligent misrepresentations.
c. puffing.
d. fraud.
c. puffing.
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Because any prudent buyer can see the sagging porch and weed-choked garden, these are puffing statements. Agents must take care that they do not make statements in such a way as to harm the buyer or take advantage of the buyer’s ignorance, which would constitute fraud.
A house built over a ditch covered with decaying timber or a house with ceilings that are improperly attached to the support beams, neither condition being visible as yet, are examples of
a. stigmatized properties.
b. environmental hazards.
c. latent defects.
d. conditions that need not be disclosed.
c. latent defects.
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A latent defect is a hidden structural defect that would not be discovered by ordinary inspection.
The seller’s agent has certain duties to the client-principal. All of these are duties of the principal EXCEPT
a. cooperating with the agent.
b. compensating the agent.
c. suggesting marketing strategies to the agent.
d. dealing with the agent in good faith.
c. suggesting marketing strategies to the agent.
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Marketing is the agent’s responsibility. The principal who hired the agent is responsible for cooperating with the agent, disclosing material defects, and compensating the agent.
Every state has a mandatory agency disclosure law that stipulates
a. how an implied agency may occur.
b. when, how, and to whom agents must reveal for whom they provide client-based services.
c. restrictions on disclosure of confidential information.
d. how a customer may be indistinguishable from a client.
b. when, how, and to whom agents must reveal for whom they provide client-based services.
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b. Mandatory agency disclosure laws now exist in every state. In addition, state laws may require a particular type of written form be used and may require that all agency alternatives be explained.
In a real estate sales transaction, who is the agent’s principal?
a. Seller
b. Buyer
c. Person who pays the commission
d. Whoever hired the agent
d. Whoever hired the agent
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d. The most complete answer is “whoever hired the agent”. That could be either the buyer or the seller, but payment of compensation is not the determining factor.
A broker was hired to represent the seller, to market the property, and to solicit offers to purchase. The broker is called a
a. general agent.
b. special agent.
c. facilitator.
d. nonagent.
b. special agent.
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b. A special agent is one who is hired for a limited time and given limited authority. A broker taking a listing is generally a special agent.
A house was the scene of a drug arrest and a violent murder last year. When it was listed on the market, many people considered it to be a
a. latent property.
b. stigmatized property.
c. damaged property.
d. property with a material defect.
b. stigmatized property.
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b. Presuming that the property is physically intact, the drug arrest and violent murder may create a psychological reaction to the property, rendering it stigmatized.
All of these will terminate an agency relationship EXCEPT
a. the death of either party.
b. destruction of the property.
c. an offer made on the property.
d. expiration of the agreement.
c. an offer made on the property.
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c. An offer on the property does not terminate the agency relationship; however, the death of either party, destruction of the property, or expiration of the term will terminate the relationship.
