General Principles of Agency

Question 1

One who engaged another to act for him or her in transactions is a(n):
   A  »  testator
   B  »  agent
   C  »  trustee
   D  »  principal

Answer 1

D) Principal is the person doing the hiring. (A) Testator is the maker of a will. (B) Agent is the one who “is hired.” (C) Trustee is someone holding property in trust.

Question 2

A seller called a salesperson asking the salesperson to list the seller’s home for sale. The salesperson did so and submitted the listing to the MLS after the salesperson’s broker approved the listing. Another Broker within the MLS cooperated with the listing broker and found a buyer for the house. Which of the following best describes the relationship of the parties involved?
A » The selling broker is an agent of the listing broker
B » The selling salesperson is a subagent of the listing broker
C » The selling broker is a subagent of the listing salesperson
D » The selling broker is a contractor of the seller

Answer 2

(A) In a cooperative sale, when there is no buyer agency involved, we can assume there is subagency. (B) The selling salesperson is an agent of the selling broker, not the listing broker. (C) is reversed. (D) The selling broker has a sub-agency contract with the listing broker, not directly with the seller.

Question 3

A for-sale-by-owner lists a property with a broker. The broker puts the listing in the multiple listing service. The seller continues to advertise the property themselves. The seller then finds a buyer for their own property but still owes a commission to the broker. This must have been a(n):
   A  »  exclusive agency listing
   B  »  exclusive right to sell listing
   C  »  open listing
   D  »  net listing

Answer 3

(B) An exclusive right to sell listing is where the broker is the sole person authorized to sell the property and earn a commission. Even if the seller sells the property, a commission is still owed to the broker. (A) An exclusive agency listing would allow the seller to sell and not pay a commission as both the seller and listing broker are authorized to sell. (C) An open listing allows the seller and multiple brokers to sell the property - the only one paid is the one who sells the property. (D) A net listing (which is illegal in many states) is where the commission is the sales price less the seller’s proceeds.