Laws of Agency

Question 1

Nondisclosure of a dual agency by a broker can result in:

A) - contract rescission.
B) - loss of commission.
C) - disciplinary action.
D) - Any of the above

Answer 1

D) - Any of the above

Answer: D—Failure to disclose a dual agency can result in rescission of the contract. The agency may also lose his/her commission and be subjected to disciplinary action by the Department of Real Estate.

Question 2

Broker Adams represents a buyer in a single-family home transaction. As an incentive, he agreed to rebate part of his commission to the buyer. Broker Adams is required to:

A) - notify the seller of the rebate.
B) - notify the Real Estate Commissioner of the rebate.
C) - notify the Internal Revenue Service of the rebate.
D) - notify no one as this is a financial matter that affects only the broker and the buyer.

Answer 2

A) - notify the seller of the rebate.

Answer: A—Failure to disclose to the seller that the buyer will receive any part of the commission may subject the broker to disciplinary action under B & P Code § 10176(a). This section declares such action to be “substantial misrepresentation.” A monetary inducement given to the buyer is a material fact and could affect the seller’s negotiation.

Question 3

Which of the following best describes a “dual agency?”

A) - An agent only represents one principal.
B) - The agent acts concurrently for both the buyer and seller in a transaction with the full knowledge and consent of both parties.
C) - The agent is authorized to do all acts connected with a particular trade, business or employment.
D) - The agent is only authorized to perform only those acts specifically authorized by the principal.

Answer 3

B) - The agent acts concurrently for both the buyer and seller in a transaction with the full knowledge and consent of both parties.

Answer: B—A dual agency is an agency relationship in which the agent acts concurrently for both of the principals in the transaction. A dual agency is lawful if it is created with the full knowledge and consent of both parties.

Question 4

An agency relationship may be created by:

A) - agreemment.
B) - ratification.
C) - estoppel.
D) - All of the above

Answer 4

D) - All of the above

Answer: D—Most agency relationships are created by written agreement. An agency relationship can also be created by ratification (consenting to acts of the agent), and estoppel (principal stopped from denying an inconsistent position in the representation).

Question 5

The commission on the sale of a $170,000 property was 6% of the selling price. Two salesmen had worked on the property, one listed and the other sold. It was agreed that they would split the commission, 35% to one salesman, 25% to the listing salesman, and 40% going to the employing broker. How much did the selling salesman receive?

A) - $3,570
B) - $2,550
C) - $4,080
D) - $10,200

Answer 5

A) - $3,570

Answer: A—$170,000 x .06 = $10,200

$ 10,200 x .35 = $ 3,570

Question 6

Typically when leasing real property, the commission of the leasing agent is based on a percentage of:

A) - the first year’s rent.
B) - cash paid by the lessee.
C) - total rents collected during the term of the lease.
D) - None of the above

Answer 6

C) - total rents collected during the term of the lease.

Answer: C—Usually, the commission of a leasing agent is figured on the total rent to be collected over the term of the lease. The commission can be any amount negotiated and specified in the employment contract.

Question 7

When negotiating a lease on behalf of a commercial real property landlord, the broker would usually calculate his commission as:

A) - a percent of the rent due in the first year of the lease.
B) - a percent of the first and last month’s rent.
C) - a percent of the rent due for the entire lease period.
D) - a percent of the rent due for the first six months of the lease.

Answer 7

C) - a percent of the rent due for the entire lease period.

Answer: C—The broker’s commission is normally calculated as a percent of the total amount of lease payments. This is negotiable, however and not a hard and fast rule of law.

Question 8

Under the law of agency, a fiduciary relationship is created between the broker and the seller on execution of the listing agreement. As far as the broker’s responsibility to third parties, the broker:

A) - must be fair and honest.
B) - has no obligation.
C) - needs to disclose material facts only when asked about them.
D) - should disclose the lowest price the seller is willling to accept.

Answer 8

A) - must be fair and honest.

Answer: A—In addition to his/her fiduciary obligations to the seller, an agent must be fair and honest to third parties. Because of the close personal relationship between broker (agent) and seller or buyer (principal), the broker often learns certain confidential information about the client and/or financial situation of the principal. This information cannot be disclosed by a broker, even after the transaction is completed and the fiduciary relationship is terminated.

Question 9

A listing agent received two offers in the morning and immediately presented the offers to the seller. In the evening the agent received two more offers, both with a lower price. What should the agent do?

A) - Don’t present the evening offers to the seller because the offers were low.
B) - Wait until the seller has made a decision on the morning offers before presenting the evening offers.
C) - Wait until the next day to present the lower evening offers.
D) - Let the seller know of the two new offers immediately.

Answer 9

D) - Let the seller know of the two new offers immediately.

Answer: D—Even though it is a temptation to favor the higher offers, it is the listing agent’s fiduciary duty to notify the buyer of the new offer immediately.

Question 10

The maximum commission a broker may charge for the sale of residential property is:

A) - set forth in the Real Estate Law.
B) - determined by the broker’s contract with his principal.
C) - six percent of the total sales price of a residence.
D) - determined by local custom.

Answer 10

B) - determined by the broker’s contract with his principal.

Answer: B—There is currently no law which controls what amount may be charged by the broker. Therefore, it is set by agreement between the parties.

Question 11

An agency relationship may be created by all of the following EXCEPT:

A) - an oral agreement.
B) - necessity or emergency.
C) - subsequent ratification.
D) - subornation.

Answer 11

D) - subornation.

Answer: D—Subornation (suborn) means to bribe or induce someone to unlawfully (or secretly) perform some misdeed or to commit a crime. (Don’t confuse this with subordination.) The other answers are methods by which agencies may be created.

Question 12

In the case of a sale of property where the deceased died without leaving a will, the commission would be set by:

A) - the administrator.
B) - the attorney.
C) - the California Code of Civil Procedure.
D) - court order.

Answer 12

D) - court order.

Answer: D—The court referred to would be the probate court.

Question 13

Who is more likely to earn the commission?

A) - The one who communicated the offer to the seller.
B) - The one who communicated the seller’s acceptance of the offer to the buyer.
C) - The one who secured the biggest down payment from the buyer.
D) - The one who secured the offer.

Answer 13

B) - The one who communicated the seller’s acceptance of the offer to the buyer.

Answer: B—Until the seller’s acceptance is communicated to the buyer, there is no contract. Therefore, the one who communicates the seller’s acceptance to the buyer is more likely to earn the commission.

Question 14

A real estate broker, licensed only in California, verbally agreed to split a commission with a real estate broker not licensed in California:

A) - This is a violation of the California Real Estate Law.
B) - This is permissible.
C) - This is permissible, but the broker must first get permission from the Real Estate Commissioner.
D) - This is unenforceable in a California court as the agreement was not in writing as required by the California Business and Professions Code.

Answer 14

B) - This is permissible.

Answer: B—In California, a real estate broker acting in the capacity of an independent contractor may agree verbally or in writing to split a commission with another broker. Such a contract is enforceable in the California courts.

Question 15

Johnson, a real estate broker, listed a property. Suzie, a salesperson working for broker Sims, received an offer. Donna, a salesperson working for broker Johnson, got the offer accepted. Who earned the commission?

A) - Johnson
B) - Sims
C) - Suzie
D) - Donna

Answer 15

A) - Johnson

Answer: A—As the listing broker, Johnson earned the commission under the terms of the listing agreement. A commission split may occur since the offer came in through another broker.

Question 16

An attorney-in-fact can best be described as a(n):

A) - duly authorized person who has been granted both actual and implied powers to act as a principal for another.
B) - properly authorized party who is acting as a dual agent.
C) - attorney appointed by the court to administer an estate of a deceased person.
D) - legally competent person who has been given the power of attorney by another competent person.

Answer 16

D) - legally competent person who has been given the power of attorney by another competent person.

Answer: D—An attorney-in-fact is a competent and disinterested person who is authorized by another person to act in his/her place.

Question 17

Which of the following statements is correct?

A) - A dual agency is always a divided agency.
B) - A divided agency is NOT always a dual agency.
C) - A dual agency is NOT necessarily a violation of law.
D) - A dual agency is always a violation of law.

Answer 17

C) - A dual agency is NOT necessarily a violation of law.

Answer: C—This is a tricky question, read it carefully. The term dual agency does not, in itself, describe an unlawful activity. In fact, the law is reasonably clear when it states that an agent cannot legally act for two principals in negotations with each other unless both have knowledge of and consent to the dual agency. [B & P Code § 10176(d)]. Thus, we find that an agent can represent both parties in the same transaction.

Question 18

A real estate broker should regard himself/herself as a:

A) - fiduciary.
B) - substitute for an attorney.
C) - legal adviser.
D) - None of the above

Answer 18

A) - fiduciary.

Answer: A—The broker acts as a fiduciary in the transaction.

Question 19

Seller “A” lets buyer “B” assume that Broker “C” was his agent. This type of agency relationship is an example of:

A) - ratification.
B) - estoppel.
C) - ostensible authority.
D) - None of the above

Answer 19

C) - ostensible authority.

Answer: C—Ostensible authority is that authority which a third person reasonably believes an agent possesses because of the acts or omissions of the principal. Ratification is the adoption or approval of an act performed on behalf of a person without previous authorization, such as the approval by a principal of an agent after the acts have been performed. Estoppel is a legal doctrine which prevents a person from alleging something to be true or a fact which is contrary to a previous affirmation or allegation made by that same person.

Question 20

A real estate licensee who misrepresents a property to a buyer while acting as agent for the seller, may face:

A) - disciplinary action by the Department of Real Estate.
B) - civil action.
C) - criminal action.
D) - All of the above

Answer 20

D) - All of the above

Answer: D—Even though a real estate agent is representing the seller, he/she must still be fair and honest to all the parties to the transaction. Misrepresenting the property to the buyer may subject an agent to choices (a), (b), and (c).

Question 21

When is a properly licensed real estate salesperson most likely to get his/her commission?

A) - When both the buyer and seller have signed the deposit receipt.
B) - When the grant deed is signed.
C) - When the grant deed is recorded.
D) - When escrow closes.

Answer 21

D) - When escrow closes.

Answer: D—Be careful in reading this question. The salesperson is most likely to get his/her commission when escrow closes.

Question 22

An owner of a home listed it at a price which would leave him $18,800 after the broker had received a 6% commission. If the broker sold the property at the listed price, how much commission would he receive?

A) - $1,088
B) - $1,193
C) - $1,200
D) - $1,064

Answer 22

C) - $1,200

Answer: C—If the seller agrees to pay the broker a 6% commission, and this is the only expense given, the seller will receive 94% of the selling price.

$18,800 (amount to seller) / 94% = $20,000 SP

$20,000 x 6% (commission to broker) = $1,200 to broker

Question 23

When selling a business, the rate of commission is determined by:

A) - the Commissioner’s Regulations.
B) - the Federal Code of Commissions.
C) - the agreement between the broker and owner.
D) - the Business Opportunities Law.

Answer 23

C) - the agreement between the broker and owner.

Answer: C—Real estate commissions are always negotiable and are determined by the agreement between the broker and owner.

Question 24

As the agent for the seller, a real estate broker negotiated a sale. By agreement, the licensee can be paid his commission in the form of:

A) - valuable personal property.
B) - assignment of a note.
C) - buyer’s personal check.
D) - Any of the above

Answer 24

D) - Any of the above

Answer: D—All of the choices may be the commission if agreed upon in advance.

Question 25

Which of the following statements does NOT correctly describe a fiduciary?

A) - A fiduciary owes loyalty to the principal.
B) - A fiduciary must conform to the principal’s legal instructions.
C) - A fiduciary is an agent.
D) - A fiduciary is a neutral third party.

Answer 25

D) - A fiduciary is a neutral third party.

Answer: D—The broker has a fiduciary duty to work in the best interest of his/her client.

Question 26

Select the choice which most nearly represents “price fixing” from the following:

A) - A broker instructing his employees not to accept listings for less than a 6% commission.
B) - A broker casually mentioning, during a luncheon with several other brokers from other offices, that his office is planning to decrease the minimum office commission from 6% to 5%.
C) - At the request of a cooperating agent, the listing broker tells the cooperating agent the amount of compensation on an exclusive right to sell listing taken by one of his salespeople.
D) - Advertising the amount of commission your office charges.

Answer 26

B) - A broker casually mentioning, during a luncheon with several other brokers from other offices, that his office is planning to decrease the minimum office commission from 6% to 5%.

Answer: B—There is no such thing as an “innocent” discussion of commissions or fees between or among competing brokers and the law views this as price fixing. As a company policy, a broker may set a commission schedule for his/her own employees.

Question 27

The law of agency is concerned with the rights and duties between and among the:

A) - agent and the principal, whether disclosed or undisclosed.
B) - principal and third parties with whom the agent deals on behalf of the principal.
C) - agent and third parties with whom the agent deals on behalf of the principal.
D) - All of the above

Answer 27

D) - All of the above

Answer: D—All three choices describe the fiduciary relationship between the real estate agent and the principal.

Question 28

Owner Johnson tells broker Stone that he wants to sell his house as soon as possible and would accept $350,000. Stone tells buyer Smith that Johnson has financial troubles and will accept a much lower price, possibly as low as $300,000. Johnson, ultimately, accepts an offer from Smith for $300,000. Broker Smith is guilty of:

A) - nothing, since his job is to find a buyer no matter what.
B) - violating the fiduciary duty to buyer Smith.
C) - unethical behavior, but not a serious breach of his fiduciary responsiblity to Johnson.
D) - unethical behavior and a violation of the fiduciary responsibility.

Answer 28

D) - unethical behavior and a violation of the fiduciary responsibility.

Answer: D—Broker Stone’s actions are a clear violation of his fiduciary responsibility to the seller. This would also be a violation of the Realtors Code of Ethics since the seller did not authorize broker Stone to disclose such information to the buyer. If broker Johnson’s financial troubles were in fact true and he authorized broker Stone to inform the buyer of such, it would not be a violation.

Question 29

In the correct order, list the chain of events necessary to comply with the agency disclosure law:

A) - confirm, disclose, elect
B) - investigate, disclose, confirm
C) - disclose, elect, confirm
D) - disclose, confirm, reconfirm

Answer 29

C) - disclose, elect, confirm

Answer: C—According to the agency disclosure law, the correct order is: disclose, elect, confirm (Memory Aid: DEC).

Question 30

A power of attorney can be terminated by the:

A) - death of the attorney-in-fact.
B) - revocation by the principal.
C) - incapacity of the parties to the power of attorney.
D) - All of the above

Answer 30

D) - All of the above

Answer: D—A power of attorney is a written instrument authorizing a person, the attorney-in-fact, to act as the agent on behalf of another to the extent indicated in the instrument. All of the choices would result in the termination of the power of attorney.

Question 31

A real estate licensee offered to rebate part of his commission to the buyer if the buyer would increase his offer to a level that the agent knew would be high enough for the seller to accept. Under these circumstances:

A) - this information must be disclosed to the seller before the offer is accepted by the seller.
B) - this action is a violation of the licensing law and would lead to immediate disciplinary action.
C) - the licensee could be held liable for damages in a civil suit even though this information was given to the seller prior to the seller’s acceptance.
D) - All of the above

Answer 31

A) - this information must be disclosed to the seller before the offer is accepted by the seller.

Answer: A—Any information material to the transaction must be disclosed to the seller prior to acceptance of the offer by the seller. This would include any agreement by a licensee to rebate a portion of his/her commission to the buyer.

Question 32

A real estate commission is usually based on the:

A) - listing price.
B) - selling price.
C) - down payment.
D) - loan amount.

Answer 32

B) - selling price.

Answer: B—Real estate commissions are usually based on a percentage of the selling price.

Question 33

You are a California real estate broker. A prospect is referred to you by an out-of-state broker and a sale is consummated by you. You want to split your commission with the cooperating broker. Under the California Real Estate law:

A) - you may pay a commission to a broker of another state.
B) - you cannot divide a commission with a broker of another state.
C) - you can pay a commission to a broker of another state only if he/she is also licensed in California.
D) - None of the above

Answer 33

A) - you may pay a commission to a broker of another state.

Answer: A—B & P Code § 10137: “it is unlawful for any licensed real estate broker to employ or compensate, directly or indirectly, any person for performing any of the acts within the scope of this chapter who is not a licensed real estate broker or a real estate salesman licensed under the broker employing or compensating him; however, a licensed real estate broker may pay a commission to a broker of another state.”

Question 34

A licensed real estate broker representing the seller becomes the gratuitous agent (no fee) of the buyer and accepts all of the fiduciary responsibilities as the buyer’s agent when he/she:

A) - shows the property to the buyer.
B) - arranges financing for the buyer, including a purchase-money-loan.
C) - gives the buyer a list of certified appraisers.
D) - writes up the offer to purchase the seller’s property.

Answer 34

B) - arranges financing for the buyer, including a purchase-money-loan.

Answer: B—If the agent representing the seller goes as far as setting up the buyer’s financing, he/she becomes the buyer’s agent and thus assumes all fiduciary responsibilities as the buyer’s agent.

Question 35

A salesman asked the listing broker, who was not his employing broker, to advance him $600 against the commission the listing broker had agreed to pay to the selling agent. The listing broker paid the selling salesman the $600, even though the deal had not yet closed escrow.

A) - The listing broker had violated a Real Estate Law.
B) - This is permissible if it is in writing.
C) - This is fraud.
D) - None of the preceding apply as brokers are allowed to pay commissions to anyone they wish.

Answer 35

A) - The listing broker had violated a Real Estate Law.

Answer: A—A salesman may only collect a commission from his employing broker. Likewise, a broker may not pay a commission to anyone other than his employed salesman. The listing broker has violated the Real Estate Law, Section 10137.

Question 36

A licensed real estate broker who specializes in property management activities usually receives commissions:

A) - based on a percentage of the rents expected to be collected over the life of the leases.
B) - equal to first and last month’s rent.
C) - based on a percentage of the gross rents collected.
D) - based on the first year’s rent.

Answer 36

C) - based on a percentage of the gross rents collected.

Answer: C—A broker specializing in property management generally receives commissions based on a percentage of the gross rents collected, not those that would be anticipated over the term of the leases.

Question 37

All of the following are essential elements of an agency agreement EXCEPT:

A) - payment of consideration.
B) - fiduciary relationship of the agent to the principal.
C) - agreement by the principal.
D) - a competent principal.

Answer 37

A) - payment of consideration.

Answer: A—Choices b, c, and d are all essential elements for the creation of an agency relationship. The payment of consideration is not related to the creation of an agency relationship.

Question 38

If you are a subagent of the listing broker, you are working for the:

A) - buyer.
B) - seller.
C) - listing broker.
D) - lender.

Answer 38

B) - seller.

Answer: B—”Subagent” means a person to whom an agent delegates agency powers. However, “subagent” does not include an associate licensee who is acting under the supervision of an agent in a real property transaction.

The marketing of real property by real estate agents is often a cooperative effort. The listing broker usually makes an offer of compensation to a cooperating broker (subagent) by placing the property on the Multiple Listing Service. Some MLS’s make the offer of subagency automatic, while for others, the offer of subagency is optional and requires an affirmative act by the listing broker. If the principal (seller) specifically authorizes his/her broker to appoint a subagent and thus establishes a new contractual and fiduciary relationship, the subagent represents the principal in the same manner as the listing broker.

Question 39

All of the following are essential to the creation of an agency relationship, EXCEPT:

A) - competent parties.
B) - agreement to pay consideration.
C) - agreement between principal and agent.
D) - fiduciary relationship.

Answer 39

B) - agreement to pay consideration.

Answer: B—The payment of consideration need not be involved in an agency relationship. One may gratuitously undertake to act as an agent and will be held to the standards of agency upon assumption of those duties.

Question 40

Which of the following types of sales requires a disclosure that the sales commission is negotiable?

A) - 30-unit apartment complex
B) - Commercial property
C) - Industrial property
D) - 1-4 unit residential property

Answer 40

D) - 1-4 unit residential property

Answer: D—B & P Code § Section 10147.5 is now operative. It reads: 10147.5(a)-Any printed or form agreement which initially establishes or is intended to establish or alters the terms of any agreement which previously established a right to compensation to be paid to a real estate licensee for the sale of residential real property containing not more than four (4) residential units, or the sale of a mobile home, shall contain the following statement in not less than 10-point boldface type immediately preceding any provision of such agreement relating to compensation of the licensee.

NOTICE THE AMOUNT OR RATE OF REAL ESTATE COMMISSIONS IS NOT FIXED BY LAW. THEY ARE SET BY EACH BROKER INDIVIDUALLY AND MAY BE NEGOTIABLE BETWEEN THE SELLER AND BROKER.

Question 41

A real estate agent is under a duty to use which of the following in the performance of his/her duties?

A) - care
B) - skill
C) - diligence
D) - all of the above

Answer 41

D) - all of the above

Answer: D—Among the obligations that a fiduciary owes to his/her principal are the duties of loyalty, obedience, and full disclosure; to be fair and honest; the duty to use skill, care and diligence; and the duty to account for all monies.

Question 42

The Real Estate Commissioner may fine a broker which of the following amounts for illegal payment of commission to an unlicensed person:

A) - $100.00
B) - $1,000.00
C) - $10,000.00
D) - None of the above

Answer 42

D) - None of the above

Answer: D—The Commissioner does not levy fines. This is done by the court. The Commissioner may temporarily suspend or permanently revoke the license of a real estate licensee for such illegal payment of commission.

Question 43

When acting as agent for seller Jones, real estate broker Smith:

A) - is obligated to render faithful service to Jones.
B) - can modify the terms of any contract that Jones enters into.
C) - can give Jones legal advice.
D) - can eliminate any offers on Jones’ property that Smith believes are not good enough.

Answer 43

A) - is obligated to render faithful service to Jones.

Answer: A—As a fiduciary, the broker (and salesperson) have a duty to be faithful to the principal.

Question 44

A real estate broker negotiated the sale of a real property and acted as agent for the seller. By agreement, the licensee can be paid his commission in the form of a(n):

A) - assignment by seller of first monies due seller from buyer on a mortgage.
B) - assignment of a note.
C) - buyer’s personal note.
D) - Any of the above

Answer 44

D) - Any of the above

Answer: D—Choices A, B, and C could all be commission payments due the broker by the seller.

Question 45

When a licensee is acting as the buyer’s agent, this fact must be disclosed to others:

A) - as soon as is practicable.
B) - after the offer has been presented and accepted.
C) - when the loan is funded.
D) - after the licensee receives a commission.

Answer 45

A) - as soon as is practicable.

Answer: A—The form of agency relationship must be disclosed as soon as practicable.

Question 46

A property leases for $30,000 for 25 years. The commission is:

• 7% the first year
• 5% the next 9 years
• 3% the next 2 years
• 1% of the remaining

What is the commission earned after 19 years?

A) - $19,500
B) - $15,000
C) - $14,700
D) - $13,500

Answer 46

A) - $19,500

Answer: A—7% the first year = $2,100 x 1 yr. = $ 2,100

5% the next 9 years = $1,500 x 9 yrs. = $13,500

3% the next 2 years = $900 x 2 yrs. = $ 1,800

1% of remaining = $300 x 7 yrs. = $ 2,100

$19,500 Commission after 19 years

Question 47

A salesman asks a broker, other than his own, for a $100.00 advance on his next commission. If the broker pays it, he is:

A) - in violation of the law.
B) - within his rights.
C) - a good friend.
D) - committing conversion.

Answer 47

A) - in violation of the law.

Answer: A—A real estate broker may never pay money to another broker’s salesman.

Question 48

Which of the following statements is most nearly correct concerning buyer’s agency:

A) - It is not legal in California.
B) - In buyer’s agency, the seller is forbidden to pay any commission, directly or indirectly, to the buyer’s agent.
C) - Buyer’s agency often gives rise to disputes over who is the “procuring cause.”
D) - The buyer’s broker has no agency relationship with the seller or the listing broker, and is therefore not liable for their actions.

Answer 48

D) - The buyer’s broker has no agency relationship with the seller or the listing broker, and is therefore not liable for their actions.

Answer: D—Statement of fact

Question 49

A parcel of land sold for $800 less than the listed price of $20,000. If the broker agreed to reduce his commission to 4%, his commission would amount to:

A) - $1,152.00
B) - $768.00
C) - $76.80
D) - $115.20

Answer 49

B) - $768.00

Answer: B—$20,000 - $800 = $19,200 Selling Price x .04 Broker’s Commission = $768.00 Commission

Question 50

A property sold for $31,000. The broker agreed to a 6% sales commission. What would the salesman receive if his share was 45% of the agreed commission?

A) - $1,860
B) - $837
C) - $1,023
D) - None of the above

Answer 50

B) - $837

Answer: B—$31,000 selling price x 6% commission = $1,860 total commission

$1,860 total commission x 45% = $837 to salesperson

Question 51

Which of the following describes the unlawful form of dual agency called “divided agency?”

A) - The agent acts concurrently for both the buyer and seller, but keeps them divided by not ever letting them communicate directly.
B) - The agent represents only one principal, but divides the duties to be performed with another agent.
C) - The agent acts concurrently for both the buyer and seller in a transaction without the knowledge and consent of both parties.
D) - The agent represents the seller and two buyers.

Answer 51

C) - The agent acts concurrently for both the buyer and seller in a transaction without the knowledge and consent of both parties.

Answer: C—When the agent becomes the agent of both the buyer and seller, without the knowledge and consent of both, the agency may be more accurately described and identified as a “divided agency.” When the agency is a divided agency, it is a violation of Section 10176(d) of the Business and Professions Code (the Real Estate Law).

Question 52

The phrase that best describes the nature of a broker’s duty to keep a principal fully informed is:

A) - ethical conduct.
B) - continuing responsibility.
C) - fiduciary obligation.
D) - trustworthy business principles.

Answer 52

C) - fiduciary obligation.

Answer: C—Among the obligations that a fiduciary owes to his/her principal are the duties of loyalty, obedience, and full disclosure; to be fair and honest; the duty to use skill, care and diligence; and the duty to account for all monies.

Question 53

A “dual agency” is legal if:

A) - All parties are told before close of escrow.
B) - The buyer and seller consent to it.
C) - The broker and escrow company agree to it.
D) - All parties are told after they sign the contracts.

Answer 53

B) - The buyer and seller consent to it.

Answer: B—The safest rule to apply is than when you represent both parties, in any way, you become a dual agent. When the agent becomes the agent of both, without the knowledge and consent of both, the agency is considered illegal.

Question 54

Commissions rate price fixing is a violation of the:

A) - Truth-in-Lending.
B) - Real Estate Settlement Procedures Act.
C) - Anti-trust laws.
D) - California Fair Employment and Housing Act.

Answer 54

C) - Anti-trust laws.

Answer: C—Price fixing is a violation of the Sherman Anti-trust laws.

Question 55

With regards to a fiduciary relationship, a Broker is to a Seller, as a:

A) - Trustor is to a Trustee
B) - Beneficiary is to a Trustor
C) - Beneficiary is to a Trustee
D) - Mortgagor is to a Mortgagee

Answer 55

C) - Beneficiary is to a Trustee

Answer: C—The broker/seller relationship is similar to the beneficiary/trustee relationship as the trustee is holding the deed of trust for the benefit of the lender (beneficiary) and works on behalf of the beneficiary. The trustee has a fiduciary responsibility to the beneficiary.

Question 56

An agency relationship may be terminated by:

A) - expiration of the term.
B) - death of the agent.
C) - agreement.
D) - All of the above

Answer 56

D) - All of the above

Answer: D—All of the choices are ways to terminate an agency relationship.

Question 57

An agency relationship can be created by all of the following, EXCEPT:

A) - principal’s agreement.
B) - implication of the law.
C) - oral agreement.
D) - agent volunteers.

Answer 57

D) - agent volunteers.

Answer: D—A real estate licensee cannot become your agent by simply volunteering. An agency relationship can be created by written agreement or it may be implied by the acts of the principal and agent. It can also be created by oral agreement.