National Agency Relationship Flashcards
The electrical wiring in a house is defective. The broker who listed the house is aware of this and intentionally deceives a potential buyer about it. The buyer purchases the home and later suffers a financial loss due to the faulty wiring. This is an example of
A)
mistake of fact.
B)
novation.
C)
mistake of law.
D)
fraud.
The electrical wiring in a house is defective. The broker who listed the house is aware of this and intentionally deceives a potential buyer about it. The buyer purchases the home and later suffers a financial loss due to the faulty wiring. This is an example of
A)
mistake of fact.
Incorrect Answer
B)
novation.
Incorrect Answer
C)
mistake of law.
Incorrect Answer
D)
fraud.
Correct Answer
Explanation
Fraud is lying or covering up a known fact. Mistake of law or fact would be when a party does not have knowledge of a situation or material fact. Novations are new contracts.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
Which statement is TRUE of a listing contract?
A)
It obligates the seller to convey the property if the broker procures a ready, willing, and able buyer.
B)
It automatically binds the owner, the broker, and the MLS to its agreed-on provisions.
C)
It is an employment contract for the professional services of the brokerage.
D)
It obligates the broker to work diligently for both the seller and the buyer.
Which statement is TRUE of a listing contract?
A)
It obligates the seller to convey the property if the broker procures a ready, willing, and able buyer.
Incorrect Answer
B)
It automatically binds the owner, the broker, and the MLS to its agreed-on provisions.
Incorrect Answer
C)
It is an employment contract for the professional services of the brokerage.
Correct Answer
D)
It obligates the broker to work diligently for both the seller and the buyer.
Incorrect Answer
Explanation
The listing is the brokerage firm’s contract of employment with the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer makes an offer that is the “mirror image” of the terms of the listing. However, in such an event, the seller may owe the brokerage a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy on the terms of the listing. The listing contract obligates the broker to work diligently only for the seller.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
An agency relationship in which a broker represents both the seller and the buyer in the same transaction would require all of following EXCEPT
A)
the broker will not disclose confidential information about one party to the other party.
B)
both the seller and the buyer are required to allow the broker to share price, terms, and motivations with the other party.
C)
the principals agree in writing that the broker is representing both sides of the transaction.
D)
commissions are to be collected according to the provisions of agreements with both parties.
An agency relationship in which a broker represents both the seller and the buyer in the same transaction would require all of following EXCEPT
A)
the broker will not disclose confidential information about one party to the other party.
Incorrect Answer
B)
both the seller and the buyer are required to allow the broker to share price, terms, and motivations with the other party.
Correct Answer
C)
the principals agree in writing that the broker is representing both sides of the transaction.
Incorrect Answer
D)
commissions are to be collected according to the provisions of agreements with both parties.
Incorrect Answer
Explanation
Real estate licensing laws may permit dual agency only if the buyer and the seller are informed and give written consent to the broker’s representation of both in the same transaction. The broker may not provide confidential information regarding price, terms, or motivations from one party to the other party in the transaction without written authorization; neither party is required to provide this authorization. Commissions are determined by the listing and buyer representation contracts with both parties or by agreement by both parties upon acceptance of the sales contract.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
A buyer and a seller are both represented by the same real estate brokerage firm acting as an agent in the same transaction. In this transaction, the firm is practicing
A)
dual agency.
B)
universal agency.
C)
single agency.
D)
implied agency.
A buyer and a seller are both represented by the same real estate brokerage firm acting as an agent in the same transaction. In this transaction, the firm is practicing
A)
dual agency.
Correct Answer
B)
universal agency.
Incorrect Answer
C)
single agency.
Incorrect Answer
D)
implied agency.
Incorrect Answer
Explanation
When the firm represents both principals in the same transaction, the broker practices dual agency. Single agency exists when the broker represents only one party, the buyer or the seller. Implied agency is created accidentally by the actions of one of the parties. Universal agency empowers an agent to do anything the principal could do personally and would not apply in this instance.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
A brokerage firm has an exclusive right-to-sell listing and represents the owner in the sale of the owner’s property. Which of these events will terminate that agency relationship?
A)
The owner declares personal bankruptcy.
B)
The broker engages other brokers to help sell the property.
C)
The broker discovers that she will not make an adequate commission due to the low market value of the property.
D)
The owner abandons the property.
A brokerage firm has an exclusive right-to-sell listing and represents the owner in the sale of the owner’s property. Which of these events will terminate that agency relationship?
A)
The owner declares personal bankruptcy.
Correct Answer
B)
The broker engages other brokers to help sell the property.
Incorrect Answer
C)
The broker discovers that she will not make an adequate commission due to the low market value of the property.
Incorrect Answer
D)
The owner abandons the property.
Incorrect Answer
Explanation
The bankruptcy of a principal in an agency relationship terminates the agency contract because title to the property transfers to a court-appointed receiver. The agency relationship remains in effect with any of the other events.
Reference: Agency Relationship > Termination of Agency
Whether or not state law requires the time when an agent must disclose his firm’s agency alternatives, good business practice requires that an agent make a disclosure about agency
A)
before any confidential information is disclosed about an individual’s motivation or financial situation.
B)
after an offer is made on a property.
C)
at the closing of a real estate transaction.
D)
when performing ministerial acts for a customer.
Whether or not state law requires the time when an agent must disclose his firm’s agency alternatives, good business practice requires that an agent make a disclosure about agency
A)
before any confidential information is disclosed about an individual’s motivation or financial situation.
Correct Answer
B)
after an offer is made on a property.
Incorrect Answer
C)
at the closing of a real estate transaction.
Incorrect Answer
D)
when performing ministerial acts for a customer.
Incorrect Answer
Explanation
Many states have mandatory agency disclosure laws. Whatever the law requires, agents should disclose their firm’s agency alternatives and any agency relationship by which the agent is bound before any confidential information is provided about an individual’s motivation or financial situation.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Offering a buyer or a seller a home warranty is
A)
an effective way to warrant against all defects.
B)
an effective marketing technique.
C)
a way to avoid litigation from latent defects.
D)
a way to reduce risk from undisclosed defects.
Offering a buyer or a seller a home warranty is
A)
an effective way to warrant against all defects.
Incorrect Answer
B)
an effective marketing technique.
Incorrect Answer
C)
a way to avoid litigation from latent defects.
Incorrect Answer
D)
a way to reduce risk from undisclosed defects.
Correct Answer
Explanation
The home warranty provides coverage for mechanical defects of the property and is not associated with the coverage of title defects. Title insurance provides coverage against title defects.
Reference: Agency Relationship > Agent’s Duties to Clients
As an agent for the seller, a real estate broker can
A)
advise a prospective buyer as to the best manner of taking title to the property.
B)
change the terms of the listing contract on behalf of the seller.
C)
solicit an offer to purchase the property from a prospective buyer.
D)
guarantee a prospective buyer that the seller will accept an offer at the price and terms offered.
As an agent for the seller, a real estate broker can
A)
advise a prospective buyer as to the best manner of taking title to the property.
Incorrect Answer
B)
change the terms of the listing contract on behalf of the seller.
Incorrect Answer
C)
solicit an offer to purchase the property from a prospective buyer.
Correct Answer
D)
guarantee a prospective buyer that the seller will accept an offer at the price and terms offered.
Incorrect Answer
Explanation
An agent representing the seller has a fiduciary responsibility to exercise skill and care to market the property to secure a buyer. The agent is a special agent for the seller, and as such is not authorized to make a decision for the seller or to change the listing contract. The agent cannot guarantee that the seller will accept an offer and must present the offer to the seller. The agent must not provide advice to the prospective buyer because doing so might create an agency relationship with the buyer.
Reference: Agency Relationship > Agent’s Duties to Clients
Under an exclusive agency listing, the listing broker would be entitled to a commission EXCEPT
A)
if the broker sells the property himself.
B)
if a salesperson from a cooperating brokerage secures a qualified buyer for the property.
C)
if the seller sells the property himself to a relative moving from out of town.
D)
if another co-op broker secures a qualified buyer for the property.
Under an exclusive agency listing, the listing broker would be entitled to a commission EXCEPT
A)
if the broker sells the property himself.
Incorrect Answer
B)
if a salesperson from a cooperating brokerage secures a qualified buyer for the property.
Incorrect Answer
C)
if the seller sells the property himself to a relative moving from out of town.
Correct Answer
D)
if another co-op broker secures a qualified buyer for the property.
Incorrect Answer
Explanation
An exclusive agency listing authorizes the listing brokerage or the co-op broker to sell and receive a commission, but the seller retains the right to sell the property without obligation to the broker. A seller who sells the property himself to a relative is not required under an exclusive agency listing to pay the listing broker a commission. The seller is obligated to pay a commission to the listing broker when that broker, another broker, or a salesperson from a cooperating brokerage firm sells the property.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
The type of listing contract that provides for payment of a commission to the broker even though the owner makes the sale without the broker’s aid is called
A)
an exclusive agency listing.
B)
an open listing.
C)
an option listing.
D)
an exclusive right-to-sell listing.
The type of listing contract that provides for payment of a commission to the broker even though the owner makes the sale without the broker’s aid is called
A)
an exclusive agency listing.
Incorrect Answer
B)
an open listing.
Incorrect Answer
C)
an option listing.
Incorrect Answer
D)
an exclusive right-to-sell listing.
Correct Answer
Explanation
In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive agency listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An option listing permits the broker to retain an option to purchase the property for the broker’s own account.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
The buyer’s salesperson states upon entering a home, “This home is the best home on the block, has the nicest floor plan and the best schools in the area.” The salesperson maybe guilty of
A)
nothing; this is how all salespeople talk.
B)
puffing, which is not breaking the law.
C)
misrepresenting the schools and puffing about the location and the floor plan.
D)
misrepresenting the property and the schools.
The buyer’s salesperson states upon entering a home, “This home is the best home on the block, has the nicest floor plan and the best schools in the area.” The salesperson maybe guilty of
A)
nothing; this is how all salespeople talk.
Incorrect Answer
B)
puffing, which is not breaking the law.
Incorrect Answer
C)
misrepresenting the schools and puffing about the location and the floor plan.
Correct Answer
D)
misrepresenting the property and the schools.
Incorrect Answer
Explanation
Puffing is making statements anyone knows may not be true, which the “best home on the block with the nicest floor plan” fit. Saying the property also has the best schools is misrepresentation because the statement was not qualified (schools with highest scores, best athletic department, etc.).
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
The property disclosure form is usually given to a buyer
A)
at the initial contact with the buyer.
B)
before an offer is made.
C)
at the closing of the transaction.
D)
after an offer is made.
The property disclosure form is usually given to a buyer
A)
at the initial contact with the buyer.
Incorrect Answer
B)
before an offer is made.
Correct Answer
C)
at the closing of the transaction.
Incorrect Answer
D)
after an offer is made.
Incorrect Answer
Explanation
State laws may vary, but generally the property disclosure form is given to the buyer before an offer is made. The disclosure helps to ensure that a buyer is aware of any defects or problems with a property before making an offer.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
The typical relationship between a listing broker and a seller represents what type of agency?
A)
Universal
B)
Special
C)
Implied
D)
General
The typical relationship between a listing broker and a seller represents what type of agency?
A)
Universal
Incorrect Answer
B)
Special
Correct Answer
C)
Implied
Incorrect Answer
D)
General
Incorrect Answer
Explanation
The broker serves the client—either a buyer or a seller—usually by performing the specific brokerage acts spelled out in the employment contract (listing or buyer brokerage agreement). Specific assignments create a special agency. In a general agency relationship, the agent is authorized by a principal to perform any and all acts associated with a particular job or business. Implied agency arises out of the words or conduct of the parties. A universal agent is a person empowered to do anything that a principal could do personally and is a general agent.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
In a real estate transaction, the term fiduciary typically refers to
A)
the person who has legal power to act on behalf of another.
B)
the agent’s relationship to the principal.
C)
the set of obligations owed by the principal to the agent and vice versa.
D)
the principal’s relationship to the agent.
In a real estate transaction, the term fiduciary typically refers to
A)
the person who has legal power to act on behalf of another.
Incorrect Answer
B)
the agent’s relationship to the principal.
Correct Answer
C)
the set of obligations owed by the principal to the agent and vice versa.
Incorrect Answer
D)
the principal’s relationship to the agent.
Incorrect Answer
Explanation
An agent’s relationship to a principal involves care, obedience, accounting, loyalty, and disclosure—a fiduciary relationship. Principals do not owe fiduciary obligations to agents. Persons with legal power to act for another are created by a power of attorney; most real estate brokers do not have such powers.
Reference: Agency Relationship > Agent’s Duties to Clients
A seller and an agent entered into a net listing agreement. The seller’s property is in a state where net listing agreements are lawful. The seller purchased the property 50 years ago, and had not kept current with the market value of real estate in the area where the subject property was situated. The seller asked the agent to help determine the sum that would represent the net proceeds the seller would receive for the equity in the property. Recent comparable properties have been selling for $1,600,000.Which of the following answer choices best reflects the potential conflict of interest of the net listing?
A)
$1,250,000
B)
$3,000,000
C)
$2,000,000
D)
$1,500,000
A seller and an agent entered into a net listing agreement. The seller’s property is in a state where net listing agreements are lawful. The seller purchased the property 50 years ago, and had not kept current with the market value of real estate in the area where the subject property was situated. The seller asked the agent to help determine the sum that would represent the net proceeds the seller would receive for the equity in the property. Recent comparable properties have been selling for $1,600,000.Which of the following answer choices best reflects the potential conflict of interest of the net listing?
A)
$1,250,000
Correct Answer
B)
$3,000,000
Incorrect Answer
C)
$2,000,000
Incorrect Answer
D)
$1,500,000
Incorrect Answer
Explanation
The best answer choice to reflect the potential conflict of interest of the net listing is the lowest dollar amount, $1,250,000. A net listing is one where, if the property is sold, the seller agrees to take a certain fixed sum. Anything over that fixed amount will be the agent’s compensation. It is in the agent’s interest for the seller to agree to a lower amount, rather than a higher one. The lower the sum the seller is willing to accept for the sale of the property, the more money the agent will potentially earn on the transaction. This potential conflict of interest is one of the reasons why the net listing is illegal in some states, and highly discouraged in other states.
Reference: Agency Relationship > Net Listing (Conflict of Interest)
A salesperson has received an offer with a $5,000 earnest money check. The next step is to
A)
hold the funds in a safe place until the offer becomes a contract.
B)
give the check to the broker to put into the operations account until it is moved to the trust account.
C)
open a trust account for this check only.
D)
deposit it immediately into the firm’s trust account.
A salesperson has received an offer with a $5,000 earnest money check. The next step is to
A)
hold the funds in a safe place until the offer becomes a contract.
Correct Answer
B)
give the check to the broker to put into the operations account until it is moved to the trust account.
Incorrect Answer
C)
open a trust account for this check only.
Incorrect Answer
D)
deposit it immediately into the firm’s trust account.
Incorrect Answer
Explanation
Once a contract is formed, the earnest money is deposited based on the terms of the contract or state law.
Reference: Agency Relationship > Agent’s Duties to Clients
Real estate professionals owe what duties to consumers they don’t represent?
A)
Disclosure of all facts, confidentiality, and accounting of funds
B)
Loyalty, confidentiality and honesty
C)
Disclosure, confidentiality, accounting of funds
D)
Honesty, disclosure of material facts, and accounting of all funds
Real estate professionals owe what duties to consumers they don’t represent?
A)
Disclosure of all facts, confidentiality, and accounting of funds
Incorrect Answer
B)
Loyalty, confidentiality and honesty
Incorrect Answer
C)
Disclosure, confidentiality, accounting of funds
Incorrect Answer
D)
Honesty, disclosure of material facts, and accounting of all funds
Correct Answer
Explanation
Real estate professionals owe unrepresented consumers DAH—disclosure of material facts, accounting of funds, and honesty.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A real estate licensee’s responsibilities include
A)
including and paying for a home warranty program with all listings.
B)
advising the seller or the buyer to purchase a home warranty program.
C)
avoiding the discussion of home warranty programs.
D)
purchasing a home warranty program on the seller’s or the buyer’s behalf.
A real estate licensee’s responsibilities include
A)
including and paying for a home warranty program with all listings.
Incorrect Answer
B)
advising the seller or the buyer to purchase a home warranty program.
Correct Answer
C)
avoiding the discussion of home warranty programs.
Incorrect Answer
D)
purchasing a home warranty program on the seller’s or the buyer’s behalf.
Incorrect Answer
Explanation
A real estate can advise the seller or the buyer to purchase a home warranty program. A home warranty program can be an attractive selling point.
Reference: Agency Relationship > Agent’s Duties to Clients
Designated agency will MOST likely occur under what circumstance?
A)
The buyer and the seller in the same transaction are both represented by the same brokerage firm.
B)
Both the buyer and the seller are customers of the firm.
C)
The seller and the buyer are represented by different brokerage firms.
D)
The buyer is a client of the firm and the seller is the customer of the firm.
Designated agency will MOST likely occur under what circumstance?
A)
The buyer and the seller in the same transaction are both represented by the same brokerage firm.
Correct Answer
B)
Both the buyer and the seller are customers of the firm.
Incorrect Answer
C)
The seller and the buyer are represented by different brokerage firms.
Incorrect Answer
D)
The buyer is a client of the firm and the seller is the customer of the firm.
Incorrect Answer
Explanation
Designated agency occurs when one brokerage firm practices dual agency in representing both the seller and the buyer in the same transaction. Both parties are clients of the firm. In many states, designated agency is a process that permits the firm’s broker to appoint one agent to represent the seller, and another agent from the same firm to represent the buyer. Each of the agents is a designated agency for her respective client, the seller or the buyer, and may not share confidential information about the party they represent.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
While a condo unit was listed for sale, the homeowners association voted to amend the bylaws to become a pet-free building. The licensee in this case should do which of these?
A)
Disregard the matter because pets are of no relevance to material defects.
B)
Avoid informing the buyers because this information might prevent a sale.
C)
Disclose the changes to all potential buyers.
D)
Avoid informing potential buyers because this action would be a violation of fiduciary duties.
While a condo unit was listed for sale, the homeowners association voted to amend the bylaws to become a pet-free building. The licensee in this case should do which of these?
A)
Disregard the matter because pets are of no relevance to material defects.
Incorrect Answer
B)
Avoid informing the buyers because this information might prevent a sale.
Incorrect Answer
C)
Disclose the changes to all potential buyers.
Correct Answer
D)
Avoid informing potential buyers because this action would be a violation of fiduciary duties.
Incorrect Answer
Explanation
Any future restriction that will apply to the future owner should be disclosed. Providing the buyer with a copy of the homeowners association bylaws would be a way to provide disclosure of any future changes that will affect owners.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
Which statement is TRUE of a real estate broker acting as the agent of the seller?
A)
The broker can accept a commission from the buyer without the seller’s approval.
B)
The broker can agree to a change in price without the seller’s approval.
C)
The broker has a fiduciary obligation of loyalty to the seller.
D)
The broker can disclose confidential information about the seller to a buyer if the buyer is also represented by the broker.
Which statement is TRUE of a real estate broker acting as the agent of the seller?
A)
The broker can accept a commission from the buyer without the seller’s approval.
Incorrect Answer
B)
The broker can agree to a change in price without the seller’s approval.
Incorrect Answer
C)
The broker has a fiduciary obligation of loyalty to the seller.
Correct Answer
D)
The broker can disclose confidential information about the seller to a buyer if the buyer is also represented by the broker.
Incorrect Answer
Explanation
Loyalty to the client-seller requires confidentiality—not revealing confidential information; it involves obedience—not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.
Reference: Agency Relationship > Agent’s Duties to Clients
A listing salesperson acting as the seller’s agent is holding an open house. The state does not allow dual agency. A buyer starts a conversation about the property and tells the salesperson she is an investor looking for a number of properties. The salesperson states that the seller of the property will take less and that the salesperson can represent the buyer in the purchase of this property and others. In this case, the salesperson
A)
may act as the buyer’s agent without disclosure because it is an open house.
B)
is an undisclosed dual agent who acted in bad faith.
C)
is guilty of conversion of agency and could be fined.
D)
can act as a subagent to the seller and a full agent to the buyer
A listing salesperson acting as the seller’s agent is holding an open house. The state does not allow dual agency. A buyer starts a conversation about the property and tells the salesperson she is an investor looking for a number of properties. The salesperson states that the seller of the property will take less and that the salesperson can represent the buyer in the purchase of this property and others. In this case, the salesperson
A)
may act as the buyer’s agent without disclosure because it is an open house.
Incorrect Answer
B)
is an undisclosed dual agent who acted in bad faith.
Correct Answer
C)
is guilty of conversion of agency and could be fined.
Incorrect Answer
D)
can act as a subagent to the seller and a full agent to the buyer.
Incorrect Answer
Explanation
The salesperson and the seller’s agent should have disclosed her agency relationship, have not shared the seller’s confidential information, and cannot represent the buyer in the purchase of the property because dual agency is not allowed in the state.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
A buyer’s agent would NOT recommend that the buyer seek expert advice if the buyer asked,
A)
“Does this crack in the foundation mean there is structural damage?”
B)
“Would you recommend a radon test?”
C)
“How should I take title to the property?”
D)
“How long has the property been on the market?”
A buyer’s agent would NOT recommend that the buyer seek expert advice if the buyer asked,
A)
“Does this crack in the foundation mean there is structural damage?”
Incorrect Answer
B)
“Would you recommend a radon test?”
Incorrect Answer
C)
“How should I take title to the property?”
Incorrect Answer
D)
“How long has the property been on the market?”
Correct Answer
Explanation
This is not a question that would require the buyer to seek expert advice.
Reference: Agency Relationship > Agent’s Duties to Clients
A seller discovered radon and has sealed the cracks in the foundation and told the listing broker that he feels sure the problem is solved. The listing broker should do which of these?
A)
Not disclose, because the broker represents the seller and it might cause the seller harm.
B)
Disclose the radon issue to all potential buyers.
C)
Disclose the radon if the buyer does not have a radon test done.
D)
Not worry, because the buyer’s inspector will find any problems.
A seller discovered radon and has sealed the cracks in the foundation and told the listing broker that he feels sure the problem is solved. The listing broker should do which of these?
A)
Not disclose, because the broker represents the seller and it might cause the seller harm.
Incorrect Answer
B)
Disclose the radon issue to all potential buyers.
Correct Answer
C)
Disclose the radon if the buyer does not have a radon test done.
Incorrect Answer
D)
Not worry, because the buyer’s inspector will find any problems.
Incorrect Answer
Explanation
The discovery of radon is a material fact that may affect a purchaser’s decision to buy the house. The listing broker is required to disclose the radon whether or not the buyer conducts a radon test. All buyers should have the recommendation to test for any hazardous material, especially radon.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
The broker protection clause in a real estate listing contract provides
A)
for how the broker will be compensated.
B)
that the seller may not file a lawsuit against the broker for lack of performance.
C)
that the seller may not file a complaint against the broker with the state regulatory commission.
D)
that the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner.
The broker protection clause in a real estate listing contract provides
A)
for how the broker will be compensated.
Incorrect Answer
B)
that the seller may not file a lawsuit against the broker for lack of performance.
Incorrect Answer
C)
that the seller may not file a complaint against the broker with the state regulatory commission.
Incorrect Answer
D)
that the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner.
Correct Answer
Explanation
The listing contract must also state the circumstances under which the broker will be paid. Nothing in the listing contract prohibits a seller from taking action through the courts or a real estate commission if the broker does not perform according to the terms of the listing contract.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
A listing agent loses the seller’s house keys. The agent has breached her fiduciary duty of
A)
accounting.
B)
disclosure.
C)
care.
D)
loyalty.
A listing agent loses the seller’s house keys. The agent has breached her fiduciary duty of
A)
accounting.
Correct Answer
B)
disclosure.
Incorrect Answer
C)
care.
Incorrect Answer
D)
loyalty.
Incorrect Answer
Explanation
The fiduciary duty of accounting requires real estate professionals to be accountable for money and the property of others that come into their possession in the performance of the agent’s duties. The duty of care requires that agents use their skill and experience to the client’s benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. The duty of loyalty means that the agent must place the client’s interests above all others, including the agent’s own self-interest.
Reference: Agency Relationship > Agent’s Duties to Clients
In an appointment with a seller, a salesperson presents a comparative market analysis (CMA) that provides a reasonable market value for the seller’s property. The seller insists on pricing the property $15,000 higher than the salesperson’s suggested price. Under these circumstances, the salesperson
A)
must hire an appraiser to conduct a formal appraisal.
B)
may change the listing price in the contract once it is executed.
C)
may choose to refuse the listing.
D)
must accept the listing with the seller’s higher listing price.
In an appointment with a seller, a salesperson presents a comparative market analysis (CMA) that provides a reasonable market value for the seller’s property. The seller insists on pricing the property $15,000 higher than the salesperson’s suggested price. Under these circumstances, the salesperson
A)
must hire an appraiser to conduct a formal appraisal.
Incorrect Answer
B)
may change the listing price in the contract once it is executed.
Incorrect Answer
C)
may choose to refuse the listing.
Correct Answer
D)
must accept the listing with the seller’s higher listing price.
Incorrect Answer
Explanation
An unrealistic listing price may make it difficult for the broker to properly market the property within the time period of the listing. The salesperson is not required to accept the listing with the higher listing price or to hire an appraiser for a formal appraisal. The salesperson may not change the listing price in a listing contract without the explicit permission of the seller.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Last month a broker took a listing on a property. She now learns that her client has been declared incompetent by the court. Her listing now is
A)
still valid.
B)
the basis for a commission if the broker produces a buyer.
C)
binding because the broker was acting in good faith.
D)
terminated.
Last month a broker took a listing on a property. She now learns that her client has been declared incompetent by the court. Her listing now is
A)
still valid.
Incorrect Answer
B)
the basis for a commission if the broker produces a buyer.
Incorrect Answer
C)
binding because the broker was acting in good faith.
Incorrect Answer
D)
terminated.
Correct Answer
Explanation
A listing contract may be terminated if either party dies or becomes incapacitated. Once terminated, the contract is not binding, and there is no basis for a commission to the broker.
Reference: Agency Relationship > Termination of Agency
A listing contract is BEST described as
A)
a sales contract.
B)
an escrow contract.
C)
a personal service contract.
D)
a property management contract.
A listing contract is BEST described as
A)
a sales contract.
Incorrect Answer
B)
an escrow contract.
Incorrect Answer
C)
a personal service contract.
Correct Answer
D)
a property management contract.
Incorrect Answer
Explanation
A listing is a personal employment contract between brokers and their clients setting forth the broker’s responsibilities in finding for the seller a ready, willing, and able buyer. A property management contract establishes the responsibilities of a broker in managing a principal’s property. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Which of these does NOT create an agency relationship?
A)
A buyer agency contract
B)
The payment of money or commissions
C)
A property management contract
D)
A listing contract
Which of these does NOT create an agency relationship?
A)
A buyer agency contract
Incorrect Answer
B)
The payment of money or commissions
Correct Answer
C)
A property management contract
Incorrect Answer
D)
A listing contract
Incorrect Answer
Explanation
The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract create an agency relationship between the broker and the principal to the contract.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Most states require a property condition disclosure in a residential transaction. The statement is completed by
A)
the broker.
B)
the property inspector.
C)
the seller.
D)
the seller and salesperson or broker.
Most states require a property condition disclosure in a residential transaction. The statement is completed by
A)
the broker.
Incorrect Answer
B)
the property inspector.
Incorrect Answer
C)
the seller.
Correct Answer
D)
the seller and salesperson or broker.
Incorrect Answer
Explanation
Most states require the seller to complete a property condition disclosure. The listing broker should review the disclosure form and question the seller about any items that are incomplete. The disclosure does not replace the need for a property inspection to be conducted on behalf of the buyer. A buyer’s agent should recommend that a buyer secure an independent property inspection.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A buyer agency contract states that the contract expires on April 30. Which event would NOT terminate the buyer agency contract?
A)
Death of the buyer
B)
Death of the broker
C)
Mutual agreement to end the contract
D)
The salesperson leaving the brokerage firm
A buyer agency contract states that the contract expires on April 30. Which event would NOT terminate the buyer agency contract?
A)
Death of the buyer
Incorrect Answer
B)
Death of the broker
Incorrect Answer
C)
Mutual agreement to end the contract
Incorrect Answer
D)
The salesperson leaving the brokerage firm
Correct Answer
Explanation
The contract is with the buyer and the firm, not the salesperson. If the salesperson leaves, the principal broker may assign another salesperson to assist the buyer. The buyer and the principal broker may come to a mutual agreement to terminate the contract. The death of either party terminates the contract.
Reference: Agency Relationship > Termination of Agency
Which of these BEST defines the common law of agency?
A)
The rules and regulations of the state licensing agency
B)
The principles that govern one’s conduct in business
C)
The rules of law that apply to the responsibilities and obligations of a person who acts for another
D)
The selling of another’s property by an authorized agency
Which of these BEST defines the common law of agency?
A)
The rules and regulations of the state licensing agency
Incorrect Answer
B)
The principles that govern one’s conduct in business
Incorrect Answer
C)
The rules of law that apply to the responsibilities and obligations of a person who acts for another
Correct Answer
D)
The selling of another’s property by an authorized agency
Incorrect Answer
Explanation
The common law of agency is formed by the judgments and decrees of courts regarding the responsibilities of a person who acts for another. Many states have enacted specific agency statutes to replace the common law of agency. A code of ethics encompasses the principles that govern one’s conduct in business. Regulations of the state licensing agency may include specific mandates and responsibilities related to agency.
Reference: Agency Relationship > Agent’s Duties to Clients
The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is
A)
an open listing clause.
B)
a multiple listing clause.
C)
a joint listing clause.
D)
a net listing clause.
The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is
A)
an open listing clause.
Incorrect Answer
B)
a multiple listing clause.
Correct Answer
C)
a joint listing clause.
Incorrect Answer
D)
a net listing clause.
Incorrect Answer
Explanation
Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
All listing agreements must contain
A)
a broker protection clause.
B)
a multiple listing service (MLS) clause.
C)
an automatic extension clause.
D)
a definite contract termination date.
All listing agreements must contain
A)
a broker protection clause.
Incorrect Answer
B)
a multiple listing service (MLS) clause.
Incorrect Answer
C)
an automatic extension clause.
Incorrect Answer
D)
a definite contract termination date.
Correct Answer
Explanation
Failing to specify a definite termination date in a listing can be grounds for suspension or revocation of a license. Broker protection clauses, MLS clauses, and automatic extensions of the contract are not required.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
A seller has told the listing agent that the agent must only represent the seller in the sale of the property. In this case, the first guide for the agent is to obey
A)
all lawful instructions of the owner.
B)
the concept of caveat emptor.
C)
any state dual agency requirements.
D)
the common law of agency, even if a state agency statute exists.
A seller has told the listing agent that the agent must only represent the seller in the sale of the property. In this case, the first guide for the agent is to obey
A)
all lawful instructions of the owner.
Correct Answer
B)
the concept of caveat emptor.
Incorrect Answer
C)
any state dual agency requirements.
Incorrect Answer
D)
the common law of agency, even if a state agency statute exists.
Incorrect Answer
Explanation
A real estate broker hired by a seller must obey all lawful instructions of the owner. A state’s agency statute may modify aspects of the common law of agency, in which case the broker must comply with the agency statute. A selling broker is not required to engage in dual agency. Caveat emptor is a warning to purchasers, not to brokers.
Reference: Agency Relationship > Agent’s Duties to Clients
While looking at a property, the potential buyers ask their salesperson if a fence is the boundary line of the property. The salesperson should recommend that the buyers
A)
ask the neighbors.
B)
ask the owners of the property.
C)
have a survey conducted.
D)
read the legal description.
While looking at a property, the potential buyers ask their salesperson if a fence is the boundary line of the property. The salesperson should recommend that the buyers
A)
ask the neighbors.
Incorrect Answer
B)
ask the owners of the property.
Incorrect Answer
C)
have a survey conducted.
Correct Answer
D)
read the legal description.
Incorrect Answer
Explanation
To determine the exact boundaries of a property, a survey is recommended. Some lenders require a survey to confirm the legal description of the property. The owners and the neighbors may not know the exact boundaries of the property.
Reference: Agency Relationship > Agent’s Duties to Clients
A brokerage represents the owner in the sale of the owner’s property, which has a salesperson acting as the listing agent. Which of these events will terminate that agency relationship?
A)
The owner abandons the property.
B)
The broker engages other brokers to help sell the property.
C)
During the listing, the salesperson dies.
D)
During the listing, the owner of the property dies.
A brokerage represents the owner in the sale of the owner’s property, which has a salesperson acting as the listing agent. Which of these events will terminate that agency relationship?
A)
The owner abandons the property.
Incorrect Answer
B)
The broker engages other brokers to help sell the property.
Incorrect Answer
C)
During the listing, the salesperson dies.
Incorrect Answer
D)
During the listing, the owner of the property dies.
Correct Answer
Explanation
When a property owner dies during a listing period, the agency relationship with a broker is terminated. The agency relationship remains in effect with any of the other events, including the death of a salesperson because the contract belongs to the firm not the salesperson.
Reference: Agency Relationship > Termination of Agency
When showing a property, an agent exaggerates the property’s benefits. This practice is
A)
fraud on the part of the agent.
B)
an illegal ministerial act.
C)
an illegal misrepresentation of the property.
D)
puffing, which is legal as long as there is no misrepresentation.
When showing a property, an agent exaggerates the property’s benefits. This practice is
A)
fraud on the part of the agent.
Incorrect Answer
B)
an illegal ministerial act.
Incorrect Answer
C)
an illegal misrepresentation of the property.
Incorrect Answer
D)
puffing, which is legal as long as there is no misrepresentation.
Correct Answer
Explanation
The broker is exaggerating the benefits of the property. In this situation, the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. A ministerial act is a routine act performed for a customer that does not involve judgment, discretion, or advice.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A salesperson representing a seller suggests to a buyer that the seller might accept less than the listing price. The salesperson in this situation
A)
no longer represents the seller because he has given advice to the buyer.
B)
may have unintentionally created an undisclosed dual agency by suggesting that the buyer offer less than the listing price.
C)
is fulfilling his fiduciary responsibilities to the seller by encouraging a buyer to purchase the property.
D)
is simply performing a ministerial act for the buyer.
A salesperson representing a seller suggests to a buyer that the seller might accept less than the listing price. The salesperson in this situation
A)
no longer represents the seller because he has given advice to the buyer.
Incorrect Answer
B)
may have unintentionally created an undisclosed dual agency by suggesting that the buyer offer less than the listing price.
Correct Answer
C)
is fulfilling his fiduciary responsibilities to the seller by encouraging a buyer to purchase the property.
Incorrect Answer
D)
is simply performing a ministerial act for the buyer.
Incorrect Answer
Explanation
The salesperson in giving advice to the buyer may lead the buyer to believe that the salesperson represents the buyer’s interests and is acting as the buyer’s advocate. The agent may have created an implied agency with the buyer and violated the duties of loyalty and confidentiality to the principal, the seller. The agent’s fiduciary responsibilities to the seller continue even with his actions. Performing ministerial acts involves granting services that do not require any discretion or advice.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Fiduciary means that there is
A)
a legal relationship between parties that creates a position of trust and confidence.
B)
a written agreement between the parties to pay a real estate commission.
C)
an oral agreement between the parties that does not create an agency agreement.
D)
a legal relationship in which only the duties of honesty and good faith are owed to the parties.
Fiduciary means that there is
A)
a legal relationship between parties that creates a position of trust and confidence.
Correct Answer
B)
a written agreement between the parties to pay a real estate commission.
Incorrect Answer
C)
an oral agreement between the parties that does not create an agency agreement.
Incorrect Answer
D)
a legal relationship in which only the duties of honesty and good faith are owed to the parties.
Incorrect Answer
Explanation
The term fiduciary refers to the relationship in which the agent (the real estate broker) is held in a position of special trust and confidence by the principal (the client). An agent owes the duties of honesty and good faith to the customer, the third party or nonrepresented consumer in the transaction. The payment of compensation in the form of a commission does not determine or define an agency relationship.
Reference: Agency Relationship > Agent’s Duties to Clients
All of these documents would create an agency relationship EXCEPT
A)
a property management contract.
B)
a buyer agency contract.
C)
a sales contract.
D)
a listing contract.
All of these documents would create an agency relationship EXCEPT
A)
a property management contract.
Incorrect Answer
B)
a buyer agency contract.
Incorrect Answer
C)
a sales contract.
Correct Answer
D)
a listing contract.
Incorrect Answer
Explanation
A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
The listing contract on a residential property states that it expires on June 30. Which event would NOT terminate the listing?
A)
The owner dies on April 29.
B)
The listing contract is not renewed prior to June 30.
C)
The salesperson who signed the listing dies on March 15.
D)
The house is destroyed by fire on June 1.
The listing contract on a residential property states that it expires on June 30. Which event would NOT terminate the listing?
A)
The owner dies on April 29.
Incorrect Answer
B)
The listing contract is not renewed prior to June 30.
Incorrect Answer
C)
The salesperson who signed the listing dies on March 15.
Correct Answer
D)
The house is destroyed by fire on June 1.
Incorrect Answer
Explanation
The salesperson is not a party to the contract, so his death would not terminate the contract. A listing contract is terminated if one of the parties to the agreement dies, if the property is destroyed by a force outside the seller’s control, or if the listing contract’s term expires.
Reference: Agency Relationship > Termination of Agency
A buyer makes an offer on a property and gives the listing agent a check for $1,000 for earnest money. The listing agent deposits the check into his personal account and, a week later, wrote the broker a check from his account to deposit into the broker’s trust account. Has the agent fulfilled his fiduciary duty to the client?
A)
No, because he has embezzled the funds.
B)
No, because he has commingled funds.
C)
Yes, if he has followed procedures provided by the broker.
D)
Yes, if the buyer has given him permission to follow that procedure.
A buyer makes an offer on a property and gives the listing agent a check for $1,000 for earnest money. The listing agent deposits the check into his personal account and, a week later, wrote the broker a check from his account to deposit into the broker’s trust account. Has the agent fulfilled his fiduciary duty to the client?
A)
No, because he has embezzled the funds.
Incorrect Answer
B)
No, because he has commingled funds.
Correct Answer
C)
Yes, if he has followed procedures provided by the broker.
Incorrect Answer
D)
Yes, if the buyer has given him permission to follow that procedure.
Incorrect Answer
Explanation
Under the fiduciary duty of accountability, the agent must account for funds received on behalf of the seller. His action violates not only his fiduciary duty but also most license laws, which require that earnest money deposits be deposited immediately (or within a specific time limit) into the brokerage firm’s trust account. Depositing the money into the agent’s own checking account is commingling, and it is illegal.
Reference: Agency Relationship > Agent’s Duties to Clients
The listing contract on a residential property states that it expires on May 2. Which event would NOT terminate the listing?
A)
The house is destroyed by fire on April 25.
B)
The owner dies on April 29.
C)
The contract is not renewed before May 2.
D)
On April 15, the owner tells the listing broker that the owner is dissatisfied with the broker’s marketing efforts.
The listing contract on a residential property states that it expires on May 2. Which event would NOT terminate the listing?
A)
The house is destroyed by fire on April 25.
Incorrect Answer
B)
The owner dies on April 29.
Incorrect Answer
C)
The contract is not renewed before May 2.
Incorrect Answer
D)
On April 15, the owner tells the listing broker that the owner is dissatisfied with the broker’s marketing efforts.
Correct Answer
Explanation
A mere complaint to the broker by the principal does not end the listing, whereas expiration of the listing with no renewal, death of the owner, or destruction of the property would end the listing.
Reference: Agency Relationship > Termination of Agency
A real estate broker acting as the agent of the seller
A)
can accept an offer on behalf of the seller.
B)
should present to the seller only the highest offer for the property.
C)
can disclose the seller’s minimum price.
D)
must promote and safeguard the seller’s best interest.
A real estate broker acting as the agent of the seller
A)
can accept an offer on behalf of the seller.
Incorrect Answer
B)
should present to the seller only the highest offer for the property.
Incorrect Answer
C)
can disclose the seller’s minimum price.
Incorrect Answer
D)
must promote and safeguard the seller’s best interest.
Correct Answer
Explanation
Real estate brokers must be loyal to their principal by promoting the principal’s best interest. A broker acting as agent for a seller should present all offers on the property but may not accept an offer on behalf of the seller. Only the seller may accept an offer. The broker may not disclose any confidential information of the seller tied to price, term, or motivation without the seller’s written permission.
Reference: Agency Relationship > Agent’s Duties to Clients
A seller tells a listing broker his home is serviced by a city water system for both water and sewer services, and indicates city water service on the property disclosure form. The broker suspects that there is no city water to the home because it is in a rural area, but she relies on the seller’s statement and says nothing concerning the water system to a buyer. The buyer discovers after the purchase that the home has no city water service. In this case, the broker
A)
may be liable for misrepresentation because she should have known about the lack of city water services.
B)
may file a complaint against the seller with the state real estate commission.
C)
is not liable for misrepresentation because the seller did not disclose the lack of city water services.
D)
may file suit against the seller for not disclosing the lack of city water services.
A seller tells a listing broker his home is serviced by a city water system for both water and sewer services, and indicates city water service on the property disclosure form. The broker suspects that there is no city water to the home because it is in a rural area, but she relies on the seller’s statement and says nothing concerning the water system to a buyer. The buyer discovers after the purchase that the home has no city water service. In this case, the broker
A)
may be liable for misrepresentation because she should have known about the lack of city water services.
Correct Answer
B)
may file a complaint against the seller with the state real estate commission.
Incorrect Answer
C)
is not liable for misrepresentation because the seller did not disclose the lack of city water services.
Incorrect Answer
D)
may file suit against the seller for not disclosing the lack of city water services.
Incorrect Answer
Explanation
The listing broker may be liable because she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A listing taken by a real estate salesperson is an employment contract between the seller and
A)
both the salesperson and the broker.
B)
the salesperson.
C)
the brokerage firm.
D)
the local multiple listing service.
A listing taken by a real estate salesperson is an employment contract between the seller and
A)
both the salesperson and the broker.
Incorrect Answer
B)
the salesperson.
Incorrect Answer
C)
the brokerage firm.
Correct Answer
D)
the local multiple listing service.
Incorrect Answer
Explanation
The parties to a listing contract are the seller and the broker. The brokerage firm and the principal broker represent the seller in listing and selling the property. The salesperson does so in the name and under the supervision of the brokerage firm and the principal broker.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
A seller has listed her home with a broker for $190,000. The listing broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation,
A)
any broker is authorized by the listing contract to encourage such bids for the property.
B)
the broker acted properly to obtain a quick offer on the property.
C)
the broker has violated his fiduciary relationship with the seller.
D)
the broker’s action was unethical but not illegal.
A seller has listed her home with a broker for $190,000. The listing broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation,
A)
any broker is authorized by the listing contract to encourage such bids for the property.
Incorrect Answer
B)
the broker acted properly to obtain a quick offer on the property.
Incorrect Answer
C)
the broker has violated his fiduciary relationship with the seller.
Correct Answer
D)
the broker’s action was unethical but not illegal.
Incorrect Answer
Explanation
The agent has a fiduciary responsibility to respect the confidentiality of his client. Agents may not reveal confidential items such as the principal’s willingness to accept less than the list price or the seller’s anxiousness to sell unless the principal has authorized the disclosure. In this case, the broker’s actions might be considered illegal under some state laws and by a court of law. Under the common law of agency, a broker is not authorized to encourage an offer lower than the listing price without specific instructions from the seller, even if to do so would obtain a quicker offer on the property.
Reference: Agency Relationship > Agent’s Duties to Clients
After signing a listing contract with a homeowner, the owner tells the listing agent that because his home is in such good condition, he does not want the home sold to any buyers with small children. The agent takes the listing and obeys the owner’s instructions by not showing the home to any buyers with small children. He discourages other agents from showing the home to families by telling them the home is not suitable for a family. Are the agent’s actions legal?
A)
No, because fair housing laws do not exempt any property from being marketed to families.
B)
Yes, because an agent may choose to whom to market a home she has listed.
C)
No, because refusing to show a property to buyers with families violates fair housing laws.
D)
Yes, because the agent has obeyed the owner’s instructions.
After signing a listing contract with a homeowner, the owner tells the listing agent that because his home is in such good condition, he does not want the home sold to any buyers with small children. The agent takes the listing and obeys the owner’s instructions by not showing the home to any buyers with small children. He discourages other agents from showing the home to families by telling them the home is not suitable for a family. Are the agent’s actions legal?
A)
No, because fair housing laws do not exempt any property from being marketed to families.
Incorrect Answer
B)
Yes, because an agent may choose to whom to market a home she has listed.
Incorrect Answer
C)
No, because refusing to show a property to buyers with families violates fair housing laws.
Correct Answer
D)
Yes, because the agent has obeyed the owner’s instructions.
Incorrect Answer
Explanation
Federal and state fair housing laws prohibit discrimination against families in the marketing and selling of residential homes. Some residential properties are exempted if they meet specific requirements for senior housing. The agent’s duty of obedience does not require agents to obey unlawful or unethical instructions from their client.
Reference: Agency Relationship > Agent’s Duties to Clients
The principal to whom an agent gives professional opinions and counsel is
A)
a client.
B)
a fiduciary.
C)
a subagent.
D)
a customer.
The principal to whom an agent gives professional opinions and counsel is
A)
a client.
Correct Answer
B)
a fiduciary.
Incorrect Answer
C)
a subagent.
Incorrect Answer
D)
a customer.
Incorrect Answer
Explanation
The client is the principal to whom the agent owes fiduciary duties. The customer is the third party or nonrepresented consumer for whom some level of service is provided and who is entitled to fairness and honesty. A subagent is the agent of a person already acting as an agent for the client.
Reference: Agency Relationship > Agent’s Duties to Clients
A seller has listed a property under an exclusive agency listing with a broker. If the seller sells the property personally during the term of the listing to someone who learns about the property through the seller, the seller will owe the broker
A)
a partial commission.
B)
the full commission.
C)
no commission.
D)
only reimbursement for the broker’s costs.
A seller has listed a property under an exclusive agency listing with a broker. If the seller sells the property personally during the term of the listing to someone who learns about the property through the seller, the seller will owe the broker
A)
a partial commission.
Incorrect Answer
B)
the full commission.
Incorrect Answer
C)
no commission.
Correct Answer
D)
only reimbursement for the broker’s costs.
Incorrect Answer
Explanation
In an exclusive agency listing, if the property is sold by the seller, the brokerage will receive no commission. Only the exclusive right-to-sell listing earns the listing broker any commission if someone else sells the property during the term of the agreement.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
The law of agency is a common-law concept. As common law, it is
A)
enacted by a legislatures and other governing bodies.
B)
may not be superseded by statutory law.
C)
legal doctrine that is formed from common sense and usual practices.
D)
part of a body of law established by tradition and court decisions.
The law of agency is a common-law concept. As common law, it is
A)
enacted by a legislatures and other governing bodies.
Incorrect Answer
B)
may not be superseded by statutory law.
Incorrect Answer
C)
legal doctrine that is formed from common sense and usual practices.
Incorrect Answer
D)
part of a body of law established by tradition and court decisions.
Correct Answer
Explanation
The law of agency is law from judgments and decrees as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
Which statement BEST explains the meaning of this sentence: To enforce a commission for brokerage services, a broker must be employed as the agent of the client?
A)
The broker must work in a real estate office.
B)
The broker must have a written contract to provide brokerage services for the client.
C)
The broker must express an interest in representing the client.
D)
The broker must have a salesperson employed in the office.
Which statement BEST explains the meaning of this sentence: To enforce a commission for brokerage services, a broker must be employed as the agent of the client?
A)
The broker must work in a real estate office.
Incorrect Answer
B)
The broker must have a written contract to provide brokerage services for the client.
Correct Answer
C)
The broker must express an interest in representing the client.
Incorrect Answer
D)
The broker must have a salesperson employed in the office.
Incorrect Answer
Explanation
A broker’s contract of employment by a client is the brokerage services agreement (a listing or buyer representation contract) signed by the parties. A valid expressed written listing is one of the usual requirements in a suit for a brokerage commission; it is proof of employment.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
According to its state’s laws, a brokerage firm is allowed to have an agency relationship with only one party in the same transaction. This relationship is known as
A)
disclosed dual agency.
B)
single agency.
C)
designated agency.
D)
exclusive buyer agency.
According to its state’s laws, a brokerage firm is allowed to have an agency relationship with only one party in the same transaction. This relationship is known as
A)
disclosed dual agency.
Incorrect Answer
B)
single agency.
Correct Answer
C)
designated agency.
Incorrect Answer
D)
exclusive buyer agency.
Incorrect Answer
Explanation
In single agency, the agent represents only one party in any single transaction. Designated agency exists when a brokerage acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. In an exclusive buyer agency relationship, the agent represents the buyer and is entitled to a commission, regardless of whether or not the agent actually locates the property purchased by the buyer.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
A seller listed his residence with a broker with a contract that agreed to pay the broker a 5% commission. Within several weeks, the broker brought an offer at full listing price and the terms of the listing from buyers ready, willing, and able to pay cash for the property. However, the seller rejected the buyers’ offer. In this situation, the seller
A)
owes a commission to the broker.
B)
must sell his property.
C)
is liable to the buyers for compensatory damages.
D)
is liable to the buyers for specific performance.
A seller listed his residence with a broker with a contract that agreed to pay the broker a 5% commission. Within several weeks, the broker brought an offer at full listing price and the terms of the listing from buyers ready, willing, and able to pay cash for the property. However, the seller rejected the buyers’ offer. In this situation, the seller
A)
owes a commission to the broker.
Correct Answer
B)
must sell his property.
Incorrect Answer
C)
is liable to the buyers for compensatory damages.
Incorrect Answer
D)
is liable to the buyers for specific performance.
Incorrect Answer
Explanation
The listing contract is a binding agreement on both the seller and the broker. While the seller may refuse to sell the home to the buyer, he owes a commission to the broker, according to the listing contract. The seller is not liable to the buyers because the seller has not signed any agreement with the buyers.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
A buyer signed a listing contract and agreed to pay the buyer’s brokerage firm when the buyer purchased any property. The buyer signed
A)
a buyer agency disclosure form.
B)
an exclusive buyer agency contract.
C)
an open buyer contract.
D)
an exclusive agency buyer contract.
A buyer signed a listing contract and agreed to pay the buyer’s brokerage firm when the buyer purchased any property. The buyer signed
A)
a buyer agency disclosure form.
Incorrect Answer
B)
an exclusive buyer agency contract.
Correct Answer
C)
an open buyer contract.
Incorrect Answer
D)
an exclusive agency buyer contract.
Incorrect Answer
Explanation
The buyer signed an exclusive buyer agency contract, which states that whenever the buyer purchases the property described in the contract, the buyer’s brokerage firm will be paid. An exclusive agency and open listing would let the buyer purchase properties the broker had not shown them, and the buyer would not be obligated to pay the brokerage firm.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Which of these events will terminate the agency relationship between the brokerage and the seller?
A)
The owner dies.
B)
The owner abandons the property.
C)
The broker appoints other salespeople to help sell the property.
D)
The broker discovers that the market value of the property is such that the broker will not make an adequate commission.
Which of these events will terminate the agency relationship between the brokerage and the seller?
A)
The owner dies.
Correct Answer
B)
The owner abandons the property.
Incorrect Answer
C)
The broker appoints other salespeople to help sell the property.
Incorrect Answer
D)
The broker discovers that the market value of the property is such that the broker will not make an adequate commission.
Incorrect Answer
Explanation
The common law of agency holds that the death of either the broker or the seller ends the agency relationship created by the listing. The market value of the property does not affect the agency relationship, and the broker may assign other agents to help sell listed property. An owner abandoning property does not terminate an agency relationship but could result in termination if the property is taken over by a third party, such as a lending institution in the event of the owner’s bankruptcy or a foreclosure proceeding.
Reference: Agency Relationship > Termination of Agency
The seller’s property disclosure form yields which of these benefits for the transaction?
A)
The disclosure form informs the buyer as to which defects exist.
B)
The disclosure form provides a basis for further investigation by the buyer.
C)
The form allows the buyer to make an informed decision about buying the property.
D)
It gives the buyer full knowledge of all issues with the property.
The seller’s property disclosure form yields which of these benefits for the transaction?
A)
The disclosure form informs the buyer as to which defects exist.
Incorrect Answer
B)
The disclosure form provides a basis for further investigation by the buyer.
Incorrect Answer
C)
The form allows the buyer to make an informed decision about buying the property.
Incorrect Answer
D)
It gives the buyer full knowledge of all issues with the property.
Correct Answer
Explanation
The seller’s property disclosure does not act as an inspection and gives the buyer full knowledge of the seller’s representation of the issues asked on the form. The seller’s property disclosure form provides all the benefits shown for the buyer. It also may provide a more concrete basis for litigation if the buyer can determine that a seller filled out the form incorrectly or failed to disclose a defect the seller knew was material to the transaction.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A contract that secures the employment of a brokerage firm to find a ready, willing, and able buyer for a seller is
A)
an escrow contract.
B)
a sales contract.
C)
a listing contract.
D)
an option contract.
A contract that secures the employment of a brokerage firm to find a ready, willing, and able buyer for a seller is
A)
an escrow contract.
Incorrect Answer
B)
a sales contract.
Incorrect Answer
C)
a listing contract.
Correct Answer
D)
an option contract.
Incorrect Answer
Explanation
A listing contract is a personal service contract securing the employment of a brokerage firm to find a ready, willing, and able buyer for a seller. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
The principal in a real estate transaction is
A)
a facilitator to the transaction.
B)
the client of the brokerage.
C)
the customer of the agent.
D)
the subagent to the client.
The principal in a real estate transaction is
A)
a facilitator to the transaction.
Incorrect Answer
B)
the client of the brokerage.
Correct Answer
C)
the customer of the agent.
Incorrect Answer
D)
the subagent to the client.
Incorrect Answer
Explanation
The principal in a real estate transaction is the individual who hires the brokerage and delegates to the firm the responsibility of representing the principal’s interest in the transaction. The customer is the third party or nonrepresented consumer in the transaction. A facilitator is a middleman between a buyer and a seller who assists one or both parties without fiduciary obligations to either. A subagent is an agent of the agent. Salespersons and broker associates who work for a brokerage are considered agents of the principal broker and subagents of the principal.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
Information that is important to buyers that could change their decision to purchase a property is known as
A)
a physical defect.
B)
a latent defect.
C)
a material fact.
D)
an observable defect.
Information that is important to buyers that could change their decision to purchase a property is known as
A)
a physical defect.
Incorrect Answer
B)
a latent defect.
Incorrect Answer
C)
a material fact.
Correct Answer
D)
an observable defect.
Incorrect Answer
Explanation
A material fact is any fact relevant to a person making a decision to buy a property. A latent defect is a hidden structural defect usually resulting from faulty construction that is known to a seller but not readily discoverable by inspection.
Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity
A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm’s listings in the past month. One of the buyers makes an attractive offer on the woman’s home without even seeing the property. The broker goes to the woman’s house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker?
A)
Express agency
B)
General agency
C)
Implied agency
D)
Universal agency
A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm’s listings in the past month. One of the buyers makes an attractive offer on the woman’s home without even seeing the property. The broker goes to the woman’s house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker?
A)
Express agency
Incorrect Answer
B)
General agency
Incorrect Answer
C)
Implied agency
Correct Answer
D)
Universal agency
Incorrect Answer
Explanation
The homeowner and the broker did not have an oral or written agency contract, but the broker’s actions implied to prospective buyers that the broker was acting as the homeowner’s agent. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
Regarding a home warranty program, a real estate licensee’s BEST business practice would be to advise the buyer or the seller to
A)
purchase a home warranty with the property because it covers title defects.
B)
avoid the purchase of a home warranty because the property passed the home inspection.
C)
purchase a home warranty with the property because it covers electrical and heating systems.
D)
avoid the purchase of a home warranty with the property since it is too costly.
Regarding a home warranty program, a real estate licensee’s BEST business practice would be to advise the buyer or the seller to
A)
purchase a home warranty with the property because it covers title defects.
Incorrect Answer
B)
avoid the purchase of a home warranty because the property passed the home inspection.
Incorrect Answer
C)
purchase a home warranty with the property because it covers electrical and heating systems.
Correct Answer
D)
avoid the purchase of a home warranty with the property since it is too costly.
Incorrect Answer
Explanation
A real estate licensee’s best business practice would be to advise the buyer or the seller to purchase a home warranty. A home warranty is a service contract that helps cover the cost of some unforeseen major repairs.
Reference: Agency Relationship > Agent’s Duties to Clients
In the middle of a national economic recession, a seller is desperate to sell a single-family residence. The home is located in a subdivision where several homes have been abandoned and others are in foreclosure. Given these neighborhood market conditions, the seller wants an agent highly motivated to procure a buyer. Therefore, the seller agrees to accept, as a fixed sum, an amount that will pay off the one outstanding mortgage on the property, with any additional proceeds from the sale going to the agent as the commission for the transaction. This is an example of
A)
a net listing.
B)
an underwater property.
C)
a subordination.
D)
a redemption.
In the middle of a national economic recession, a seller is desperate to sell a single-family residence. The home is located in a subdivision where several homes have been abandoned and others are in foreclosure. Given these neighborhood market conditions, the seller wants an agent highly motivated to procure a buyer. Therefore, the seller agrees to accept, as a fixed sum, an amount that will pay off the one outstanding mortgage on the property, with any additional proceeds from the sale going to the agent as the commission for the transaction. This is an example of
A)
a net listing.
Correct Answer
B)
an underwater property.
Incorrect Answer
C)
a subordination.
Incorrect Answer
D)
a redemption.
Incorrect Answer
Explanation
A net listing agreement is one where the seller sets a certain fixed net price, with anything over that amount going to the agent as the brokerage commission. It is illegal in some states because of the potential conflict of interest between an agent (who might push a seller to list a property at lower than market value) and a seller. However, in those states where it is still legal, this type of listing agreement may motivate an agent to find a buyer for a property. Redemption is a phase of the foreclosure process during which a defaulted borrower must pay off the entire outstanding mortgage and all late fees in order to save the property: There is nothing in the fact pattern to indicate the property is in foreclosure. An underwater property is one where the property is carrying more debt than its current market value. Here, however, the seller is hopeful that the sales price will both pay off the mortgage and pay the agent’s commission. Finally, a subordination is a way for lenders to artificially reorder the priority of liens: There is nothing in the question related to lien priority.
Reference: Agency Relationship > Net Listing (Conflict of Interest)
A seller purchased a single-family residence in 1970 for $76,000. When hiring a real estate broker, the seller told the broker that anything over $1,500,000 would be the broker’s compensation for finding a buyer. The broker agreed and wrote up the listing agreement accordingly. This is an example of
A)
an exclusive right-to-sell listing agreement.
B)
a net listing agreement.
C)
a competitive market analysis (CMA).
D)
an exclusive agency listing agreement.
A seller purchased a single-family residence in 1970 for $76,000. When hiring a real estate broker, the seller told the broker that anything over $1,500,000 would be the broker’s compensation for finding a buyer. The broker agreed and wrote up the listing agreement accordingly. This is an example of
A)
an exclusive right-to-sell listing agreement.
Incorrect Answer
B)
a net listing agreement.
Correct Answer
C)
a competitive market analysis (CMA).
Incorrect Answer
D)
an exclusive agency listing agreement.
Incorrect Answer
Explanation
The net listing agreement is used when the seller states that anything over a specific dollar amount will be the compensation the broker will earn for selling the property. This type of listing agreement is illegal in multiple states. Even where it is legal, the net listing is discouraged because of the possibility for the more knowledgeable broker to take advantage of an uninformed member of the public. A CMA provided by a real estate licensee to clients analyzes recent sales and listings to help sellers set a reasonable list price and help buyers make an informed offer: It is not a type of listing agreement. The exclusive right-to-sell and the exclusive agency listing agreements typically express brokerage firm compensation as a percentage of the sales price.
Reference: Agency Relationships > Net Listing (Conflict of Interest)
A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do?
A)
Submit both offers at the same time.
B)
Submit the offer from his salesperson first.
C)
Submit the offer from the other salesperson first.
D)
Submit the higher offer first.
A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do?
A)
Submit both offers at the same time.
Correct Answer
B)
Submit the offer from his salesperson first.
Incorrect Answer
C)
Submit the offer from the other salesperson first.
Incorrect Answer
D)
Submit the higher offer first.
Incorrect Answer
Explanation
An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespersons from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received.
Reference: Agency Relationship > Agent’s Duties to Clients
Unless some other written agreement has been made, the brokerage will usually receive the brokerage commission when
A)
the seller lists the property with the broker.
B)
the transaction is closed.
C)
the purchaser takes possession of the property.
D)
an offer, procured from a ready, willing, and able buyer, has been accepted by the seller.
Unless some other written agreement has been made, the brokerage will usually receive the brokerage commission when
A)
the seller lists the property with the broker.
Incorrect Answer
B)
the transaction is closed.
Correct Answer
C)
the purchaser takes possession of the property.
Incorrect Answer
D)
an offer, procured from a ready, willing, and able buyer, has been accepted by the seller.
Incorrect Answer
Explanation
Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing.
Reference: Agency Relationship > Termination of Agency
A listing contract in which payment of the commission is contingent on the broker’s being able to produce a buyer before the property is sold by the owner or another broker is called
A)
an exclusive agency listing.
B)
an exclusive right-to-sell listing.
C)
a net listing.
D)
an open listing.
A listing contract in which payment of the commission is contingent on the broker’s being able to produce a buyer before the property is sold by the owner or another broker is called
A)
an exclusive agency listing.
Incorrect Answer
B)
an exclusive right-to-sell listing.
Incorrect Answer
C)
a net listing.
Incorrect Answer
D)
an open listing.
Correct Answer
Explanation
In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An exclusive agency listing provides that the brokerage firm and the co-op broker will be paid unless the seller sells the property on his own.
Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest
Which of these would be considered dual agency?
A)
A broker listing and then selling the same property
B)
A broker representing more than one seller
C)
A broker acting for both the landlord and the tenant in the same transaction
D)
Two brokerage companies cooperating with each other
Which of these would be considered dual agency?
A)
A broker listing and then selling the same property
Incorrect Answer
B)
A broker representing more than one seller
Incorrect Answer
C)
A broker acting for both the landlord and the tenant in the same transaction
Correct Answer
D)
Two brokerage companies cooperating with each other
Incorrect Answer
Explanation
In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the tenant or buyer and either the agent or subagent of the landlord or seller. Brokerage companies cooperate with each other through multiple listing services and other agreements. Brokerage companies represent many sellers through different listing agreements in which the broker agrees to represent the sellers in selling their properties.
Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships
