PRINCIPLES AND PRACTICES CHP8

Question 1

What is another word for principal?

A. agent

B. client

C. customer

D. fiduciary

Answer 1

B. client

Question 2

Leroy has power of attorney to care for all aspects of his sister’s life while the sister is serving in the military overseas. He handles her bills, signs legal papers, and even takes on the task of selling his sister’s house. What sort of agency authority does he have?

A. general agent

B. limited agent

C. special agent

D. universal agent

Answer 2

D. universal agent

Question 3

A licensee who works for broker Charles at ABC Realty, Inc. would be considered what type of agent of the broker?

A. general agent

B. special agent

C. universal agent

D. This does not describe an agency relationship.

Answer 3

A. general agent

Question 4

Jack and Jill sign a contract with XYZ Real Estate to represent them in their search for the perfect house. They intend for the seller to compensate XYZ. What type of agency situation does this represent?

A. indirect agency

B. implied agency

C. express agency

D. tacit agency

Answer 4

C. express agency

Question 5

A potential home buyer is chatting with a broker. Of the information the prospect shares with the broker, which is LEAST LIKELY to be considered confidential?

A. their current address

B. their reason for house hunting

C. their price range

D. the terms of their divorce

Answer 5

A. their current address

Question 6

A licensee learns that their seller client highly motivated and would be happy to receive an offer for much less than market value. The licensee decides to make a cash offer for the seller’s list price that the seller accepts. The licensee then sells the property for market value. Which duty has the licensee breached?

A. confidentiality

B. disclosure

C. obedience

D. no breach has occurred

Answer 6

B. disclosure

Question 7

A woman lists her home for sale with a real estate agent for $300,000. At an open house, a buyer asks the agent what the seller’s bottom line is. The agent says the seller won’t consider any offer under $295,000. The buyer offers $295,000, and the seller accepts. Which is CORRECT?

A. The agent did not violate any fiduciary duties because the seller’s bottom line is not confidential information.

B. The agent engaged in self-dealing to close the deal quickly, violating fiduciary duties owed to the client.

C. The agent fulfilled the fiduciary duties to the seller
by negotiating a successful real estate transaction.

D. The agent violated the duties of loyalty and confidentiality by telling the buyer the lowest acceptable offer price.

Answer 7

D. The agent violated the duties of loyalty and confidentiality by telling the buyer the lowest acceptable offer price.

Question 8

A licensee hosts an open house for a seller client of their brokerage. A prospective buyer visiting the open house wants to make an offer but declines to enter into an agency relationship. What duty does the agent owe to the buyer?

A. honesty

B. loyalty

C. obedience

D. none, the buyer is not a client

Answer 8

A. honesty

Question 9

A buyer asks the buyer’s agent to write an offer on terms that don’t match the listing agreement. The buyer’s agent refuses to write the offer and then, in writing, unilaterally terminates the agency relationship with the buyer. Which is TRUE?

A. The buyer’s agent will be subject to disciplinary action.

B. The buyer’s agent is permitted to unilaterally terminate the agency relationship.

C. The buyer’s agent is allowed to terminate the agency but must write the offer before terminating.

D. The buyer’s agent is not permitted to write such an offer.

Answer 9

B. The buyer’s agent is permitted to unilaterally terminate the agency relationship.

Question 10

A listing agent’s seller client countered a buyer’s offer with an offer for $5,000 below the list price. The buyer found a different house. The listing agreement expired, and now the house is listed with a different brokerage. The original listing agent has a buyer client who wants to make an offer on the house. Can the agent tell the buyer that the seller would accept $5,000 below list price? Why or why not?

A. No, the agent’s negotiations on behalf of a former seller client are confidential.

B. Yes, the agent has a duty to close the transaction as quickly as possible.

C. Yes, the agent must act in the current buyer client’s best interest.

D. Yes, the agent’s relationship with the seller ended when the listing expired.

Answer 10

A. No, the agent’s negotiations on behalf of a former seller client are confidential.

Question 11

Of these, which agency termination is due to an operation of law?

A. The listing broker abandons the seller before the listing period ends.

B. The listing broker does not find a buyer before the listing period ends.

C. The listing broker sells the house.

D. The seller dies before the listing period ends.

Answer 11

D. The seller dies before the listing period ends.

Question 12

The seller tells the buyer’s agent the home has never had a problem with flooding, but when touring the home, the buyer’s agent noticed a mildew smell in the basement. The buyer’s agent should

A. advise the buyer that the smell may be a sign of previous flooding and recommend further inquiries.

B. contact the seller directly to ask about the source of the smell.

C. instruct the buyer to stop considering the property and look elsewhere.

D. say nothing because the seller indicated that there were no flooding issues.

Answer 12

A. advise the buyer that the smell may be a sign of previous flooding and recommend further inquiries.

Question 13

The broker of ACE Realty appoints one associated licensee to work with a seller client and a different associated licensee to work with the buyer client in the same transaction. The associated licensees are MOST LIKELY ___ agents.

A. delegated

B. designated

C. dual

D. single

Answer 13

B. designated

Question 13

Which of these situations would LEAST LIKELY trigger the need to discuss agency relationships?

A. a home show when someone stops by the booth and picks up marketing materials

B. an initial listing appointment where you inspect the property and start to learn about the seller

C. an open house when a prospective buyer begins to
express serious interest in the property

D. in your office when someone comes in off the street and asks to look at one of your listings

Answer 13

A. a home show when someone stops by the booth and picks up marketing materials

Question 14

Top Realty signs a property management agreement with Campus Apartment Rentals (CAR). Do they have an agency agreement and, if so, what scope of authority would they have?

A. No, to create an agency relationship, they would have to sign a listing agreement.

B. No, CAR has only hired Top to manage the properties, not be its agent.

C. Yes, CAR has hired Top to be a general agent.

D. Yes, CAR has hired Top to be a special agent.

Answer 14

C. Yes, CAR has hired Top to be a general agent.

Question 15

Which agency relationship requires the written consent of both parties to the transaction?

A. buyer’s agency

B. dual agency

C. seller’s agency

D. transactional brokerage

Answer 15

B. dual agency

Question 16

A home is built on a lot where an old underground storage tank is buried. The current owner knows about the tank but has never had any problems with it. When they sell the house, the owner tells the listing agent, but neither of them mentions it to the buyer since it hasn’t been an issue. Two years later, corrosion from the tank contaminates the well water on the property. Who, if anyone, can the new owner sue?

A. the listing agent

B. the seller

C. both the seller and the listing agent

D. neither the listing agent nor the seller

Answer 16

C. both the seller and the listing agent

Question 17

The buyers ask a listing agent about a rumor they’ve heard about a sex offender living in the neighborhood. The agent should

A. deny it because they are the seller’s agent.

B. inform the buyers where this kind of information can be verified.

C. research the question and report back to the buyers.

D. tell the seller they must disclose this information to the buyers.

Answer 17

B. inform the buyers where this kind of information can be verified.

Question 18

Which is the best definition of a material fact?

A. a defect that could affect the buyer’s possibility of receiving clear title

B. a defect that is not readily apparent or visible

C. knowledge that can be discovered only through physical inspection of the property

D. knowledge that would affect a buyer’s decision whether or not to buy

Answer 18

D. knowledge that would affect a buyer’s decision whether or not to buy

Question 19

A licensee has worked long hours with a buyer client to negotiate an agreement to buy a house. A day before closing, the buyer tells the agent that they just lost their job and they are sure that the mortgage won’t close. However, they do not want to abandon the deal yet, just in case it does. What should the buyer’s agent do?

A. The agent cannot disclose this information without breaching their fiduciary duty of confidentiality.

B. The agent must disclose this information as it is a material fact.

C. The agent must follow the client’s lawful orders and let things stand for the time being.

D. The agent should ask their employing broker to terminate the agency agreement with the buyer.

Answer 19

B. The agent must disclose this information as it is a material fact.