PSI Exam Prep: General Principles of Agency

Question 1

it is someone who uses or purchases a product or service.

Answer 1

A consumer

Question 2

it is someone who’s working with a real estate licensee but who isn’t represented by that licensee (nor owed the full range of agency responsibilities)

Answer 2

A customer. the customer may or may not be represented by another licensee.

Question 3

it is usually the party to the transaction who is represented

Answer 3

A principal (the client)

Question 4

it is someone in a position of trust who owes loyalty to another.

Answer 4

A fiduciary

Question 5

it is someone who acts on behalf of someone else.

Answer 5

An agent

Question 6

he/she has broad authority to act for the principal, such as someone who has power of attorney.

Answer 6

A universal agent

Question 7

she/he has limited authority to act on a client’s behalf, such as a real estate agent or an escrow officer. This type of agent can’t bind a client to a contract.

Answer 7

A special agent (aka limited agent)

Question 8

she/he is responsible for handling all dealings in a given area for a client, such as a property manager. This type of agent may bind a client to a contract.

Answer 8

A general agent

Question 9

it is when a licensee represents one party, either the buyer or the seller, in a transaction. it don’t permit licensees to engage in dual agency, even if the state permits it.

Answer 9

Single agency

Question 10

it is the representation of both the buyer and the seller in the same transaction.

Answer 10

Dual agency

Question 11

it is when a single licensee represents both the buyer and the seller in the same transaction.

Answer 11

Single licensee dual agency

Question 12

it is when two separate licensees from a single firm each represent one party (buyer or seller) in the same transaction.

Answer 12

Designated/appointed agency (aka dual-licensed dual agency)

Question 13

What are the two duties almost impossible to deliver in a dual agency situation?

Answer 13

Loyalty and confidentiality

Question 14

a licensee who provides real estate services to a buyer while actually representing the seller in a real estate transaction.

Answer 14

Sub-agent (sub-agency)

Question 15

the licensee doesn’t represent the consumer in an agency capacity but instead provides non-agency assistance that doesn’t require the licensee to exercise judgment or discretion

Answer 15

Non-agency relationships

Question 16

What are other names for non-agency relationship?

Answer 16

transactional or facilitator roles

Question 17

What are the 6 fiduciary responsibilities a licensee have? (OLD CAR)

Answer 17

Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable skill and care

Question 18

it means following a client’s lawful instructions. Licensees may not obey a client’s illegal or unethical instructions.

Answer 18

Obedience

Question 19

it means putting your client’s interests ahead of others, including your own. It also means working in the client’s best interests.

Answer 19

Loyalty

Question 20

any information that could harm your client’s negotiating position in a transaction. This includes your client’s motivations, time frames, willingness to settle for terms/price other than those offered, and any other information your client deems confidential (unless disclosure is required by law).

Answer 20

Confidentiality

Question 21

it means that you must disclose to your client any facts that are relevant to the transaction (aka material facts; e.g., any information, including agency-related information, that might have an impact on the transaction).

Answer 21

Disclosure

Question 22

it means proper handling of client property, which includes keys, funds, paperwork, and the property itself. This means no commingling or conversion of the earnest money, among other requirements.

Answer 22

Accounting

Question 23

it requires agents to operate within the scope of their expertise and advise clients to seek expert advice on matters that are outside of the agent’s scope of knowledge

Answer 23

Reasonable skill and care

Question 24

What are the two duties that continues even after the agency relationship terminates?

Answer 24

Confidentiality and Accounting

Question 25

is an agency relationship that’s understood and agreed to by the parties. Spoken or written words create this agency.

Answer 25

express agency

Question 26

Actions of the parties may create this type of agency. It should be avoided

Answer 26

Implied Agency

Question 27

it is acceptance after the fact, either through signing paperwork or through the parties’ actions.

Answer 27

Ratification

Question 28

prevents one party from suing another, because the party’s actions or statements implied that he or she agreed with the other party; In other words, so that later on no one can deny you were in an implied agency

Answer 28

Estoppel

Question 29

When does agency is created?

Answer 29

solely through the agency agreement—not through compensation

Question 30

it is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price. these listings are illegal in most jurisdictions because they create a conflict of interest and encourage unethical behavior such as trying to sell a property for more than its value.

Answer 30

net listing

Question 31

it allow only one brokerage to market and sell the property. However, if the seller finds her own buyer, she doesn’t pay commission to the brokerage.

Answer 31

Exclusive agency agreements

Question 32

provides the listing agent with a commission no matter who brings the buyer to the transaction. it includes definite start and end dates.

Answer 32

Exclusive right-to-sell agreements

Question 33

it allow the seller to work with multiple agents. They don’t always result in a listing agent earning a commission, as only the agent who successfully brings a buyer will be paid.

Answer 33

Open listing agreements

Question 34

it allow the buyer to work with many agents during the home search process. If a buyer enters into an exclusive agreement with a broker, any open agreements are terminated.

Answer 34

Non-exclusive/open buyer representation agreements

Question 35

it means that the agent has some form of ownership of, security interest in, or possession of the principal’s property. The agent’s compensation depends on continuance of the agency agreement

Answer 35

Agency coupled with interest

Question 36

What four duties do you owe to other people? (other than your clients)

Answer 36

honesty, integrity, fairness, and accounting.

Question 37

what are two major duties you owe to third parties?

Answer 37

cooperating and disclose material facts

Question 38

How agency contracts be terminated?

Answer 38

expiration, completion, force of law, through destruction or death, and by mutual agreement.

Question 39

it is a situation where a single licensee represents both the buyer and seller in a given transaction with informed consent in place, the broker’s permission, and the state’s blessing.

Answer 39

single license dual agency

Question 40

can principal brokers let anyone use their license even with a POA?

Answer 40

NO!!

Question 41

What are the similarities between an open and exclusive agreement?

Answer 41

If the seller finds the buyer, commissions will not be owed to the broker

Question 42

You represent the buyer in one transaction and the seller in a different transaction. What type of agency relationship do you have with the buyer?

Answer 42

Buyer agency

Question 43

Bernie represented Oscar in the sale of Oscar’s home. They signed an exclusive right-to sell-listing agreement. If Oscar were able to find his own buyer, would he owe Bernie a commission?

Answer 43

Yes, because “exclusive right to sell” means Bernie gets paid no matter who finds the buyer.

Question 44

Which type of agent is an escrow officer?

Answer 44

An escrow officer works in limited agency capacity.

Question 45

Leigh Ann is a licensee. Her cousin, Carly, is interested in buying a house. Leigh Ann shows Carly how to look for properties online and runs some CMAs for her. When Carly finds a property she likes and asks Leigh Ann to help her make the offer, Leigh Ann decides she should ratify the agreement with Carly. What are Leigh Ann’s options for accepting an agency relationship after the fact?

Answer 45

Prepare an agency agreement or continue to assist Carly with the purchase.

Question 46

Describe the type of agents

Answer 46

Universal Agent: Power, usually appointed by courts
General Agent: Ongoing business, businesswise
Special Agent: Limited to certain role

Question 47

You represent the buyer and seller in the same transaction. What type of agency relationship do you have with your clients?

Answer 47

Disclosed limited agency

Question 48

Ratification means

Answer 48

“affirming something after the fact”

Question 49

Which clause in the listing agreement gives the listing broker the authority and obligates the broker to market the property to other brokers?

Answer 49

Multiple listing clause

Question 50

Which of the following is a common element of a buyer representation agreement?

Answer 50

Description of the property being sought

Question 51

Which of the following is the most common type of buyer representation agreement?

Answer 51

Exclusive right-to-represent agreement

Question 52

Licensee Kennie Mae’s neighbor, Buzz, wants to sell his house but doesn’t want to sign an agency agreement. Kennie Mae works with Buzz to list and show the property and negotiate offers. After the property sells, Buzz discovers that Kennie Mae didn’t present all offers to him, and he sues Kennie Mae. Kennie Mae claims that because she didn’t have an agency agreement with Buzz, she wasn’t required to perform all fiduciary duties. What legal principle applies here?

Answer 52

The doctrine of estoppel prohibits an individual from making an assertion that’s in opposition to actions or to a previous statement. Kennie Mae acted as if she was Buzz’s agent, so she can’t later disavow that behavior.