SU # 07__Agency Laws

Question 1

The essence of the agency relationship between an agent and a principal can best be described as a relationship of

a. mutual consent, consideration, and acceptance.
b. diligence, results, and compensation.
c. service, dignity, and respect.
d. trust, confidence, and good faith.

Answer 1

d. trust, confidence, and good faith.

Question 2

In an agency relationship, the principal is required to

a. promote the agent’s best interests.
b. accept the advice of the agent.
c. provide sufficient information for the agent to complete the agent’s tasks.
d. maintain confidentiality

Answer 2

c. provide sufficient information for the agent to complete the agent’s tasks.

Question 3

A principal empowers an agent to conduct the ongoing activities of one of her business enterprises. This is an example of

a. limited agency.
b. general agency.
c. universal agency.
d. special agency.

Answer 3

b. general agency.

Question 4

A property seller empowers an agent to market and sell a property on his behalf. This is an example of

a. general agency.
b. special agency.
c. universal agency.
d. no agency.

Answer 4

b. special agency.

Question 5

Implied agency arises when

a. an agent accepts an oral listing.
b. a principal accepts an oral listing.
c. a party creates an agency relationship outside of an express agreement.
d. a principal agrees to all terms of a written listing agreement, whether express or implied.

Answer 5

c. a party creates an agency relationship outside of an express agreement.

Question 6

An agency relationship may be involuntarily terminated for which of the following reasons?

a. Death or incapacity of the agent
b. Mutual consent
c. Full performance
d. Renewal of the agent’s license

Answer 6

a. Death or incapacity of the agent

Question 7

A principal discloses that she would sell a property for $375,000. During the listing period, the house is marketed for $425,000. No offers come in, and the listing expires. Two weeks later, the agent grumbles to a customer that the seller would have sold for less than the listed price. Which of the following is true?

a. The agent has violated the duty of confidentiality.
b. The agent has fulfilled all fiduciary duties, including confidentiality, since the listing had expired.
c. The agent is violating the duties owed this customer.
d. The agent has created a dual agency situation with the customer.

Answer 7

a. The agent has violated the duty of confidentiality.

Question 8

A principal instructs an agent to market a property only to families on the north side of town. The agent refuses to comply. In this case,

a. the agent has violated fiduciary duty.
b. the agent has not violated fiduciary duty.
c. the agent is liable for breaching the listing terms.
d. the agent should obey the instruction to salvage the listing.

Answer 8

b. the agent has not violated fiduciary duty.

Question 9

An owner’s agent is showing a buyer an apartment building. The buyer notices water stains on the ceiling, and informs the agent. The agent’s best course of action is to

a. immediately contract to paint the ceiling.
b. immediately contract to repair the roof.
c. suggest the buyer make a lower-price offer.
d. inform the seller.

Answer 9

d. inform the seller.

Question 10

An agent owes customers several duties. These may be best described as

a. fairness, care, and honesty.
b. obedience, confidentiality, and accounting.
c. diligence, care, and loyalty.
d. honesty, diligence, and skill.

Answer 10

a. fairness, care, and honesty.

Question 11

An agent fails to discover flood marks on the walls in the basement of a property. The agent sells the property, and the buyer later sues the agent for failing to mention the problem. In this case, the agent

a. may be guilty of intentional misrepresentation.
b. has an exposure to a charge of negligent misrepresentation.
c. has little exposure, since the problem was not mentioned on the signed disclosure form.
d. is not vulnerable, since the problem was not discovered

Answer 11

b. has an exposure to a charge of negligent misrepresentation.

Question 12

An agent informs a buyer that a clause in a contract is standard language. After explaining the clause, the agent assures the buyer that the clause does not mean anything significant. If something goes wrong with the transaction, the agent could be liable for

a. violating duties owed a customer.
b. misinterpreting the clause.
c. intentional misrepresentation.
d. practicing law without a license

Answer 12

d. practicing law without a license

Question 13

An outside broker locates a seller for a buyer representative’s client. In this instance, the outside broker is acting as

a. a single agent.
b. a dual agent.
c. a subagent.
d. a secret agent

Answer 13

c. a subagent.

Question 14

Agent Bob, who works for Broker Bill, obtains an owner listing to lease a building. Bill’s other agent, Sue, locates a tenant for Bob’s listing. In the absence of any arrangement to the contrary, Broker Bill in this instance is

a. an implied agent.
b. a dual agent.
c. a single agent.
d. a subagent

Answer 14

b. a dual agent.

Question 15

An agent is operating as a disclosed dual agent on a transaction. In this case, the agent

a. may not represent one party’s interests to the detriment of the other.
b. must withdraw from the relationships.
c. must be obedient and loyal to both parties.
d. must require that the principals share equally in paying the commission

Answer 15

a. may not represent one party’s interests to the detriment of the other.

Question 16

The duties of an agent acting as a facilitator are most similar to those of a

a. subagent.
b. single agent.
c. dual agent.
d. implied agent

Answer 16

c. dual agent.

Question 17

The meaning and import of the agency relationship should be disclosed to the client

a. prior to completing a listing agreement.
b. prior to or upon completion of an offer.
c. upon the initial contact with the person.
d. whenever a dual agency relationship is indicated.

Answer 17

a. prior to completing a listing agreement.

Question 18

Owner agents must disclose their agency relationship to tenants or buyers

a. immediately prior to the initial contact.
b. upon initial contact.
c. whenever substantive contact is made.
d. immediately following any offer executed by the customer.

Answer 18

c. whenever substantive contact is made.

Question 19

A tenant representative should disclose his or her agency relationship to the owner’s agent

a. immediately prior to the initial contact.
b. upon initial contact.
c. immediately prior to substantive contact.
d. immediately following any offer executed by the landlord

Answer 19

b. upon initial contact.

Question 20

A transaction broker should disclose his or her agency relationship to the transaction principals

a. upon first substantive contact.
b. upon completion of the listing agreement.
c. immediately following completion of any offer.
d. upon initial contact of any kind.

Answer 20

a. upon first substantive contact.

Question 21

What two types of law govern agency? Define each

Answer 21

Common law – Societal rules and court decisions

Statutory law – Laws and rules enacted by legislatures and other governing bodies

Question 22

Define the term special agency.

Answer 22

The principal delegates authority to conduct a specific activity, after which the agency relationship terminates.

Question 23

What does the Illinois Administrative Code say about all exclusive brokerage agreements?

Answer 23

They must be in writing.

Question 24

What are licensees authorized to do when writing sales contracts?

Answer 24

Licensees are ONLY authorized to fill in blanks and make the appropriate deletions on already-printed form contracts used in the real estate industry.

Question 25

List three statutory duties a licensee has towards a client according to Illinois law.

Answer 25

Acting in accordance with the brokerage agreement.
Promoting the best interests of the client
Exercising skill and care in performing all duties

Question 26

What is considered to be confidential information?

Answer 26

Information obtained by a licensee from a client during the term of a brokerage agreement that was made confidential by the written request or written instruction of the client, deals with the negotiating position of the client, or is information which if disclosed could materially harm the negotiating position of the client.

Question 27

When may a licensee legally receive a rebate or incentive for giving a referral?

Answer 27

When it is associated with his or her own transaction.

Question 28

From whom may a licensee receive compensation?

Answer 28

His or her sponsoring broker ONLY

Question 29

Acts that a licensee may perform for a consumer, which are informative or clerical in nature and do not rise to the level of active representation on behalf of a consumer are known as:

Supervision

Ministerial acts

Fiduciary acts

Acts of non-licensure

Answer 29

Ministerial acts

Question 30

According to the Act, legal proceedings, against a license for a violation of the Act, must commence no later than ___________ years from the occurrence.

2

3

5

6

Answer 30

5

Question 31

Which of the following statements is true regarding compensation?

The sponsoring broker is the only one allowed to compensate his/her licensee.

Compensation must be disclosed to clients.

Compensation must always go from the seller or the buyer through the sponsoring broker to the licensee.

All of the above are true regarding compensation.

Answer 31

All of the above are true regarding compensation.

Question 32

Which of the following statements are correct?

A written document is needed to create agency.

A power of attorney is required to establish a special agent.

Compensation creates agency.

Compensation does not create agency.

Answer 32

Compensation does not create agency.

Question 33

Referral fees and bonuses for licensees are known as:

Compensation

Percentages

Commission

Finder fees

Answer 33

Compensation

Question 34

Which of the following describes a person who is not represented, but is receiving ministerial acts?

Shareholder

Salesperson

Customer

Broker

Answer 34

Customer

Question 35

The name of a case wherein it was determined that a real estate licensee can only fill in the blanks in a form provided by legal counsel is ______.

Smith vs. Johnson

Chicago Bar Association vs. Quinlan & Tyson, Inc.

Hulse vs. Criger

Link vs. Jones

Answer 35

Chicago Bar Association vs. Quinlan & Tyson, Inc.

Question 36

What is the type of agency created, when a licensee holds a stake in the transaction?

Agency of limited liability

Agency coupled with an interest

Freehold agency

Agency of contract

Answer 36

Agency coupled with an interest

Question 37

What is commonly referred to as “the Act” in Illinois real estate is actually:

The Real Estate License Act of 1983

The Real Estate License Act of 2000, as amended 12/31/2009

The IDFPR Act of 2000

The Real Estate Council Act of 1998

Answer 37

The Real Estate License Act of 2000, as amended 12/31/2009

Question 38

A written or oral agreement between a sponsoring broker & a consumer for licensed activities to be provided to a consumer in return for compensation / the right to receive compensation from another is called a:

Listing agreement

License by reciprocity agreement

Dual agency agreement

Brokerage agreement

Answer 38

Brokerage agreement

Question 39

The relationship between the licensee and a principal, during which the licensee is authorized to represent the principal in certain transactions, is known as:

Dual agency

Agency

Time-share agreement

Principality

Answer 39

Agency

Question 40

Which of the following forms of commission agreements is not recommended due to potential ethical issues?

Commission is the excess of the sale price over an agreed-upon (net) price

Flat fee

Hourly rate

Percentage of the transaction amount

Answer 40

Commission is the excess of the sale price over an agreed-upon (net) price

Question 41

Annie is a licensee. Which of the following entities can she receive referrals from and pay a referral fee?

Local banks

National home inspection companies

Attorneys

None of the above

Answer 41

None of the above

Question 42

What is the result when a licensee produces a ready, willing and able buyer, but the seller refused to complete the transaction?

The buyer is required to pay the commission.

The agency is required to pay the commission.

The licensee’s firm may be entitled to the commission.

The commission becomes null and void.

Answer 42

The licensee’s firm may be entitled to the commission.

Question 43

Seller Joe has told his agent Sam that if he sells his house within three weeks, he will give Sam a $500 bonus. What are the acceptable means by which Sam can be paid the bonus?

The bonus can be given to Sam directly.

The bonus is to be put into an escrow account, then given to Sam.

The bonus is to be given to Sam’s sponsoring broker and then passed on to Sam

Neither Sam nor the brokerage is allowed a bonus.

Answer 43

The bonus is to be given to Sam’s sponsoring broker and then passed on to Sam

Question 44

When is a licensee required to disclose third party sources of compensation to client?

The licensee is not required to disclose third party compensation.

Disclosure is required if based on brokerage office policy.

Disclosure is required if monies come from out of state sources.

As soon as known, third party compensation must be disclosed.

Answer 44

As soon as known, third party compensation must be disclosed.