Unit 2 Exam

Question 1

One who represents a client is known as an agent.

Answer 1

T

Question 2

In Tennessee, agency agreements may be verbal as long as they have the consent of all parties.

Answer 2

F

Question 3

Subagency and facilitator status are essentially the same thing.

Answer 3

F

Question 4

According to recent changes in license law, Tennessee licensees may no longer practice dual agency.

Answer 4

F

Question 5

One who is assisted by a facilitator is a customer.

Answer 5

T

Question 6

Licensees are obligated to disclose adverse facts.

Answer 6

T

Question 7

Under state license law, agency disclosure requirements apply to the sale of a single-family residence up to a four-family residence.

Answer 7

T

Question 8

All licensees who are members of the National Association of REALTORS® (NAR) must disclose their agency status in all aspects of real estate.

Answer 8

T

Question 9

Agents must disclose latent defects in a property even if they don’t know about them, just as adverse facts must be disclosed.

Answer 9

F

Question 10

Upon the termination of the agency, the duty of confidentiality terminates.

Answer 10

F

Question 11

If a licensee has an unrepresented buyer, agency must be disclosed immediately after the buyer’s offer has been prepared.

Answer 11

F

Question 12

A licensee owns a building inspection service and recommends that the buying client use her service for the home inspection. The licensee must disclose in writing that she owns the inspection service.

Answer 12

T

Question 13

An example of a market condition that could affect a transaction is an increase in the interest rate of a loan.

Answer 13

T

Question 14

Confidential information entrusted by a customer before agency disclosure must be kept confidential.

Answer 14

T

Question 15

A buyer engaged a broker to find a property. The parties agreed that if the broker found a property that fit the buyer’s specifications and price range, the buyer would pay the broker a finder’s fee. Two weeks later, the broker told the buyer that a seller had just listed a property with him that met all the buyer’s specifications. The buyer inspected the property and liked it.

Over a few days of negotiation, the sale was made and the broker collected a commission from the seller-client, as well as a finder’s fee from the buyer, which was not disclosed to the seller. The seller learned about the finder’s fee a few weeks later and filed a complaint charging the broker with duplicity and unprofessional conduct.

Did the broker do anything wrong?

Answer 15

The answer is yes. The fact that the broker intended to receive compensation from both parties should have been fully disclosed in advance in writing. (Source: NAR arbitration manual)

Question 16

A broker listed a parcel of land (A) with an open listing. An interested buyer said she would purchase the land if she could also purchase another adjacent parcel of land (B) not listed with the broker, but she asked the broker to contact the owners of the adjacent parcel to see whether they would sell.

The owners of B refused to deal with the listing agent of parcel A but agreed to sell directly to the buyer. The buyer contracted directly with B to purchase the land contingent upon the closing of the purchase of A. After both transactions closed, the owners of A filed suit against their agent claiming the agent had engaged in dual agency.

Did the broker do anything wrong?

Answer 16

The answer is no. A trial court found that the broker’s limited contact with the buyer in connection with the buyer’s purchase of the B property did not constitute agency representation and was done merely to further the sale of property A. (Court Case: Olsen v. Vail Associates)

Question 17

The Selling Broker represents who?

Answer 17

Buyer

Question 18

Listing Broker represents who?

Answer 18

Seller

Question 19

When an affiliate broker places a listing in the MLS and offers cooperation, it automatically offers compensation to the cooperating broker.

Answer 19

F

Question 20

A written and signed Confirmation of Agency Status with a seller stating that the licensee is the listing agent is the same thing as a listing contract.

Answer 20

F

Question 21

In a nonexclusive buyer agency agreement, the buyers may employ multiple brokers to represent their interest.

Answer 21

T

Question 22

Match the Following:

Subagent, Dual agent, Designated agent, Facilitator, Agent

A)
A licensee who represents a client

B)
An agent of an agent

C)
A licensee who assists one or more parties to a transaction, but does not represent any party

D)
A licensee representing two clients whose interests are adverse to each other in the same transaction

E)
The licensee appointed by the managing broker to be the firm’s exclusive representative of a client

Answer 22

Subagent = B

Dual agent = D

Designated agent = E

Facilitator = C

Agent = A

Question 23

When taking on a new buyer or seller, a good agency rule of thumb to follow is the rule of the four D’s. Put the four D’s in the proper order.

Document, Disclose, Do, Decide

Answer 23

Decide
Disclose
Document
Do

Question 24

Match the following:

Agent, Facilitator, Client, Subagent, Designated agent, Disclosed dual agency

A)
Licensee who represents nobody

B)
One affiliate giving representation

C)
Consumer represented by a licensee

D)
Everyone in the firm represents buyer and seller

E)
Agent with buyer who represents the seller

F)
Licensee who represents a client

Answer 24

Agent = F

Facilitator = A

Client = C

Subagent = E

Designated agent = B

Disclosed dual agency = D

Question 25

If the owners give their agent permission to disclose confidential information,

A)
the disclosure cannot be made until after the sale of the property.
B)
the agent should document the permission in writing and have the client sign.
C)
verbal permission to disclose confidential information is enforceable in court.
D)
the disclosure cannot be made until after the death of the owner.

Answer 25

Explanation
The answer is the agent should document the permission in writing and have the client sign. Confidential information should not be disclosed without written permission by the client.

Question 26

Disclosure of agency must be acknowledged by an unrepresented seller before

A)
the presentation of the offer.
B)
the seller signs the offer.
C)
taking the listing.
D)
working with a buyer in the same transaction.

Answer 26

Explanation
The answer is the presentation of the offer. License law requires that disclosure of a licensee’s agency position must be confirmed in writing with an unrepresented seller before the presentation of the buyer’s offer.

Question 27

A hidden defect in a property not readily visible by normal inspection that does NOT have to be discovered or disclosed by the agent unless known is

A)
a defective caveat.
B)
a latent defect.
C)
an effect of defect.
D)
a disclaimed caveat.

Answer 27

Explanation

The answer is a latent defect. It is a property defect not readily visible by normal inspection.

Question 28

The law of agency applies to all real estate transactions. Agency status disclosure, however, applies to the

A)
lease of commercial real estate.
B)
sale of commercial real estate.
C)
sale of residential real estate of a four-family property or smaller.
D)
sale or lease of all residential real estate.

Answer 28

Explanation
The answer is sale of residential real estate of a four-family property or smaller. This rule is part of agency disclosure law.

Question 29

The contract that creates the agency relationship between a seller and a broker is a

A)
buyer representation agreement.
B)
for sale by owner agreement.
C)
management agreement.
D)
listing agreement.

Answer 29

Explanation
The answer is listing agreement. The listing agreement creates a contractual agreement for representation between the broker and the seller.

Question 30

Broker A has both buyer and seller in the same in-house transaction. The broker chooses to assist both sides, negotiates compensation from either or both, but represents neither side. In this transaction, the broker has become a

A)
facilitator.
B)
dual agent.
C)
designated agent.
D)
subagent.

Answer 30

Explanation
The answer is facilitator. A facilitator is one who assists one or more parties to a transaction but represents nobody in the transaction.

Question 31

If a licensee is a facilitator, the licensee

A)
represents both parties in a transaction.
B)
will not receive compensation.
C)
represents one party only.
D)
represents no one in the transaction.
.

Answer 31

Explanation
The answer is represents no one in the transaction. As a facilitator, the licensee may assist both parties, but represent neither party. Facilitator indicates the lack of any type of agency status

Question 32

If asked for real estate advice by an unrepresented customer, the licensee may advise

A)
seller only.
B)
neither party.
C)
either or both parties.
D)
buyer only.

Answer 32

Explanation
The answer is either or both parties. If asked for advice, the licensee may advise either or both parties but may not volunteer advice to either party.

Question 33

If a listing agent realizes after listing a property that the CMA or appraisal was incorrect, the agent as part of the duty of disclosure should

A)
not disclose such information because doing so would jeopardize the agency.
B)
not disclose such information to the seller because it would lessen the agent’s credibility.
C)
disclose an incorrect appraisal but not an incorrect CMA.
D)
disclose such information to the seller.

Answer 33

Explanation
The answer is disclose such information to the seller. Whether an appraisal or a CMA, if the agent believes either is incorrect, such disclosure must be made to the client, and action to remedy the inaccuracy should be undertaken.

Question 34

Disclosure of agency must be confirmed in writing with an unrepresented buyer

A)
before the preparation of the offer.
B)
before loan application.
C)
within three days of formal loan application.
D)
immediately before closing.

Answer 34

Explanation
The answer is before the preparation of the offer. License law requires that disclosure of a licensee’s agency position be confirmed in writing with an unrepresented buyer before the preparation of the buyer’s offer.

Question 35

A licensee is representing the unlicensed office manager of her real estate firm in the purchase of a home. The licensee

A)
must disclose the business relationship.
B)
is not related to the buyer; therefore, disclosure of the business relationship is not required.
C)
does not have to disclose that the buyer works in her office.
D)
must disclose the relationship verbally to her broker.

Answer 35

Explanation
The answer is must disclose the business relationship. Disclosure is required if the relationship is immediate family or close business relationship.

Question 36

Agency agreements create representation between the broker and the

A)
managing broker.
B)
customer.
C)
principal broker.
D)
client.

Answer 36

Explanation

The answer is client. Agency agreements are between brokers and clients.

Question 37

When acting as a facilitator, a licensee may

A)
advise both parties if asked.
B)
not give advice to either party, even if asked.
C)
advise one party but not the other party.
D)
volunteer advice to either or both parties, even if not asked.

Answer 37

Explanation
The answer is advise both parties if asked. The facilitator represents neither party but may advise either or both parties if asked for advice.

Question 38

If a buyer’s agent is NOT compensated in a cooperative split at closing by a listing agent, the buyer’s agent is

A)
likely to receive no compensation.
B)
paid by the buyer if compensation was agreed to in the agency agreement.
C)
paid by the real estate attorney closing the transaction.
D)
paid by his own real estate firm.

Answer 38

Explanation
The answer is paid by the buyer if compensation was agreed to in the agency agreement. The buyer agency agreement has a paragraph addressing the possibility that if compensation is not received from the listing agent or seller, the buyer will pay it to the buyer agent’s firm.

Question 39

The unrepresented party in a transaction is the

A)
subagent.
B)
agent.
C)
client.
D)
customer.

Answer 39

Explanation
The answer is customer. The customer receives professional assistance but not representation. Customers are entitled to honest answers to their inquiries.

Question 40

In the first case study, regarding receiving fees from both buyer and seller in the same transaction, which of the following is TRUE?

A)
Receiving fees from both is legal as long as disclosure is made to both parties.
B)
Receiving fees from both is only legal if both parties are bring represented.
C)
An attorney must draw up a dual representation document.
D)
It is never legal to receive compensation from more than one party in the same transaction.

Answer 40

Explanation
The answer is receiving fees from both is legal as long as disclosure is made to both parties. Full disclosure to both parties is required when receiving compensation from both in the same transaction.

Question 41

In taking a listing, the firm’s affiliate broker

A)
represents prospective buyers.
B)
represents the broker who represents the client.
C)
represents no one.
D)
directly represents the client.

Answer 41

Explanation
The answer is represents the broker who represents the client. Affiliate brokers represent brokers who represent clients. The brokers then share representation with the affiliate broker.

Question 42

An agent is in the process of listing a residential three-family home. In this instance, agency disclosure is

A)
not required because the property is larger than a duplex.
B)
optional.
C)
mandatory.
D)
not required because the duplex is residential and not commercial.

Answer 42

Explanation
The answer is mandatory. The law of agency requires that licensees disclose their agency status in the purchase or sale of any residential property that is a one to four-family residence.

Question 43

If dual compensation is negotiated in a transaction, the broker

A)
only needs to disclose to the party being represented.
B)
could represent both or neither.
C)
must represent neither party.
D)
must represent both parties.

Answer 43

Explanation

The answer is could represent both or neither. Representation is not required in order to negotiate compensation.

Question 44

The type of buyer agency agreement that allows one broker the right to represent a buyer for an agreed period of time is

A)
a deed of trust agreement.
B)
an exclusive buyer agency agreement.
C)
an option buyer agency agreement.
D)
a nonexclusive buyer agency agreement.

Answer 44

Explanation
The answer is an exclusive buyer agency agreement. Exclusive buyer agency agreements allow one broker to represent a buyer for a period of time as contractually agreed.

Question 45

If a licensee recommends to a buyer or a seller a service in which they have an ownership interest, and the prospect may use that service, the licensee must

A)
collect a retainer fee.
B)
charge for the use of the service.
C)
disclose ownership interest.
D)
disclose knowledge of any latent defects.

Answer 45

Explanation
The answer is disclose ownership interest. Licensees must disclose ownership interest in any service they recommend in which they own or expect to receive a fee or a referral fee.

Question 46

A listing agent lists a property and places the information in the multiple listing service (MLS). A selling agent shows a buyer the listing and helps negotiate a binding agreement. At the closing, because there is an offer of cooperation through the MLS, the selling agent can expect to receive

A)
a 6% commission because that is what is always offered through the MLS.
B)
a 3% cooperative split in commission.
C)
the usual and customary split offered in that area.
D)
nothing, if the listing agent’s offer of cooperation lists no offer of compensation.

Answer 46

Explanation
The answer is nothing, if the listing agent’s offer of cooperation lists no offer of compensation. Just because a property is listed in the MLS, an offer of cooperation does not imply an offer of compensation to cooperating brokers.

Question 47

When acting as a facilitator or transaction broker, a licensee may

A)
volunteer advice to one party only.
B)
act as an advocate for one party but not both.
C)
not volunteer advice to either party.
D)
volunteer advice to both parties.

Answer 47

Explanation
The answer is not volunteer advice to either party. As a facilitator, a licensee may not volunteer advice or advocacy for either party.

Question 48

In a real estate transaction, a facilitator may also represent

A)
the buyer.
B)
no one.
C)
the seller.
D)
both seller and buyer with prior informed, written consent.

Answer 48

Explanation
The answer is no one because a facilitator represents no one in the transaction. In fact, the term facilitator represents a lack of agency status.

Question 49

While not required by law, when recommending a service provider, it would be BEST to recommend

A)
one in which the agent has ownership interest.
B)
a service provider from whom the agent expects to receive a referral fee.
C)
a small, privately owned service provider.
D)
several, then let the prospects choose the one they prefer.

Answer 49

Explanation
The answer is several, then let the prospects choose the one they prefer. By doing so, the agent is not slanting the choice to one service provider, thereby losing credibility if the service is not satisfactory.

Question 50

In real estate, a limited agent is one who

A)
is limited to working no more than 40 hours per week.
B)
has limited authority to represent the seller.
C)
is limited to providing real estate services to the client.
D)
is limited in the number of day he is allowed to list property.

Answer 50

Explanation
The answer is is limited to providing real estate services to the client. The fact that the agent contractually represents the client in real estate does not imply representation in other areas.

Question 51

In the absence of a written, bilateral written representation contract,

A)
there is no agency.
B)
the agency’s status is pending.
C)
both parties must be represented by only one broker.
D)
the agency is executor.

Answer 51

Explanation
The answer is there is no agency. It takes a written bilateral agreement to create an agency in Tennessee, which does not recognize implied agency, created through actions or deeds.

Question 52

Before buyer representation, a familiar term heard often in real estate was

A)
pur autre vie.
B)
caveat emptor.
C)
como estas.
D)
lis pendens.

Answer 52

Explanation
The answer is caveat emptor. It means let the buyer beware. Before buyer representation, buyers had to beware because they were never represented and the licensees working with them actually were subagents of the seller.