CHAPTER 6 -- LAWS OF AGENCY

Question 0

In describing the relationship between a seller and a salesperson employed by the listing broker, the salesperson is considered:

(A) an agent of the seller; (B) a subagent of the seller; (C) an employee of the seller; (D) an independent contractor, employed by the seller.

Answer 0

(A) an agent of the seller

Question 1

Is an agent responsible for the wrongful acts of a subagent appointed with the seller’s approval?

Answer 1

No, the seller is.

Question 2

A real estate broker who has been appointed as a subagent for a seller, with the seller’s approval, has which of the following duties?

(A) a fiduciary duty equally to both the buyer and the seller; (B) a fiduciary duty to the seller only; (C) a fiduciary duty to the seller and the broker who appointed him as a subagent; (D) a duty to be honest and fair to the seller and a fiduciary duty to the broker who appointed him as the subagent.

Answer 2

(B) a fiduciary duty to the seller only

Question 3

When a real estate broker has been authorized by another real estate broker to act as a subagent for a seller and the seller has approved the appointment of the subagent, the subagent is primarily responsible to:

(A) the broker who appointed him; (B) the seller; (C) both the broker and seller equally; (D) neither the broker nor the seller.

Answer 3

(B) the seller

Question 4

What are the four ways agency can be created?

Answer 4

1 - Express agreement (by words or written)
2 - Implied agreement (by acts and conduct, not words)
3 - Ratification (principal approves agency after it has been performed)
4 - Estoppel (person is barred from asserting or denying a fact because of their previous acts or words)

Question 5

What is a statement made by a tenant confirming the terms of the lease and that the tenant has no claims against the landlord?

Answer 5

An estoppel certificate

Question 6

When a real estate broker is employed to represent a seller in the sale of a property, the broker is usually employed to act as:

(A) a limited agent; (B) a privileged agent; (C) a general agent; (D) a special agent.

Answer 6

(D) a special agent

Question 7

The agency of a real estate broker may be established by:

(A) express agreement; (B) implied agreement; (C) ratification or estoppel; (D) any of the above.

Answer 7

(D) any of the above

Question 8

The term “estoppel” describes:

(A) an architectural element; (B) a plumbing fixture; (C) a document confirming the terms of a lease and that tenant has no claims against the landlord; (D) a trade fixture.

Answer 8

(C) a document confirming the terms of a lease and that tenant has no claims against the landlord

Question 9

What are the three types of authority that can be conferred upon an agent?

Answer 9

1 - Actual authority
2 - Express authority (a contract precisely delineates)
3- Ostensible authority (providing services without knowledge the principal considered them an agent).

Question 10

A broker provided agency services for both a buyer and a seller without the proper disclosures because he was unaware that both the buyer and the seller considered him to be their agent. Consequently, the broker was involved in which of the following?

(A) voidable agency; (B) accidental agency; (C) ostensible agency; (D) deniable agency

Answer 10

(C) ostensible agency

Question 11

The fiduciary relationship between an agent and the principal is comparable to the relationship between:

(A) trustor and beneficiary; (B) mortgagor and mortgagee; (C) trustor and trustee; (D) trustee and beneficiary.

Answer 11

(D) trustee and beneficiary

Question 12

The relationship of a broker representing a principal when dealing with a third party in selling, buying, or exchanging property is defined as all of the following EXCEPT:

(A) a fiduciary relationship; (B) an agency relationship; (C) an attorney-in-fact relationship; (D) broker/client relationship.

Answer 12

(C) an attorney-in-fact relationship

Question 13

Agents must present offers to the seller until:

(A) opening of escrow; (B) buyer has qualified for the loan; (C) documents were already drawn; (D) close of escrow.

Answer 13

(D) close of escrow

Question 14

If a real estate broker fails to obey all lawful instructions given by his principal, the broker could be:

(A) subjected to fine and/or imprisonment under the law; (B) prohibited by a court from working as a real estate broker; (C) liable in damages for any injuries suffered by the principal as a result; (D) all of the above.

Answer 14

(C) liable in damages for any injuries suffered by the principal as a result

Question 15

A seller entered into an oral listing agreement to sell real property with the broker, without a subsequent written verification. The payment of a commission to the broker under these circumstances would be:

(A) permissible if the seller elects to do so; (B) a violation of the regulations of the Real Estate Commissioner; (C) regarded as contrary to public policy; (D) a violation of criminal law.

Answer 15

(A) permissible if the seller elects to do so

Question 16

When dealing with the general public, which of the following may a broker NOT do?

(A) delegate duties; (B) refuse to take a listing; F(C) remain silent regarding material facts known only to him; (D) all of the above.

Answer 16

(C) remain silent regarding material facts known only to him

Question 17

Both the seller and broker were sued by the buyer because the broker failed to disclose the leaky roof to the buyer. The broker knew of the problem but forgot to disclose it to the buyer. The probable result of the lawsuit would be:

(A) buyer was not entitled to recover from either the broker or the seller; (B) buyer recovered from the broker, but not the seller; (C) buyer recovered from the seller, but not the broker; (D) buyer would be successful in the suit against both seller and broker and the seller would be successful in the suit against the broker.

Answer 17

(D) buyer would be successful in the suit against both seller and broker and the seller would be successful in the suit against the broker

Question 18

When a broker, while acting as an agent for the seller in a sale of real property, misrepresents the property to a buyer, the broker may cause the seller to be subjected to:

(A) rescission of the contract by the buyer; (B) a court action for damages by the buyer; (C) tort liability for damages; (D) any of the above.

Answer 18

(D) any of the above

Question 19

What are the three steps for disclosing agency?

Answer 19

1 - Disclose (give seller or buyer the form)
2 - Elect (choose the agency relationship for the transaction)
3 - Confirm (in writing, either in purchase agreement or in separate, acknowledged writings prior to – or coincident – with the execution of the contract)

Question 20

A broker made a sale to a buyer based on false information provided by the seller. The broker acted in good faith and had reasonably relied on the false information. Thereafter, the buyer rescinded the contract because of the fraud. Under these circumstances, the broker is normally entitled to:

(A) only a reimbursement for out-of-pocket expenses; (B) a full commission and indemnity for any liability caused by legal action by the defrauded buyer against the broker; (C) one-half of the money deposited by the buyer in escrow; (D) no commission because an agent is responsible for the principal’s action.

Answer 20

(B) a full commission and indemnity for any liability caused by legal action by the defrauded buyer against the broker

Question 21

The agency disclosure form must be given to the parties in which of the following transactions?

(A) sale of a theater; (B) sale of an office building; (C) sale of vacant land; (D) sale of a residential triplex.

Answer 21

(D) sale of a residential triplex

Question 22

Which of the following is true concerning a buyer agency?

(A) it is illegal in California; (B) the agent represents buyers only; (C) the agent represents mostly buyers, but some sellers; (D) the agent must charge an advance fee to the buyer.

Answer 22

(B) the agent represents buyers only

Question 23

Which of the following is NOT a required step for a licensee under the current agency disclosure law?

(A) representation; (B) election; (C) confirmation; (D) disclosure.

Answer 23

(A) representation

Question 24

When a real estate agent acts as a dual agent for both the buyer and seller in a 1031 exchange, and does not disclose his dual agency to both parties, he may: (A) provide grounds for either party to rescind the purchase agreement; (B) be prevented from receiving any commission; (C) be disciplined by the Real Estate Commissioner; (D) all of the above.

Answer 24

(D) all of the above

Question 25

All of the following statements are true concerning an in-house sale, EXCEPT: (A) the listing broker can buy the property himself; (B) the listing broker can act as an agent for the seller only; (C) the listing broker can act as an agent for the buyer only; (D) the listing broker can act as a dual agent for the seller and the buyer.

Answer 25

(C) the listing broker can act as an agent for the buyer only

Question 26

What are the 7 things that can terminate an agency?

Answer 26

1 - Death or incapacity 2 - Mutual consent 3 - Destruction (of the subject matter of the agency) 4 - Expiration (of the time of the exclusive listing) 5 - Agent may renounce (but will be liable for damages) 6 - Principal may revoke (but will be liable for damages) 7 - Completion of purpose (close of escrow)

Question 27

All of the following will terminate an agency relationship, EXCEPT: (A) the death of the agent or the seller; (B) the mutual consent of agent and seller; (C) the destruction of the subject property; (D) estoppel.

Answer 27

(D) estoppel

Question 28

Which of the following is a common agency relationship under California law? (A) agent for seller; (B) agent for buyer; (C) dual agent; (D) all of the above.

Answer 28

(D) all of the above

Question 29

Why do some clients prefer "single agency" representation? (A) a "single agency" broker may have one of his salespersons become the agent for the seller and have another salesperson in his office become the agent for the buyer; (B) the "single agency" broker provides better service because he represents both the sller and buyer in the same transaction; (C) in a "single agency" transaction, the seller cannot choose his own broker or represent himself; (D) the "single agency" broker is more client oriented.

Answer 29

(D) the "single agency" broker is more client oriented

Question 30

When a real estate licensee acts as an agent for a principal without authority or color of authority and the acts are later approved by the principal, an agency relationship was created by: (A) implication; (B) ratification; (C) express authorization; (D) estoppel.

Answer 30

(B) ratification

Question 31

An agency relationship may NOT be created by: (A) subornation; (B) oral agreement; (C) ratification; (D) necessity or emergency.

Answer 31

(A) subornation

Question 32

When a real estate broker becomes an agent for a seller or a buyer in a real estate transaction, what type of relationship has been established? (A) a gratuitous relationship; (B) a fiduciary relationship; (C) an independent contractor relationship; (D) a subcontractor relationship.

Answer 32

(B) a fiduciary relationship

Question 33

When a broker obtains confidential financial information about his principal during a real estate transaction, that information must be kept confidential for how long? (A) only until close of escrow; (B) 30 days after close of escrow; (C) three years after closing of escrow; (D) forever.

Answer 33

(D) forever

Question 34

When you, as a real estate agent, know that the seller will not accept an offer from the buyer, you should not do which of the following: (A) write new terms on the back of the offer and go back to the buyer for approval; (B) present the offer to the seller anyway; (C) upon rejection of the offer by the seller, induce the seller to make a counter-offer; (D) change to buyer's offer to what you believe the seller will accept, initial the changes, and the present the offer to the seller.

Answer 34

(D) change to buyer's offer to what you believe the seller will accept, initial the changes, and the present the offer to the seller

Question 35

The selling agent, Jones, prepared an offer for a buyer of a home. At the very latest, when should agent Jones give the buyer the Agency Disclosure form? (A) as soon as he meets the buyer; (B) before showing the buyer the house; (C) before preparing the offer for the buyer; (D) at opening of escrow.

Answer 35

(C) before preparing the offer for the buyer

Question 36

A real estate agent handling the sale of four or less residential units must elect his or her agency relationship to all the parties: (A) as soon as practical; (B) as soon as an offer has been accepted; (C) at the close of escrow; (D) whenever asked by either party.

Answer 36

(A) as soon as practical

Question 37

A seller accepted an offer presented by a real estate broker. During escrow, the seller discovered that the buyer was the brother of the broker. This relationship was not disclosed in the offer. The seller can: (A) do nothing because the property sold for the full asking price; (B) cancel the transaction, but be liable for the full commission; (C) cancel the transaction without liability for the commission; (D) none of the above.

Answer 37

(C) cancel the transaction without liability for the commission

Question 38

A lender paid a 3% commission to an agent in a real estate transaction. This must be revealed to: (A) the buyer only; (B) the seller only; (C) both the buyer and the seller; (D) neither the buyer nor seller.

Answer 38

(C) both the buyer and the seller