National Agency Relationship Flashcards

Question

The broker protection clause in a real estate listing contract provides A) for how the broker will be compensated. B) that the seller may not file a lawsuit against the broker for lack of performance. C) that the seller may not file a complaint against the broker with the state regulatory commission. D) that the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner.

Answer 1

The broker protection clause in a real estate listing contract provides A) for how the broker will be compensated. Incorrect Answer B) that the seller may not file a lawsuit against the broker for lack of performance. Incorrect Answer C) that the seller may not file a complaint against the broker with the state regulatory commission. Incorrect Answer D) that the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner. Correct Answer Explanation The listing contract must also state the circumstances under which the broker will be paid. Nothing in the listing contract prohibits a seller from taking action through the courts or a real estate commission if the broker does not perform according to the terms of the listing contract. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 2

A listing agent loses the seller's house keys. The agent has breached her fiduciary duty of A) accounting. Correct Answer B) disclosure. Incorrect Answer C) care. Incorrect Answer D) loyalty. Incorrect Answer Explanation The fiduciary duty of accounting requires real estate professionals to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. The duty of loyalty means that the agent must place the client's interests above all others, including the agent's own self-interest. Reference: Agency Relationship > Agent's Duties to Clients

Answer 3

In an appointment with a seller, a salesperson presents a comparative market analysis (CMA) that provides a reasonable market value for the seller's property. The seller insists on pricing the property $15,000 higher than the salesperson's suggested price. Under these circumstances, the salesperson A) must hire an appraiser to conduct a formal appraisal. Incorrect Answer B) may change the listing price in the contract once it is executed. Incorrect Answer C) may choose to refuse the listing. Correct Answer D) must accept the listing with the seller’s higher listing price. Incorrect Answer Explanation An unrealistic listing price may make it difficult for the broker to properly market the property within the time period of the listing. The salesperson is not required to accept the listing with the higher listing price or to hire an appraiser for a formal appraisal. The salesperson may not change the listing price in a listing contract without the explicit permission of the seller. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 4

Last month a broker took a listing on a property. She now learns that her client has been declared incompetent by the court. Her listing now is A) still valid. Incorrect Answer B) the basis for a commission if the broker produces a buyer. Incorrect Answer C) binding because the broker was acting in good faith. Incorrect Answer D) terminated. Correct Answer Explanation A listing contract may be terminated if either party dies or becomes incapacitated. Once terminated, the contract is not binding, and there is no basis for a commission to the broker. Reference: Agency Relationship > Termination of Agency

Answer 5

A listing contract is BEST described as A) a sales contract. Incorrect Answer B) an escrow contract. Incorrect Answer C) a personal service contract. Correct Answer D) a property management contract. Incorrect Answer Explanation A listing is a personal employment contract between brokers and their clients setting forth the broker's responsibilities in finding for the seller a ready, willing, and able buyer. A property management contract establishes the responsibilities of a broker in managing a principal's property. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 6

Which of these does NOT create an agency relationship? A) A buyer agency contract Incorrect Answer B) The payment of money or commissions Correct Answer C) A property management contract Incorrect Answer D) A listing contract Incorrect Answer Explanation The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract create an agency relationship between the broker and the principal to the contract. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 7

Most states require a property condition disclosure in a residential transaction. The statement is completed by A) the broker. Incorrect Answer B) the property inspector. Incorrect Answer C) the seller. Correct Answer D) the seller and salesperson or broker. Incorrect Answer Explanation Most states require the seller to complete a property condition disclosure. The listing broker should review the disclosure form and question the seller about any items that are incomplete. The disclosure does not replace the need for a property inspection to be conducted on behalf of the buyer. A buyer's agent should recommend that a buyer secure an independent property inspection. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 8

A buyer agency contract states that the contract expires on April 30. Which event would NOT terminate the buyer agency contract? A) Death of the buyer Incorrect Answer B) Death of the broker Incorrect Answer C) Mutual agreement to end the contract Incorrect Answer D) The salesperson leaving the brokerage firm Correct Answer Explanation The contract is with the buyer and the firm, not the salesperson. If the salesperson leaves, the principal broker may assign another salesperson to assist the buyer. The buyer and the principal broker may come to a mutual agreement to terminate the contract. The death of either party terminates the contract. Reference: Agency Relationship > Termination of Agency

Answer 9

Which of these BEST defines the common law of agency? A) The rules and regulations of the state licensing agency Incorrect Answer B) The principles that govern one’s conduct in business Incorrect Answer C) The rules of law that apply to the responsibilities and obligations of a person who acts for another Correct Answer D) The selling of another’s property by an authorized agency Incorrect Answer Explanation The common law of agency is formed by the judgments and decrees of courts regarding the responsibilities of a person who acts for another. Many states have enacted specific agency statutes to replace the common law of agency. A code of ethics encompasses the principles that govern one's conduct in business. Regulations of the state licensing agency may include specific mandates and responsibilities related to agency. Reference: Agency Relationship > Agent's Duties to Clients

Answer 10

The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is A) an open listing clause. Incorrect Answer B) a multiple listing clause. Correct Answer C) a joint listing clause. Incorrect Answer D) a net listing clause. Incorrect Answer Explanation Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 11

All listing agreements must contain A) a broker protection clause. Incorrect Answer B) a multiple listing service (MLS) clause. Incorrect Answer C) an automatic extension clause. Incorrect Answer D) a definite contract termination date. Correct Answer Explanation Failing to specify a definite termination date in a listing can be grounds for suspension or revocation of a license. Broker protection clauses, MLS clauses, and automatic extensions of the contract are not required. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 12

A seller has told the listing agent that the agent must only represent the seller in the sale of the property. In this case, the first guide for the agent is to obey A) all lawful instructions of the owner. Correct Answer B) the concept of caveat emptor. Incorrect Answer C) any state dual agency requirements. Incorrect Answer D) the common law of agency, even if a state agency statute exists. Incorrect Answer Explanation A real estate broker hired by a seller must obey all lawful instructions of the owner. A state's agency statute may modify aspects of the common law of agency, in which case the broker must comply with the agency statute. A selling broker is not required to engage in dual agency. Caveat emptor is a warning to purchasers, not to brokers. Reference: Agency Relationship > Agent's Duties to Clients

Answer 13

While looking at a property, the potential buyers ask their salesperson if a fence is the boundary line of the property. The salesperson should recommend that the buyers A) ask the neighbors. Incorrect Answer B) ask the owners of the property. Incorrect Answer C) have a survey conducted. Correct Answer D) read the legal description. Incorrect Answer Explanation To determine the exact boundaries of a property, a survey is recommended. Some lenders require a survey to confirm the legal description of the property. The owners and the neighbors may not know the exact boundaries of the property. Reference: Agency Relationship > Agent's Duties to Clients

Answer 14

A brokerage represents the owner in the sale of the owner's property, which has a salesperson acting as the listing agent. Which of these events will terminate that agency relationship? A) The owner abandons the property. Incorrect Answer B) The broker engages other brokers to help sell the property. Incorrect Answer C) During the listing, the salesperson dies. Incorrect Answer D) During the listing, the owner of the property dies. Correct Answer Explanation When a property owner dies during a listing period, the agency relationship with a broker is terminated. The agency relationship remains in effect with any of the other events, including the death of a salesperson because the contract belongs to the firm not the salesperson. Reference: Agency Relationship > Termination of Agency

Answer 15

When showing a property, an agent exaggerates the property's benefits. This practice is A) fraud on the part of the agent. Incorrect Answer B) an illegal ministerial act. Incorrect Answer C) an illegal misrepresentation of the property. Incorrect Answer D) puffing, which is legal as long as there is no misrepresentation. Correct Answer Explanation The broker is exaggerating the benefits of the property. In this situation, the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. A ministerial act is a routine act performed for a customer that does not involve judgment, discretion, or advice. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 16

A salesperson representing a seller suggests to a buyer that the seller might accept less than the listing price. The salesperson in this situation A) no longer represents the seller because he has given advice to the buyer. Incorrect Answer B) may have unintentionally created an undisclosed dual agency by suggesting that the buyer offer less than the listing price. Correct Answer C) is fulfilling his fiduciary responsibilities to the seller by encouraging a buyer to purchase the property. Incorrect Answer D) is simply performing a ministerial act for the buyer. Incorrect Answer Explanation The salesperson in giving advice to the buyer may lead the buyer to believe that the salesperson represents the buyer's interests and is acting as the buyer's advocate. The agent may have created an implied agency with the buyer and violated the duties of loyalty and confidentiality to the principal, the seller. The agent's fiduciary responsibilities to the seller continue even with his actions. Performing ministerial acts involves granting services that do not require any discretion or advice. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 17

Fiduciary means that there is A) a legal relationship between parties that creates a position of trust and confidence. Correct Answer B) a written agreement between the parties to pay a real estate commission. Incorrect Answer C) an oral agreement between the parties that does not create an agency agreement. Incorrect Answer D) a legal relationship in which only the duties of honesty and good faith are owed to the parties. Incorrect Answer Explanation The term fiduciary refers to the relationship in which the agent (the real estate broker) is held in a position of special trust and confidence by the principal (the client). An agent owes the duties of honesty and good faith to the customer, the third party or nonrepresented consumer in the transaction. The payment of compensation in the form of a commission does not determine or define an agency relationship. Reference: Agency Relationship > Agent's Duties to Clients

Answer 18

All of these documents would create an agency relationship EXCEPT A) a property management contract. Incorrect Answer B) a buyer agency contract. Incorrect Answer C) a sales contract. Correct Answer D) a listing contract. Incorrect Answer Explanation A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 19

The listing contract on a residential property states that it expires on June 30. Which event would NOT terminate the listing? A) The owner dies on April 29. Incorrect Answer B) The listing contract is not renewed prior to June 30. Incorrect Answer C) The salesperson who signed the listing dies on March 15. Correct Answer D) The house is destroyed by fire on June 1. Incorrect Answer Explanation The salesperson is not a party to the contract, so his death would not terminate the contract. A listing contract is terminated if one of the parties to the agreement dies, if the property is destroyed by a force outside the seller's control, or if the listing contract's term expires. Reference: Agency Relationship > Termination of Agency

Answer 20

A buyer makes an offer on a property and gives the listing agent a check for $1,000 for earnest money. The listing agent deposits the check into his personal account and, a week later, wrote the broker a check from his account to deposit into the broker's trust account. Has the agent fulfilled his fiduciary duty to the client? A) No, because he has embezzled the funds. Incorrect Answer B) No, because he has commingled funds. Correct Answer C) Yes, if he has followed procedures provided by the broker. Incorrect Answer D) Yes, if the buyer has given him permission to follow that procedure. Incorrect Answer Explanation Under the fiduciary duty of accountability, the agent must account for funds received on behalf of the seller. His action violates not only his fiduciary duty but also most license laws, which require that earnest money deposits be deposited immediately (or within a specific time limit) into the brokerage firm's trust account. Depositing the money into the agent's own checking account is commingling, and it is illegal. Reference: Agency Relationship > Agent's Duties to Clients

Answer 21

The listing contract on a residential property states that it expires on May 2. Which event would NOT terminate the listing? A) The house is destroyed by fire on April 25. Incorrect Answer B) The owner dies on April 29. Incorrect Answer C) The contract is not renewed before May 2. Incorrect Answer D) On April 15, the owner tells the listing broker that the owner is dissatisfied with the broker's marketing efforts. Correct Answer Explanation A mere complaint to the broker by the principal does not end the listing, whereas expiration of the listing with no renewal, death of the owner, or destruction of the property would end the listing. Reference: Agency Relationship > Termination of Agency

Answer 22

A real estate broker acting as the agent of the seller A) can accept an offer on behalf of the seller. Incorrect Answer B) should present to the seller only the highest offer for the property. Incorrect Answer C) can disclose the seller's minimum price. Incorrect Answer D) must promote and safeguard the seller's best interest. Correct Answer Explanation Real estate brokers must be loyal to their principal by promoting the principal's best interest. A broker acting as agent for a seller should present all offers on the property but may not accept an offer on behalf of the seller. Only the seller may accept an offer. The broker may not disclose any confidential information of the seller tied to price, term, or motivation without the seller's written permission. Reference: Agency Relationship > Agent's Duties to Clients

Answer 23

A seller tells a listing broker his home is serviced by a city water system for both water and sewer services, and indicates city water service on the property disclosure form. The broker suspects that there is no city water to the home because it is in a rural area, but she relies on the seller's statement and says nothing concerning the water system to a buyer. The buyer discovers after the purchase that the home has no city water service. In this case, the broker A) may be liable for misrepresentation because she should have known about the lack of city water services. Correct Answer B) may file a complaint against the seller with the state real estate commission. Incorrect Answer C) is not liable for misrepresentation because the seller did not disclose the lack of city water services. Incorrect Answer D) may file suit against the seller for not disclosing the lack of city water services. Incorrect Answer Explanation The listing broker may be liable because she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 24

A listing taken by a real estate salesperson is an employment contract between the seller and A) both the salesperson and the broker. Incorrect Answer B) the salesperson. Incorrect Answer C) the brokerage firm. Correct Answer D) the local multiple listing service. Incorrect Answer Explanation The parties to a listing contract are the seller and the broker. The brokerage firm and the principal broker represent the seller in listing and selling the property. The salesperson does so in the name and under the supervision of the brokerage firm and the principal broker. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 25

A seller has listed her home with a broker for $190,000. The listing broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation, A) any broker is authorized by the listing contract to encourage such bids for the property. Incorrect Answer B) the broker acted properly to obtain a quick offer on the property. Incorrect Answer C) the broker has violated his fiduciary relationship with the seller. Correct Answer D) the broker’s action was unethical but not illegal. Incorrect Answer Explanation The agent has a fiduciary responsibility to respect the confidentiality of his client. Agents may not reveal confidential items such as the principal's willingness to accept less than the list price or the seller's anxiousness to sell unless the principal has authorized the disclosure. In this case, the broker's actions might be considered illegal under some state laws and by a court of law. Under the common law of agency, a broker is not authorized to encourage an offer lower than the listing price without specific instructions from the seller, even if to do so would obtain a quicker offer on the property. Reference: Agency Relationship > Agent's Duties to Clients

Answer 26

After signing a listing contract with a homeowner, the owner tells the listing agent that because his home is in such good condition, he does not want the home sold to any buyers with small children. The agent takes the listing and obeys the owner's instructions by not showing the home to any buyers with small children. He discourages other agents from showing the home to families by telling them the home is not suitable for a family. Are the agent's actions legal? A) No, because fair housing laws do not exempt any property from being marketed to families. Incorrect Answer B) Yes, because an agent may choose to whom to market a home she has listed. Incorrect Answer C) No, because refusing to show a property to buyers with families violates fair housing laws. Correct Answer D) Yes, because the agent has obeyed the owner’s instructions. Incorrect Answer Explanation Federal and state fair housing laws prohibit discrimination against families in the marketing and selling of residential homes. Some residential properties are exempted if they meet specific requirements for senior housing. The agent's duty of obedience does not require agents to obey unlawful or unethical instructions from their client. Reference: Agency Relationship > Agent's Duties to Clients

Answer 27

The principal to whom an agent gives professional opinions and counsel is A) a client. Correct Answer B) a fiduciary. Incorrect Answer C) a subagent. Incorrect Answer D) a customer. Incorrect Answer Explanation The client is the principal to whom the agent owes fiduciary duties. The customer is the third party or nonrepresented consumer for whom some level of service is provided and who is entitled to fairness and honesty. A subagent is the agent of a person already acting as an agent for the client. Reference: Agency Relationship > Agent's Duties to Clients

Answer 28

A seller has listed a property under an exclusive agency listing with a broker. If the seller sells the property personally during the term of the listing to someone who learns about the property through the seller, the seller will owe the broker A) a partial commission. Incorrect Answer B) the full commission. Incorrect Answer C) no commission. Correct Answer D) only reimbursement for the broker's costs. Incorrect Answer Explanation In an exclusive agency listing, if the property is sold by the seller, the brokerage will receive no commission. Only the exclusive right-to-sell listing earns the listing broker any commission if someone else sells the property during the term of the agreement. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 29

The law of agency is a common-law concept. As common law, it is A) enacted by a legislatures and other governing bodies. Incorrect Answer B) may not be superseded by statutory law. Incorrect Answer C) legal doctrine that is formed from common sense and usual practices. Incorrect Answer D) part of a body of law established by tradition and court decisions. Correct Answer Explanation The law of agency is law from judgments and decrees as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 30

Which statement BEST explains the meaning of this sentence: To enforce a commission for brokerage services, a broker must be employed as the agent of the client? A) The broker must work in a real estate office. Incorrect Answer B) The broker must have a written contract to provide brokerage services for the client. Correct Answer C) The broker must express an interest in representing the client. Incorrect Answer D) The broker must have a salesperson employed in the office. Incorrect Answer Explanation A broker's contract of employment by a client is the brokerage services agreement (a listing or buyer representation contract) signed by the parties. A valid expressed written listing is one of the usual requirements in a suit for a brokerage commission; it is proof of employment. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 31

According to its state's laws, a brokerage firm is allowed to have an agency relationship with only one party in the same transaction. This relationship is known as A) disclosed dual agency. Incorrect Answer B) single agency. Correct Answer C) designated agency. Incorrect Answer D) exclusive buyer agency. Incorrect Answer Explanation In single agency, the agent represents only one party in any single transaction. Designated agency exists when a brokerage acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. In an exclusive buyer agency relationship, the agent represents the buyer and is entitled to a commission, regardless of whether or not the agent actually locates the property purchased by the buyer. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 32

A seller listed his residence with a broker with a contract that agreed to pay the broker a 5% commission. Within several weeks, the broker brought an offer at full listing price and the terms of the listing from buyers ready, willing, and able to pay cash for the property. However, the seller rejected the buyers' offer. In this situation, the seller A) owes a commission to the broker. Correct Answer B) must sell his property. Incorrect Answer C) is liable to the buyers for compensatory damages. Incorrect Answer D) is liable to the buyers for specific performance. Incorrect Answer Explanation The listing contract is a binding agreement on both the seller and the broker. While the seller may refuse to sell the home to the buyer, he owes a commission to the broker, according to the listing contract. The seller is not liable to the buyers because the seller has not signed any agreement with the buyers. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 33

A buyer signed a listing contract and agreed to pay the buyer's brokerage firm when the buyer purchased any property. The buyer signed A) a buyer agency disclosure form. Incorrect Answer B) an exclusive buyer agency contract. Correct Answer C) an open buyer contract. Incorrect Answer D) an exclusive agency buyer contract. Incorrect Answer Explanation The buyer signed an exclusive buyer agency contract, which states that whenever the buyer purchases the property described in the contract, the buyer's brokerage firm will be paid. An exclusive agency and open listing would let the buyer purchase properties the broker had not shown them, and the buyer would not be obligated to pay the brokerage firm. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 34

Which of these events will terminate the agency relationship between the brokerage and the seller? A) The owner dies. Correct Answer B) The owner abandons the property. Incorrect Answer C) The broker appoints other salespeople to help sell the property. Incorrect Answer D) The broker discovers that the market value of the property is such that the broker will not make an adequate commission. Incorrect Answer Explanation The common law of agency holds that the death of either the broker or the seller ends the agency relationship created by the listing. The market value of the property does not affect the agency relationship, and the broker may assign other agents to help sell listed property. An owner abandoning property does not terminate an agency relationship but could result in termination if the property is taken over by a third party, such as a lending institution in the event of the owner's bankruptcy or a foreclosure proceeding. Reference: Agency Relationship > Termination of Agency

Answer 35

The seller's property disclosure form yields which of these benefits for the transaction? A) The disclosure form informs the buyer as to which defects exist. Incorrect Answer B) The disclosure form provides a basis for further investigation by the buyer. Incorrect Answer C) The form allows the buyer to make an informed decision about buying the property. Incorrect Answer D) It gives the buyer full knowledge of all issues with the property. Correct Answer Explanation The seller's property disclosure does not act as an inspection and gives the buyer full knowledge of the seller's representation of the issues asked on the form. The seller's property disclosure form provides all the benefits shown for the buyer. It also may provide a more concrete basis for litigation if the buyer can determine that a seller filled out the form incorrectly or failed to disclose a defect the seller knew was material to the transaction. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 36

A contract that secures the employment of a brokerage firm to find a ready, willing, and able buyer for a seller is A) an escrow contract. Incorrect Answer B) a sales contract. Incorrect Answer C) a listing contract. Correct Answer D) an option contract. Incorrect Answer Explanation A listing contract is a personal service contract securing the employment of a brokerage firm to find a ready, willing, and able buyer for a seller. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 37

The principal in a real estate transaction is A) a facilitator to the transaction. Incorrect Answer B) the client of the brokerage. Correct Answer C) the customer of the agent. Incorrect Answer D) the subagent to the client. Incorrect Answer Explanation The principal in a real estate transaction is the individual who hires the brokerage and delegates to the firm the responsibility of representing the principal's interest in the transaction. The customer is the third party or nonrepresented consumer in the transaction. A facilitator is a middleman between a buyer and a seller who assists one or both parties without fiduciary obligations to either. A subagent is an agent of the agent. Salespersons and broker associates who work for a brokerage are considered agents of the principal broker and subagents of the principal. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 38

Information that is important to buyers that could change their decision to purchase a property is known as A) a physical defect. Incorrect Answer B) a latent defect. Incorrect Answer C) a material fact. Correct Answer D) an observable defect. Incorrect Answer Explanation A material fact is any fact relevant to a person making a decision to buy a property. A latent defect is a hidden structural defect usually resulting from faulty construction that is known to a seller but not readily discoverable by inspection. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 39

A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm's listings in the past month. One of the buyers makes an attractive offer on the woman's home without even seeing the property. The broker goes to the woman's house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker? A) Express agency Incorrect Answer B) General agency Incorrect Answer C) Implied agency Correct Answer D) Universal agency Incorrect Answer Explanation The homeowner and the broker did not have an oral or written agency contract, but the broker's actions implied to prospective buyers that the broker was acting as the homeowner's agent. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 40

Regarding a home warranty program, a real estate licensee's BEST business practice would be to advise the buyer or the seller to A) purchase a home warranty with the property because it covers title defects. Incorrect Answer B) avoid the purchase of a home warranty because the property passed the home inspection. Incorrect Answer C) purchase a home warranty with the property because it covers electrical and heating systems. Correct Answer D) avoid the purchase of a home warranty with the property since it is too costly. Incorrect Answer Explanation A real estate licensee's best business practice would be to advise the buyer or the seller to purchase a home warranty. A home warranty is a service contract that helps cover the cost of some unforeseen major repairs. Reference: Agency Relationship > Agent's Duties to Clients

Answer 41

In the middle of a national economic recession, a seller is desperate to sell a single-family residence. The home is located in a subdivision where several homes have been abandoned and others are in foreclosure. Given these neighborhood market conditions, the seller wants an agent highly motivated to procure a buyer. Therefore, the seller agrees to accept, as a fixed sum, an amount that will pay off the one outstanding mortgage on the property, with any additional proceeds from the sale going to the agent as the commission for the transaction. This is an example of A) a net listing. Correct Answer B) an underwater property. Incorrect Answer C) a subordination. Incorrect Answer D) a redemption. Incorrect Answer Explanation A net listing agreement is one where the seller sets a certain fixed net price, with anything over that amount going to the agent as the brokerage commission. It is illegal in some states because of the potential conflict of interest between an agent (who might push a seller to list a property at lower than market value) and a seller. However, in those states where it is still legal, this type of listing agreement may motivate an agent to find a buyer for a property. Redemption is a phase of the foreclosure process during which a defaulted borrower must pay off the entire outstanding mortgage and all late fees in order to save the property: There is nothing in the fact pattern to indicate the property is in foreclosure. An underwater property is one where the property is carrying more debt than its current market value. Here, however, the seller is hopeful that the sales price will both pay off the mortgage and pay the agent's commission. Finally, a subordination is a way for lenders to artificially reorder the priority of liens: There is nothing in the question related to lien priority. Reference: Agency Relationship > Net Listing (Conflict of Interest)

Answer 42

A seller purchased a single-family residence in 1970 for $76,000. When hiring a real estate broker, the seller told the broker that anything over $1,500,000 would be the broker's compensation for finding a buyer. The broker agreed and wrote up the listing agreement accordingly. This is an example of A) an exclusive right-to-sell listing agreement. Incorrect Answer B) a net listing agreement. Correct Answer C) a competitive market analysis (CMA). Incorrect Answer D) an exclusive agency listing agreement. Incorrect Answer Explanation The net listing agreement is used when the seller states that anything over a specific dollar amount will be the compensation the broker will earn for selling the property. This type of listing agreement is illegal in multiple states. Even where it is legal, the net listing is discouraged because of the possibility for the more knowledgeable broker to take advantage of an uninformed member of the public. A CMA provided by a real estate licensee to clients analyzes recent sales and listings to help sellers set a reasonable list price and help buyers make an informed offer: It is not a type of listing agreement. The exclusive right-to-sell and the exclusive agency listing agreements typically express brokerage firm compensation as a percentage of the sales price. Reference: Agency Relationships > Net Listing (Conflict of Interest)

Answer 43

A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do? A) Submit both offers at the same time. Correct Answer B) Submit the offer from his salesperson first. Incorrect Answer C) Submit the offer from the other salesperson first. Incorrect Answer D) Submit the higher offer first. Incorrect Answer Explanation An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespersons from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received. Reference: Agency Relationship > Agent's Duties to Clients

Answer 44

Unless some other written agreement has been made, the brokerage will usually receive the brokerage commission when A) the seller lists the property with the broker. Incorrect Answer B) the transaction is closed. Correct Answer C) the purchaser takes possession of the property. Incorrect Answer D) an offer, procured from a ready, willing, and able buyer, has been accepted by the seller. Incorrect Answer Explanation Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing. Reference: Agency Relationship > Termination of Agency

Answer 45

A listing contract in which payment of the commission is contingent on the broker's being able to produce a buyer before the property is sold by the owner or another broker is called A) an exclusive agency listing. Incorrect Answer B) an exclusive right-to-sell listing. Incorrect Answer C) a net listing. Incorrect Answer D) an open listing. Correct Answer Explanation In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An exclusive agency listing provides that the brokerage firm and the co-op broker will be paid unless the seller sells the property on his own. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 46

Which of these would be considered dual agency? A) A broker listing and then selling the same property Incorrect Answer B) A broker representing more than one seller Incorrect Answer C) A broker acting for both the landlord and the tenant in the same transaction Correct Answer D) Two brokerage companies cooperating with each other Incorrect Answer Explanation In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the tenant or buyer and either the agent or subagent of the landlord or seller. Brokerage companies cooperate with each other through multiple listing services and other agreements. Brokerage companies represent many sellers through different listing agreements in which the broker agrees to represent the sellers in selling their properties. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 47

A homeowner received estimates that ranged between $20,000 and $25,000 for repairing damage caused by water leaking into the basement. The owner couldn't afford the repairs, so he constructed a false floor over the entire basement and installed carpet over the floor to conceal the damage. When he listed the house, he did not disclose the leak or the damage to the basement on the property disclosure form. The basement damage is an example of A) a latent defect, and the listing brokerage firm is not liable for not discovering the false floor over the damage. Correct Answer B) a latent defect, and the listing brokerage firm may be liable for not discovering the false floor over the damage. Incorrect Answer C) a patent defect, and the brokerage firm may be liable for not discovering the false floor and the damage. Incorrect Answer D) a patent defect, and the brokerage firm is not liable for not discovering the false floor and the damage. Incorrect Answer Explanation The basement damage is a hidden structural defect known to the seller but not known to the brokerage firm or those working for the firm or to a purchaser. Real estate professionals are not liable for discovery and disclosure of latent defects not disclosed by the purchaser. Patent defects are property defects that are easily visible when inspecting a property. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 48

A property owner individually signed a 90-day listing contract with a brokerage. The owner was killed in an accident before the listing expired. Now the listing is A) still in effect as the owner's intention was clearly defined. Incorrect Answer B) binding only if the broker can produce offers to purchase the property. Incorrect Answer C) binding on the owner's spouse for the remainder of the 90 days. Incorrect Answer D) terminated automatically because of the death of the principal. Correct Answer Explanation A listing contract may be terminated if either party dies or becomes incapacitated. Neither the dead owner's intention nor the 90-day listing period keeps the listing in effect. Reference: Agency Relationship > Termination of Agency

Answer 49

A listing broker knows that a known sex offender lives within a block of a home she has listed. The prospective buyers are a family with three small children. What is the broker's disclosure obligation in this situation? A) The broker has no responsibility under any law. Incorrect Answer B) The broker must determine what his state law requires, as all states have different requirements. Correct Answer C) The broker should tell the buyers that the home is under contract with another buyer. Incorrect Answer D) The broker should inform the seller not to accept an offer from any families with small children. Incorrect Answer Explanation While federal law requires all states to release information about known convicted sex offenders to the public, many state laws require active notification to a buyer about a sex offender living in the area. Under fair housing laws, the broker and the seller may not discriminate in the sale of the house against a family with children. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 50

A buyer signs a buyer agency contract with a broker agreeing to pay commission to the buyer broker but with the expectation that the seller will actually pay the commission. However, the buyer learns that the seller has not agreed to a sharing of the commission with the buyer agent. The buyer refuses to pay any commission to the broker. In this case, A) the buyer has breached the agency contract with the broker and will be held liable for the broker’s commission. Correct Answer B) the seller is liable for payment of the buyer broker’s commission. Incorrect Answer C) the listing broker is liable for payment of the buyer broker’s commission. Incorrect Answer D) the buyer broker is unable to collect a commission. Incorrect Answer Explanation If the buyer is unwilling to pay the buyer's broker a commission according to the terms of the buyer agency contract, the broker may sue the buyer to recover the broker's commission. The buyer is liable for the commission according to the terms of the contract. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 51

A landowner subdivides her acreage and offers the lots for sale. A broker tells her that he can sell the lots. After the broker sells some of the lots, the landowner refuses to pay him a commission. The broker can A) report the landowner to the real estate licensing authorities. Incorrect Answer B) file a lien against the landowner's remaining lots. Incorrect Answer C) sue the landowner for breach of contract. Incorrect Answer D) do nothing. Correct Answer Explanation An oral agreement does not constitute a valid agency contract entitling the broker to a commission. Unless the broker has been employed by the seller under a valid written agency contract, the broker is not entitled to a commission. The broker has no grounds for a lien or for a suit. Real estate licensing authorities do not regulate or arbitrate commission disputes between a broker and a prospective client. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 52

A broker lists a property for sale at $100,000 with a 5% commission. He later obtains an oral offer from a prospective buyer to purchase the property. The seller indicates to the broker that the offer would be acceptable if it were submitted in writing. Before it can be put in writing, the buyer backs out and revokes the oral offer. In this situation, the broker would be entitled to A) a commission of $5,000. Incorrect Answer B) no commission. Correct Answer C) the standard rate of commission for the area. Incorrect Answer D) only a partial commission. Incorrect Answer Explanation The broker only earns a commission by procuring a ready, willing, and able buyer who purchases the property on the seller's terms. There is no standard rate of commission for a locality because commission rates are determined by individual agreements between a broker and a client. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 53

A broker helps a buyer and a seller with paperwork but does not represent either party as an agent. This arrangement is A) a transaction brokerage. Correct Answer B) prohibited in all states because a broker must always represent one party. Incorrect Answer C) dual agency. Incorrect Answer D) designated agency. Incorrect Answer Explanation When a broker does not represent either party in a transaction and acts as a facilitator or nonagent, the arrangement is known as transaction brokerage and is legal in some states. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. Designated agency exists when a broker acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 54

A broker may act as a dual agent and represent both the seller and the buyer in the same transaction if A) the broker informs either the buyer or the seller that the broker is representing both parties to the transaction. Incorrect Answer B) both the seller and the buyer give their informed consent, usually in writing. Correct Answer C) the seller and the buyer are related by blood or marriage. Incorrect Answer D) both parties are represented by attorneys. Incorrect Answer Explanation When a broker represents both the seller and the buyer in the same transaction, the broker is practicing dual agency. State laws, where dual agency is allowed, require both parties to give written consent of dual agency. Informing only one party of the dual agency does not meet the requirements for practicing dual agency. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 55

A salesperson working with a customer knows that the neighborhood he is showing is very near an airport with low-flying planes that create a lot of noise. The salesperson should disclose the level of airplane noise in the neighborhood because it is A) a material fact. Correct Answer B) material information. Incorrect Answer C) a material defect. Incorrect Answer D) a material breach. Incorrect Answer Explanation A material fact is information that if known could change a buyer's decision to purchase a property. Airplane noise is a material fact and should be disclosed to the buyer. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 56

A real estate broker's responsibility to keep the principal informed of all the facts that could affect a transaction is the duty of A) accounting. Incorrect Answer B) obedience. Incorrect Answer C) disclosure. Correct Answer D) care. Incorrect Answer Explanation It is the real estate professional's duty to keep the consumer informed of all facts or information that could affect a transaction. The broker also owes the principal care and accounting. The broker must act with reasonable care while acting on behalf of the consumer. Reference: Agency Relationship > Agent's Duties to Clients

Answer 57

In order for a listing contract to be enforceable, MOST states require that the contract be A) in writing. Correct Answer B) an oral contract. Incorrect Answer C) a form contract used by all licensees. Incorrect Answer D) drafted by an attorney. Incorrect Answer Explanation While, in some states, oral listings are legal, a listing contract must be in writing in order for either party to be able to enforce the provisions of the contract. Many licensees use form contracts drafted by a real estate association or real estate commission. Many states do not require all licensees to use the same contract form. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 58

By executing an agency listing contract with a seller, a real estate brokerage firm becomes A) responsible for sharing the commission. Incorrect Answer B) a procuring cause. Incorrect Answer C) the agent of the seller. Correct Answer D) obligated to open a special trust account. Incorrect Answer Explanation An agency listing contract is an employment agreement whereby a brokerage agrees to represent the seller as the seller's agent in the sale of the seller's property. The brokerage firm or one of the firm's licensees may be a procuring cause if either produces a willing, ready, and able buyer. The brokerage firm is obligated to open a special trust account only when receiving escrow funds from a prospective buyer. The brokerage firm is responsible for sharing the commission only with a salesperson or associate broker working for the brokerage firm. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 59

In response to the question by a buyer of how much to offer, the best response of the listing agent is, A) “I can’t offer you any advice unless you hire me to represent you.” Incorrect Answer B) “You can always offer less and see if the seller will counter." Incorrect Answer C) “I am not sure, but I think a full price offer should be accepted.” Correct Answer D) “Typically 5% under the asking price is a good place to start.” Incorrect Answer Explanation The answer is "I am not sure but I think a full price offer should be accepted." The listing agent is obligated to keep confidential what the seller may accept. However, the seller should be willing to accept a full-price offer that meets the terms of the listing contract. Reference: Agency Relationship > Agent's Duties to Clients

Answer 60

A couple enters a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the property. Without having the couple sign a written buyer agency contract, the salesperson drives the couple to the house, and even recommends that before they buy the house, they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created A) an implied agency relationship with the buyers. Correct Answer B) an express agency relationship with the buyers. Incorrect Answer C) a universal agency relationship with the buyers. Incorrect Answer D) a general agency relationship with the buyers. Incorrect Answer Explanation The salesperson has unintentionally created an agency relationship with the buyers. There is no formal oral or written agency contract with the buyers. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as that authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 61

A listing contract will usually include all of these EXCEPT A) unusual deed conditions or restrictions. Incorrect Answer B) the multiple listing service (MLS) standard commission rate. Correct Answer C) termination and default provisions. Incorrect Answer D) the broker’s authority and responsibilities. Incorrect Answer Explanation A listing contract will include the broker's commission. Commission rates are determined by the individual listing broker, not by an MLS. A listing contract will usually state the broker's responsibilities, reasons for termination or default of the contract, and any unusual deed conditions or restrictions. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 62

Which statement is TRUE of a listing contract? A) It obligates the brokerage firm to work diligently for both the seller and the buyer. Incorrect Answer B) A seller must transfer the property if the brokerage firm produces a ready, willing, and able buyer. Incorrect Answer C) The contract usually includes an automatic extension clause upon expiration of its term. Incorrect Answer D) The contract is an employment contract for the professional services of a brokerage firm. Correct Answer Explanation The listing contract obligates the brokerage firm to work only for the seller. The seller may negotiate terms through the brokerage with a ready, willing, and able buyer, and refuse to sell to a buyer who is not willing to come to terms with the seller. A contract usually specifies a definite termination date and may not include an automatic extension of the term. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 63

Which of these BEST defines the law of agency? A) The rules of law that apply to the responsibilities of a person who acts as agent for another Correct Answer B) The principles that govern one's conduct in business Incorrect Answer C) The rules and regulations of the state's licensing agency Incorrect Answer D) The selling of another's property by a properly licensed brokerage Incorrect Answer Explanation The law of agency determines how an agent is authorized to act on behalf of another and the responsibilities of that agent. The selling of another's property by a licensed brokerage is determined by a listing or brokerage agreement. Principles that govern one's conduct in business are often stated in a business code of ethics. Rules and regulations of a state's licensing agency state the requirements for real estate licensing for persons and firms. Reference: Agency Relationship > Agent's Duties to Clients

Answer 64

A buyer in a fast-selling market has written a number of offers in hopes of getting at least two accepted. The buyer then plans to terminate those that the buyer does not want during the inspection period. The buyer can buy only one property, and the broker representing him as an agent knows this and is helping with the process. In this case, the A) buyer and broker are acting in bad faith. Correct Answer B) buyer is acting in good faith, but the broker is acting in bad faith. Incorrect Answer C) broker will be sure to get paid, which is second to helping the buyer. Incorrect Answer D) buyer has a good business plan, which is standard in seller’s markets. Incorrect Answer Explanation The broker and buyer in presenting offers they have no intention of closing are acting in bad faith. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 65

A salesperson is working with a young married couple expecting a child who are buying their first home. The couple has found a home they want to make an offer on, and in completing the offer, the salesperson explains the options for taking title and then asks how the couple wants to take title. The couple state that they are still not sure what will be best for them and their family. The salesperson should A) recommend they speak to an attorney. Correct Answer B) recommend they take title as joint tenants with right of survivorship. Incorrect Answer C) recommend they take title as tenancy in common. Incorrect Answer D) leave the form blank to be completed by the title company. Incorrect Answer Explanation A real estate professional may not recommend how title should be taken. Suggesting the buyers speak to an attorney who can advise them is part of the obligations of competent real estate professionals. Reference: Agency Relationship > Agent's Duties to Clients

Answer 66

A listing broker discovers a latent defect in the home, which the seller has not disclosed on the seller's property disclosure form. The broker A) should trust that the buyer’s property inspection will discover the defect. Incorrect Answer B) should report the seller to the state real estate commission. Incorrect Answer C) must disclose the defect to the buyer or the buyer’s representative. Correct Answer D) is not required to disclose defects that the seller does not indicate on the property disclosure form. Incorrect Answer Explanation It is the broker's duty to discover any material facts that may affect the home's value, whether or not they are disclosed by the seller. The material facts must be disclosed to prospective buyers. A buyer's property inspection may not discover a latent defect that a seller does not disclose and does not relieve the agent of the responsibility to disclose the defect. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 67

All of these are typically found in a listing contract EXCEPT A) the responsibilities of the broker and the seller. Incorrect Answer B) the price the seller is asking for the property. Incorrect Answer C) the commission rate to be paid to the listing broker. Incorrect Answer D) the date the broker will schedule an open house. Correct Answer Explanation All listing and buyer representation contracts tend to require similar information: type of listing agreement, broker's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, et cetera. They are not required to provide the dates of open houses. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 68

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of these statements is TRUE? A) The broker must refer the buyer to another broker to negotiate the sale. Incorrect Answer B) The seller and the buyer must be informed of the situation and agree, usually in writing, to the broker's representing both of them. Correct Answer C) The buyer should not have been shown a house listed by the broker. Incorrect Answer D) The broker must treat the buyer as a consumer/customer and proceed to write an offer on the property and submit it. Incorrect Answer Explanation Both buyer and seller must give informed consent, generally written, for dual representation. The broker is not required to treat the buyer as a client or to refer the buyer to another broker. In many areas it may be common for buyer-clients to purchase a home listed by their broker, however, both the seller and the buyer must agree to the dual agency in writing. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 69

A broker is aware that a property near his new listing may have environmental concerns. In this situation, the environmental issues A) need to be disclosed only if they are not obvious and would not be easy for a buyer to discover. Incorrect Answer B) do not need to be disclosed because issues outside the neighborhood have no impact on value. Incorrect Answer C) need to be disclosed because they can impact the value of the listing. Correct Answer D) do not need to be disclosed unless they are within the property’s boundaries. Incorrect Answer Explanation Environmental issues, both inside and outside property boundaries, may impact value and must be disclosed no matter how obvious they are. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 70

A salesperson representing a buyer is told that the buyer plans to operate a dog-grooming business out of any house he buys. The salesperson does not tell the buyer to verify local zoning ordinances to determine in which parts of town such a business can be conducted. Which duty does the salesperson violate? A) Obedience Incorrect Answer B) Care Correct Answer C) Disclosure Incorrect Answer D) Loyalty Incorrect Answer Explanation Salespersons must use their skills and knowledge to protect the client's interests in purchasing. In this case, the salesperson should have told the buyer to verify local zoning ordinances that might prohibit a buyer conducting a business from a home. All salespersons and brokers owe this duty and the disclosure of material facts to the consumer. An agent would owe obedience and loyalty to the principal. Reference: Agency Relationship > Agent's Duties to Clients

Answer 71

A listing salesperson schedules an open house with the sellers. Before the open house, she advises the sellers to place valuable jewelry that is visible in the bedroom into a safe or another secure place. The sellers ignore the salesperson's advice. The morning after the open house, the sellers call the salesperson to inform her that some of their jewelry is missing from the bedroom. Will the salesperson likely be held accountable for the missing jewelry? A) Yes, because the salesperson should have checked every visitor leaving the open house for any stolen valuables. Incorrect Answer B) No, because the salesperson advised the sellers to remove or hide all valuables before the open house. Correct Answer C) No, because the sellers should have watched over their valuables during the open house. Incorrect Answer D) Yes, because the salesperson is accountable for the money or property of her clients. Incorrect Answer Explanation The salesperson has a duty to account for any money or possessions given to her by her clients and to exercise care in her actions on their behalf. Because she advised them to remove the jewelry, she has fulfilled her duty to them. In most cases, sellers will not be present during an open house. It is not reasonable and may not be lawful for the salesperson to search visitors leaving the open house. Reference: Agency Relationship > Agent's Duties to Clients

Answer 72

A listing agent's duty of care to a seller includes all of these EXCEPT A) sharing the seller’s financial situation with a buyer in order to expedite a sale. Correct Answer B) making reasonable efforts to market the property. Incorrect Answer C) helping the seller arrive at a realistic listing price and commission splits for the MLS entry. Incorrect Answer D) helping the seller evaluate an offer to purchase and write a counteroffer if needed. Incorrect Answer Explanation An agent representing a seller may not disclose confidential information to a buyer without the seller's explicit permission, even to expedite the sale of the property. All the other activities are examples of an agent exercising the duty of care for the seller. Reference: Agency Relationship > Agent's Duties to Clients

Answer 73

A property that has an undesirable reputation because of an event that occurred on or near the property is A) a polluted property. Incorrect Answer B) a stigmatized property. Correct Answer C) a dangerous property. Incorrect Answer D) considered a physical hazard. Incorrect Answer Explanation A property that has been the site of an event such as a suicide, murder, or other undesirable event is known as a stigmatized property. The property is not necessarily dangerous or polluted because of that event. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 74

A buyer's broker whose commission is shared via the MLS with the commission paid by the seller to the listing broker in a real estate purchase A) remains the agent of the buyer. Correct Answer B) must disclose the dual agency to the buyer. Incorrect Answer C) becomes the agent of the seller. Incorrect Answer D) becomes a designated agent for the buyer. Incorrect Answer Explanation The source of compensation for a broker is not the factor that determines agency relationship. A buyer's broker whose commission is shared with the listing broker remains the agent of the buyer. A buyer's agent may be compensated by either the buyer or the seller. Reference: Agency Relationship > Multiple-Listing Service (MLS)

Answer 75

The listing broker learned, while he was out of town, that a large hail and rain storm caused some flooding in the area of the property he is due to close on this week. The seller has not called to report any issues with the property, even though many properties in the neighborhood were damaged. The listing broker A) has no responsibility because it will be the buyer’s broker who should request an inspection. Incorrect Answer B) has no duty to inform the buyer because he represents the seller. Incorrect Answer C) should verify that no damage occurred to the property. Correct Answer D) does not need to worry because only the seller will be liable if there is undisclosed damage. Incorrect Answer Explanation The listing broker will want to make sure the seller understands that disclosure of material facts is required until title passes. The buyer's broker would also need to be proactive in requesting a new seller's property disclosure or asking to have the roof certified, but because the listing broker knows the storm occurred, he must verify whether or not damage occurred. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 76

A broker is hired as a buyer's agent. The buyer confides that he filed for bankruptcy two years ago. The buyer would like to find a seller who is willing to carry the loan. In this situation, a correct statement about the broker's responsibility regarding disclosure of the bankruptcy when presenting the offer to purchase is that the broker is A) not required to disclose the bankruptcy because the seller might reject the offer. Incorrect Answer B) not required to disclose the bankruptcy because the broker has no agency relationship with the seller. Incorrect Answer C) required to disclose the bankruptcy because it is a material fact—information important to the seller's evaluation of the offer. Correct Answer D) required to disclose the bankruptcy under Equal Credit Opportunity Act (ECOA). Incorrect Answer Explanation The broker is obligated to disclose any material fact—something that might make the parties to the transaction change their mind, regardless of the agency or nonagency relationship the broker has with the seller. The ECOA is a federal law prohibiting discrimination in the granting of credit and does not regulate disclosures required by in a real estate transaction. Reference: Agency Relationship > Agent's Duties to Clients

Answer 77

A broker who has done a proper comparative market analysis (CMA) discusses the probable market value of the property with the seller, and the seller wants an unrealistic price on the property. All of the following are true EXCEPT A) the broker should suggest the seller have a formal appraisal done. Incorrect Answer B) the broker should take the listing with the understanding from the seller that price reductions may be needed to sell the property. Incorrect Answer C) the broker may decline to take the listing at the high price. Incorrect Answer D) the broker must taking the listing at the proposed seller's high price. Correct Answer Explanation Whether a CMA or a formal appraisal is conducted, the value sought is the property's market value. While it is the property owners' privilege to set whatever listing price they choose, a broker should consider rejecting any listing that is severely out of line. If the broker chooses to accept the listing at the seller's proposed price, the broker should advise the seller that the price may have to be reduced in the future in order to sell the house. Reference: Agency Relationship > Agent's Duties to Clients

Answer 78

The multiple listing service (MLS) clause in a listing contract provides that A) a buyer broker may not represent a purchaser in the transaction. Incorrect Answer B) the broker agree to the standard commission rate set by the MLS. Incorrect Answer C) the seller grant permission for the broker to make the listing available through an MLS. Correct Answer D) the seller enter the listing into the MLS. Incorrect Answer Explanation The multiple listing service clause grants authority for brokers to share the listing with other brokers through an MLS. Brokers enter the listing into the MLS within a time period stated in their contract with the MLS. The sellers do not enter the information with the MLS. Brokers negotiate their own commission rate with the sellers, and buyer brokers may represent buyers for properties listed in an MLS. Reference: Agency Relationship > Multiple-Listing Service (MLS)

Answer 79

MOST states require that listing and buyer representation contracts contain A) a multiple listing service (MLS) clause. Incorrect Answer B) an automatic extension clause. Incorrect Answer C) a broker protection clause. Incorrect Answer D) a definite contract termination date. Correct Answer Explanation If brokers fail to specify a specific listing contract termination date in a listing, they may be subject to suspension or revocation of their real estate license in many states. In some states, automatic extension clauses that extend a listing past its expiration date are illegal. A listing may contain a broker protection clause providing that, within a specified period of time, a property owner will pay the listing broker a commission if the owner transfers the property to someone the broker originally introduced to the seller. Many listing and buyer representation contracts do contain a multiple listing clause permitting the broker to share the listing with other brokers through the MLS, but states do not usually require such a clause. These same requirements hold true for buyer representation contracts. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 80

A real estate broker learns that her neighbor wishes to sell his house. The broker knows the property well and is able to persuade a buyer to make an offer for the property. The broker then asks the neighbor if she can present the offer, and the neighbor agrees. At this point, which statement is TRUE? A) The neighbor is not obligated to pay the broker a commission. Correct Answer B) The neighbor is obligated to pay the broker a commission for producing an offer to purchase. Incorrect Answer C) The buyer is obligated to pay the broker for locating the property. Incorrect Answer D) The broker may not be considered the procuring cause without a written contract. Incorrect Answer Explanation The broker procured a buyer for the property on the basis of an oral agreement with her neighbor, the seller. State real estate commissions generally require a commission agreement to be in writing and signed by both parties, the broker and the client. The broker in this case has no written contract for her services with either the seller or the buyer and is not entitled to a commission from either, even if she is the procuring cause of the sale. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 81

A buyer's agent knows that a property has been on the market for a time longer than normal for the neighborhood and type of house. Her buyer decides to write an offer above the listed price of the home because the buyer is in a hurry to find a home and move in. The buyer's agent does not mention to the buyer the length of time the home has been on the market. Has the buyer's agent violated any duties to the buyer? A) Yes, because the license law requires agents to disclose the length of time on the market to all parties in a transaction. Incorrect Answer B) No, because the agent has served the buyer’s interest in finding a suitable home that the buyer wants to purchase. Incorrect Answer C) Yes, the agent should disclose the time on the market because that fact creates a more favorable opportunity for the buyer to offer a lower price. Correct Answer D) No, because the agent is not required to disclose that information to any party in the transaction. Incorrect Answer Explanation The buyer's agent has a duty to disclose any material information to the buyer. The extended time the home has been on the market provides the buyer with the possibility that the seller will accept an offer lower than the listed price for the home. While license law does not specifically prohibit or require disclosing the length of time a property has been on the market, license law does require the disclosure of material facts. In this case, length of time on market is material to the buyer because it puts the buyer in a favorable position. Reference: Agency Relationship > Agent's Duties to Clients

Answer 82

At last week's homeowners association meeting, the board voted to install new windows in the coming months. As a result of this improvement, the association dues will be increased by $100 per month. This increase will become effective the following year. In this case, if a homeowner decides to sell in the interim, which of these BEST applies? A) Disclosures of this type should be handled by the attorneys. Incorrect Answer B) Disclosure is not required because the increase will not go immediately into effect. Incorrect Answer C) It is not the seller’s responsibility to disclose changes. Incorrect Answer D) Proposed changes should always trigger disclosure. Correct Answer Explanation Any change that will impact a future owner should be disclosed to a prospective buyer. Providing the buyer with a copy of the homeowners association bylaws would be a way to provide disclosure of any future changes or increases that will affect owners. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 83

All of these are true of an open listing and an exclusive agency listing EXCEPT A) each type of listing grants a commission to any brokerage who procures a buyer for the seller’s property. Incorrect Answer B) the seller may offer an open listing to several brokers while an exclusive agency listing is given to one broker. Incorrect Answer C) under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. Correct Answer D) under each listing, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. Incorrect Answer Explanation Both open and excusive agency listings allow the owner to sell without the assistance of the broker thus avoiding the seller from having to pay a commission. Each require the broker to be the procuring cause or in an exclusive agency tied to the procuring broker through the MLS agreements. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 84

Good faith as applied to agency is BEST defined as A) using honest and sincere intentions. Correct Answer B) following all lawful instructions of a principal. Incorrect Answer C) putting the interest of a principal above those of an agent. Incorrect Answer D) using professional skills to support all parties in a transaction. Incorrect Answer Explanation All parties to a contract are to use their best good-faith effort to fulfill the contract. Putting a principal's interest above an agent's is loyalty. Following lawful instructions of a principal is obedience, and using professional skills is considered to be skill and care for all consumers, including a principal. Reference: Agency Relationship > Agent's Duties to Clients

Answer 85

An individual who is authorized and who consents to represent the interests of another person above their own interests is A) a principal. Incorrect Answer B) a client. Incorrect Answer C) customer. Incorrect Answer D) an agent. Correct Answer Explanation An individual authorized by a principal (client) to represent the interests of that person is an agent; the fiduciary obligations require the agent to put the interests of the principal above the agents. In real estate, a firm's principal broker is the agent. The principal is the individual who hires the brokerage firm to represent the individual's interests and act as an agent. The client is the principal. The customer is a third party or nonrepresented consumer, who is entitled to fairness and honesty from the agent of the principal. Reference: Agency Relationship > Agent's Duties to Clients

Answer 86

A buyer has signed a contract with a broker to compensate the broker even if the buyer purchases the property from a relative. This is called A) an exclusive buyer agency contract. Correct Answer B) an open buyer agency contract. Incorrect Answer C) an exclusive agency buyer agency contract. Incorrect Answer D) an invalid contract. Incorrect Answer Explanation An exclusive buyer agency contract binds the buyer to compensate the agent whenever the buyer purchases a property of the type described in the contract, even if the buyer finds the property independently. An exclusive agency buyer agency limits the broker's right to a commission; the broker is entitled to payment only if the broker locates the property the buyer purchases. An open buyer agency contract permits the buyer to enter into similar agreements with an unlimited number of brokers, with commission limited to the broker who locates/procures the property the buyer purchases. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 87

A broker was told by her principal not to advertise her property in a certain newspaper, which was out of the area. The broker complied because he A) had never advertised in that newspaper anyway. Incorrect Answer B) was not intending to advertise the property at all. Incorrect Answer C) must obey the lawful instructions of her principal. Correct Answer D) allowed to advertise only in local newspapers. Incorrect Answer Explanation The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. The seller has a right to advertise in a newspaper of her choice, provided the advertisement does not violate fair housing laws. Reference: Agency Relationship > Agent's Duties to Clients

Answer 88

A listing agent is frustrated that a property has been on the market for over two months, and the agent wants to sell the home quickly. The listing agent shares with a nonrepresented buyer that the home has been on the market for a long time and so the seller would welcome any offer on the home. The buyer makes an offer at a price lower than he had expected to offer. Has the agent violated any duties to the seller? A) No, because the agent is not required to disclose that information to any party in the transaction. Incorrect Answer B) Yes, the agent has violated his fiduciary duty because license law prohibits any discussion of how long a property has been on the market. Incorrect Answer C) No, because the agent has served the seller’s interest by producing a ready, willing, and able buyer. Incorrect Answer D) Yes, the agent has violated his fiduciary duty by disclosing a fact that could benefit the buyer. Correct Answer Explanation The agent has duties of care and loyalty to the seller, and although he must disclose any material fact to a buyer, disclosing this information directly benefits the buyer. The license law does not prohibit or require disclosing information about how long a property has been on the market. The license laws of most states do require agents to disclose any material facts to clients and customers. Reference: Agency Relationship > Agent's Duties to Clients

Answer 89

A seller and real estate licensee enter into a listing agreement for the seller's home. The real estate licensee now owes fiduciary duties to the seller. Assuming that all of the following listing agreements are legal in the state where the seller's home is situated, which type of listing agreement might particularly test the real estate licensee's fiduciary duty of loyalty? A) Exclusive agency Incorrect Answer B) Net Correct Answer C) Seller reserved Incorrect Answer D) Exclusive right-to-sell Incorrect Answer Explanation The net listing is illegal in some states and discouraged in others because of the potential conflict of interest between the real estate licensee (agent) and the seller. With a net listing, the seller sets a net minimum price, with anything over that going to the real estate licensee as the commission. This may test the agent's fiduciary duty of loyalty because the agent typically has more knowledge of the property's market value, and may not be motivated to recommend the seller set a sufficiently high net minimum price. The lower the seller's net minimum price, the more profit the agent may earn from the transaction. The other answer choices are widely used listing agreements that do not set up a potential test of the agent's fiduciary duty of loyalty. Note: Exclusive agency and seller reserved are synonyms. Under this type of listing agreement, a real estate agent will receive a commission, unless the seller finds the buyer. Reference: Agency Relationship > Net Listing (Conflict of Interest)

Answer 90

A broker tells a prospective buyer that a lake property has a spectacular view of the lake. In fact, the view from the property also includes several large trees that block the view of parts of the lake. In this case, the broker A) is guilty of intentional misrepresentation. Incorrect Answer B) is merely puffing, which is legal as long as there is no misrepresentation. Correct Answer C) has committed fraud. Incorrect Answer D) is guilty of negligent misrepresentation. Incorrect Answer Explanation The broker is exaggerating the benefits of the property, in this case, the view of the lake. In this situation the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 91

All of these reasons are valid bases for terminating a listing or buyer's contract EXCEPT A) the sale of the property. Incorrect Answer B) agreement of the parties. Incorrect Answer C) destruction of the premises. Incorrect Answer D) the death of the salesperson. Correct Answer Explanation Because the listing and buyer's contract is a contract with the broker, and not with the salesperson, the death of the salesperson does not terminate the listing. The broker may assign another salesperson to the listing. The sale of the property, an agreement by the seller and the broker, and the destruction of the property are all valid bases for terminating a listing contract. Reference: Agency Relationship > Termination of Agency

Answer 92

On discovering a latent defect in a property, a salesperson should discuss the problem with the seller and then A) inform any prospective buyers of the defect. Correct Answer B) contact the city building inspector about the defect. Incorrect Answer C) tell the seller that the defect must be repaired. Incorrect Answer D) arrange for the repairs. Incorrect Answer Explanation A salesperson or broker is also expected to disclose information about material defects in the property to prospective buyers. The seller is not required to correct the defects, but the salesperson should inform the seller that not repairing the defects may result in lower offers from buyers. The salesperson should not arrange for repairs without explicit instructions from the seller and is not required to contact a city inspector about the defect. The salesperson should be sure that the defect is included in any property inspection report to the buyer if not corrected by the seller. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 93

A broker who is the agent of the buyer should do which of these? A) Disclose to the seller the maximum price the buyer is willing to pay Incorrect Answer B) Disclose to the seller that the buyer is a minority person Incorrect Answer C) Present to the seller only offers that are acceptable Incorrect Answer D) Advise the buyer if the listing price of the seller's house is unrealistic Correct Answer Explanation Agents have the fiduciary duty of reasonable care to their client. Reasonable care requires that an agent for the buyer disclose to the buyer if the property is overpriced. Fair housing laws prohibit discrimination based on race or national origin and prohibit real estate professionals from disclosing to the seller that the buyer is a minority person. The duty of confidentiality requires that the agent not disclose the maximum price the buyer is willing to pay. The agent is required to present to the seller all offers from the buyer, even if the agent believes the seller will not accept the offer. Reference: Agency Relationship > Agent's Duties to Clients

Answer 94

A prospective buyer looks at a house listed for sale and asks the listing broker if it is connected to the city water system. The broker does not know the answer, but sensing it is important to making a sale, says yes. If the prospect relies on this statement, purchases the house, and finds out there is no sewer system, the broker A) may face court action resulting in cancellation of the sale and money damages. Correct Answer B) is not liable because the buyer is responsible for her own property inspection. Incorrect Answer C) is not liable for information she does not know. Incorrect Answer D) is only liable if she falsifies the property disclosure form. Incorrect Answer Explanation The broker misrepresents a material fact important to the buyer's decision to purchase the house. The broker's response should have been "I don't know, but I'll find out for you." While a buyer should secure a property inspection, the broker is still responsible for the statement to the buyer. The broker does not complete a property disclosure form. The form is completed by the seller. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 95

The seller has completed a property disclosure for an "as is" sale, which states that all items are in working order. After closing, the buyer finds out the sewer system has had long-term problems. The person or persons MOST likely to be held responsible for the misrepresentation is A) the seller. Correct Answer B) the buyer’s broker. Incorrect Answer C) no one because it is an “as is” sale. Incorrect Answer D) the listing broker and the seller. Incorrect Answer Explanation The seller must disclose all materials facts on all sales. "As is" simply means the seller is not repairing issues, not that the seller has no obligation to disclose them. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 96

A buyer's agent reveals to a listing agent that the buyer is moving into the area for a new job and must be in a new home as soon as possible. The buyer's agent A) terminates the agency relationship by revealing this information to the seller’s agent. Incorrect Answer B) has violated her duty of confidentiality to the buyer. Correct Answer C) is required to share this information with the seller or the seller’s agent as a material fact relevant to the transaction. Incorrect Answer D) may share this information with anyone because it is not relevant to the transaction. Incorrect Answer Explanation Providing the information to the listing agent may weaken the bargaining power of the buyer. The buyer's agent is not allowed to share confidential information with anyone without explicit permission from the buyer. Reference: Agency Relationship > Agent's Duties to Clients

Answer 97

Under which of these listing agreements can owners of listed property sell the property on their own without having to pay the listing broker a commission? A) Open listing and exclusive agency listing Correct Answer B) Open listing only Incorrect Answer C) Exclusive agency listing only Incorrect Answer D) Exclusive right-to-sell listing and exclusive agency listing Incorrect Answer Explanation In an exclusive agency listing, one brokerage is authorized to act as the exclusive agent of the principal. However, the seller retains the right to sell the property without obligation to the brokerage. In an open listing, the seller retains the right to employ any number of brokers to sell the property. In an open listing, the seller is obligated to pay the listing broker a commission only if the listing broker is the procuring cause of the sale. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 98

The relationship of agents to their principal is that of A) a fiduciary. Correct Answer B) a subagent. Incorrect Answer C) an attorney-in-fact. Incorrect Answer D) a trustee. Incorrect Answer Explanation The principal is the party to whom the agent gives advice and counsel. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties. A trustee holds property for another as a fiduciary, but an agent does not hold the principal's property. A subagent, though working in the principal's interest, is an agent of the brokerage firm/principal broker who is already acting as agent for the principal. An attorney-in-fact is a competent third-party authorized by the principal to act in the principal's place through a written and recorded power of attorney. Reference: Agency Relationship > Agent's Duties to Clients

Answer 99

A listing broker is typically A) a universal agent. Incorrect Answer B) a designated agent. Incorrect Answer C) a special agent. Correct Answer D) a general agent. Incorrect Answer Explanation A real estate broker is usually a special agent, an agent authorized to represent the principal (the seller) in one specific business transaction, with no power to bind the principal. The listing broker's authority is limited to finding a ready, willing, and able buyer for the property. A general agent represents the principal in a broad range of matters related to a particular business and has a limited power to bind the principal. A property manager is usually a general agent. A universal agent is a person empowered to fully bind the principal as authorized by a general power of attorney. A designated agent is an individual licensee authorized by a broker to represent one party in a transaction in which the other party is also represented by the broker. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 100

A seller agreed to list his home for $220,000, but the listing agent did not tell him that the fair market value of the home was $245,000. The listing agent purchased the property the next day. The agent has violated which of these duties to the seller? A) Accounting Incorrect Answer B) Care Incorrect Answer C) Disclosure Incorrect Answer D) Loyalty Correct Answer Explanation The fiduciary duty of loyalty means that the agent must place the client's interests above all others, including the agent's own self-interest. The duty of accounting requires agents to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. Reference: Agency Relationship > Agent's Duties to Clients

Answer 101

A brokerage represents the owner in the sale of the owner's property. Which of these events will terminate that agency relationship? A) The broker engages other brokers to help sell the property. Incorrect Answer B) The owner abandons the property. Incorrect Answer C) The broker discovers that an adequate commission cannot be made due to the low market value of the property. Incorrect Answer D) A fire destroys the owner’s property. Correct Answer Explanation The destruction or condemnation of a property during a listing period terminates the listing. The agency relationship remains in effect with any of the other events. Reference: Agency Relationship > Termination of Agency

Answer 102

Each of two brokerage companies claimed full commission for the sale of a property that was listed by both of the firms under an open listing agreement. The broker who is entitled to the commission is the one who A) listed the property. Incorrect Answer B) advertised the property. Incorrect Answer C) obtained the first offer. Incorrect Answer D) was the procuring cause of the sale. Correct Answer Explanation In an open listing, the seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. The broker who can prove that the sale resulted from that broker's efforts will be considered the procuring cause of the sale and be entitled to the commission. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 103

A listing agent does not disclose to his client that he has agreed to manage a duplex for the buyer once it has been sold. The agent's action A) terminates the agency contract with the seller. Incorrect Answer B) violates his duty of disclosing material facts to the seller. Correct Answer C) is legal under dual agency. Incorrect Answer D) is legal and ethical because his managing the property after the sale does not affect the seller. Incorrect Answer Explanation The agent has a fiduciary duty to keep the seller, his client, informed of all facts that could affect the transaction. The agent's future contract with the buyer may affect his ability to properly represent his seller's interest in his eagerness to have the property sold. Dual agency requires full disclosure of material facts. He may accidentally create an implied agency by acting in the buyer's interest. The action does not in itself terminate the contract with the seller. Reference: Agency Relationship > Agent's Duties to Clients

Answer 104

A salesperson lists a residence. The owner confides to the salesperson that a lower price would be acceptable. The salesperson tells a prospective buyer that the seller will accept up to $5,000 less than the asking price for the property. Based on these facts, which statement is TRUE? A) The salesperson should have disclosed this information, regardless of its accuracy. Incorrect Answer B) The disclosure is improper—and possibly illegal—regardless of the salesperson’s motive. Correct Answer C) The salesperson has not violated any agency responsibilities to the seller. Incorrect Answer D) The relationship between the salesperson and the seller ends automatically if the purchaser submits an offer. Incorrect Answer Explanation Such action is an example of the salespersons failure to obey the seller and maintain confidentiality—both breaches of fiduciary duties. The salesperson may not disclose such information without the seller's written permission. Such an action does not terminate the agency relationship upon the submission of an offer. Reference: Agency Relationship > Agent's Duties to Clients

Answer 105

A salesperson who works for ABC Realty was the buyer's agent for a property that was listed by XYZ Realty. The seller agreed to pay the commission. From whom will the salesperson receive her commission check? A) The principal broker of ABC Realty Correct Answer B) Directly from the buyer Incorrect Answer C) Either principal broker Incorrect Answer D) The principal broker of XYZ Realty Incorrect Answer Explanation The salesperson may receive the commission check only from her broker. While the seller may pay the commission to the principal broker of XYZ, the listing broker, the salesperson may receive her share of the commission only from that part of the commission provided to her broker by the listing broker. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 106

A contract that secures a brokerage firm to assist a buyer in finding a suitable property to buy is A) a buyer representation contract. Correct Answer B) a sales contract. Incorrect Answer C) an escrow contract. Incorrect Answer D) an option contract. Incorrect Answer Explanation A buyer representation contract is an employment contract in which the broker is employed as the buyer's agent in finding a suitable property. A sales contract is a contract between a buyer and a seller for purchase of a property. An escrow contract is an agreement between a buyer, a seller, and an escrow holder (such as a broker) defining the responsibilities of each. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 107

An agent for a brokerage firm has six listings. Another agent for the same firm represents a buyer who wants to purchase one of the six listings. The firm's broker appoints the listing agent as an agent for the seller, while appointing the other agent to represent the buyer in the same transaction. The broker has both the seller and the buyer sign a statement acknowledging that arrangement. The arrangement that results is A) single agency. Incorrect Answer B) undisclosed agency. Incorrect Answer C) designated agency. Correct Answer D) implied agency. Incorrect Answer Explanation The brokerage firm represents both parties to the transaction as a dual agent, and the broker designates two salespersons from the company to represent opposite sides in the same transaction. Implied agency occurs when an agency relationship is accidental. In single agency, a broker represents only one party to a transaction. The broker in this case has disclosed the firm's dual agency and the designated agent to each party in the transaction. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 108

A real estate broker was responsible for a chain of events that resulted in the sale of one of his client's properties. The broker's efforts are called A) pro forma. Incorrect Answer B) procuring cause. Correct Answer C) proffered offer. Incorrect Answer D) private offering. Incorrect Answer Explanation The procuring cause in a real estate transaction is the effort and work that brings about the result stated in a brokerage agreement. A broker who starts a chain of events that results in a sale and does so without abandoning the transaction may be considered the procuring cause of sale. Pro forma is a term meaning "for form only," in other words, not official. A private offering is the offering of a real estate security that is not required to be registered with any state or federal agency because it is not a public offering. The word "proffer" means the same as "offer," although a "proffered offer" is a term used to describe an informal, oral offer made before the start of any formal negotiations. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 109

A listing contract must be signed by A) both the seller and the listing broker. Correct Answer B) only the seller. Incorrect Answer C) an attorney. Incorrect Answer D) only the broker. Incorrect Answer Explanation All parties identified in the listing contract must sign it, including all individuals who have a legal interest in the party. Because the contract is between the seller and the listing broker, the listing broker or the broker's designated representative must sign the contract. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 110

A real estate broker lists a home as agent for the seller. Later that same day, a buyer comes into the office and asks for general information about homes for sale in the area. Based on these facts, which statement is TRUE? A) The brokerage firm owes fiduciary duties to both seller and buyer. Incorrect Answer B) If the buyer later asks for buyer representation by the firm, he cannot have it because the firm is an agent of the seller only. Incorrect Answer C) The seller is the broker’s client; the buyer is a consumer. Correct Answer D) Both seller and buyer have no relationship with the brokerage except as consumers. Incorrect Answer Explanation The listing contract creates the agency relationship and obligations between the seller and the broker. A prospective purchaser who asks for general information is not represented by the broker but is a consumer. Consumers are not owed fiduciary duties but may later contract with the broker for buyer representation. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 111

The principal to whom a real estate broker provides professional opinions and counsel is A) a client. Correct Answer B) a customer. Incorrect Answer C) a subagent. Incorrect Answer D) a fiduciary. Incorrect Answer Explanation The person with whom a broker has a service contract to provide professional opinions and advice is a client. A customer is another party to a real estate contract with whom a broker has no contract. A subagent is an agent of a person who is already acting as an agent for a client. The term fiduciary describes the relationship owed by an attorney or a broker to a client. Reference: Agency Relationship > Agent's Duties to Clients

Answer 112

A principal broker authorizes one agent in her firm to represent the seller and another to represent the buyer in the same real estate transaction. Each agent is A) a designated agent. Correct Answer B) a dual agent. Incorrect Answer C) a universal agent. Incorrect Answer D) a single agent. Incorrect Answer Explanation A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has a fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In a single agent, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 113

Two salespeople working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make an informed decision about the first offer. Which of these statements is TRUE? A) The broker has no authority to withhold any offers from the seller. Correct Answer B) The broker was smart to protect the seller from getting into a negotiating battle over two offers. Incorrect Answer C) The broker's actions are permissible provided the commission is split between the two salespeople. Incorrect Answer D) After the first offer was received, the broker should have told the salespeople that no additional offers would be accepted until the seller decided on the offer. Incorrect Answer Explanation It is the broker's duty to keep the principal informed of all facts or information that could affect a transaction. A broker for the seller has a duty to disclose all offers. A commission split does not affect the broker's responsibilities to submit all offers to the seller. Reference: Agency Relationship > Agent's Duties to Clients

Answer 114

A seller directed an agent to market a property in-house. The agent replied to the seller that, because the agent was a member of the multiple listing service (MLS), the property must be placed on the online electronic platform and an equal split offered to cooperating agents. The agent's statement to the seller was A) incorrect as to placing the listing on the MLS. Incorrect Answer B) incorrect as to placing the listing on the MLS and as to the percentage split. Correct Answer C) incorrect as to the percentage split with cooperating agents. Incorrect Answer D) correct. Incorrect Answer Explanation If the seller—in writing—opts out of listing the property on the MLS, then the listing agent must honor the seller's decision. Typically, MLS listings state that the listing agent (seller's agent) and the selling agent (buyer's agent) will split the commission 50/50, but there is no MLS rule to that effect. Reference: Agency Relationship > Multiple-Listing Service (MLS)

Answer 115

Which of the following listing agreements are discouraged or illegal because of the potential for a conflict of interest between an agent and a client? A) Exclusive agency Incorrect Answer B) Seller reserved Incorrect Answer C) Net Correct Answer D) Exclusive right-to-sell Incorrect Answer Explanation The potential for a conflict of interest between an agent and a seller is one reason why the net listing agreement is either discouraged or illegal in many states. The net listing is where the profit an agent will earn is anything over the specific amount that the seller sets. The potential for abuse exists because real estate brokers are frequently much more knowledgeable than sellers as to the current market value of the subject property. All of these are widely-used listing agreements. During the term of the exclusive right-to-sell listing, the broker will earn a commission no matter who finds the buyer. Exclusive agency and seller reserved mean the same thing; with this type of listing agreement, a broker will earn a commission, unless the seller finds the buyer. Reference: Agency Relationships > Net Listing (Conflict of Interest)

Answer 116

A buyer's agent notices that the seller's property disclosure form provided to him by the listing broker is not complete because some of the boxes indicating structural damage have NOT been checked. What should the buyer's agent do? A) Contact the listing broker and request a properly completed disclosure form. Correct Answer B) Advise the buyers that a property inspection will uncover any structural problems. Incorrect Answer C) Contact the sellers directly and question them about the form. Incorrect Answer D) File a complaint against the sellers with the state real estate commission. Incorrect Answer Explanation Because the sellers are represented by a broker, the buyer's agent should contact the listing broker and request that the sellers provide a properly completed form. A property inspection may not uncover latent defects, hidden structural problems that are not easily discovered. A real estate commission investigates only complaints against real estate licensees. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 117

The type of agency that exists when a broker represents the seller or the buyer, but not both, in a transaction is A) single agency. Correct Answer B) dual agency. Incorrect Answer C) facilitator or transaction broker. Incorrect Answer D) designated agency. Incorrect Answer Explanation When a broker is representing only the seller or the buyer in a transaction, the agency is single agency. Dual agency exists when an agent represents two principals in the same transaction. Designated agency is created when an agent is appointed by a broker to act for a specific principal or client when the brokerage firm represents both parties in the same transaction. A transaction broker does not have the fiduciary obligations to either party in a transaction. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 118

All of these are valid reasons for terminating a listing contract EXCEPT A) destruction of the premises. Incorrect Answer B) sale of the property. Incorrect Answer C) death of the salesperson. Correct Answer D) agreement of the parties. Incorrect Answer Explanation A listing contract is a personal service contract between a brokerage and a seller, not between a salesperson and a seller. If the salesperson who secures the listing dies, the listing contract still exists between the brokerage and the seller. A listing contract may be terminated upon the sale or destruction of a property, or by agreement of the parties to the contract, or if the seller or brokerage/broker die. Reference: Agency Relationship > Termination of Agency

Answer 119

A seller has sold property to a neighbor without the services of a real estate broker. However, the seller still owes the broker a commission because the seller signed A) an option listing. Incorrect Answer B) an exclusive right-to-sell listing. Correct Answer C) an exclusive agency listing. Incorrect Answer D) an open listing. Incorrect Answer Explanation In an exclusive right-to-sell listing, a commission will be owed to a broker regardless of which party sells the house. In exclusive agency and open listings, the seller retains the right to sell without obligation to the broker. An option listing permits the broker to retain an option to purchase the property for the broker's own account. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 120

A real estate broker lists her neighbor's home for $212,000. Later that same day a buyer to the community comes into her office and asks for information on houses for sale in the $180,000‒$225,000 price range. The broker offers to represent the buyer as a buyer's agent, but the newcomer refuses representation by her company at this time. Based on these facts, which of these statements is TRUE? A) The real estate broker owes fiduciary duties to both her neighbor and the buyer. Incorrect Answer B) If the buyer later asks for buyer representation from the broker’s firm, the broker cannot offer buyer representation because of her listing contract with the neighbor. Incorrect Answer C) The neighbor is the broker’s client, and the buyer is her customer. Correct Answer D) Both the neighbor and the buyer are the broker’s customers. Incorrect Answer Explanation The listing contract with the neighbor establishes an agency relationship with the neighbor, who becomes the client of the broker. Without representation, the buyer remains a customer of the broker, a nonrepresented consumer who is entitled to fairness and honesty. The broker owes fiduciary duties only to the neighbor, her client. The broker may offer buyer representation to the buyer at a later date if the broker's company policy permits dual agency in a situation in which the buyer may want to purchase one of the company's own listings. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 121

A buyer entered into a buyer agency agreement that gave him the right to purchase property on his own and not pay the buyer's agent. This BEST describes A) an exclusive agency buyer agency contract. Correct Answer B) a designated buyer agency contract. Incorrect Answer C) an exclusive right-to-buy buyer agency contract. Incorrect Answer D) an open buyer agency contract. Incorrect Answer Explanation Exclusive buyer or seller agency contracts allow the buyer find a property and buy it without owing the buyer's agent a commission. A seller under these agreements is allowed to sell the property on her own without paying a commission. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 122

A broker listing an older home secures his own property inspection to discover any defects in the property. The inspection reveals that water has been seeping into the basement and the crawl space beneath the house for years. What should the broker advise the seller to do? A) Reveal the problem on the property disclosure form Correct Answer B) Tell buyers that any drainage problems have been corrected Incorrect Answer C) Leave the discovery of the problem up to the buyers Incorrect Answer D) Hide the problem as much as possible to get the best price from a buyer Incorrect Answer Explanation Reveal the problem on the property disclosure form and expect that the problem will affect how much buyers are willing to offer for the house. The seller has a duty to discover and disclose any known defects that threaten structural soundness or personal safety. A broker must disclose any known material fact to a buyer or a buyer's agent. A buyer's property inspection does not relieve the seller or the broker of the duty to disclose the problem to the buyer. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 123

A seller and a real estate licensee agree to sell the property as a pocket listing. The real estate licensee is a member of the multiple-listing service (MLS). Is this legal? A) Yes, provided the seller authorizes an opt-out from the MLS. Correct Answer B) Yes, provided the real estate licensee authorizes an opt-out from the MLS. Incorrect Answer C) No. A member of the MLS must not restrict potential buyers with a pocket listing. Incorrect Answer D) No. If a seller employs a listing agent, then the property must be marketed through the MLS. Incorrect Answer Explanation A pocket listing—that is, a listing that is not marketed on the MLS—is legal, provided the seller authorizes an opt-out in writing. The seller would choose to opt-out of marketing the property on the MLS, not the listing agent. Reference: Agency Relationships > Multiple-Listing Service (MLS)

Answer 124

A property manager is hired to manage a property while the owner is overseas for two years. The property manager is A) a general agent. Correct Answer B) an attorney-in-fact. Incorrect Answer C) a special agent. Incorrect Answer D) a universal agent. Incorrect Answer Explanation A general agent may represent a principal in a broad range of matters related to a particular business or activity. A property manager is usually considered a general agent. A special agent may represent a principal in one specific act or business transaction under detailed instructions, such as when an agent represents a seller under a listing agreement. A universal agent is a person empowered through a general power of attorney to do anything the principal could do personally. The power of attorney makes the agent an attorney-in-fact. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 125

Before the buyer signs a buyer agency contract, a real estate professional must do all of these EXCEPT A) explain the forms of agency available. Incorrect Answer B) describe specific services to be provided. Incorrect Answer C) obtain financial information from the buyer. Correct Answer D) inform the buyer of the charges or compensation for services. Incorrect Answer Explanation Once the buyer representation contract is signed, not before, the real estate professional should obtain detailed financial information from the buyer. State regulations require that real estate professionals inform the buyer of all types of agency available, the broker's compensation requirements, and the services that the broker will provide under the agreement. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 126

A new salesperson lists a unit in a condominium building for sale. In this transaction, the salesperson A) acts on behalf of the condominium association, as well as the seller. Incorrect Answer B) has a direct agency relationship with the owners of the unit. Incorrect Answer C) acts on behalf of the brokerage firm. Correct Answer D) must personally find a buyer for the unit to obtain a share of the commission. Incorrect Answer Explanation Salespersons or associate brokers act as agents of their brokers. Only the broker has a direct agency relationship with the owners of the unit but not with the condominium association. Under the terms of most listing agreements, the broker and, in turn, the salesperson are entitled to a share of the commission, even if the broker or the salesperson does not personally find a buyer for the unit. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 127

In a dual agency situation, a broker may represent both the seller and the buyer if A) the broker determines dual agency is the only option to sell the property and get paid a full commission. Incorrect Answer B) the broker informs either the buyer or the seller of this fact. Incorrect Answer C) both parties give their informed consent, usually in writing, to the dual agency. Correct Answer D) both parties are represented by attorneys. Incorrect Answer Explanation Dual agency, in states that allow it, requires informed written consent from both parties. The broker must have written consent from both parties; consent from only one party will not permit dual agency. The dual agency relationship does not determine payment of commissions and does not require attorney representation by either party. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 128

A listing taken by a real estate salesperson is technically an employment contract between the seller and A) the local multiple listing service (MLS). Incorrect Answer B) the brokerage firm. Correct Answer C) the salesperson and principal broker together. Incorrect Answer D) the salesperson. Incorrect Answer Explanation Only a principal or an employing broker for the brokerage firm may enter into brokerage agreements. The broker's salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the subagent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 129

A prospective buyer looking to build on a vacant lot asks his salesperson if a septic tank could be built on the lot. The salesperson may suggest that the buyer conduct A) a percolation test. Correct Answer B) a topography test. Incorrect Answer C) a septic soil test. Incorrect Answer D) a hydroponics test. Incorrect Answer Explanation A percolation test determines how quickly the ground will absorb water and would be conducted to determine if a septic tank could be installed on the lot. A septic tank can be installed only if the soil has the ability to absorb and drain water. Hydroponic refers to a method of growing plants in water rather than in soil and is not related to septic tank installation. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 130

Shortly before closing on her home, a seller learns that her listing broker is related to the buyer. The listing broker has not disclosed that relationship to the seller. If the seller later refuses to pay the listing broker his commission, will the broker likely prevail in a lawsuit to recover the commission? A) Yes, because a seller must pay commission if the broker produces a ready, willing, and able buyer. Incorrect Answer B) Yes, because the disclosure of a relationship between the buyer and the listing broker is not relevant to the transaction. Incorrect Answer C) No, because the broker has violated his fiduciary duties to the seller. Correct Answer D) No, because the seller may rescind a listing agreement at any time before closing. Incorrect Answer Explanation The broker has violated the duty of disclosure to his client because the relationship may be relevant to the seller's decision to accept the buyer's offer. The broker may also have established an undisclosed dual agency in bringing a relative into the transaction. The broker's actions do not automatically provide the seller with a reason to terminate the listing contract. Reference: Agency Relationship > Agent's Duties to Clients

Answer 131

A property manager is typically A) a special agent. Incorrect Answer B) a general agent. Correct Answer C) a universal agent. Incorrect Answer D) a designated agent. Incorrect Answer Explanation A general agent represents a principal in a broad range of matters related to a particular business or activity. A broker has a property management contract with a property owner and may bind the owner to contracts or agreements related to management of the property. A universal agent is a person empowered to do anything the principal could do personally, authorized by a general power of attorney. A special agent may represent the principal in a specific transaction only and has no power to bind the principal; a real estate broker is typically a special agent. A designated agent is an individual licensee authorized by a broker to represent one party in a transaction in which the other party is also represented by the broker. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 132

The final decision on a property's listing price should be made by A) the appraiser. Incorrect Answer B) the seller. Correct Answer C) the seller’s attorney. Incorrect Answer D) the listing broker. Incorrect Answer Explanation The seller must determine the listing price of the seller's property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or a salesperson may use a comparative market analysis (CMA) to help the seller determine a reasonable listing price. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 133

A listing agent brings an offer from his separated spouse to his seller. The agent and his spouse, though separated, still own the property. The agent does not tell the seller, his client, that the buyer is his spouse, because she has retained her maiden name throughout the marriage. The agent's action A) terminates the agency contract with the seller. Incorrect Answer B) is legal and ethical because the agent’s relationship to the buyer does not affect the seller. Incorrect Answer C) creates an express agency with the buyer. Incorrect Answer D) violates his duty of disclosing material facts to the seller. Correct Answer Explanation The agent has a fiduciary duty to keep the seller, his client, informed of all facts that could affect the transaction. The agent's relationship with the buyer and interest in the property may affect his ability to properly represent his seller's interest in his eagerness to have the property sold. The agent does not have an express agency contract with the buyer at this point. He may accidentally create an implied agency by acting in the buyer's interest. The action does not in itself terminate the contract with the seller. Reference: Agency Relationship > Agent's Duties to Clients

Answer 134

The relationship between a broker and a seller is generally what type of agency? A) General agency Incorrect Answer B) Implied agency Incorrect Answer C) Special agency Correct Answer D) Universal agency Incorrect Answer Explanation A special (or limited) agent is authorized to represent the principal in a specific act or business transaction, under detailed instructions from the principal. The relationship between a brokerage and a seller is usually a special agency, as is the agency between a brokerage and a buyer client. A general agent may represent the principal in a broad range of matters. A property manager is typically a general agent for the owner. A universal agent is a person empowered to do anything the principal could do personally, as is authorized in a power of attorney. An implied agency is usually created unintentionally or accidentally by the actions of the parties. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 135

A couple accompanies a property inspector during an inspection of a house on which they have a contract. The inspector points to a six-inch crack at the corner of a dining room window. The crack is an example of A) a latent defect. Incorrect Answer B) a structural defect. Incorrect Answer C) an environmental defect. Incorrect Answer D) a patent defect. Correct Answer Explanation A patent defect is easily visible when inspecting a property. A latent defect is a hidden defect that is not easily visible during an inspection, and may be known to a seller but not disclosed to an agent or buyer. A small crack at a window is usually not a structural defect in a property and does not indicate an environmental danger. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 136

During an inspection, the inspector finds structural issues, recommends a roof certification, and states that the buyer should have a radon test. The salesperson representing the buyer should do what next? A) Tell the buyer to have another inspection done to see if the new inspector comes up with the same issues Incorrect Answer B) Call a roofer and structural engineer and have the inspector start the radon test Incorrect Answer C) Give the buyer a list of recommended professionals if the buyer asks Correct Answer D) Inspect the property and tell the buyer which issues seem to be correct Incorrect Answer Explanation Real estate professionals limit their liability by offering buyers and sellers professional assistance and also making sure there is more than one name per category. Reference: Agency Relationship > Agent's Duties to Clients

Answer 137

A real estate agent acting as a single agent owes either fiduciary or statutory agency duties to any of these EXCEPT A) a buyer. Incorrect Answer B) a landlord. Incorrect Answer C) a customer. Correct Answer D) a seller. Incorrect Answer Explanation In single agency, the agent represents only one party in any single transaction. The agent owes fiduciary or statutory agency duties exclusively to one principal, who may be a seller, a buyer, a landlord, or a tenant. The customer is the other party not represented by the agent in the transaction. Reference: Agency Relationship > Agent's Duties to Clients

Answer 138

All of these events terminate an agency relationship EXCEPT A) bankruptcy of the principal. Incorrect Answer B) destruction of the property. Incorrect Answer C) completion of the purpose of the agency. Incorrect Answer D) an appraisal with a value less than the selling price. Correct Answer Explanation If an appraisal reveals a market value less than the stated selling price in a contract, the parties will have to renegotiate their contract if both parties are still interested in the sale. The appraisal does not affect any agency relationship. Completion of the agency's purpose, destruction of the property, and bankruptcy of the principal terminate an agency relationship. Reference: Agency Relationship > Termination of Agency

Answer 139

Hidden defects, which are not easily discovered during a property inspection, are called A) material facts. Incorrect Answer B) fraudulent defects. Incorrect Answer C) latent defects. Correct Answer D) observable defects. Incorrect Answer Explanation A latent defect is a hidden structural defect that is not easily discovered during a property inspection. A material fact is any fact relevant to a person making a decision to buy a property. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 140

The type of listing contract that provides the LEAST protection for the listing broker is A) the net listing. Incorrect Answer B) the exclusive agency listing. Incorrect Answer C) the exclusive right-to-sell listing. Incorrect Answer D) the open listing. Correct Answer Explanation In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A broker entering into an open listing should negotiate terms in writing that specify a commission due the broker if the broker is the procuring cause of a sale. An exclusive agency listing authorizes a broker to act as sole agent of the seller, but the seller may sell the property without the broker and without paying the broker a commission. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. Reference: Agency Relationship > Creation of Agency and Non-Agency Agreements; Disclosure of Conflict of Interest

Answer 141

To protect the buyer, many states require A) a broker’s certification of property condition. Incorrect Answer B) a property survey. Incorrect Answer C) a seller’s property condition disclosure. Correct Answer D) a buyer’s independent property inspection. Incorrect Answer Explanation Most states require that the seller truthfully complete a seller's property condition disclosure statement. Some states use mandated disclosure forms. While states do not require property inspections, buyers should secure their own independent property inspection to ensure that they know the actual condition of the property. A property survey determines the exact boundaries of a property but does not note the condition of the property. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 142

It is the duty of an agent to disclose to the principal every material step taken in the transaction of the principal's business. This duty exists because A) the state license laws have this requirement. Incorrect Answer B) the terms of the purchase contract require the agent to do so. Incorrect Answer C) the commission can be adjusted up or down according to the agent's efforts. Incorrect Answer D) the agent has fiduciary obligations to the principal. Correct Answer Explanation One of the duties of a fiduciary is that of disclosure, keeping the principal informed of all facts or information related to the transaction. The duty exists because of the law of agency, not because of the terms of any contract. An agent's commission is established under a contract between the agent's broker and the principal and is based on the successful completion of a transaction. Reference: Agency Relationship > Agent's Duties to Clients

Answer 143

Sellers became aware of zoning changes that will affect the land across the street from their home. In this case, A) the seller is obligated to disclose any changes that might impact the proximity of the property. Correct Answer B) the seller is not obligated to make any disclosures because these changes have no effect on the property itself. Incorrect Answer C) the buyer has the responsibility of conducting due diligence to determine neighborhood changes. Incorrect Answer D) the appraiser is obligated to investigate any possible changes in zoning that will affect the value of a property. Incorrect Answer Explanation The courts have decided in favor of the buyer when the seller neglected to reveal violations of zoning or building codes. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 144

A broker helps a buyer and a seller with paperwork but does not have fiduciary obligations to either party. The broker's activity in this situation is that of A) a single agent. Incorrect Answer B) a designated agent. Incorrect Answer C) a dual agent. Incorrect Answer D) a transaction broker. Correct Answer Explanation In some states, a broker may be an agent of neither party to a transaction but help both the buyer and the seller with necessary paperwork and formalities in a transaction. The broker acts as a transaction broker or facilitator but not as an agent of either party. Reference: Agency Relationship > Agency and Non-Agency Relationships and Licensee-Client Relationships

Answer 145

A salesperson working with a commercial client for the first time follows the client's orders and drafts a contract for the purchase of a small strip center. Which of these is TRUE? A) The salesperson is in violation of truth-in-lending laws. Incorrect Answer B) The salesperson is legally practicing law because the client ordered him. Incorrect Answer C) The salesperson is illegally practicing law and is most likely not competent. Correct Answer D) Commercial brokers are allowed to draft contracts under the direction of clients. Incorrect Answer Explanation Real estate professionals are not allowed to practice law and drafting contracts comes under that practice. This is not allowed even if the client directs or requests it or the sale is commercial. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 146

A broker has an exclusive right-to-sell listing on a building. The owner is out of town when the broker gets an offer from a buyer to purchase the building. The buyer must have an answer from the seller before the seller is scheduled to return to the city. Under these circumstances, A) the broker must obtain the signature of the seller to effect a contract. Correct Answer B) the broker may collect a commission even if the transaction falls through because of the seller's absence from the city. Incorrect Answer C) the broker may enter into a binding agreement on behalf of the seller. Incorrect Answer D) the buyer is obligated to keep the offer open until the seller returns. Incorrect Answer Explanation A real estate broker is usually a special agent who when representing the seller is limited to finding a ready, willing, and able buyer for the property. As a special agent, the broker may not bind the principal to any contract. The broker may collect a commission only upon completion of the transaction. A buyer may write an offer requiring a response before the seller returns and is not obligated to keep the offer open past the time period the buyer states in the offer. Reference: Agency Relationship > Multiple-Listing Service (MLS)

Answer 147

A real estate broker hired by an owner to sell a parcel of real estate must comply with A) all lawful instructions of the owner. Correct Answer B) all dual agency requirements. Incorrect Answer C) the common law of agency, even if a state statute exists. Incorrect Answer D) the concept of caveat emptor. Incorrect Answer Explanation Under the law of agency, a broker serving as agent for an owner must obey all lawful instructions of the owner. Unless the broker also represents a buyer in the same transaction, the broker is not subject to the requirements of dual agency. Caveat emptor, meaning "let the buyer beware," applies in some states but is not a responsibility of a broker representing a seller. If a state agency statute exists, it must be followed by the broker. Reference: Agency Relationship > Agent's Duties to Clients

Answer 148

Before making an offer on a property, the buyer should have received and read A) the broker policy manual. Incorrect Answer B) the general warranty deed. Incorrect Answer C) the independent contractor agreement. Incorrect Answer D) the seller’s property disclosure form. Correct Answer Explanation The buyer should receive and read a seller's property disclosure statement before making an offer on a property. The independent contractor agreement establishes the employment relationship between a broker and a salesperson and is not read by the buyer. The broker policy manual provides policies and procedures for the brokerage firm and is not a document usually provided to buyers. The general warranty deed fully warrants good clear title to the premises. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 149

A broker touring a house before taking a listing notices that the floor is sagging in the living room. The seller has placed a large rug over the floor. What should the broker do in this situation? A) Ask the seller about the sagging floor to discover if there is a structural problem with the house. Correct Answer B) Tell the seller that the buyer is responsible for discovering any defects in the home. Incorrect Answer C) Take the listing and rely on the seller to disclose any defect on the property disclosure form. Incorrect Answer D) Rely on the buyer’s property inspection to discover any defect. Incorrect Answer Explanation The broker is responsible for disclosing any material fact about the home to a buyer or a buyer's agent. It is the broker's duty to discover any material facts that may affect the property's value. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 150

A listing broker notices that a seller's property disclosure form is not signed and that some of the boxes indicating structural damage have not been checked. What should the agent do? A) Nothing, because a property inspection will discover defects in the property. Incorrect Answer B) File a complaint against the sellers with the state real estate commission. Incorrect Answer C) Question the sellers and have them sign and truthfully complete the form. Correct Answer D) Turn the form over to the property inspector to verify the condition of the property. Incorrect Answer Explanation A listing broker is responsible for ensuring that the sellers complete the property disclosure form and for disclosing any material facts on the property's condition to a buyer. The form is delivered to the buyer or the buyer's representative, not to the property inspector. A property inspector may not discover latent defects that should be disclosed on a property disclosure form by the buyer. The real estate commission only investigates complaints against real estate licensees. Reference: Agency Relationship > Responsibilities of Agent to Customers and Third Parties, Including Disclosure, Honesty, and Integrity

Answer 151

A buyer's agent duty of care to a buyer includes all of these EXCEPT A) helping the buyer to evaluate a seller’s counteroffer. Incorrect Answer B) helping the buyer to locate a suitable property. Incorrect Answer C) evaluating neighborhood and property conditions. Incorrect Answer D) sharing with a listing agent that the buyer is willing to pay more for the property. Correct Answer Explanation Sharing with a seller how much a buyer is willing to pay for a property violates the buyer's agent's duty of care and confidentiality to the buyer-client. All of the other activities are examples of a buyer's agent exercising the duty of care for the buyer. Reference: Agency Relationship > Agent's Duties to Clients

National Agency Relationship Flashcards

(175 cards)