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Chapter 2 Study Set Laws of Agency and Fiduciary Duties

Terms in this set (97)

The creation of an agency requires:
a. express agreement
b. written agreement
c. attorney in fact
d. none of these
d. none of these. it may be created by verbal, written, or express but none of it is REQUIRED. there's plenty of reasons it can be created
the real estate law is part of:
Business and Professions Code
a principle does not need to show disclose their license if they are also an agent t/f
true
if a salesperson withholds a new listing from the MLS in an attempt to sell it themselves it is called
a pocket listing
When an opinion is coupled with advice expressing no further need for the buyer to investigate and confirm the prediction, the opinion is elevated to the level of a:
a) guarantee.
b) distinct possibility.
c) misnomer.
d) fact.
a. guarantee.(When an opinion is coupled with advice expressing no further need for the buyer to investigate and confirm the prediction, it rises to the level of a guarantee. Prudence is needed when voicing an opinion as an opinion stated by someone presumed to be an expert may cause this confusion.)
An agent is an individual who represents another, called the:
a) cooperating broker.
b) principal.
c) appraiser.
d) trustee.
b. principal.(An agent is an individual who represents another, called a principal. Both salespersons and brokers are agents. However, the representation of a salesperson is indirect since they represent their employing broker who then represents the principal.)
Which of these actions does not create an agency relationship?
a) Subornation.
b) Implication.
c) Ratification.
d) A verbal agreement.
a. Subornation.(This is a NOT question. Subornation is a legal matter, to induce someone to perform an illegal act such as perjury. It does not create an agency relationship. The alternative answer selections are all possible ways to create an agency relationship.)
Agency disclosure is handled in the following sequential steps:
a) disclose, confirm, elect.
b) confirm, elect, disclose.
c) disclose, elect, disclose.
d) disclose, elect, confirm.
d. disclose, elect, confirm.(The agency relationship options are first disclosed. Then the agent elects what the relationship will be and finally confirms that choice with all participants involved in the transaction.)
Broker Sarah delivered an offer to purchase real property to Owner Martha. Owner Martha asked for 24 hours to consider the offer. Later that same day, Broker Sarah received two additional offers through other brokers. Broker Sarah believes the owner will reject all three offers. In order to comply with the law, Broker Sarah is to:
a) hold the new offers until Owner Martha has made a decision on the first offer, then present the other offers.
b) present the two additional offers in the order they arrived.
c) simultaneously present the two additional offers to Owner Martha as soon as possible.
d) refuse to receive the offers until Owner Martha decides not to accept the original offer.
c. simultaneously present the two additional offers to Owner Martha as soon as possible.(The decision regarding any offer is for the seller to make. The broker in this question is required to notify the seller and present both additional offers as soon as possible.)
The selling agent presents their buyer's offer to the seller. When is the best time for the agent to give the seller the Agency Law Disclosure form?
a) On the opening of escrow.
b) Before the seller signs the offer.
c) After presenting the offer to the seller.
d) As soon as practicable.
d. As soon as practicable.(The Agency Law Disclosure is always to be delivered as soon as practicable.)
An agency relationship in real estate is terminated in multiple ways. Which of these is NOT likely to be the cause of termination of an agency relationship?
a) The incapacity or death of either the seller or broker.
b) Revocation of the agency by the owner.
c) Destruction of the property.
d) Estoppel.
d. Estoppel.(Estoppel is a legal theory barring a person from later asserting or denying a condition based on the person's previous acts or statements, and thus will not terminate an agency relationship. The alternative answer selections are ways in which an agency relationship is terminated.)
Which of the following is an illegal activity for a broker under agency law?
a) Accepting commissions from both the buyer and the seller.
b) Acting as an escrow.
c) Selling their own property without disclosing their license status.
d) Depositing additional personal funds into a client's trust account.
d. Depositing additional personal funds into a client's trust account.(Depositing personal funds into a client's trust account is an example of improper commingling.)
When a deed includes the racial identity of the parties, it can be rewritten under which of the following circumstances:
a) when the title company rewrites it.
b) it was created prior to 1968.
c) if it is offensive or discriminatory.
d) by court order.
d. by court order.(Altering an existing signed document can never be done without serious legal consideration. Of the answer selections, D is the only one that addresses a court order.)
Admiralty Escrow offers a $100 "referral fee" to any real estate agent who opens escrow during the month of May. Under the Real Estate Settlement Procedures Act (RESPA), such an offer:
a) is always allowed.
b) is allowed if disclosed to both the buyer and seller.
c) must be disclosed in the settlement statement.
d) is not allowed.
d. is not allowed.(The Real Estate Settlement Procedures Act (RESPA) does not permit referral fees or kickbacks under any circumstance.)
When a broker represents only a buyer in the sale of real estate, this is referred to as:
a) single agency.
b) implied agency.
c) dual agency.
d) general agency.
a. single agency.(An agent may only be a single agent (representing one party in a transaction) or a dual agent (representing both parties in a transaction). As the broker in this question represents only a buyer, the broker is a single agent.)
Broker Stan acts as a dual agent for both Buyer Esmerelda and Seller Geoffrey. At no point does Broker Stan reveal their dual agency status. Which is the least likely outcome?
a) The broker is forced to forfeit their broker fee.
b) The broker is disciplined by the Department of Real Estate (DRE).
c) The broker is liable for their principals' money losses.
d) The broker faces a criminal conviction.
d. The broker faces a criminal conviction.(When a broker fails to disclose their dual agency status, the seller does not have to pay the broker's fee on a closed transaction. Further, the broker may be liable for the financial losses suffered by the client (though not more than triple the client's losses). However, there is no criminal liability for the failure to disclose a dual agency relationship.)
A(n) __________ is a broker who simultaneously represents the best interest of opposing parties in a transaction, e.g., both the buyer and the seller.
a) dual agent.
b) secret agent.
c) subagent.
d) finder.
a. dual agent.(The dual agent is a broker who concurrently represents both principals in a single transaction, such as the buyer and seller, lessee and lessor, or borrower and lender.)
In the order in which they are to occur, the three steps of agency disclosure are:
a) elect, confirm, disclose.
b) disclose, confirm, disclose.
c) disclose, elect, confirm.
d) confirm, elect, disclose.
c. disclose, elect, confirm.(The agency disclosure law requires the agent to first disclose the existence of the law at the earliest possible moment to the prospective client. Then, the agent needs to elect who they will represent and confirm that election.)
A buyer's agent prepares an offer for a buyer of a home. When is the buyer's agent to give the buyer the Agency Law Disclosure form?
a) As soon as practicable.
b) Before showing the buyer the house.
c) Before preparing the offer for the buyer.
d) At opening of escrow.
a. As soon as practicable.(The three steps in the creation of an agency relationship are to first disclose, then elect who is represented, then confirm that decision. Disclosure is to be made as soon as practicable.)
The creation of an agency requires:
a) express agreement.
b) considerastion.
c) subornation.
d) None of the above.
d. None of the above.(None of these conditions are required to create an agency relationship. An ostensible or implicit agency has none of these conditions.)
A seller's agent listed a ranch for sale under an exclusive right to sell listing. A buyer's agent,working through the local multiple listing service (MLS), presented an offer which the seller accepted. During escrow, the seller's agent discovered the buyer had recently purchased many similar ranches in the area at a far higher cost per acre than had been offered in this transaction. What should the seller's agent do?
a) Do nothing because the deal is in escrow.
b) Disclose all information to the seller and let the seller decide what to do.
c) Cancel the escrow on behalf of the seller and try to resell the property for a higher price.
d) Inform the seller, but insist the deal must stay in escrow.
b. Disclose all information to the seller and let the seller decide what to do.(The listing agent's fiduciary duty requires them to disclose all material facts to their client, including the existence of the other transactions.)
A real estate agent may not represent all of the principals in a transaction if:
a) they have not obtained the consent of all parties to this agency relationship.
b) they have informed all principals they are acting as a dual agent.
c) they are collecting a commission from each principal with the knowledge of the others.
d) they also represent other clients in other unrelated transactions.
a. they have not obtained the consent of all parties to this agency relationship.(This is a NOT question. To represent both principals in a dual agency capacity, the agent needs to obtain the consent of all principals at the earliest possible moment.)
When a dual agency relationship is established in a targeted sales transaction, the broker and their agents may not pass on any information from one party to the other relating to:
a) the price the buyer may be willing to pay.
b) the terms of payment the seller may be willing to accept.
c) confidential financial information of the parties.
d) All of the above.
d. All of the above.(Under a dual agency, the agent may not express any information from one party to the other regarding the price the buyer may be willing to pay, the terms of payment the seller may be willing to accept, or confidential financial information of either party.)
Which of the following statements is least true in regard to items of value held in trust?
a) Trust funds can be kept in separate interest bearing accounts.
b) Trust funds for taxes and insurance may bear interest.
c) The FDIC must insure trust funds.
d) Trust funds cannot take the form of precious gems or stones.
d. Trust funds cannot take the form of precious gems or stones. (Trust funds come in many forms, including checks, precious metals/stones, stocks/bonds, collectibles, promissory notes, and any other item or evidence of valu
A listing broker may not be:
a) the sole agent of the owner.
b) the sole agent of the buyer.
c) a sole agent of the seller.
d) a dual agent.
b) the sole agent of the buyer.
The Real Estate Commissioner is authorized to:
a) impose fines on any real estate licensee who is convicted of fraudulent activities.
b) promulgate rules and regulations to enforce the California real estate laws.
c) issue non-resident real estate licenses to states which prohibit their residents from holding California real estate licenses.
d) implement federal lending legislation to encourage a healthy housing market.
b. promulgate rules and regulations to enforce the California real estate laws.(The chief officer of the Department of Real Estate is the Real Estate Commissioner. The Real Estate Commissioner's principal responsibility is to enforce all the real estate laws pertaining to real estate practice, licensing and the Subdivided Lands Act.)
Agency relationships may not be created:
a) by ratification.
b) without the consent of the principal.
c) by implied contract.
d) when necessitated by emergency.
b. without the consent of the principal.(This is a NOT question. An agency relationship cannot be created without the consent of the principal. It may be created by ratification after the fact, be implied by the actions of the agent or be created out of necessity in the event of an emergency.)
A real estate agent may represent all principals in a transaction if:
a) they have obtained the consent of all parties to this dual agency relationship.
b) they have informed all principals that they are the agent for each principal.
c) they are collecting a commission from each principal with the knowledge of the other party.
d) All of the above.
d. All of the above.(In order to properly be a dual agent, the dual agency status needs to be disclosed as soon as possible and all parties must consent.)
Brokerage events triggering a listing agent's preparation of a seller's net sheet includes:
a) entering into a seller's listing agreement.
b) submitting a buyer's purchase agreement to a seller.
c) Both a. and b.
d) Neither a. nor b.
c. Both a. and b.(The seller's net sheet is a document prepared by a seller's agent to disclose the financial consequences of a sale when setting the listing price and on acceptance of a buyer's price in a purchase offer. A seller may request this at the time of signing a listing or whenever an offer is presented.)
When a broker solicits and accepts a deposit on the purchase of real property without express written authorization from the owner to sell the property, the broker is:
a) guilty of converting a customer's funds for their own benefit.
b) guilty of violating their fiduciary duty to the owner.
c) acting as an agent for the buyer.
d) acting under a restricted listing.
c) acting as an agent for the buyer.
The Agency Law Disclosure is not required to be attached to a(n):
a) exchange arrangement.
b) purchase agreement for single family residential property.
c) purchase agreement for commercial property.
d) month-to-month rental agreement.
. month-to-month rental agreement.(The Agency Law Disclosure is to be attached to a purchase agreement, or exchange agreement and a lease for greater than one year. It is not required on a month-to-month rental agreement.)
Barnard made an offer to buy a vacant residence. The offer was accepted by the seller. Prior to the close of escrow, Barnard requested permission from the broker to enter and make minor repairs to the house. Which of the following is true?
a) The broker is to get a signed rental agreement from Barnard before allowing him to enter.
b) Barnard doesn't need permission from anyone since he is the equitable owner of the property.
c) The broker needs to get the seller's permission.
d) Bernard may only enter to conduct repairs that correct material defects in the property.
c. The broker needs to get the seller's permission.(A seller needs to provide approval to a buyer who intends to enter a vacant house prior to the close of escrow. Until escrow closes, the property still belongs to the seller. When the buyer is given permission to enter and make repairs, it creates liability if something happens prior to the close of escrow, such as an injury on the property.)
Failure to provide the Agency Law Disclosure in targeted transactions:
a) puts the agent's fee at risk of loss.
b) renders the transaction invalid.
c) affects only the listing half of a commission.
d) affects only the salesperson's share of the commission.
a. puts the agent's fee at risk of loss.(The failure to disclose the agency relationship at the earliest available opportunity puts the agent's fee at risk.)
When a seller's agent takes a listing which does not authorize the listing broker to accept a deposit from a buyer, the broker is to advise their agent that:
a) the broker will not be able to accept a deposit from a buyer.
b) it is an implied right of a broker to accept a deposit in behalf of the seller on any offer.
c) a deposit will be accepted and retained by the broker from the buyer, but only as an agent for the buyer.
d) the deposit has to be paid directly to the seller's agent.
c) a deposit will be accepted and retained by the broker from the buyer, but only as an agent for the buyer.
The best guideline to determine whether an action is ethical can be found in:
a) state legislation.
b) the Business and Professions Code.
c) the Preamble of the National Association of REALTORS®.
d) what is in the best interest of the real estate licensee.
b. the Business and Professions Code.(The Real Estate Law is found in the Business and Professions Code, which also covers the ethical practice of licensees.)
Fee amounts are always:
a) 6% of the price received for a property.
b) 2%-8% of the price received for a property.
c) nonnegotiable and set by law.
d) negotiable and not fixed by law.
d) negotiable and not fixed by law.
A dual agency is required to be disclosed to each client:
a) after escrow closes.
b) the moment the conflict arises.
c) before the parties met.
d) any time prior to the close of escrow.
b. the moment the conflict arises.(Dual agency requires an immediate disclosure as soon as it occurs. This is a question that may be asked in various forms. Certainly answer choice A. after escrow closes and D. any time prior to the close of escrow are inappropriate. C. before the parties meet makes little sense since the principals rarely meet.)
"Agency" includes relationships between licensed sales agents and their brokers and:
a) brokers and members of the public.
b) finders and their brokers or principals.
c) escrow officers.
d) Both a. and b.
d. Both a. and b.(Agency is the relationship between a licensed agent and principals as well as other brokers and finders.)
A real estate commission is normally calculated as a percentage of the:
a) asking price.
b) sales price.
c) owner's equity in the property being sold.
d) fair market value (FMV) of the property being sold.
sales price.(Real estate commissions are based on a percentage of the sales price mutually agreed to by the participants.)
A seller's broker receives a written offer on a listed property. The broker is certain the seller will not accept it. Which of the following may the broker not do?
a) Write new terms on the back of the offer and go back to the buyer for approval.
b) Change the offer price to what the broker thinks the seller will accept, and initial the change.
c) Present the offer to the seller as written.
d) Present the offer to the seller, but advise them not to accept it.
b) Change the offer price to what the broker thinks the seller will accept, and initial the change.
A listing broker enters into negotiations to sell an office building to a limited partnership in which the broker is a limited partner. The broker does not disclose their interest in the limited partnership to the seller. Before closing, the seller discovers the broker's interest and refuses to sell. What is the likely outcome of a civil suit to collect a commission?
a) The case is transferred to the Real Estate Commissioner.
b) The case is sent to criminal court.
c) No commission would be due to the broker.
d) The broker would likely be awarded their full commission.
c. No commission would be due to the broker.(The failure to disclose the fact that the broker is also a partner in the partnership buying the property allows the seller to withdraw from the sale with no obligation to pay the brokerage commission. This scenario presents a conflict of interest that needs to be disclosed by the broker at the moment the conflict arises.)
In 1968, the U.S. Supreme Court barred all racial discrimination in the sale or rental of property. A person discriminated against should:
a) contact the local police.
b) file a criminal action in local and state courts.
c) plead the fifth.
d) file a civil action in federal court.
d. file a civil action in federal court.(The U.S. Supreme Court has a federal jurisdiction. The action would thus be heard in a federal court.)
A listing broker may be the sole agent of the seller or:
a) the sole agent of the buyer.
b) a dual agent of both the seller and the buyer.
c) a dual agent of both the lender and the buyer.
d) a dual agent of the both the seller and the buyer's broker.
b. a dual agent of both the seller and the buyer.
A prospective buyer gave their broker a personal check for $1,000 payable to the seller along with an offer to buy the property. The buyer told the broker the check was not to be cashed until the end of the month. Which of the following is correct?
a) The broker is to refuse to accept the check.
b) The broker is to accept the check, but deposit into their trust account within 24 hours.
c) The broker needs to deliver the check either to the seller or escrow upon acceptance.
d) The broker may hold the check, but needs to tell the seller it is being held uncashed before the seller accepts the offer.
d) The broker may hold the check, but needs to tell the seller it is being held uncashed before the seller accepts the offer.
The federal Loan Estimate is to be delivered to a borrower:
a) within three business days of receipt of a consumer mortgage application.
b) within three business days of closing.
c) no more than one calendar day before the close of escrow.
d) at least ten business days from the date of the loan commitment.
a) within three business days of receipt of a consumer mortgage application.
When approached by members of minority groups who want to be shown property, a real estate salesperson avoids showing the buyers property in integrated areas. This would be an example of:
a) blockbusting.
b) steering.
c) redlining.
d) best business practice.
b. steering.(Steering perpetuates segregated housing through restricting an individual seeking to rent or purchase a property in a community, neighborhood or development by influencing the choice of the tenant or prospective buyer. Redlining is the refusal to make loans or issue insurance in a neighborhood. Blockbusting is related to listing efforts and occurs when an owner is warned about demographic changes in the neighborhood. The salesperson's actions are not indicative of best business practice since they are discriminatory.)
When a dual agency is established in a one-to-four unit residential sales transaction, the broker and their agents may pass on information relating to the_____ from one party to the other.
a) price of comparable homes in the neighborhood
b) maximum pricing obtainable from the buyer
c) minimum pricing sought by the seller
d) the terms of payment the seller may be willing to accept
a. price of comparable homes in the neighborhood(Comparable home prices are acceptable information to be shared. However, personal financial information cannot be shared.)
All of the following statements are true concerning an in-house sale, except:
a) the listing broker can buy the property themselves.
b) the listing broker can act as an agent for the seller only.
c) the listing broker can act as a dual agent.
d) the listing broker can act as an agent for the buyer only.
. the listing broker can act as an agent for the buyer only.(This is an EXCEPT question. For an in-house sale, the listing broker cannot represent only the buyer. An in-house sale refers to one in which the broker or their salespersons are working with the seller and the buyer.)
All of the following transactions require compliance with the agency law, except:
a) The sale of a single family residence sold independently by the owner.
b) Upon the entry into a three-year lease arranged by a broker on a residential property.
c) On the sale of a five-unit residential building that is sold by a licensed broker.
d) Both b. and c.
a. The sale of a single family residence sold independently by the owner.(Agency law is activated when a transaction involves an agent working on behalf of a principal. Therefore, answer selection A does not apply as no agents are involved.)
A salesperson who works for a broker who dies:
a) may continue working for up to 60 days or until another broker takes over the office.
b) needs to close escrow on all pending transactions.
c) may continue working if there is an office manager appointed by the broker with two years of management experience within the last five years.
d) needs to stop real estate activity immediately.
d. needs to stop real estate activity immediately.(When an employing broker dies, all real estate activity needs to stop until a new broker has been authorized to be responsible for the clients' welfare.)
The Real Estate Law is part of:
a) the Corporations Code.
b) the Business and Professions Code.
c) the Statute of Limitations.
d) Penal Code.
b. the Business and Professions Code.(The Real Estate Law is located in a specific state code. Not all real estate companies are corporations, so it would not be reasonable for the law to come from the Corporations Code. The Statute of Limitations has to do with time limits before which action need to be taken. Real estate brokerage is considered a profession, and thus is controlled under the Business and Professions Code.)
A broker who simultaneously represents the best interests of both opposing parties in a transaction is known as a(n):
a) finder.
b) dual agent.
c) subagent.
d) unlawful agent.
b. dual agent.(A dual agent represents both principals in a transaction - buyer/seller or lessee/lessor.)
The Agency Law Disclosure form is not mandated to be presented to all parties when listing, selling, buying or exchanging:
a) commercial property.
b) trust deed notes.
c) mobilehomes.
d) single family residential property.
trust deed notes. (All purchase agreements for targeted transactions are covered by Agency Law Disclosure rules. Since the sale of trust deed notes is not a targeted transaction, it does not fall under the purview of the Agency Law Disclosure.
A person who is not among the protected groups under the Americans with Disabilities Act (ADA) and can therefore be refused a rental is a(n):
a) alcoholic.
b) pregnant women.
c) drug addict.
d) blind individual with a guide dog.
c. drug addict.(Only a drug addict is not a protected class under the Americans with Disabilities Act (ADA).)
The __________ contained in all purchase agreements, states the existence or nonexistence of each broker's fiduciary agency with the various parties to the transaction.
a) agency confirmation provision
b) broker liability agreement
c) hold harmless agreement
d) attorney fee provision
a. agency confirmation provision(The agency confirmation provision contained in all purchase agreements states the existence and nonexistence of each broker's fiduciary duty owed to the parties of the transaction. The word "agency," as appears in the question, is only present in answer choice A. Confirmation is the third step in the agency disclosure process: disclose, elect and confirm.)
With only a few days left before the close of escrow, the buyer asks the broker for permission to move into the vacant house. The broker is to:
a) ask the buyer to deposit the balance of the down payment into escrow first.
b) give the buyer access and approval.
c) refuse to give the buyer access and approval.
d) seek approval from the seller.
seek approval from the seller.(If a buyer asks the broker for permission to move into a vacant house prior to the close of escrow, the broker needs to ask the seller for permission before granting access to the buyer. Until escrow closes, the property belongs to the seller. Thus, the seller is liable and responsible for whatever occurs on the property, including any injuries and property damage. Further, if escrow fails to close, a dispute may arise regarding any alterations the buyer made to the property.)
A dual agent may not release:
a) the last names of either party.
b) the size of their fee.
c) confidential pricing information.
d) material facts about the property.
c. confidential pricing information.(This is a NOT question. The best answer is C. confidential pricing information. Material facts, the name of the other principals and broker fees charged may be released by a dual agent.)
The Agency Law Disclosure does not need to be made to all parties in which of the following transactions?
a) The sale of a commercial building.
b) The sale of vacant land.
c) The sale of a residence.
d) Lease agreements for less than a year.
d. Lease agreements for less than a year.(The Agency Law Disclosure is not required for leases of less than one year.)
The authority a broker has when acting as an agent for a principal is:
a) that which is granted by the Commissioner of the California Bureau of Real Estate (CalBRE)
b) whatever the broker chooses to take.
c) that which is conferred by the principal.
d) whatever the broker accepts as limited by the statute of frauds.
that which is conferred by the principal.(The authority of the broker, or the limits to that authority, are determined by what the client grants. For example, if the client insists on being present during showings of the property, this condition limits the authority of the broker.)
In the context of the relationship between the listing broker and the seller, the broker is a(n):
a) agent of the seller.
b) dual agent.
c) empolyer of the seller.
d) subagent of the seller.
In the context of the relationship between the listing broker and the seller, the broker is a(n):a. agent of the seller.
Which of the following will terminate an agency relationship?
a) Mutual consent.
b) Death of a third party.
c) Estoppel.
d) Dispute.
a. Mutual consent.(Among the choices, only mutual consent will terminate an agency relationship. Death of a third party will have no relation to an existing agency relationship. Further, estoppel is a legal theory barring a person from later asserting or denying a condition based on the person's previous acts or statements, and thus has little relevance to the question. A dispute does not terminate an agency relationship.)
A real estate broker is guilty of conversion if they:
a) acted as a dual agent without the approval of all parties.
b) split their commission with an unlicensed party.
c) used trust funds for their personal use.
d) commingled funds.
c. used trust funds for their personal use.(Unlike commingling which is the mixing of client funds, conversion requires the personal use of client monies.)
A salesperson representing a buyer, in selling properties listed with another broker, is directly responsible to:
a) the selling broker.
b) the Multiple Listing Service (MLS).
c) the listing broker.
d) the owner.
a) the selling broker.
Who may withdraw money from a trust fund?
a) Any person employed by the broker.
b) Only salespeople in the broker's employ.
c) A corporate director.
d) Any authorized employee of the broker.
d. Any authorized employee of the broker.(The broker is required to name the employee who is authorized to withdraw trust funds. The authorized party need not be licensed.)
. Which of the following does not terminate an agency relationship?
a) Destruction of the subject property.
b) Death or incapacity of the agent or principal.
c) Refusal to perform by the agent or principal.
d) Completion of the purpose of the employment.
c. Refusal to perform by the agent or principal.(An agency relationship cannot be terminated by a refusal to perform.)
A valid agency relationship does not require a(n):
a) written agreement.
b) express agreement.
c) attorney-in-fact.
d) Any of the above.
d. Any of the above.(None of the provided answer selections are required to create a valid agency relationship. For example, an ostensible agency is neither written nor express. Further, an agency relationship may be implied or created by a verbal agreement.)
An agency relationship in real estate between a licensee and a principal is terminated in several ways. Which of the following does not terminate an agency relationship?
a) The death or incapacity of either the seller or broker.
b) Revocation at any time by the principal.
c) Destruction of the property.
d) None of the above.
None of the above.(This is a NOT question. All of the answer selections will terminate the agency relationship, though some have negative consequences. For instance, if a principal revokes the agency before the listing has expired, the principal will be liable to the broker for money losses.)
A real estate commission is normally calculated as a percentage of the:
a) selling price.
b) listing price.
c) seller's equity in the property.
d) down payment or earnest money deposit paid by the buyer.
a. selling price.(The price paid for a property establishes what the commission due to the broker will be.)
The________ is a succinct restatement of existing agency codes and case law on agency relationships in targeted real estate transactions.
a) Transfer Disclosure Statement (TDS)
b) Natural Hazard Disclosure (NHD)
c) Agency Law Disclosure
d) Fair Housing Law
Agency Law Disclosure(The Agency Law Disclosure is a restatement of agency codes and cases which establish the conduct of real estate licensees. It is delivered to all parties in targeted sales and leasing transactions. Agency law is distinctly different from material facts regarding the property contained in the Transfer Disclosure Statement (TDS), or natural hazards that affect the property contained in the Natural Hazard Disclosure (NHD). Fair housing is a series of laws that mandate equal treatment for buyers, tenants and borrowers.)
A real estate salesperson's license has been suspended because money was paid out of the Recovery Account. Their license will not be reinstated:
a) until they pay the person any amount not paid by the Recovery Account.
b) until they pay the Recovery Account for half of the money, plus interest.
c) ever, as a suspended license may never be reinstated.
d) until they repay the Recovery Account for all money paid, plus interest.
until they repay the Recovery Account for all money paid, plus interest.(As this is civil action, the answer selection C is inappropriate. Only the full restitution of the funds paid from the Recovery Fund allows for the reinstatement of the salesperson'slicense.)
67. An individual who has been delegated agency duties by an agent of the client, not the client directly, is known as a(n):
a) principal.
b) amanuensis.
c) subagent.
d) subtenant.
c. subagent.(An individual who has been delegated agency duties by the primary agent of the client, not the client themselves, is a subagent. For example, when another broker acts on behalf of a seller at the request of the seller's broker, a subagency with the seller has been established by the brokers.)
When a salesperson's employing broker dies, the salesperson needs to:
a) stop all real estate activity immediately until they find a new employing broker.
b) continue working for up to 30 days.
c) continue working if there is an office manager manager appointed by the broker with two years' experience within the last five years.
d) continue working for up to 60 days or until another broker takes over the office or the office is closed.
a) stop all real estate activity immediately until they find a new employing broker.
In addition to a general duty owed to the other party in a transaction, a licensee owes a(n) _______ to act with the utmost good faith and diligence for the benefit of their principal.
a) fiduciary duty
b) partial duty
c) legislative duty
d) gratuitous duty
a) fiduciary duty
A broker acting as an agent on behalf of both the landlord and tenant is a(n):
a) Single agent.
b) dual agent.
c) double agent.
d) subagent.
b) dual agent.
Which of the following is conveyed incident and appurtenant to the land?
a) Easements and restrictions.
b) Water rights.
c) Mineral rights.
d) All of the above.
d) All of the above.
An agent discloses the race, color, and creed of a prospective buyer to their principal. Has the agent committed a discriminatory act?
a) No, since an agent is obligated to disclose to their principal all material facts that might influence the principal's decisions concerning any real estate transaction.
b) No, since a fiduciary relationship exists between the agent and the principal and the agent must exercise good faith in working for the principal's best interest.
c) Yes, since the race, creed or color of the prospect does not matter.
d) Yes, but there is no penalty.
c. Yes, since the race, creed or color of the prospect does not matter.(This is a Civil Rights Act question. The answer may seem obvious if one thinks 'color blind' - the race, creed or color of the prospect does not matter.)
A buyer's agent prepared a purchase offer on a home for their buyer. When should the agent give the buyer the Agency Law Disclosure form?
a) As soon as practicable.
b) Before showing the buyer the house.
c) Before preparing the offer for the buyer.
d) On the opening of escrow.
a. As soon as practicable.(The Agency Law Disclosure is to be made as early as practical, but always before the principal signs any contract.)
Failure to provide the Agency Law Disclosure form:
a) exposes the agent to criminal penalties.
b) puts the agent's fee at risk of loss.
c) exposes the agent to license penalties.
d) forfeits the agent's license.
puts the agent's fee at risk of loss.(When the Agency Law Disclosure is not provided in a targeted transaction, the client may refuse to pay the commission earned by the broker. There is no criminal or license penalties when an agent fails to properly provide the Agency Law Disclosure and confirmation. It also does not automatically result the forfeiture of the broker's license.)
When showing a listed property to potential buyers, what is the listing broker required to disclose?
a) Only what they have been authorized by the seller to disclose.
b) All facts about the seller's motivation that might cause the buyer to make an offer.
c) Anything that encourages the buyer to buy quickly.
d) All known material facts about the property.
All known material facts about the property.(A listing broker is to disclose all known material facts regarding the property to potential buyers when showing a listed property. The only exception is confidential personal or financial information about the seller, or other legal limits placed by the seller.)
If a broker is to appraise a property and generate an appraisal report, they need to:
a) only appraise properties they are listing.
b) be a licensed or certified appraiser.
c) charge no more than $500 for the service.
d) advertise their appraisal service.
be a licensed or certified appraiser.(Only licensed or certified appraisers may generate an appraisal report. Therefore, to formally conduct an appraisal, the broker needs to acquire the appropriate license under the Department of Real Estate Appraisers (DREA).)
When a real estate broker fails to address all lawful instructions given by their principal, the broker could:
a) face criminal charges.
b) have their driver's license suspended.
c) be liable for the principal's financial losses resulting from their actions.
d) be compelled to retake the state licensing exam.
. be liable for the principal's financial losses resulting from their actions.(If a broker fails to abide by the lawful instruction of the principal they represent, they may be liable for the principal's financial loss. The failure to follow instructions would rarely rise to a level warranting criminal charges.)
When a broker deposits their own personal or business funds in a client trust fund account, that act is referred to as:
a) subrogation.
b) subordination.
c) conversion.
d) commingling.
. commingling.(The mixing of monies is commingling, as demonstrated here. In order for this to be conversion, the broker would have to be using client funds for personal purposes.)
The real estate disclosure law that became effective January 1, 1988 concerns:
a) agency relationships.
b) people who arrange credit.
c) disclosures made by property sellers.
d) the federal Truth-in-Lending Act (TILA).
a) agency relationships.
A listing broker sells an office building to a syndicate of which the broker is a member without informing the seller of this interest. Before closing, the seller discovers the broker's interest and refuses to sell. What would happen in a civil suit to collect a commission?
a) The case would be transferred to the Real Estate Commissioner.
b) No commission would be due.
c) The broker would be awarded their full commission.
d) The court would demand a mitigation hearing.
b. No commission would be due.(The broker's failure to disclose their interest in the syndication allows the seller to deny the commission to the broker.)
When one broker authorizes another broker to act as a subagent on the seller's approval, the subagent is primarily responsible to:
a) the Department of Real Estate (DRE)
b) the seller.
c) the original broker.
d) both the buyer and the seller.
the seller.(When a subagency is created with the seller's approval, the subagent is primarily responsible to the seller, not the original broker.)
Nathan agreed to list his property for sale with Broker Chan. In the listing agreement, Nathan specified Broker Chan is not authorized to accept a deposit towards the purchase price from the buyer. What happens if Broker Chan produces a buyer?
a) He must refuse to accept any deposit.
b) He cannot present the offer as written.
c) If he accepts a deposit, he holds it as an agent of the buyer until the offer is accepted by the seller.
d) If he accepts a deposit and the buyer rescinds the offer prior to acceptance by the seller, Chan is entitled to one-half of the deposit.
if he accepts a deposit, he holds it as an agent of the buyer until the offer is accepted by the seller.(Due to the lack of seller authorization, Broker Chan holds the deposit towards the purchase price as an agent of the buyer until the offer is accepted by the seller.)
When representing their client to third persons in a sale, a licensed real estate broker is operating under the law of:
a) real estate.
b) agency.
c) power-of-attorney.
d) licensure.
b. agency.(In the context of representing their client to third persons in a sale, the law of agency exists for the purpose of clarifying the conduct of an agent when dealing with a third-party for the benefit of their client.)
86. A real estate agent is obligated to communicate any offer to the principal:
a) unless the offer is patently frivolous or the agent is acting on written instructions of their seller.
b) only if it is in writing.
c) whether the offer is verbal or written until the agency is terminated.
d) unless the offer is terminated.
unless the offer is patently frivolous or the agent is acting on written instructions of their seller.(The agent's fiduciary duty requires them to present every offer received, allowing the seller to decide how to respond. However, if the offer is clearly frivolous or the agent receives specific instructions from their seller, the agent is not required to submit the offer.)
A broker may never:
a) accept a commission from the buyer and the seller.
b) sell their own property to a customer.
c) act as an escrow.
d) None of these.
d. None of these.(All of those are legal actions for a broker.)
It is essential that every party to a real estate transaction receives a full and complete disclosure of who is representing whom because of:
a) the federal law of agency.
b) the mandate from private real estate associations.
c) the doctrine of imputed notice.
d) the good neighbor principle.
c) the doctrine of imputed notice.
A real estate agent needs to confirm their agency relationship:
a) as soon as practicable
b) before escrow closes.
c) as soon as escrow opens.
d) whenever asked by either party in the transaction.
a) as soon as practicable
A real estate broker acts from a position of trust for the seller or buyer they have been contracted to represent. This relationship is legally described as a(n):
a) attorney-in-fact.
b) ostensible agent.
c) fiduciary relationship.
d) independent contractor relationship.
c) fiduciary relationship.
The SW 1/4 of the N 1/2 of section 12 contains how many acres?
a) 160
b) 80
c) 40
d) 320
(A section contains 640 acres. The formula is: 1/2 of 640 = 320; 1/4 of 320 = 80.)
Two salespeople submit offers on the same property listed by a third salesperson within the same office. Before any offer is presented, the salesperson who submitted the first offer argues the seller should be given time to make a decision about their offer before being presented the second offer. The listing agent is to:
a) agree to do so.
b) refuse to present the second offer at all if the seller likes the first.
c) present both offers in the order received, allowing the seller to make counter offers on each.
d) present both offers at the same time.
d) present both offers at the same time.
An agency relationship requires all of the following except:
a) consideration.
b) mutual consent.
c) a competent principal.
d) Both b. and c.
a. consideration.(This is an EXCEPT question. An agency relationship does not require consideration to be valid. However, it needs to have mutual consent and a legally competent principal.)
When representing their client to third persons in the sale of a residential duplex, a licensed real estate broker is operating under the law of:
a) corporations.
b) transactions.
c) agency.
d) torts.
c. agency.(The law under which agents represent their client to third persons falls under the law of agency. Stated more broadly, the agency relationship is the scope of activities imposed on the broker by law as arising out of the representation authorized by the employment.)
Which of the following is not a possible agency relationship in California?
a) Agent for the buyer.
b) Dual agent.
c) Agent for the seller.
d) Agent for themselves.
d. Agent for themselves. (An agent is a person who acts on behalf of another. Thus, an agent cannot be an agent for themselves. Here, they are a principal acting for their own account.)
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