Arkansas Real Estate License Agency and Fiduciary Duties 4 — Questions and Answers
Question 1: A licensee tells the buyer that a neighborhood is experiencing a lot of crime to discourage them from buying there. This could constitute a violation of:
- Fiduciary duty of loyalty only
- Both the duty of honesty and fair housing laws (Correct answer)
- The duty of confidentiality
- The duty of obedience
Correct answer: Both the duty of honesty and fair housing laws
Steering buyers away from areas based on neighborhood composition violates fair housing law, and making unsubstantiated crime claims violates the duty of honesty.
Question 2: Broker Kim lists a property and later wants to personally purchase it. Under Arkansas law, Kim must:
- Withdraw the listing before making an offer
- Disclose her licensed status and the agency relationship in writing to the seller (Correct answer)
- Have the seller represented by the AREC
- Simply make an offer through another broker without disclosure
Correct answer: Disclose her licensed status and the agency relationship in writing to the seller
Arkansas requires licensees purchasing property they list to fully disclose their licensed status and the nature of the relationship to avoid a breach of fiduciary duty.
Question 3: What is 'vicarious liability' in the context of Arkansas real estate agency?
- The agent's liability for their own misconduct
- A broker's potential legal responsibility for the authorized acts of their affiliated licensees (Correct answer)
- Liability shared equally between buyer and seller
- The AREC's responsibility for agent errors
Correct answer: A broker's potential legal responsibility for the authorized acts of their affiliated licensees
Vicarious liability means a broker can be held responsible for the wrongful acts of their sponsored licensees when those acts fall within the scope of the agency.
Question 4: A seller's agent learns of a zoning change that will reduce the property's value. Disclosing this to the buyer is an example of fulfilling the duty of:
- Confidentiality
- Obedience
- Disclosure of material facts (Correct answer)
- Accounting
Correct answer: Disclosure of material facts
Material facts that affect the value or desirability of a property must be disclosed to all parties, even when the agent represents the seller.
Question 5: If a buyer's agent follows a client instruction that the agent believes is unwise but legal, this reflects which fiduciary duty?
- Loyalty
- Obedience (Correct answer)
- Reasonable care
- Confidentiality
Correct answer: Obedience
The duty of obedience requires agents to follow all lawful instructions from their client, even if the agent disagrees with the decision.
Question 6: In Arkansas, which of the following would NOT create an agency relationship?
- A signed buyer representation agreement
- Implied conduct showing the agent represents the buyer
- A licensee handing a buyer a property flyer (Correct answer)
- An oral agreement where both parties agree to agency
Correct answer: A licensee handing a buyer a property flyer
Simply providing marketing materials does not create an agency relationship; there must be an agreement — written, oral, or implied by conduct — to represent the party.
Question 7: An agent who represents a seller but negotiates in the buyer's favor to speed up the sale is violating which duty?
- Disclosure
- Confidentiality
- Loyalty (Correct answer)
- Reasonable care
Correct answer: Loyalty
The duty of loyalty requires the listing agent to negotiate in the seller's best interest, not the buyer's or the agent's own interest in closing quickly.
Arkansas Real Estate License Agency and Fiduciary Duties 4
A licensee tells the buyer that a neighborhood is experiencing a lot of crime to discourage them from buying there.
This could constitute a violation of: