CRECI Industry Standards & Ethical Practices 2 — Questions and Answers
Question 1: Under CRECI ethical standards, when a commercial broker represents both buyer and seller in the same transaction, this is known as:
- Exclusive agency
- Dual agency (Correct answer)
- Net listing
- Open listing
Correct answer: Dual agency
Dual agency occurs when the same broker or brokerage represents both parties in a transaction, requiring full disclosure and informed consent.
Question 2: A commercial real estate professional discovers their client is planning to use a property for an illegal purpose. The ethical course of action is to:
- Proceed with the transaction and report after closing
- Immediately withdraw from representation (Correct answer)
- Reduce the commission to compensate for the risk
- Notify the other party's attorney only
Correct answer: Immediately withdraw from representation
A professional must withdraw from representation if they learn their client intends to use the property for illegal purposes to avoid facilitating unlawful activity.
Question 3: Which standard requires commercial real estate professionals to disclose all known material facts about a property to prospective buyers?
- Caveat emptor
- Full disclosure doctrine (Correct answer)
- Agency representation rule
- Fiduciary exception clause
Correct answer: Full disclosure doctrine
The full disclosure doctrine requires professionals to proactively share all known material facts that could affect a buyer's decision, superseding caveat emptor in professional practice.
Question 4: CRECI standards require that earnest money deposits in commercial transactions be held in:
- The broker's personal operating account
- An escrow or trust account separate from operating funds (Correct answer)
- The listing broker's savings account
- A joint account shared by buyer and seller attorneys
Correct answer: An escrow or trust account separate from operating funds
Earnest money must be placed in a separate escrow or trust account to protect client funds and comply with professional standards.
Question 5: When is it ethically permissible for a commercial broker to accept referral fees from third-party service providers such as inspectors or title companies?
- Always, as a standard industry practice
- Only when disclosed to and consented to by the client (Correct answer)
- Never under any circumstances
- Only when the fee is under $500
Correct answer: Only when disclosed to and consented to by the client
Referral fees from third parties are permissible only when the client is fully informed and provides consent, preventing undisclosed conflicts of interest.
Question 6: A commercial real estate professional's duty of confidentiality to a client:
- Ends upon the closing of the transaction
- Continues indefinitely after the transaction concludes (Correct answer)
- Applies only to financial information
- Is waived if the client signs a disclosure form
Correct answer: Continues indefinitely after the transaction concludes
The duty of confidentiality survives the transaction and requires professionals to protect client information indefinitely unless authorized to disclose.
Question 7: Which of the following best describes 'puffery' in commercial real estate marketing?
- Fraudulent misrepresentation of property income
- Exaggerated promotional claims not meant as factual statements (Correct answer)
- Omission of known structural defects
- False statements about zoning classifications
Correct answer: Exaggerated promotional claims not meant as factual statements
Puffery refers to vague, subjective promotional language ('premier location') that courts typically do not treat as actionable misrepresentation.
CRECI Industry Standards & Ethical Practices 2
Under CRECI ethical standards, when a commercial broker represents both buyer and seller in the same transaction, this is known as: