Free Arkansas Real Estate License Agency Relationships and Disclosures Questions and Answers — Questions and Answers
Question 1: An agent with ABC Realty has a listing agreement with a seller. A buyer, who is not represented by any agent, becomes interested in the property. The agent from ABC Realty assists this buyer in preparing an offer. Which of the following statements is TRUE regarding the agent's duties?
- The agent must act as a dual agent, representing both parties equally.
- The agent's primary duty is to the seller, and they must disclose to the buyer that they represent the seller. (Correct answer)
- The agent now represents the buyer because they are helping them prepare the offer.
- The agent is acting as a transaction broker and does not owe fiduciary duties to either party.
Correct answer: The agent's primary duty is to the seller, and they must disclose to the buyer that they represent the seller.
According to Arkansas law, a listing agent's primary duty is to protect and promote the interests of the seller. When assisting an unrepresented buyer, the agent must clearly disclose that they represent the seller. The agent's actions in assisting the buyer do not create an agency relationship with the buyer; their fiduciary duty remains with their client, the seller.
Question 2: A real estate firm practices designated agency. The firm's principal broker designates one affiliated licensee to represent the buyer and another to represent the seller in the same transaction. In this scenario, what is the agency role of the principal broker?
- The principal broker represents only the seller.
- The principal broker represents only the buyer.
- The principal broker is considered a dual agent. (Correct answer)
- The principal broker is a subagent of both parties.
Correct answer: The principal broker is considered a dual agent.
In a designated agency situation within a single firm, while individual agents are appointed to represent the buyer and seller exclusively, the principal broker (and the firm) is considered a dual agent. This is because the firm has agency agreements with both clients. The principal broker must remain neutral.
Question 3: Under what circumstances is dual agency permissible in an Arkansas real estate transaction?
- It is permissible as long as the agent provides verbal disclosure to both parties.
- It is never permissible in Arkansas due to inherent conflicts of interest.
- It is permissible only if the buyer and seller are related.
- It is permissible with prior written consent from both the buyer and the seller. (Correct answer)
Correct answer: It is permissible with prior written consent from both the buyer and the seller.
Arkansas Real Estate Commission regulations explicitly allow for dual agency, but only when both the seller and the buyer have given their informed, written consent. This consent must be obtained prior to or at the time of executing any contract, such as a listing agreement or an offer and acceptance.
Question 4: A buyer's agent in Arkansas has a duty to keep certain information confidential. Which of the following would the agent be required to disclose to the seller or seller's agent?
- The buyer's willingness to pay more than their initial offer price.
- The fact that the buyer's financing has fallen through. (Correct answer)
- The buyer's motivation for purchasing a new home.
- The buyer's negotiating strategy.
Correct answer: The fact that the buyer's financing has fallen through.
While a buyer's agent must keep their client's confidential information private (like their financial limits or motivations), they have a duty of honesty and fair dealing with all parties. The buyer's inability to secure financing is a material fact that directly affects their ability to perform under the contract and must be disclosed.
Question 5: Which of the following events would automatically terminate an agency relationship between a seller and a principal broker by operation of law in Arkansas?
- The seller receives an offer that meets all terms of the listing agreement.
- The listing agent takes a two-week vacation.
- The principal broker's license expires. (Correct answer)
- The seller rejects a full-price offer from a qualified buyer.
Correct answer: The principal broker's license expires.
An agency relationship is dependent on the broker holding a valid real estate license. If the principal broker's license expires, is suspended, or is revoked, the agency relationship is terminated by operation of law because the broker can no longer legally perform the duties for which they were hired.
Question 6: An agent working for a listing broker shows a property to a prospective buyer. This agent is not the listing agent and does not have a buyer representation agreement with the prospective buyer. In Arkansas, this agent is generally considered to be a:
- Designated agent for the buyer.
- Transaction broker.
- Subagent of the seller. (Correct answer)
- Dual agent.
Correct answer: Subagent of the seller.
In a multiple listing service (MLS) transaction, an agent who brings a buyer to a property but does not have an agency agreement with that buyer is considered a subagent of the seller. Their fiduciary duties are owed to the seller through the listing broker, not to the buyer they are assisting.
Free Arkansas Real Estate License Agency Relationships and Disclosures Questions and Answers
An agent with ABC Realty has a listing agreement with a seller.
A buyer, who is not represented by any agent, becomes interested in the property.
The agent from ABC Realty assists this buyer in preparing an offer.
Which of the following statements is TRUE regarding the agent's duties?