NAR Agency Relationships & Fiduciary Duties 3

Question 1

According to NAR's Code of Ethics, when must REALTORS® disclose the existence of an agency relationship to prospective buyers and sellers?

Accepted Answer

At first substantive contact with a prospective client

Answer

NAR's Code of Ethics (Article 9 and Standard of Practice 1-11) requires REALTORS® to disclose their agency relationship at first substantive contact, before entering into a representation agreement.

Question 2

What is 'implied agency' in real estate?

Accepted Answer

An agency relationship that arises from the conduct and actions of the parties, without a formal written agreement

Answer

Implied agency is created by the words, conduct, and actions of the parties that suggest an agency relationship exists, even without a formal written agreement.

Question 3

What is the primary difference between a general agent and a special agent in real estate?

Accepted Answer

A general agent has broad authority to act on the principal's behalf in many transactions; a special agent is authorized for a single specific transaction

Answer

A general agent has ongoing broad authority to represent the principal in multiple matters, while a special agent (typical in real estate) is authorized for one specific transaction or purpose.

Question 4

A listing agent who also owns investment properties and purchases a listing without disclosing their agent status to the seller is violating which principle?

Accepted Answer

The duty of loyalty and disclosure

Answer

An agent purchasing their client's property without disclosure violates both the duty of loyalty (self-dealing) and the duty of disclosure (failing to reveal their interest), which are core fiduciary obligations.

Question 5

If a seller's agent learns that the property has serious foundation problems, what is their obligation to a potential buyer?

Accepted Answer

Disclose it to the buyer as a material fact regardless of their agency relationship

Answer

Known material defects that affect the value or desirability of a property must be disclosed by the agent to all parties, even a seller's agent must disclose material facts to buyers to avoid fraud and misrepresentation.

(NAR) National Association of Realtors Certification Practice Test

(NAR) National Association of Realtors Certification Practice Test

NAR Agency Relationships & Fiduciary Duties 3