Real Estate License Agency Relationships 1 — Questions and Answers
Question 1: What type of legal relationship is established when a real estate licensee represents a buyer or seller in a transaction?
- Arm's length transaction
- Principal-agent relationship (Correct answer)
- Independent contractor arrangement
- Third-party brokerage agreement
Correct answer: Principal-agent relationship
An agency relationship in real estate is a principal-agent relationship where the licensee (agent) owes fiduciary duties to the client (principal).
Question 2: Which of the following is NOT one of the fiduciary duties an agent owes to their principal?
- Loyalty
- Disclosure
- Confidentiality
- Profitability (Correct answer)
Correct answer: Profitability
Fiduciary duties include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care — profitability is not among them.
Question 3: A listing agreement between a seller and a real estate broker creates which type of agency?
- Buyer's agency
- Dual agency
- Seller's agency (Correct answer)
- Transaction brokerage
Correct answer: Seller's agency
A listing agreement establishes a seller's agency, meaning the broker is engaged to represent the seller's interests throughout the transaction.
Question 4: Dual agency in real estate occurs when:
- Two brokerages co-list the same property
- One broker represents both the buyer and seller in the same transaction (Correct answer)
- A buyer works with two different buyer's agents simultaneously
- A listing agent splits commission evenly with a buyer's agent
Correct answer: One broker represents both the buyer and seller in the same transaction
Dual agency arises when a single broker or brokerage represents both the buyer and seller in one transaction, requiring full disclosure and consent from both parties.
Question 5: An agent's fiduciary duty of loyalty primarily requires the agent to:
- Disclose all material property facts to all parties
- Place the client's interests above all others, including the agent's own (Correct answer)
- Maintain accurate financial records for every transaction
- Follow all lawful instructions from any party in the transaction
Correct answer: Place the client's interests above all others, including the agent's own
The duty of loyalty obligates the agent to act exclusively in the client's best interest, even when doing so conflicts with the agent's own financial gain.
Question 6: Express agency in real estate is best described as an agency relationship:
- Created through the parties' behavior and conduct alone
- Processed and approved within 24 hours of listing
- Clearly established through a written or oral agreement (Correct answer)
- Where the principal grants the agent unlimited authority
Correct answer: Clearly established through a written or oral agreement
Express agency is explicitly created by a written or oral agreement between principal and agent, distinguishing it from implied agency which arises from conduct.
Question 7: Which document formally establishes a buyer's agency relationship in a real estate transaction?
- Purchase and Sale Agreement
- Listing Agreement
- Buyer Representation Agreement (Correct answer)
- MLS Registration Form
Correct answer: Buyer Representation Agreement
A Buyer Representation Agreement (also called a Buyer Agency Agreement) is the contract that formally creates the agency relationship between a buyer and their agent.
Real Estate License Agency Relationships 1
What type of legal relationship is established when a real estate licensee represents a buyer or seller in a transaction?