Real Estate Sales Exam Real Estate Sales Agency and Fiduciary Duties 1 — Questions and Answers
Question 1: A seller's agent overhears a buyer tell their spouse they would pay $20,000 over the asking price if necessary. What must the agent do with this information?
- Keep it confidential since it was overheard and not formally disclosed
- Disclose it to the seller immediately, as loyalty requires sharing material information (Correct answer)
- Report it to the state real estate commission
- Ignore it to avoid influencing the transaction
Correct answer: Disclose it to the seller immediately, as loyalty requires sharing material information
A listing agent owes the seller undivided loyalty, which includes disclosing any material information — including the buyer's willingness to pay more — that could benefit the seller's negotiating position.
Question 2: Which fiduciary duty requires a real estate agent to follow all lawful instructions given by the client, even if the agent personally disagrees with the decision?
- Disclosure
- Obedience (Correct answer)
- Confidentiality
- Accounting
Correct answer: Obedience
Obedience requires an agent to follow all lawful instructions from the client. As long as the instruction is legal, the agent must carry it out regardless of personal opinion.
Question 3: A buyer's agent is also the listing agent for a property the buyer wants to purchase. The agent does not inform either party of this dual role. What has the agent violated?
- The duty of accounting
- The duty of disclosure (Correct answer)
- The duty of obedience
- The duty of reasonable care
Correct answer: The duty of disclosure
An agent acting as a dual agent must disclose this role to both parties and obtain informed consent. Failure to disclose the dual agency violates the fiduciary duty of disclosure.
Question 4: A listing agent receives two offers simultaneously — one slightly lower from a first-time buyer and one higher from a real estate investor. Which action best fulfills the agent's fiduciary duty?
- Present only the higher offer to save the seller time
- Present the lower offer first since it arrived earlier
- Present both offers to the seller and let the seller decide (Correct answer)
- Advise the seller to accept the investor's offer without presenting both
Correct answer: Present both offers to the seller and let the seller decide
The duty of loyalty and care requires the agent to present all offers to the seller and allow the seller to make an informed decision. Withholding any offer violates fiduciary duty.
Question 5: An agent is representing a buyer and learns through public records that the property being purchased was previously used as a methamphetamine lab. The seller has not disclosed this. What is the agent's obligation?
- Disclose the information to the buyer only if asked directly
- Keep the information confidential since it came from public records
- Disclose the material fact to the buyer immediately (Correct answer)
- Notify the listing agent and take no further action
Correct answer: Disclose the material fact to the buyer immediately
A buyer's agent owes the duty of disclosure to the buyer, which includes all known material facts that could affect the buyer's decision. A prior methamphetamine lab is a significant material fact requiring immediate disclosure.
Question 6: After a real estate transaction closes, a buyer's agent holds $500 in unspent funds that were part of the client's inspection budget. What should the agent do?
- Keep the funds as part of the commission
- Donate the funds to a local charity on the buyer's behalf
- Return the funds to the buyer promptly (Correct answer)
- Deposit the funds into the agency's operating account
Correct answer: Return the funds to the buyer promptly
The fiduciary duty of accounting requires an agent to safeguard and promptly return any client funds. The agent has no right to retain money belonging to the client.
Real Estate Sales Exam Real Estate Sales Agency and Fiduciary Duties 1
A seller's agent overhears a buyer tell their spouse they would pay $20,000 over the asking price if necessary.
What must the agent do with this information?