Real Estate Sales Exam Real Estate Sales Agency Law and Fiduciary Duties 1

Question 1

A seller's agent receives two offers on the same day.
The seller instructs the agent to present only the higher offer and discard the lower one without informing the lower bidder.
What should the agent do?

Accepted Answer

Present both offers to the seller but explain the legal risk of not responding to the lower offer

Answer

Follow the seller's instructions, as obedience to the principal is paramount

Answer

Discard the lower offer but notify the lower buyer that their offer was not considered

Answer

Refuse to present either offer until the seller agrees to consider all offers fairly

Question 2

Under a general agency relationship in real estate, which of the following best describes the agent's authority?

Accepted Answer

The agent has broad authority to act on behalf of the principal in an ongoing series of transactions

Answer

The agent may only perform a single specific transaction on behalf of the principal

Answer

The agent is authorized to bind the principal to any contract without restriction

Answer

The agent may represent both buyer and seller simultaneously without disclosure

Question 3

A buyer's agent discovers through personal research that the neighborhood where her client wants to buy is slated for a major commercial development that will likely reduce residential property values. The agent should:

Accepted Answer

Disclose the information to the buyer immediately as part of the duty of disclosure

Answer

Keep the information confidential to avoid alarming the buyer unnecessarily

Answer

Share the information only if the buyer specifically asks about future development plans

Answer

Disclose only after the buyer has made an offer to avoid losing the commission

Question 4

Which of the following actions by a listing agent would constitute a breach of the fiduciary duty of loyalty?

Accepted Answer

Purchasing the listed property through a third party without disclosing the agent's interest

Answer

Presenting a low offer to the seller along with market data supporting its reasonableness

Answer

Advising the seller to reduce the asking price based on recent comparable sales

Answer

Disclosing a known material defect to a prospective buyer

Question 5

A real estate licensee working as a transaction broker (non-agent) in a state that permits this relationship owes the parties:

Accepted Answer

Limited duties including honesty, accounting, and reasonable care, but not loyalty or obedience

Answer

Full fiduciary duties identical to those owed in a traditional agency

Answer

No duties whatsoever, as no agency relationship exists

Answer

Fiduciary duties only to the party who pays the commission

Question 6

An agent representing a seller is approached by a buyer who is also the agent's close friend. The buyer confides that they are willing to pay the full asking price. What is the agent's obligation under agency law?

Accepted Answer

Disclose to the seller that the buyer has indicated willingness to pay the full asking price

Answer

Keep the buyer's willingness confidential to protect the personal friendship

Answer

Withdraw from the transaction to avoid a conflict of interest

Answer

Inform both parties simultaneously to remain neutral