Real Estate Sales Exam Agency and Fiduciary Duties 3 — Questions and Answers
Question 1: A transaction broker differs from a single agent because a transaction broker:
- Represents only the seller in all transactions
- Provides limited representation without full fiduciary duties to either party (Correct answer)
- Must always disclose all confidential information
- Charges higher commissions than single agents
Correct answer: Provides limited representation without full fiduciary duties to either party
A transaction broker facilitates the sale without representing either party as a fiduciary, providing limited representation and focusing on completing the transaction.
Question 2: A seller lists a home with an agent. A few weeks later, the agent wants to purchase the property personally. The agent should:
- Buy the property at market value without disclosing the agency relationship
- Disclose the agency relationship and obtain the seller's informed written consent (Correct answer)
- Simply resign the listing before making an offer
- Have a family member purchase it to avoid the conflict
Correct answer: Disclose the agency relationship and obtain the seller's informed written consent
An agent who wants to purchase a listed property must fully disclose their agency status to the seller and receive written consent to avoid a breach of fiduciary duty.
Question 3: What is 'informed consent' in the context of dual agency?
- The state licensing board's approval of a dual agency agreement
- The client's agreement to dual agency after being fully informed of the limitations (Correct answer)
- Written permission from the National Association of Realtors
- A broker's internal policy allowing dual agency transactions
Correct answer: The client's agreement to dual agency after being fully informed of the limitations
Informed consent means the client understands and agrees to dual agency after being told how it limits the agent's ability to advocate fully for them.
Question 4: An agent who fails to present all offers to a seller, even low ones, is violating which duty?
- Confidentiality
- Obedience
- Loyalty and disclosure (Correct answer)
- Accounting
Correct answer: Loyalty and disclosure
Failing to present all offers breaches both loyalty (acting in the seller's best interest) and disclosure (informing the seller of all relevant information).
Question 5: Which statement best describes a 'designated agency'?
- A brokerage that only handles commercial real estate
- Different agents within the same brokerage are designated to represent buyer and seller separately (Correct answer)
- An agent appointed by the state to handle foreclosures
- A national franchise brokerage operating in multiple states
Correct answer: Different agents within the same brokerage are designated to represent buyer and seller separately
In designated agency, the broker assigns different agents within the firm to represent the buyer and seller, reducing the conflict inherent in dual agency.
Question 6: An agent's duty of 'reasonable care' in a real estate transaction means the agent must:
- Guarantee the property is free of all defects
- Use the skill and diligence expected of a competent real estate professional (Correct answer)
- Personally inspect every property before showing it
- Provide legal advice about title issues
Correct answer: Use the skill and diligence expected of a competent real estate professional
Reasonable care requires agents to perform their duties with the competence and diligence of a skilled real estate professional, though they are not guarantors of outcomes.
Question 7: A seller's agent learns the seller is going through a divorce and must sell quickly. This information should be:
- Disclosed to the buyer to help close the deal
- Kept confidential because it could harm the seller's bargaining position (Correct answer)
- Included in the MLS listing as a motivating factor
- Shared with the buyer's lender for underwriting purposes
Correct answer: Kept confidential because it could harm the seller's bargaining position
Personal or financial motivations of the client that could weaken their negotiating position must be kept confidential under the agent's fiduciary duty of confidentiality.
Real Estate Sales Exam Agency and Fiduciary Duties 3
A transaction broker differs from a single agent because a transaction broker: