Real Estate Sales Exam Agency and Fiduciary Duties 5 — Questions and Answers
Question 1: A listing agent who also brings in the buyer and represents both parties in the same transaction without disclosure is guilty of:
- Puffery
- Undisclosed dual agency, which is illegal (Correct answer)
- Latent misrepresentation
- Commingling
Correct answer: Undisclosed dual agency, which is illegal
Representing both buyer and seller without disclosure and consent is undisclosed dual agency, which is illegal in all states and can result in license revocation.
Question 2: When a client relationship ends, an agent's obligation to protect the client's confidential information is:
- Eliminated immediately upon termination of the agency
- Maintained indefinitely even after the relationship ends (Correct answer)
- Reduced to only financial information
- Transferred to the new listing agent
Correct answer: Maintained indefinitely even after the relationship ends
The duty of confidentiality survives the end of the agency relationship, meaning former clients' personal and motivational information must remain protected indefinitely.
Question 3: A non-exclusive buyer-broker agreement allows a buyer to:
- Work only with that one broker for the agreed period
- Work with multiple brokers simultaneously during the agreement term (Correct answer)
- Purchase any property without owing a commission
- Terminate the agreement at any time without penalty for any reason
Correct answer: Work with multiple brokers simultaneously during the agreement term
A non-exclusive buyer-broker agreement permits the buyer to work with multiple brokers, with commission typically owed only to whichever broker procures the purchased property.
Question 4: A real estate agent who secretly earns a referral fee from a home inspector without telling the buyer client is violating which duty?
- Obedience
- Reasonable care
- Loyalty and disclosure (Correct answer)
- Confidentiality
Correct answer: Loyalty and disclosure
Accepting an undisclosed referral fee creates a conflict of interest that violates the agent's duties of loyalty (putting their own gain first) and disclosure (hiding the financial relationship).
Question 5: Which document is used in most states to notify consumers about the types of agency relationships available before they enter into one?
- The purchase and sale agreement
- The agency disclosure form (Correct answer)
- The title commitment report
- The property disclosure statement
Correct answer: The agency disclosure form
Most states require agents to provide an agency disclosure form early in the relationship, explaining buyer agency, seller agency, dual agency, and other options.
Question 6: An agent represents a buyer and discovers that the neighborhood has rising crime rates that could affect the property's value. The agent should:
- Withhold the information to keep the buyer motivated to purchase
- Disclose this material information to the buyer client (Correct answer)
- Report it only if the buyer asks specifically about crime
- Refer the buyer to local police statistics and say nothing more
Correct answer: Disclose this material information to the buyer client
Rising crime rates are a material fact that could affect property value and the buyer's decision, triggering the agent's duty to disclose this information to their buyer client.
Question 7: Which scenario best illustrates a breach of the fiduciary duty of loyalty?
- An agent who recommends a higher list price than the market supports to win the listing (Correct answer)
- An agent who informs the buyer of all known defects
- An agent who presents every offer to the seller promptly
- An agent who advises the seller to reject a low offer
Correct answer: An agent who recommends a higher list price than the market supports to win the listing
Recommending an inflated list price to win a listing (known as 'buying the listing') puts the agent's own business interest ahead of the seller's best interest, breaching the duty of loyalty.
Real Estate Sales Exam Agency and Fiduciary Duties 5
A listing agent who also brings in the buyer and represents both parties in the same transaction without disclosure is guilty of: