Real Estate Sales Exam Agency Law and Fiduciary Duties 4 — Questions and Answers
Question 1: A real estate agent who is also the owner of a property they are selling must disclose their:
- License expiration date
- Personal interest in the property to potential buyers (Correct answer)
- Commission split arrangement
- Brokerage affiliation only
Correct answer: Personal interest in the property to potential buyers
Agents who have a personal ownership interest in a property must disclose this fact to all potential buyers to avoid a conflict of interest.
Question 2: Which type of agency is created when a principal acts as though an agency exists, even though no formal agreement was made?
- Express agency
- Implied agency
- Apparent agency (Correct answer)
- Ratified agency
Correct answer: Apparent agency
Apparent agency (also called ostensible agency) arises when a principal's conduct leads a third party to reasonably believe an agency relationship exists.
Question 3: A seller's agent who steers buyers toward or away from neighborhoods based on racial composition violates:
- Agency law only
- The Fair Housing Act and fiduciary duties (Correct answer)
- Only state licensing laws
- The duty of confidentiality
Correct answer: The Fair Housing Act and fiduciary duties
Steering violates both the Fair Housing Act's anti-discrimination provisions and the agent's fiduciary duty of loyalty and care to clients.
Question 4: The principal in a real estate agency relationship is:
- The real estate broker supervising the agent
- The client who hires and authorizes the agent to act on their behalf (Correct answer)
- The state licensing authority
- The buyer in every transaction
Correct answer: The client who hires and authorizes the agent to act on their behalf
The principal is the party who engages the agent and grants them authority to act on their behalf, which could be the seller, buyer, or landlord.
Question 5: An agent's fiduciary duty of obedience requires them to follow all lawful client instructions. Which instruction would the agent be RIGHT to refuse?
- Reject all offers below the listed price
- Do not disclose that the property is located in a flood zone (Correct answer)
- Schedule open houses on weekends only
- Decline to negotiate with a specific buyer
Correct answer: Do not disclose that the property is located in a flood zone
Failing to disclose a known material fact such as flood zone location violates state disclosure laws and the agent must refuse such instructions.
Question 6: Which of the following is NOT a fiduciary duty owed by a real estate agent to their client?
- Loyalty
- Confidentiality
- Profit maximization (Correct answer)
- Accounting
Correct answer: Profit maximization
Profit maximization is not a fiduciary duty; the standard duties are loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting (LCDOCA).
Question 7: A buyer's agent who tells the seller the buyer is willing to pay more than their offer reveals violates:
- The duty of disclosure
- The duty of loyalty and confidentiality to the buyer (Correct answer)
- The duty of obedience to the seller
- No duty — transparency is always required
Correct answer: The duty of loyalty and confidentiality to the buyer
Sharing a buyer's maximum willingness to pay with the seller directly harms the buyer's negotiating position, violating loyalty and confidentiality.
Real Estate Sales Exam Agency Law and Fiduciary Duties 4
A real estate agent who is also the owner of a property they are selling must disclose their: