RES Agency Law & Ethics — Questions and Answers
Question 1: What fiduciary duties does a real estate agent owe their client?
- Obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care (Correct answer)
- Only to find the cheapest property
- To represent both buyer and seller equally at all times
- To maximize the agent's commission
Correct answer: Obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care
The fiduciary duties (often remembered as OLD CAR) require agents to follow lawful instructions, put the client's interests first, disclose material facts, keep information confidential, account for funds, and exercise competence.
Question 2: What is the difference between a buyer's agent and a seller's agent?
- A buyer's agent represents the buyer's interests; a seller's agent (listing agent) represents the seller's interests (Correct answer)
- They perform the same duties for different fees
- A buyer's agent always charges more
- There is no legal distinction
Correct answer: A buyer's agent represents the buyer's interests; a seller's agent (listing agent) represents the seller's interests
A buyer's agent has a fiduciary duty to the buyer, helping them find and negotiate the best deal. A seller's agent (listing agent) represents the seller, working to get the highest price and best terms.
Question 3: What must a real estate agent disclose to potential buyers about a property?
- All known material facts that could affect the property's value or desirability (Correct answer)
- Only defects visible during a showing
- Nothing if the seller instructs them not to
- Only issues discovered during a professional inspection
Correct answer: All known material facts that could affect the property's value or desirability
Agents must disclose all known material facts including structural defects, environmental hazards, neighborhood issues, and any condition that might affect a reasonable buyer's decision, regardless of the seller's wishes.
Question 4: What is the Fair Housing Act and what does it prohibit?
- A federal law prohibiting discrimination in housing based on race, color, religion, sex, national origin, disability, and familial status (Correct answer)
- A law requiring all housing to be the same price
- A regulation about building accessibility only
- A local ordinance about property maintenance
Correct answer: A federal law prohibiting discrimination in housing based on race, color, religion, sex, national origin, disability, and familial status
The Fair Housing Act (Title VIII of the Civil Rights Act of 1968, as amended) prohibits discrimination in the sale, rental, and financing of housing based on seven protected classes.
Question 5: What is steering in real estate?
- The illegal practice of directing buyers toward or away from neighborhoods based on protected class characteristics (Correct answer)
- Advising clients on the best direction to face their home
- Guiding buyers to properties within their budget
- Showing properties in alphabetical order
Correct answer: The illegal practice of directing buyers toward or away from neighborhoods based on protected class characteristics
Steering violates the Fair Housing Act by directing prospective buyers or renters toward or away from certain neighborhoods based on race, religion, national origin, or other protected characteristics.
Question 6: What is a listing agreement?
- A contract between a property owner and a real estate broker authorizing the broker to market and sell the property (Correct answer)
- A list of properties for sale in a neighborhood
- A contract between two real estate agents
- A government registration of a property for sale
Correct answer: A contract between a property owner and a real estate broker authorizing the broker to market and sell the property
A listing agreement establishes the agency relationship between seller and broker, defining the broker's authority, commission rate, listing price, duration, and marketing responsibilities.
RES Agency Law & Ethics
What fiduciary duties does a real estate agent owe their client?