Agency

A buyer is looking at homes with a salesperson. The buyer is

being treated as a customer, a relationship that was disclosed to

the buyer by the salesperson in the initial consultation. When

making an offer on a property, the buyers disclose to the

salesperson that they have been pre-approved for a figure

significantly higher than the offer they are making. The

salesperson:

A. Must disclose this information to the seller/client

B. Must keep this information confidential

C. Must ask the buyer for written permission to disclose the financial

information

D. Must simply comply with the guidelines for a disclosed dual agent

• Your duty to disclose is to your client

• Since the buyer is only a customer, whatever they tell you is not confidential & must be disclosed to the seller

A salesperson agrees to represent a prospective buyer in the

search for a home. The buyer subsequently decides to rent a

home instead of buying. If the salesperson is also representing

another buyer/client who wants to see some of the homes that

were shown to the previous buyer/client, the salesperson:

A. Can show them the homes without regard to the previous buyer/client

B. Cannot show them the homes without the permission of the previous

buyer/client

C. Can show them the homes, but only as a disclosed dual agent

D. Cannot show them the homes unless the sellers are informed of the

conflict of interest

California License Law 

No conflict of interest in showing 2 different buyers the same properties

•However, it is advisable to have to all parties you are represent sign CAR Form 

• POSSIBLE REPRESENTATION OF MORE THAN ONE BUYER OR SELLER - DISCLOSURE AND CONSENT

When a salesperson takes a listing on a property on

behalf of the broker, the seller is typically termed the:

A. Customer

B. Subagent

C. Principal

D. Agent

• Principal/client = who you work for 

• Customer = who you work with

• Broker = legal agent

• Salesperson = subagent

A salesperson has a listing on a property. The salesperson

is going to show that property to a buyer/customer. The

salesperson must disclose:

A. The dual agency to both parties

B. To the buyer that the agent represents the seller

C. To the seller that the agent represents the buyer

D. That the agent will act as a facilitator

The listing salesperson represents the seller

• Must disclose to buyer that you are the seller’s agent

• There is no dual agency, unless the buyer were to become a client

A listing agent knows of a defect in the listed property.

When the listing agent becomes ill, another agent in the

same company takes over the listing. The second agent:

A. Is not responsible for disclosing the defect unless the

agent had actual knowledge

B. Must disclose the defect only if asked

C. Is relieved of any liability based on the fiduciary

responsibility to the seller

D. By law has the same responsibility regarding the defect as

the listing agent whether or not the listing agent disclosed

it to the second agent

A salesperson has a listing on a property. The seller has several

mortgages on the property, all of which are delinquent, as well as

an IRS tax lien. When a prospective purchaser makes an offer, the

seller insists on the earnest money deposit check being paid to

the seller rather than deposited in the broker’s trust account. The

salesperson has a duty to:

A. Write a counteroffer per the seller’s instructions

B. Inform the buyer of the seller’s mortgage default

C. Cancel the listing

D. Observe the fiduciary responsibility of confidentiality to

the buyer

• While you could disclose the seller’s tax lien ( is public record)

• you cannot disclose the seller’s delinquent mortgage as this is confidential

• Your fiduciary duty is to the seller, not the buyer

• You must obey all legal instructions of your principal 

A salesperson has an exclusive right to sell listing on a residential

property. One offer has already been received, but not yet

presented, when another offer is submitted by a different

purchaser. The salesperson’s duty regarding the multiple offers is:

A. With the seller’s permission, disclose the existence of the

multiple offers to the buyers

B. Present the first offer first, then the second if the first was

not accepted

C. Present the offers together, but only in the order received

D. Tell the second buyer of the first, regardless of the wishes

of the seller

• You must present all bona fide offers, no exceptions

• Verbal offers are bona fide offers

• Note: Transfer of Real Estate MUST be in writing

• You may only inform a buyer of another outstanding offer if the seller allows it

• Present all bona fide offers, regardless of when received and regardless of what order they were received in

An agent knew a large sum of money was hidden by his

client in the client’s house. After the client passes away,

the agent tells the widow about the money. This:

A. Is okay, because the agency contract ends with the death

of the client

B. Is not okay, because confidentiality lasts forever

C. Is okay, because the wife will get the money anyway

D. Is not okay, because of the Statute of Descent and

Distribution

• Confidentiality is the fiduciary duty that lasts forever. 

• It survives the termination of the contract

• If subpoenaed, the agent must disclose the confidential information

You are showing a property and discover a significant

crack in the foundation, which is covered up by boxes.

What should you do?

A. Tell your broker

B. Tell the buyer

C. Instruct the seller to tell the buyer

D. Have the seller correct the seller Transfer Disclosure

Statement

• This question assumes that the sellers have tried to hide the defect

• The agent must disclose this defect directly to the buyers or their agent

• The sellers has a duty to amend the property disclosure statement

• Latent

• Patent

• Latent – hidden, must disclose

• Patent – open

According to California Law, the buyer in a real estate

transaction is represented by:

A. No one

B. The broker

C. The broker and the salesperson

D. All licensees within the company

• There is no presumption that a broker or agent represents anyone until a listing or buyer brokerage contract is signed

• The answers would have to say “buyer’s broker” and “buyer’s agent”

The position of trust assumed by the broker as an agent

for a principal is described most accurately as:

A. a gratuitous relationship

B. a trustor relationship

C. an employment relationship

D. a fiduciary relationship

Fiduciary

• Putting their clients' interests ahead of their own

•Duty to preserve good faith and trust

• Bound both legally and ethically to act in the other's best interests.

Principal (client) 

Is a main party to transaction 

• Seller (Grantor) or Buyer (Grantee)

• Lessor (owner) or Lessee (tenant)

• Agents work for client/principal

Vicarious liability 

• Principal can be held responsible for agent’s actions that occur within scope of agency relationship

Agent (Broker)

Person authorized by another person (principal/client) to act on her behalf.

•the broker is authorized & owes fiduciary duties to principal/client.

Salesperson 

subagent to their employing broker

• Created by an employment contract.

Customer/Third Party

•non-represented consumer 

• entitled to fairness and honesty. 

• Licensees work with customers, not for them

Most contracts between a seller and broker for the

purpose of selling real estate are in the form of a (an):

A. general power of attorney

B. novation

C. written agreement

D. assignmen

Expressed agency

• is created when principal & broker express agreed upon terms & conditions in writing. 

• Listing contracts with sellers 

• Buyer-broker employment agreements 

Implied agency 

•is created as result of acts or conduct.

• AKA ostensible because outward appearances imply agency relationship.

• Extremely rare in real estate bc contracts must be in writing.

• Agency relationships regarding real estate must also be in writing.

Taking legal action to collect commission

• Evidence agent was properly licensed when commission was earned

• Evidence agent had signed, written agreement with party obligated to pay commission

• Evidence agent was procuring cause

•Depends on the Listing Type 

Creation of Agency

The source of compensation does not determine agency. 

• An agent does not necessarily represent the person who pays the agent’s commission. 

If an agent has fiduciary duties to the client, what duties

does the client have to an agent?

A. Compensation, indemnification and performance

B. Cooperation, confidentiality and correction

C. Honesty, disclosure and insurance

D. Information, independence and inspection

Duty of the Principal to the Agent

•truthful information abt property

•indemnification (hold harmless)

• bargain in good faith

• pay agreed-upon compensation if the agent has ready, willing, and able buyer

Seller and Broker enter into a listing agreement? The

type of agency established is?

Seller and Broker enter into a listing agreement? The

type of agency established is?

A. Universal Agent

B. Special Agent

C. General Agent

D. Dual Agent

Universal

• Acts on behalf of client in all matters and situations

    •Has unlimited authority 

    •(adult child/elderly parents). 

• Requires power of attorney 

   • Agent becomes attorney-in-fact

   • Paper = Power of Attorney

   • Person = Attorney-in-Fact

 Special

•authorized to perform one specific transaction for principal

    • Such as:

• Listing broker representing seller to sell property.

• Buyer broker representing buyer.

• With established agency agreement

• Buyer Representation Agreement

Single agent

•represents either the seller or the buyer

•most common form of representation.

Dual Agent 

• Licensee represents both the seller and buyer

• Requires written consent by both parties

• prior to any contractual negotiations.

Limited Dual Agent 

•salesperson representing buyer sells listing of another salesperson with the same brokerage.

The salesperson is what type of agent to their employing

broker and is established by?

A. General Agent by the employment contact

B. Specific Agent by the employment contact

C.General Agent when they represent the seller.

D.Specific Agent when they represent the seller.

General Agent 

Authorized to perform variety of transactions for principal on an ongoing basis. 

Property manager is general agent to owners. 

Real estate salesperson is general agent to brokerage. 

Broker has vicarious liability for agent’s action

Employing Broker

• An entity Corporation or Limited Liability Company (LLC) 

• Managed by one responsible (designated) broker

   • Must be a DRE licensed broker

   • All salesperson and Broker Associates report to the designated broker

• All contracts belong to the employing broker.

•If responsible broker dies or loses their license they are replaced the next day.

Self Employed Broker

•Owned and managed by one person.

• May employ salespersons or broker associates. 

• All contracts belong to the self-employed broker. 

•If the self-employed broker dies:

• all salesperson employment contracts & client contracts are terminated.

• Salesperson licenses are suspended

What is not one of the elements of the agency

disclosure process?

A. Disclose

B. Elect

C.Confirm

D.Commission

Steps in the Disclosure Process

•Disclose

•Elect

•Confirm

Seller’s Broker (Agent)

•represents the Seller

• AKA: Listing Broker

Buyer’s Broker (Agent)

•represents the Buyer

• AKA: Selling Broker

Agency Disclosure (AD Form):

Describes the obligations of an agent as seller’s agent, buyer’s agent, or dual agent.

•Does NOT established agency!

•Discloses the types of agency.

•Who Presents Agency Disclosure (AD Form)

• Seller’s agent must deliver the form to the seller before entering into a listing agreement

• Buyer’s agent must provide the form to the buyer before the Buyer makes an offer to purchase.

• Buyer’s agent is the Selling Agent