Chapter 6 Quiz (17% Of The Exam)

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  • 1/30 Questions

    The term "estoppel" describes: 

    • An architectural element
    • A plumbing fixture
    • A document confirming the terms of a lease and that tenant has no claims against the landlord
    • A trade fixture
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About This Quiz

This Chapter 6 Quiz covers key concepts related to agency relationships in real estate, focusing on the roles and responsibilities of salespersons, brokers, and subagents. It assesses understanding of fiduciary duties and the types of agency, crucial for professionals in the real estate industry.

Chapter 6 Quiz (17% Of The Exam) - Quiz

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  • 2. 

    A broker made a sale to a buyer based on false information provided by the seller. The broker acted in good faith and had reasonably relied on the false information. Thereafter, the buyer rescinded the contract because of the fraud. Under these circumstances, the broker is normally entitled to: 

    • Only a reimbusement for out-of-pocket expenses

    • A full commission and indemnity for any liability caused by legal action by the defrauded buyer against the broker

    • One-half of the money deposited by the buyer in escrow

    • No commission because an agent is responsible for the principal's action

    Correct Answer
    A. A full commission and indemnity for any liability caused by legal action by the defrauded buyer against the broker
    Explanation
    The broker is normally entitled to a full commission and indemnity for any liability caused by legal action by the defrauded buyer against the broker because the broker acted in good faith and reasonably relied on false information provided by the seller. Even though the buyer rescinded the contract due to fraud, the broker should still be compensated for their services and protected from any legal actions taken against them by the buyer.

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  • 3. 

    The agency disclosure form must be given to the parties in which of the following transactions? 

    • Sale of a theater

    • Sale of an office building

    • Sale of vacant land

    • Sale of a residential triplex

    Correct Answer
    A. Sale of a residential triplex
    Explanation
    The agency disclosure form must be given to the parties in a sale of a residential triplex. This form is required in transactions involving residential properties, and a triplex falls under this category. It is important to provide this form to ensure that all parties involved are aware of the agency relationship and any potential conflicts of interest.

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  • 4. 

    The agency of a real estate broker may be established by: 

    • Express agreement

    • Implied agreement

    • Ratification or estoppel

    • Any of the above

    Correct Answer
    A. Any of the above
    Explanation
    The agency of a real estate broker may be established by any of the above options, which include express agreement, implied agreement, ratification, or estoppel. This means that the broker can be authorized to act on behalf of the client through a formal agreement, through the actions and conduct of both parties, through the client's acceptance of the broker's actions, or through the legal principle of estoppel. These various methods provide flexibility in establishing the agency relationship between the broker and the client.

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  • 5. 

    A seller entered into an oral listing agreement to sell real property with the broker, without a subsequent written verification. The payment of a commission to the broker under these circumstances would be: 

    • Permissible if the seller elects to do so

    • A violation of the regulations of the Real Estate Commissioner

    • Regarded as contrary to public policy

    • A violation of criminal law

    Correct Answer
    A. Permissible if the seller elects to do so
    Explanation
    In this scenario, the seller and broker entered into an oral listing agreement to sell real property. Although it is generally recommended to have a subsequent written verification, the payment of a commission to the broker would still be permissible if the seller chooses to do so. While it may not be the best practice and could potentially lead to misunderstandings or disputes, it is not a violation of any regulations or criminal law. It is ultimately up to the seller to decide whether they want to honor the oral agreement and pay the commission to the broker.

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  • 6. 

    Both the seller and broker were sued by the buyer because the broker failed to disclose the leaky roof to the buyer. The broker knew of the problem but forgot to disclose it to the buyer. The probable result of the lawsuit would be: 

    • Buyer was not entitled to recover from either the broker or the seller

    • Buyer recovered from the broker, but not the seller

    • Buyer recovered from the seller, but not the broker

    • Buyer would be successful in the suit against both seller and broker and the seller would be successful in the suit against the broker

    Correct Answer
    A. Buyer would be successful in the suit against both seller and broker and the seller would be successful in the suit against the broker
    Explanation
    The buyer would be successful in the suit against both the seller and the broker because the broker failed to disclose the leaky roof to the buyer, despite knowing about the problem. This failure to disclose important information is a breach of the broker's duty to the buyer. Additionally, the seller would be successful in a suit against the broker because the broker's failure to disclose the leaky roof could potentially lead to financial consequences for the seller as well.

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  • 7. 

    Which of the following is true concerning a buyer agency? 

    • It is illegal in California

    • The agent represents buyers only

    • The agent represents mostly buyers, but some sellers

    • The agent must charge an advance fee to the buyer

    Correct Answer
    A. The agent represents buyers only
    Explanation
    A buyer agency refers to a situation where the agent exclusively represents the buyers. This means that the agent's primary responsibility is to protect and advocate for the best interests of the buyers throughout the real estate transaction. This arrangement is common in many real estate markets and is aimed at ensuring that buyers have dedicated representation and guidance in their property purchase process.

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  • 8. 

    When a real estate agent acts as a dual agent for both the buyer and seller in a 1031 exchange, and does not disclose his dual agency to both parties, he may: 

    • Provide grounds for either party to rescind the purchase agreement

    • Be prevented from receiving any commission

    • Be disciplined by the Real Estate Commissioner

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    When a real estate agent acts as a dual agent for both the buyer and seller in a 1031 exchange without disclosing this dual agency to both parties, several consequences may occur. Firstly, this action may provide grounds for either party to rescind the purchase agreement, as the lack of disclosure can be seen as a breach of trust. Secondly, the agent may be prevented from receiving any commission for their services due to their failure to disclose the dual agency. Lastly, the Real Estate Commissioner may discipline the agent for their unethical behavior. Therefore, the correct answer is "all of the above."

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  • 9. 

    Which of the following is a common agency relationship under California law? 

    • Agent for seller

    • Agent for buyer

    • Dual agent

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    All of the options listed (agent for seller, agent for buyer, and dual agent) are common agency relationships under California law. An agent for a seller represents the seller's interests in a transaction, an agent for a buyer represents the buyer's interests, and a dual agent represents both the buyer and the seller in the same transaction. Therefore, all of these options are correct.

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  • 10. 

    When a broker has an enforceable listing he must do which of the following to earn a commission: 

    • Submit a cash all offer

    • Submit a full price offer from a buyer ready, willing, and able to purchase on the exact terms of the listing

    • Secure a binding contract between the buyer and the seller

    • Either "B" or "C" will earn a commission

    Correct Answer
    A. Either "B" or "C" will earn a commission
    Explanation
    When a broker has an enforceable listing, they must either submit a full price offer from a buyer ready, willing, and able to purchase on the exact terms of the listing or secure a binding contract between the buyer and the seller in order to earn a commission.

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  • 11. 

    A seller accepted an offer presented by a real estate broker. During escrow, the seller discovered that the buyer was the brother of the broker. This relationship was not disclosed in the offer. The seller can: 

    • Do nothing because the property sold for the full asking price

    • Cancel the transaction, but be liable for the full commission

    • Cancel the transaction without liability for the commission

    • None of the above

    Correct Answer
    A. Cancel the transaction without liability for the commission
    Explanation
    In this scenario, the seller can cancel the transaction without being liable for the commission because the buyer's relationship with the broker was not disclosed in the offer. This lack of disclosure can be seen as a breach of trust and potentially a conflict of interest, which gives the seller the right to cancel the transaction without any penalties or liability for the commission.

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  • 12. 

    A broker provided agency services for both a buyer and a seller without the proper disclosures because he was unaware that both the buyer and the seller considered him to be their agent. Consequently, the broker was involved in which of the following: 

    • Voidable agency

    • Accidental agency

    • Ostensible agency

    • Deniable agency

    Correct Answer
    A. Ostensible agency
    Explanation
    The correct answer is ostensible agency. In this scenario, the broker acted as an agent for both the buyer and the seller without their knowledge. This created an ostensible agency, where the broker appeared to have the authority to act on behalf of both parties, even though he did not actually have the proper disclosures or consent.

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  • 13. 

    The relationship of a broker representing a principal when dealing with a third party in selling, buying, or exchanging property is defined as all of the following except:

    • A fiduciary relationship

    • An agency relationship

    • An attorney-in-fact relationship

    • Broker/client relationship

    Correct Answer
    A. An attorney-in-fact relationship
    Explanation
    The relationship of a broker representing a principal when dealing with a third party in selling, buying, or exchanging property is defined as a fiduciary relationship, an agency relationship, and a broker/client relationship. However, it is not defined as an attorney-in-fact relationship. An attorney-in-fact relationship typically involves granting someone the power to act on behalf of another person in legal matters, which is different from the relationship between a broker and a principal in real estate transactions.

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  • 14. 

    Agents must present offers to the seller until: 

    • Opening of escrow

    • Buyer has qualified for the loan

    • Documents were already drawn

    • Close of escrow

    Correct Answer
    A. Close of escrow
    Explanation
    Agents must present offers to the seller until the close of escrow. This means that agents are required to continue presenting offers to the seller until the escrow process is completed and the property officially changes ownership. It is important for agents to fulfill this duty in order to ensure that the seller has the opportunity to consider all potential offers and make an informed decision.

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  • 15. 

    All of the following will terminate an agency relationship, except: 

    • The death of the agent or the seller

    • The mutual consent of agent and seller

    • The destruction of the subject property

    • Estoppel

    Correct Answer
    A. Estoppel
    Explanation
    An agency relationship may be created by but not terminated by estoppel

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  • 16. 

    Why do some clients prefer "single agency" representation? 

    • A "single agency" broker may have one of his salespersons become the agent for the seller and have another salesperson in his office become the agent for the buyer

    • The "single agency" broker is more client oriented

    • In a "single agency" transaction, the seller cannot choose his own broker or represent himself

    • The "single agency" broker provides better service because he represents both the seller and buyer in the same transaction

    Correct Answer
    A. The "single agency" broker is more client oriented
    Explanation
    Some clients prefer "single agency" representation because the "single agency" broker is more client oriented. This means that the broker prioritizes the needs and interests of the client above all else. By having one salesperson become the agent for the seller and another salesperson become the agent for the buyer, the broker can provide personalized and dedicated service to both parties. Additionally, in a "single agency" transaction, the seller cannot choose their own broker or represent themselves, which ensures that the broker is solely focused on advocating for the client's best interests.

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  • 17. 

    When a broker obtains confidential financial information about his principal during a real estate transaction, that information must be kept confidential for how long? 

    • Only until close of escrow

    • 30 days after close of escrow

    • Three years after closing of the transaction

    • Forever

    Correct Answer
    A. Forever
    Explanation
    When a broker obtains confidential financial information about his principal during a real estate transaction, that information must be kept confidential forever. This means that the broker is obligated to never disclose or share this information with anyone, even after the close of escrow or the completion of the transaction. The confidentiality of the principal's financial information is paramount and must be maintained indefinitely by the broker.

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  • 18. 

    If a seller no longer wants the broker to represent him during the term of an exclusive right to sell listing, the seller may: 

    • Revoke the listing contract without liability

    • Revoke the listing contract but may be liable for damages

    • Not revoke the listing because an exclusive right to sell listing is irrevocable for the term of the listing agreement

    • None of the above

    Correct Answer
    A. Revoke the listing contract but may be liable for damages
    Explanation
    If a seller no longer wants the broker to represent him during the term of an exclusive right to sell listing, the seller can revoke the listing contract. However, by doing so, the seller may be liable for damages. This means that the seller may have to compensate the broker for any losses or expenses incurred as a result of the contract being terminated prematurely. Therefore, while the seller has the right to revoke the listing, they should be aware of the potential financial consequences.

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  • 19. 

    In describing the relationship between a seller and a salesperson employed by the listing broker, the salesperson is considered: 

    • An agent of the seller

    • A subagent of the seller

    • An employee of the seller

    • An independent contractor, employed by the seller

    Correct Answer
    A. An agent of the seller
    Explanation
    The salesperson is considered an agent of the seller because they are employed by the listing broker, who is acting as the seller's representative. As an agent, the salesperson has a fiduciary duty to act in the best interests of the seller and has the authority to negotiate and enter into contracts on behalf of the seller.

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  • 20. 

    A real estate broker who has been appointed as a subagent for a seller, with the seller's approval, has which of the following duties?

    • A fiduciary duty equally to both the buyer and the seller

    • A fiduciary duty to the seller only

    • A fiduciary duty to the seller and the broker who appointed him as the subagent

    • A duty to be honest and fair to the seller and a fiduciary duty to the broker who appointed him as the subagent

    Correct Answer
    A. A fiduciary duty to the seller only
    Explanation
    The correct answer is "a fiduciary duty to the seller only." When a real estate broker is appointed as a subagent for a seller, they have a legal and ethical obligation to act in the best interests of the seller. This fiduciary duty means that the broker must prioritize the seller's interests above their own and any other parties involved in the transaction. They must provide honest and fair representation to the seller, maintain confidentiality, and disclose any relevant information that may impact the seller's decision-making process. The broker does not owe a fiduciary duty to the buyer or the broker who appointed them as a subagent.

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  • 21. 

    When a real estate broker is employed to represent a seller in the sale of a property, the broker is usually employed to act as: 

    • A limited agent

    • A privileged agent

    • A general agent

    • A special agent

    Correct Answer
    A. A special agent
    Explanation
    When a real estate broker is employed to represent a seller in the sale of a property, they are typically employed as a special agent. A special agent is someone who is authorized to perform specific acts on behalf of the principal (seller) and has limited authority. In this case, the broker is specifically hired to represent the seller in the sale of the property, and their authority is limited to the scope of that transaction. They do not have the authority to make decisions or take actions outside of this specific role.

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  • 22. 

    When dealing with the general public, which of the following may a broker not do? 

    • Delegate duties

    • Refuse to take a listing

    • Remain silent regarding material facts known only to him

    • All of the above

    Correct Answer
    A. Remain silent regarding material facts known only to him
    Explanation
    A broker may not remain silent regarding material facts known only to him when dealing with the general public. This is because brokers have a fiduciary duty to act in the best interests of their clients and provide them with all relevant information. By remaining silent about material facts, the broker would be withholding important information that could potentially affect the client's decision-making process. Therefore, it is not permissible for a broker to remain silent in such situations.

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  • 23. 

    When a broker, while acting as an agent for the seller in a sale of real property, misrepresents the property to a buyer, the broker may cause the seller to be subjected to: 

    • Rescission of the contract by the buyer

    • A court action for damages by the buyer

    • Tort liability for damages

    • Any of the above

    Correct Answer
    A. Any of the above
    Explanation
    When a broker misrepresents the property to a buyer while acting as an agent for the seller in a sale of real property, it can lead to various consequences for the seller. The buyer may choose to rescind the contract, meaning they can cancel the agreement and potentially seek a refund of any money paid. Additionally, the buyer may take legal action against the seller, seeking damages for any losses suffered as a result of the misrepresentation. Lastly, the broker's actions can also expose the seller to tort liability, which means they may be held responsible for any damages caused by the broker's misrepresentation. Therefore, any of the options mentioned can be a consequence for the seller in this situation.

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  • 24. 

    The fiduciary relationship between an agent and the principal is comparable to the relationship between: 

    • Trustor and beneficiary

    • Mortgagor and mortgagee

    • Trustor and trustee

    • Trustee and beneficiary

    Correct Answer
    A. Trustee and beneficiary
    Explanation
    The fiduciary relationship between an agent and the principal is comparable to the relationship between a trustee and beneficiary. In both cases, there is a legal and ethical duty for the agent/trustee to act in the best interests of the principal/beneficiary. The agent/trustee must exercise loyalty, care, and skill in managing the affairs of the principal/beneficiary. They are entrusted with the responsibility of making decisions and taking actions that will benefit the principal/beneficiary and not their own personal interests.

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  • 25. 

    When you, as a real estate agent, know that the seller will not accept an offer from the buyer, you should not do which of the following: 

    • Write new terms on the back of the offer and go back to the buyer for approval

    • Present the offer to the seller anyway

    • Upon rejection of the offer by the seller, induce the seller to make a counter-offer

    • Change the buyer's offer to what you believe the seller will accept, initial the changes, and then present the offer to the seller

    Correct Answer
    A. Change the buyer's offer to what you believe the seller will accept, initial the changes, and then present the offer to the seller
  • 26. 

    When a real estate broker has been authorized by another real estate broker to act as a subagent for a seller and the seller has approved the appointment of the subagent, the subagent is primarily responsible to: 

    • The broker who appointed him

    • The seller

    • Both the broker and seller equally

    • Neither the broker nor the seller

    Correct Answer
    A. The seller
    Explanation
    When a real estate broker is authorized by another broker to act as a subagent for a seller and the seller approves the appointment, the subagent is primarily responsible to the seller. This means that the subagent must prioritize the interests and needs of the seller above all else. The subagent acts as a representative of the seller and owes them fiduciary duties, such as loyalty, confidentiality, and full disclosure. While the broker who appointed the subagent may have some oversight and involvement, the subagent's main responsibility lies with the seller.

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  • 27. 

    A real estate agent handling the sale of four or less residential units must elect his or her agency relationship to all the parties:

    • As soon as practical

    • As soon as an offer has been accepted

    • At the close of escrow

    • Whenever asked by either party

    Correct Answer
    A. As soon as practical
    Explanation
    When a real estate agent is handling the sale of four or fewer residential units, they are required to elect their agency relationship to all parties involved as soon as practical. This means that the agent must disclose their agency relationship and any potential conflicts of interest to the buyers and sellers as soon as it is reasonable to do so. This ensures transparency and allows all parties to make informed decisions throughout the process of buying or selling the property.

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  • 28. 

    All of the following statements are true concerning an in-house sale, except: 

    • The listing broker can buy the property himself

    • The listing broker can act as an agent for the seller only

    • The listing broker can act as an agent for the buyer only

    • The listing broker can act as a dual agent for the seller and the buyer

    Correct Answer
    A. The listing broker can act as an agent for the buyer only
    Explanation
    The correct answer is that the listing broker can act as an agent for the buyer only. This means that in an in-house sale, the listing broker can represent the buyer and work solely in their best interest. However, they cannot act as an agent for the seller or act as a dual agent representing both the buyer and the seller in the transaction.

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  • 29. 

    Which of the following is not a required step for a licensee under the current agency disclosure law? 

    • Representation

    • Election

    • Confirmation

    • Disclosure

    Correct Answer
    A. Representation
  • 30. 

    If a real estate broker fails to obey all lawful instructions given by his principal, the broker could be: 

    • Subjected to fine and/or imprisonment under the law

    • Prohibited by a court from working as a real estate broker

    • Liable in damages for any injuries suffered by the principal as a result

    • All of the above

    Correct Answer
    A. Liable in damages for any injuries suffered by the principal as a result
    Explanation
    If a real estate broker fails to obey all lawful instructions given by his principal, the broker could be liable in damages for any injuries suffered by the principal as a result. This means that the broker would be held responsible for any harm or losses that the principal experiences due to the broker's failure to follow instructions. This could involve financial compensation to the principal to cover the damages incurred.

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • May 18, 2015
    Quiz Created by
    Ktngo

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