Modern Real Estate Practice 17th Edition (Chapter 4)

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  • 1/19 Questions

    A real estate broker's responsibility to keep the principal informed of all of the facts that could affect a transaction is the duty of

    • Care
    • Disclosure
    • Obedience
    • Accounting
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Real Property Quizzes & Trivia
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This quiz will be used for practice only. The questions are from class material.

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  • 2. 

    Which of the following would be considered dual agency?

    • A broker acting for both the buyer and the seller in the same transaction

    • Two brokerage companies' cooperating with each other

    • A broker representing more than one pricipal

    • A broker listing and then selling the same property

    Correct Answer
    A. A broker acting for both the buyer and the seller in the same transaction
    Explanation
    Dual agency occurs when a broker represents both the buyer and the seller in the same transaction. This means that the broker has a fiduciary duty to both parties and must act in their best interests. Dual agency can present potential conflicts of interest, as the broker must navigate between the needs and desires of both the buyer and the seller. It is important for the broker to disclose the dual agency relationship to both parties and obtain their informed consent.

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  • 3. 

    The relationship of a broker to his or her client is that of a(n)

    • Trustee

    • Subagent

    • Fiduciary

    • Attorney in fact

    Correct Answer
    A. Fiduciary
    Explanation
    A fiduciary is a person who is entrusted with the responsibility to act in the best interest of another party. In the context of a broker-client relationship, a broker is expected to act as a fiduciary, meaning they must prioritize the client's interests above their own. This includes providing honest and transparent advice, disclosing any conflicts of interest, and making decisions that align with the client's goals and objectives. By acting as a fiduciary, the broker establishes a relationship of trust and confidence with the client, ensuring that their best interests are protected.

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  • 4. 

    A real estate broker acting as the agent of the seller

    • Must promote and safeguard the seller's best interest

    • Can disclose the seller's minimum price

    • Should present to the seller only the highest offer for the property

    • Can accept an offer on behalf of the seller

    Correct Answer
    A. Must promote and safeguard the seller's best interest
    Explanation
    A real estate broker acting as the agent of the seller is required to promote and safeguard the seller's best interest. This means that the broker must work in the seller's favor, ensuring that their needs and preferences are prioritized throughout the transaction. The broker should act in a way that maximizes the seller's profit and protects their legal rights. This includes providing them with all relevant information, negotiating on their behalf, and ensuring that their interests are protected at all times.

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  • 5. 

    In designated agency all of the following apply EXCEPT

    • The broker could be a dual agent

    • The same agent may represent both the buyer and the seller at the same time

    • The broker can choose an agent in the office to reprsent the seller

    • The broker may appoint an agent to negotiate for the buyer

    Correct Answer
    A. The same agent may represent both the buyer and the seller at the same time
    Explanation
    In a designated agency, all of the options listed are true except for the statement that the same agent may represent both the buyer and the seller at the same time. In designated agency, the broker can choose an agent in the office to represent the seller, and the broker may appoint an agent to negotiate for the buyer. However, the same agent cannot represent both the buyer and the seller simultaneously in a designated agency.

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  • 6. 

    A broker is permitted to represent both the seller and the buyer in the same transaction when

    • The principals are not aware o fsuch action

    • The broker is a subagent rather than the agent of the seller

    • Commisions are collected from both parties

    • Both parties have been informed and agree to the dual representation

    Correct Answer
    A. Both parties have been informed and agree to the dual representation
    Explanation
    In this scenario, the correct answer is that both parties have been informed and agree to the dual representation. This means that the broker can represent both the seller and the buyer in the same transaction only if both parties are aware of this arrangement and have given their consent. This ensures transparency and avoids any potential conflicts of interest.

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  • 7. 

    Which of the following would be considered lawful practice in real estate brokerage?

    • Deceitful or dishonest practices

    • Exaggerated statements about the property

    • Omitted statements of material fact

    • Misstatements about the property

    Correct Answer
    A. Exaggerated statements about the property
    Explanation
    Exaggerated statements about the property would be considered lawful practice in real estate brokerage. This means that it is acceptable for real estate brokers to make statements that may slightly exaggerate the positive aspects of a property in order to attract potential buyers. However, deceitful or dishonest practices, omitted statements of material fact, and misstatements about the property are all considered unlawful practices in real estate brokerage as they involve providing false or misleading information to buyers.

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  • 8. 

    As an agent for the seller, a real estate broker can

    • Guarantee a prospective buyer that the seller will accept an offer at the listed price and terms

    • Solicit an offer to purchase the propery from a prospective buyer

    • Advise a prospective buyer as to the best manner of taking title to the property

    • Change the terms of the listing contract on behalf of the seller.

    Correct Answer
    A. Solicit an offer to purchase the propery from a prospective buyer
    Explanation
    A real estate broker, as an agent for the seller, has the authority to solicit offers from potential buyers to purchase the property. This means that the broker can actively seek out interested parties and encourage them to make an offer on the property. This is a key role for the broker as it helps to generate interest and potential buyers for the seller's property.

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  • 9. 

    A seller has listed her home with a broker for $190,000. The listing broker tellls a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000 and the seller accepts it. In this situation,

    • The broker has violated his agency relationship with the seller.

    • The broker was unethical, but the seller did get her property.

    • The broker acted properly to obtain a quick offer on the property

    • Any broker is authorized to encourage such bids for the property

    Correct Answer
    A. The broker has violated his agency relationship with the seller.
    Explanation
    The correct answer is that the broker has violated his agency relationship with the seller. This is because the broker has a fiduciary duty to act in the best interests of the seller, which includes obtaining the highest possible price for the property. By advising the buyer to submit a low offer and accepting it without negotiating for a higher price, the broker has not fulfilled his duty to the seller. This behavior is considered a breach of the agency relationship and is unethical.

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  • 10. 

    When Broker Hearn was told by his principle not to advertise her property in a certain newspaper, which was out of the area, hearn complied because he

    • Had never advertised in that newspaper anyway

    • Must obey the lawful instructions of his pricipal

    • Was NOT intending to advertise the property at all

    • Is allowed to advertise only in local newspapers

    Correct Answer
    A. Must obey the lawful instructions of his pricipal
    Explanation
    The correct answer is "must obey the lawful instructions of his principal." This is because as a broker, Hearn has a duty to follow the instructions given to him by his principal, which in this case is not to advertise the property in a certain newspaper. Even if Hearn had never advertised in that newspaper before or was not intending to advertise the property at all, his primary responsibility is to comply with the lawful instructions of his principal.

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  • 11. 

    It is the duty of the agent to disclose to the principal every material step taken in the transaction of the principal's business. This is because the

    • Commission can be adjusted up or down according to the agent's efforts

    • Agent has fiduciary obligations to the principal.

    • Terms of the listing contract require the agent to do so.

    • Terms of the purchase contract require the agent to do so.

    Correct Answer
    A. Agent has fiduciary obligations to the principal.
    Explanation
    The correct answer is that the agent has fiduciary obligations to the principal. Fiduciary obligations refer to the legal and ethical duty of an agent to act in the best interests of their principal. This includes providing full disclosure of all material steps taken in the transaction, as it allows the principal to make informed decisions. By disclosing every material step, the agent ensures transparency and trust between themselves and the principal, fulfilling their fiduciary obligations.

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  • 12. 

    Upon discovering a latent defect in a property, the Broker Alice should discuss the problem with seller Juan and then

    • Tell him that the defect must be repaired

    • Arrange fr the repairs herself

    • Inform any prospective buyers of the defect

    • Contact the city building inspector about the defect

    Correct Answer
    A. Inform any prospective buyers of the defect
    Explanation
    Upon discovering a latent defect in a property, it is important for the Broker Alice to discuss the problem with seller Juan to ensure transparency and communication. After discussing with the seller, the next step for Alice should be to inform any prospective buyers of the defect. This is crucial as it allows potential buyers to make an informed decision about the property and its condition. By disclosing the defect, Alice is being ethical and ensuring that buyers have all the necessary information before making a purchase.

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  • 13. 

    The type of agency practiced in which there is only ever one client is

    • Designated agency

    • Disclosed dual agency

    • Exclusive buyer agency

    • Single agency

    Correct Answer
    A. Single agency
    Explanation
    Single agency refers to the type of agency practiced in which there is only ever one client. In this arrangement, the agent exclusively represents and works for the best interests of the client, without any conflicts of interest. The agent owes fiduciary duties to the client, including loyalty, confidentiality, obedience, disclosure, and accountability. This type of agency ensures that the agent can provide undivided attention and advocacy to the client throughout the real estate transaction process.

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  • 14. 

    A salesperson who is employed by a broker told a prospective buyer that the house she was looking at is "the best house in the area". Because of this statement.

    • The salesperson was guilty of fraud

    • The broker was guilty of fraud because the employing broker is responsible for the actions of the salesperson.

    • The salesperson was practicing puffing

    • The salesperson would be guilty of fraud only if the buyer purchased the house

    Correct Answer
    A. The salesperson was practicing puffing
    Explanation
    The correct answer is that the salesperson was practicing puffing. Puffing refers to exaggerated statements or opinions made by a salesperson to promote a product or service. In this case, the salesperson claimed that the house was "the best house in the area," which is a subjective opinion rather than a factual statement. Puffing is generally considered legal and not fraudulent, as long as it does not involve misrepresentation of material facts.

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  • 15. 

    Which of the follwing best defines the law of agency?

    • The selling of another's property by a properly lincensed brokerage company

    • The rules of law that apply to the respnsibilities of a person who acts as agent for another

    • The principles that govern one's conduct in business

    • The rules and regulations of the state's licensing agency

    Correct Answer
    A. The rules of law that apply to the respnsibilities of a person who acts as agent for another
    Explanation
    The law of agency refers to the set of legal rules and responsibilities that apply to a person who acts as an agent for another individual or entity. This includes the duties, obligations, and rights that an agent has when representing their principal. It governs the relationship between the agent and the principal, outlining the agent's authority to act on behalf of the principal and the fiduciary duties they owe. This definition accurately captures the essence of the law of agency by emphasizing the legal rules and responsibilities involved in acting as an agent for another party.

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  • 16. 

    A broker who is the agent of the buyer should do which of the following?

    • Disclose to the seller that the buyer is a minority person

    • Disclose to the seller the maximum price the buyer is willing to pay

    • Present to the seller only offers that are acceptable

    • Advise the buyer if the listing price of the seller's house is unrealistic

    Correct Answer
    A. Advise the buyer if the listing price of the seller's house is unrealistic
    Explanation
    A broker who is the agent of the buyer should advise the buyer if the listing price of the seller's house is unrealistic. This is because the broker's responsibility is to represent the best interests of the buyer. By informing the buyer about the unrealistic listing price, the broker can provide valuable guidance and help the buyer make an informed decision. This ensures that the buyer does not overpay for the property and maximizes their chances of getting a fair deal.

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  • 17. 

    A salesperson sells buyer Fred property listed by another brokerage firm in the Multiple Listing System. The salesperson has been working with Fred for many months but does not have an agency contract with him. This salesperson has fiduciary obligations to

    • The seller.

    • The buyer.

    • No one.

    • The public.

    Correct Answer
    A. The seller.
    Explanation
    In this scenario, the salesperson does not have an agency contract with the buyer, Fred. Therefore, they do not have fiduciary obligations towards him. However, since the salesperson is selling a property listed by another brokerage firm, they have a fiduciary duty towards the seller. This means that the salesperson must act in the best interest of the seller, protecting their confidentiality and negotiating the best terms for them. The salesperson is obligated to prioritize the seller's interests over those of the buyer, the public, or anyone else involved in the transaction.

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  • 18. 

    Broker Joan shows properties listed for sale with her company to prospect Karl. Karl has refused buyer representation. Karl is Joan's

    • Client.

    • Principal.

    • Customer.

    • Fiduciary.

    Correct Answer
    A. Customer.
    Explanation
    In this scenario, Karl has refused buyer representation, which means he is not seeking any professional advice or representation from Joan. Instead, he is simply looking at the properties listed for sale by Joan's company. Therefore, Karl is considered a customer rather than a client or principal. A customer typically receives basic services and information but does not have a formal relationship or representation with the broker.

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  • 19. 

    Mr. Moles's house has been listed for sale for more than one year and he is very anxious to move into a retirement community. Salesperson Rachel, who is a subagent of the seller, tells a prospective buyer to make a low offer because she is sure that the seller will accept it. Regarding Rachel's conduct, all of the following would be true Except?

    • She acted appropriately to get the seller's property sold.

    • She violated her fiduciary duty to mr. mole.

    • Her conduct implies she is representing the buyer.

    • She should not assume that an anxious seller will accept a lower offer.

    Correct Answer
    A. She acted appropriately to get the seller's property sold.
    Explanation
    Rachel's conduct does not imply that she acted appropriately to get the seller's property sold. By advising the prospective buyer to make a low offer, she is not acting in the best interest of the seller, which is her fiduciary duty as a subagent. This conduct implies that she is representing the buyer, not the seller. Additionally, it is not appropriate for Rachel to assume that an anxious seller will accept a lower offer.

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Aug 29, 2009
    Quiz Created by
    Vi001gi

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