rep ch 8

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rep ch 8
2011-12-12 03:25:07

rep ch 8
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  1. 1. Agency law is concerned with the duties and rights among:
    A. agent and principal
    B. agent and third party
    C. principal and third party
    D. All of the above
    • Question #1
    • Answer: D
    • Explanation: Agency law governs all relationships among agents, principals, and third parties.
  2. 2. A broker took a listing which expressly authorized him to accept buyers' deposits. The broker accepted a deposit from a buyer, but then misappropriated the funds and fled. In this situation, the risk of the loss belongs to the:
    A. seller, since the broker was acting within his express authority to accept deposits
    B. buyer, since the broker was acting as his agent in regard to the deposit
    C. seller, under the Uniform Vendor and Purchaser Risk Act, since possession had not been transferred
    D. buyer, since the seller was not criminally culpable
    • Question #2
    • Answer: A
    • Explanation: Accepting a buyer's deposit was within the agent's scope of authority, as authorized by the seller. Therefore, the seller bears the risk of loss of the deposit.
  3. 3. A broker received two offers on the same property from two salespersons in his office, both accompanied by deposits. The broker decided to hold the second offer until the seller had seen the first offer, without informing the seller of the second offer. The broker's actions were:
    A. permissible if the offers are for the same price
    B. permissible if both salespersons will be able to split the seller's commission
    C. not permissible because the broker owes a fiduciary duty to both buyers
    D. not permissible because the broker must disclose all offers
    • Question #3
    • Answer: D
    • Explanation: A broker working for a seller has a fiduciary duty to disclose all offers to the seller, regardless of the contents of the offers. A seller's agent would have no fiduciary duty to the buyer.
  4. 4. Which of the following phrases describes the nature of a real estate agent's duty to keep her principal informed?
    A. Contractual obligation
    B. Fiduciary duty
    C. Ethical standards
    D. Public duty
    • Question #4
    • Answer: B
    • Explanation: The agent's duty to keep the principal informed is part of the fiduciary relationship. A fiduciary is held to exacting standards in disclosure and accountability because she operates in a position requiring trust and confidence.
  5. 5. Which of the following elements is not necessary for the creation of an agency relationship?
    A. A competent principal
    B. Mutual agreement between principal and agent
    C. Payment of consideration
    D. A fiduciary relationship
    • Question #5
    • Answer: C
    • Explanation: Consideration is not necessary to the formation of an agency relationship; an agency may be gratuitous. Whether or not the agent is being paid, though, the relationship is always a fiduciary relationship.
  6. 6. A broker who accepts a listing to sell real estate owes a fiduciary duty to:
    A. the buyer only
    B. the seller only
    C. both the buyer and the seller
    D. the general public
    • Question #6
    • Answer: B
    • Explanation: A broker who accepts a listing is a seller's agent, and owes a fiduciary duty to the seller only. The broker will still owe certain duties to all parties, such as the duties of honesty and good faith, and of disclosure of latent defects. However, the fiduciary relationship is between broker and seller.
  7. 7. Which of the following would terminate an agency (listing) agreement?
    A. A qualified buyer submits a full-price offer
    B. The death or incapacity of the seller or broker
    C. The seller rejects the buyer’s offer
    D. The buyer rejects a seller’s counteroffer
    • Question #7
    • Answer: B
    • Explanation: If a seller or broker dies, the agency relationship between them is terminated by operation of law.
  8. 8. If a principal no longer desires an agent's services, which of the following is correct?
    A. The principal may not unilaterally revoke an agency
    B. The agent may compel the principal to complete the contract under the theory of specific performance
    C. The principal may revoke the contract, but may be liable for damages
    D. The principal may revoke the contract without liability for damages
    • Question #8
    • Answer: C
    • Explanation: Either party to an agency agreement may unilaterally revoke or renounce the relationship, but may be liable for any damages that the end of the relationship causes.
  9. 9. Broker Larsen took a listing on a rural property from King, who told Larsen that the property was served by sewer service. Larsen checked with the county and found that there was no sewer service in that area. When Larsen sold the property to Burns, he did not mention the lack of sewer service, although Burns did not ask about it. Which of the following is correct?
    A. The liability rests entirely with Hastings, since he misled his broker
    B. Larsen had a duty to disclose all latent defects that he knew about, even though Burns did not ask
    C. Burns can take no action, since he did not inquire about the sewer system
    D. The legality of the situation would depend on whether there was an "as is" clause in the deposit receipt
    • Question #9
    • Answer: B
    • Explanation: The duty to disclose latent defects is an affirmative duty; the broker must disclose them even if the buyer does not ask. In addition, the broker must provide the buyer with a Transfer Disclosure Statement that discloses all known latent defects.
  10. 10. When may a real estate agent represent both principals in one transaction?
    A. If he has informed each principal that he will be representing each principal
    B. If he has obtained the consent of each principal for a dual agency arrangement
    C. If each principal knows that he will be collecting a commission from both parties
    D. All of the above
    • Question #10
    • Answer: D
    • Explanation: Both parties in a dual agency transaction must be informed in writing that they will not receive full representation, and they must provide written consent.
  11. 11. When may a broker fill out the seller's portion of the Transfer Disclosure Statement?
    A. When given express authority to do so by the seller
    B. When authorized to do so by an escrow agent
    C. Only when acting as a dual agent
    D. Never
    • Question #11
    • Answer: D
    • Explanation: A broker may never fill out the seller's portion of the Transfer Disclosure Statement. This responsibility may not be delegated
  12. 12. An agency would not terminate in which of the following situations?
    A. The principal refuses an offer to purchase that is presented by an agent
    B. The agent unilaterally renounces the agreement
    C. The principal dies
    D. The subject property is destroyed by a flood
    • Question #12
    • Answer: A
    • Explanation: Rejection of an offer terminates the offer, but it does not terminate the agency relationship between principal and agent.
  13. 13. Under the Real Estate Law in California, a salesperson is:
    A. an independent contractor because he is paid on a commission basis only
    B. an employee because he is working under the license of his supervising broker
    C. an independent contractor because his broker will closely supervise how the salesperson works
    D. an employee because taxes will be withheld from his paycheck
    • Question #13
    • Answer: A
    • Explanation: A salesperson is customarily an independent contractor because he is paid only on a commission basis. Taxes are usually not withheld from a salesperson’s earnings, and a broker does not closely supervise a salesperson’s activities.
  14. 14. An agent representing a seller owes the buyer:
    A. the duty of honesty and fair dealing
    B. the duty of confidentiality
    C. the same fiduciary duties that she owes the seller
    D. nothing, under the rule of caveat emptor
    • Question #14
    • Answer: A
    • Explanation: A seller’s agent owes all parties the duty of honesty and fair dealing. There are a number of fiduciary duties that she does not owe the buyer, such as the duty of confidentiality.
  15. 15. An agency relationship may be created in all of the following ways, except:
    A. appointment by the principal
    B. voluntary offer by an agent
    C. oral contract
    D. agreement without consideration
    • Question #15
    • Answer: B
    • Explanation: An agency relationship cannot be created unilaterally by one party's offer. The principal would need to accept the agent's offer, for instance, through an express agreement or ratification. The agreement does not require consideration, and it is not required to be in writing, although it must be in writing to be enforceable.