NAR Agency Relationships & Fiduciary Duties 1 — Questions and Answers
Question 1: Which fiduciary duty requires a real estate agent to place the client's interests above their own at all times?
- Obedience
- Loyalty (Correct answer)
- Disclosure
- Confidentiality
Correct answer: Loyalty
The duty of loyalty obligates an agent to prioritize the client's best interests over their own or any third party's interests throughout the relationship.
Question 2: A listing agreement between a seller and a broker establishes which type of agency relationship?
- Buyer agency
- Dual agency
- Seller agency (listing agency) (Correct answer)
- Transactional brokerage
Correct answer: Seller agency (listing agency)
A listing agreement creates a seller agency relationship, making the broker the seller's agent and obligating the broker to represent the seller's interests.
Question 3: The fiduciary duty of 'accounting' in real estate requires an agent to:
- Prepare tax returns for the client
- Safeguard and report on all funds and property entrusted to them (Correct answer)
- Audit the seller's financial statements
- Calculate capital gains for property sales
Correct answer: Safeguard and report on all funds and property entrusted to them
Accounting requires agents to keep accurate records of and properly handle all money, documents, and property received on behalf of the client.
Question 4: What must an agent disclose to a client under the fiduciary duty of disclosure?
- Only information that benefits the client financially
- All material facts and relevant information that could affect the client's decisions (Correct answer)
- Information about the agent's personal investment portfolio
- Only information required by state law
Correct answer: All material facts and relevant information that could affect the client's decisions
The duty of disclosure requires agents to proactively share all known material facts and relevant information that could influence the client's decisions, even if not asked.
Question 5: In a dual agency arrangement, the agent represents:
- Two buyers competing for the same property
- Both the buyer and the seller in the same transaction (Correct answer)
- Two sellers listing similar properties
- A buyer and a lender simultaneously
Correct answer: Both the buyer and the seller in the same transaction
Dual agency occurs when the same agent or brokerage represents both the buyer and the seller in the same real estate transaction.
Question 6: Which of the following is TRUE about undisclosed dual agency?
- It is permitted if both parties are sophisticated buyers and sellers
- It is a common and accepted practice in commercial real estate
- It is illegal and a breach of fiduciary duty (Correct answer)
- It is allowed if the commission is split equally
Correct answer: It is illegal and a breach of fiduciary duty
Undisclosed dual agency is illegal because it violates the duty of loyalty and disclosure — an agent cannot secretly represent both parties without their informed consent.
Question 7: A subagent in real estate owes fiduciary duties to:
- The buyer they are working with directly
- The listing broker's principal (the seller) (Correct answer)
- Both the buyer and seller equally
- The MLS that listed the property
Correct answer: The listing broker's principal (the seller)
A subagent is an agent of the listing broker's principal (the seller), so even when working with a buyer, the subagent owes fiduciary duties to the seller.
NAR Agency Relationships & Fiduciary Duties 1
Which fiduciary duty requires a real estate agent to place the client's interests above their own at all times?