Real Estate License Agency Relationships 2 — Questions and Answers
Question 1: What is the primary distinction between a special agent and a general agent in real estate?
- Special agents handle commercial deals; general agents handle residential
- Special agents are licensed; general agents are not required to be
- Special agents are authorized for one specific act; general agents have broader ongoing authority (Correct answer)
- Special agents represent buyers; general agents represent sellers
Correct answer: Special agents are authorized for one specific act; general agents have broader ongoing authority
A special agent is authorized only to perform a specific act such as selling one property, while a general agent has broader, continuing authority to act for the principal.
Question 2: Implied agency is created when:
- A written agency agreement is signed by both parties
- A court appoints a broker to represent a party
- An agency relationship is established through the parties' words, conduct, or actions (Correct answer)
- A state license board assigns an agent to a client
Correct answer: An agency relationship is established through the parties' words, conduct, or actions
Implied agency arises from the behavior and actions of the parties rather than a formal written or oral agreement, and can unintentionally create fiduciary obligations.
Question 3: A listing agent discovers a serious structural defect in the property they represent. What is the agent's primary obligation?
- Keep it confidential to protect the seller's negotiating position
- Disclose it to potential buyers as a material fact (Correct answer)
- Disclose it only if a buyer's agent asks a direct question about it
- Report it solely to the state real estate commission
Correct answer: Disclose it to potential buyers as a material fact
Agents must disclose all known material facts to potential buyers; concealing a structural defect violates the duty of disclosure and can expose the agent to legal liability.
Question 4: A Transaction Broker (also called a Facilitator or Non-Agent) is a licensee who:
- Specializes in commercial transactions exceeding $1 million
- Assists both parties in a transaction without serving as a fiduciary for either (Correct answer)
- Only prepares paperwork and does not show properties
- Is a dual agent who has received written consent from both parties
Correct answer: Assists both parties in a transaction without serving as a fiduciary for either
A transaction broker provides limited assistance to both parties without owing full fiduciary duties to either the buyer or seller.
Question 5: The agent's fiduciary duty of accounting requires the agent to:
- Prepare the seller's tax returns related to the property sale
- Provide complete financial records to the state licensing board
- Properly account for all funds received or held on behalf of the client (Correct answer)
- Verify the buyer's financial qualifications before each showing
Correct answer: Properly account for all funds received or held on behalf of the client
The duty of accounting obligates the agent to accurately manage all client funds, such as earnest money deposits, preventing commingling or misappropriation.
Question 6: What is designated agency in real estate?
- A broker assigns separate agents from their office to each party in the same transaction (Correct answer)
- The state designates which brokerage must handle a particular transaction
- A buyer selects their preferred agent from an MLS-provided list
- An agent is appointed as the sole representative for all properties in a defined area
Correct answer: A broker assigns separate agents from their office to each party in the same transaction
Designated agency allows a managing broker to appoint different licensees within the same firm to represent the buyer and seller separately, reducing dual agency conflicts.
Question 7: For a dual agency arrangement to be legally valid, which of the following must occur?
- The commission must be split evenly between the buyer and seller
- Only the seller's written consent is required
- Both the buyer and seller must provide informed written consent (Correct answer)
- Each dual agency arrangement must receive prior approval from the state real estate board
Correct answer: Both the buyer and seller must provide informed written consent
Dual agency is only lawful when both the buyer and seller are fully informed of the conflict of interest and each provides written consent to the arrangement.
Real Estate License Agency Relationships 2
What is the primary distinction between a special agent and a general agent in real estate?