Agency & Fiduciary Duties Practice Questions

Explanation: A dual agent represents both the buyer and seller in the same transaction. Dual agency requires informed written consent from both parties and limits the agent's ability to advocate fully for either side.

Explanation: Loyalty requires the agent to act in the client's best interest at all times, even if it conflicts with the agent's personal financial gain. The common fiduciary duties owed to a principal are remembered with the acronym OLDCAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care.

Explanation: A transaction broker (non-agent or facilitator) assists both parties but does not act as a fiduciary for either. The licensee owes limited duties — honesty, skill, and reasonable care — but does NOT owe undivided loyalty, full confidentiality, or the duty to promote one party's interests over the other. This relationship must be disclosed.

Explanation: The duty of disclosure requires the agent to promptly inform the client of all material facts that could affect the transaction, including information about the buyer (such as financing capability). This is distinguished from confidentiality — the agent must keep the client's confidential information private while still disclosing relevant facts to the client.

Explanation: Agents are legally and ethically required to disclose known material defects to prospective buyers, regardless of the seller's wishes. A material defect is any condition that would significantly affect the property's value or the buyer's decision to purchase. Failure to disclose can result in license suspension, lawsuits, and rescission of the contract.

Explanation: Most state laws require that agency disclosure be made at the first substantive contact with a prospective buyer or seller — meaning the first time real estate business is discussed. This ensures the consumer understands whom the licensee represents before any sensitive information is shared.

Explanation: The duty of confidentiality requires the agent to protect information gained during the agency relationship that the client would not want disclosed. Revealing a buyer's willingness to pay more than the offer price directly harms the buyer and constitutes a breach of the buyer's agent's fiduciary duty of confidentiality.

Explanation: Designated (or assigned) agency allows a broker to designate one salesperson to act as the buyer's agent and a different salesperson from the same firm to act as the seller's agent in the same transaction. This allows each party to receive full representation even though both licensees work for the same broker, who may act as a dual agent.

Explanation: The duty of accounting requires the agent to safeguard all money, documents, and property received on behalf of the client and to provide prompt accounting of all funds handled. This includes depositing earnest money into a proper escrow account and never commingling client funds with the agent's personal funds.

Explanation: Agency relationships are created by express agreement, implied agreement, estoppel (apparent agency), or ratification. Unilateral termination by an agent without cause is a way agency is TERMINATED, not created. Termination can occur by completion of the transaction, mutual agreement, expiration, death, incapacity, or abandonment.