Real Estate Law Of Agency Chapter 3

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Questions: 9 | Attempts: 1,695 | Updated: Mar 22, 2023

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Real Estate Law Of Agency Chapter 3 - Quiz

The law of agency is an area of commercial law that deals with a set of contractual, quasi-contractual and non-contractual fiduciary relationships involving an agent. What role does it play in real estate? Let’s find out!

Questions and Answers

1.

In the real estate profession when a broker is authorized to purchase a particular house for this principal the broker is designated as:
- A.
  
  General agent of the principal
- B.
  
  Special agent of the principal
- C.
  
  Ostensible agent of the principal
- D.
  
  Realtor
Correct Answer
B. Special agent of the principal

Explanation
A special agent is a broker who is authorized to perform a specific task or transaction on behalf of the principal. In this case, the broker is authorized to purchase a particular house for the principal. Unlike a general agent who has broader authority to act on behalf of the principal, a special agent's authority is limited to the specific task or transaction they have been authorized for. Therefore, the correct answer is "Special agent of the principal."

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2.

The position of trust assumed by the broker as an agent for a principal is described most accurately as:
- A.
  
  A trustee
- B.
  
  A trustor relationship
- C.
  
  A fiduciary relationship
- D.
  
  An employment reationship
Correct Answer
C. A fiduciary relationship

Explanation
A fiduciary relationship is the most accurate description for the position of trust assumed by the broker as an agent for a principal. In this relationship, the broker is legally obligated to act in the best interests of the principal, putting their needs and interests above their own. This requires the broker to exercise loyalty, honesty, and utmost good faith in their dealings with the principal. The fiduciary relationship establishes a high standard of trust and confidence between the broker and the principal, ensuring that the broker acts in a responsible and ethical manner.

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3.

Anthony gives Benson, a broker, an exclusive contract to sell his property at $4,000. Benson procures Clark as a purchaser upon Anthony's terms. Clark signs an agreement but Anthony, the owner, refuses to sign:
- A.
  
  The buyer can force the sales
- B.
  
  Buyer can sue seller for specific performance
- C.
  
  Seller must pay broker's commission
- D.
  
  Anthony is liable to clark
Correct Answer
C. Seller must pay broker's commission

Explanation
In this scenario, Anthony, the owner of the property, gave Benson, a broker, an exclusive contract to sell the property. Benson successfully procured Clark as a purchaser on the terms set by Anthony. Although Clark signed the agreement, Anthony, the owner, refused to sign. Despite Anthony's refusal, the broker, Benson, fulfilled his duty by finding a buyer who agreed to the terms. Therefore, according to the terms of the exclusive contract, Anthony is still obligated to pay the broker's commission for successfully finding a buyer.

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4.

The law of agency:
- A.
  
  Establishers the broker-principal relationship
- B.
  
  Licenses real estate brojkers
- C.
  
  Requires all real estate contracts to be in writing
- D.
  
  Requires all listings to have an expiration date
Correct Answer
A. Establishers the broker-principal relationship

Explanation
The law of agency establishes the broker-principal relationship. This means that it defines the legal relationship between a real estate broker (the agent) and the person or entity they represent (the principal). The law of agency outlines the duties and responsibilities of both parties and governs their interactions in real estate transactions. It is important for both brokers and principals to understand and abide by the law of agency to ensure a smooth and legally compliant working relationship.

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5.

real estate broker is:
- A.
  
  A fiduciary to the owner of property which he lists
- B.
  
  Appointed by the owner to negotiate for him
- C.
  
  Both "A" and "B"
- D.
  
  Neither "A" nor "B"
Correct Answer
C. Both "A" and "B"

Explanation
A real estate broker is both a fiduciary to the owner of the property which he lists and is appointed by the owner to negotiate on their behalf. As a fiduciary, the broker is legally obligated to act in the best interests of the property owner and must prioritize their needs and goals. Additionally, the owner appoints the broker to handle negotiations, meaning the broker has the authority to represent the owner and make decisions on their behalf during the negotiation process. Therefore, both statements "A" and "B" are correct.

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6.

Green lists his house for sale with Brown, a real estate salesperson employed by the PDQ Realty CO:
- A.
  
  The agency exists between Brown and Green
- B.
  
  The agency exists between Green and PDQ CO.
- C.
  
  Both "A" and "B"
- D.
  
  Neither "A" nor "B"
Correct Answer
B. The agency exists between Green and PDQ CO.

Explanation
The correct answer is "The agency exists between Green and PDQ CO." This is because Green lists his house for sale with Brown, who is employed by PDQ Realty CO. The agency relationship exists between the property owner (Green) and the real estate company (PDQ CO), as Brown is acting as the representative of the company in facilitating the sale of Green's house.

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7.

A real estate roker could be held liable to a buyer if the broker:
- A.
  
  Unkowingly makes a misrepresentation to the buyer on false information given to him by the seller
- B.
  
  Executes an agreement with the buyer on behalf of the seller under a Power-of-attorney
- C.
  
  Acts in excess of the authority given to him by the seller under a listing agreement
- D.
  
  Retains the buyer's check at the seller's request after an offer has been accepted by the seller and acceptance has been communicated to the buyer
Correct Answer
C. Acts in excess of the authority given to him by the seller under a listing agreement

Explanation
If a real estate broker acts in excess of the authority given to him by the seller under a listing agreement, he could be held liable to the buyer. This means that the broker has gone beyond the scope of his authority and has acted in a way that is not authorized by the seller. This could include making decisions or taking actions that the seller did not approve or agree to. As a result, if the buyer suffers any harm or loss due to the broker's actions, the broker may be held responsible for it.

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8.

Under certain circumstances, a real estate broker acts for more than on party in a transaction. A broker would most likely act as an agent for borth parties when:
- A.
  
  Negotiating the sale of investment property
- B.
  
  Holding an option to purchase, together with a listing on the same property
- C.
  
  Negotiating an exchange of real property
- D.
  
  Selling real property securities to the public
Correct Answer
C. Negotiating an exchange of real property

Explanation
A real estate broker would most likely act as an agent for both parties when negotiating an exchange of real property. In this scenario, the broker would be representing both the buyer and the seller in the transaction, ensuring that the interests of both parties are protected and facilitating a fair and smooth exchange of the property. This situation may arise when both parties have engaged the same broker to handle the transaction and have agreed to dual agency representation.

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9.

A broker finds a purchaser acceptable to the seller. After the agreements are signed, the buyer and seller agree not to consummmate the transaction. The broker:
- A.
  
  Loses his commission
- B.
  
  Is only entitled to the earnest money
- C.
  
  Can collect full commission from the seller
- D.
  
  May collect from the buyer
Correct Answer
C. Can collect full commission from the seller

Explanation
In this scenario, the broker can collect the full commission from the seller because they successfully found a purchaser acceptable to the seller. Even though the transaction did not ultimately take place, the broker's role in bringing the buyer and seller together and securing their agreement warrants the collection of the full commission from the seller.

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Current Version
Mar 22, 2023

Quiz Edited by
ProProfs Editorial Team
Mar 31, 2009

Quiz Created by
Loeding

Real Estate Law Of Agency Chapter 3

In the real estate profession when a broker is authorized to purchase a particular house for this principal the broker is designated as:

The position of trust assumed by the broker as an agent for a principal is described most accurately as:

Anthony gives Benson, a broker, an exclusive contract to sell his property at $4,000. Benson procures Clark as a purchaser upon Anthony's terms. Clark signs an agreement but Anthony, the owner, refuses to sign:

The law of agency:

real estate broker is:

Green lists his house for sale with Brown, a real estate salesperson employed by the PDQ Realty CO:

A real estate roker could be held liable to a buyer if the broker:

Under certain circumstances, a real estate broker acts for more than on party in a transaction. A broker would most likely act as an agent for borth parties when:

A broker finds a purchaser acceptable to the seller. After the agreements are signed, the buyer and seller agree not to consummmate the transaction. The broker: