Arkansas Real Estate Broker Exam — All Questions

EPA recommends that a home be fixed when the measured indoor radon level reaches or exceeds:

• a.0.4 picocuries per liter of air
• b.40 picocuries per liter of air
• c.4 picocuries per liter of air✓
• d.4 parts per million of air

EPA's guidance is that homes be fixed if the radon level is 4 pCi/L, equivalent to 150 becquerels per cubic meter, or more. Radon is a colorless, odorless radioactive gas from the natural decay of uranium in soil and rock; it enters through foundation cracks, sump openings, and other gaps, and EPA identifies it as a leading cause of lung cancer. Mitigation is typically a sub-slab depressurization system. There is no federal statute requiring a radon test or a radon disclosure in a resale, so the licensee's exposure runs through the general duty not to misrepresent a known material condition.

A developer wants to place fill material in a wetland on a tract being sold. Under Section 404 of the Clean Water Act, 33 U.S.C. § 1344, a permit must be obtained from:

• a.the U.S. Fish and Wildlife Service
• b.the Bureau of Land Management
• c.the Federal Emergency Management Agency
• d.the U.S. Army Corps of Engineers✓

33 U.S.C. § 1344(a) provides that "the Secretary may issue permits, after notice and opportunity for public hearings for the discharge of dredged or fill material into the navigable waters at specified disposal sites," and § 1344(d) identifies the Secretary as the Secretary of the Army, acting through the Chief of Engineers. EPA writes the § 404(b)(1) guidelines and may veto a disposal site under § 1344(c), but the permit itself comes from the Corps. The Fish and Wildlife Service administers the Endangered Species Act, FEMA administers flood insurance and flood maps, and the Bureau of Land Management has no role here.

Arkansas license law recognizes several license classes. Which class holds ultimate responsibility for a real estate firm and its trust account?

• a.Executive broker
• b.Salesperson
• c.Associate broker
• d.Principal broker✓

Regulation 10.4(a)(1) makes the principal broker "generally responsible for all business conducted by the broker's firm and for all of the real estate activities of all of those licensed under or associated with the principal broker," and Regulation 10.8(c) makes the principal broker "solely responsible and accountable for all trust funds received by the firm and all deposits to or disbursements from the trust account." An executive broker holds a broker license and may supervise, but Regulation 10.4(a)(3) says designating one "does not absolve the principal broker of general responsibility." Ark. Code Ann. § 17-42-103(1)(B) says an associate broker has no supervisory authority, and § 17-42-103(15) puts the salesperson under supervision.

Under AREC Regulation 10.4(a)(2), a principal broker designates an executive broker by:

• a.filing a designation form with the Commission signed by both brokers✓
• b.noting the designation in the firm's written policy and procedure manual
• c.recording the designation in the firm minutes and notifying the affiliates
• d.issuing the executive broker a duplicate license at the firm's main office

Regulation 10.4(a)(2) provides that "for each executive broker so designated, the principal broker must complete and file with the Commission an appropriate designation form signed by both the principal broker and the designated executive broker. The designation of an executive broker is effective when filed with the Commission." An internal manual entry, a duplicate license, or firm minutes do not create the designation. Once designated, the executive broker may sign offer and acceptance forms as supervising broker, may instruct and supervise licensees, and may be delegated administrative duties such as signing transfer applications.

AREC Regulation 10.4(e) provides that a broker who is gainfully employed or engaged in a non-real-estate field may not:

• a.accept a listing on property located outside the broker's county
• b.hold an active Arkansas real estate broker's license at all
• c.employ any licensee to work under that broker's license✓
• d.supervise more than five affiliated licensees at any one time

Regulation 10.4(e) provides that "no broker who is gainfully employed, or who is engaged in a non-real estate related field, may employ any licensee to work under the broker's license issued to such broker," and a broker employed in any other field is presumed to be so engaged. The presumption may be overcome by proof that the other work is in a real-estate-related field and is conducted in the same office as the broker's real estate business. The rule limits whom a part-time broker may supervise; it does not bar the broker from holding a license, from listing outside a county, or set any numeric supervision cap.

If a principal broker learns that an affiliated licensee has been doing real estate business independently without permission, Regulation 10.1(a) requires the principal broker to:

• a.report the matter to the local board of REALTORS for an ethics hearing
• b.immediately terminate the licensee and withhold all pending commissions
• c.immediately notify the Commission in writing and forward the license✓
• d.document the incident in the firm file and review it at annual renewal

Regulation 10.1(a) makes it "the duty of the principal broker or executive broker to immediately notify the Commission in writing and forward such licensee's license to the Commission." Regulation 10.1(b) adds that the licensee who dealt independently "shall be presumed to be in violation of A.C.A. § 17-42-311 and subject to appropriate sanctions." The same immediate-notification duty appears in Regulation 10.15(d) when a licensee prepares a broker's price opinion independently. Internal documentation, a commission holdback, or a private trade association complaint does not satisfy the rule.

Regulation 10.11 requires a licensee who buys, sells, rents, or leases property for the licensee's own account to disclose that fact:

• a.in writing, before the sale, rental, or lease contract is entered into✓
• b.in writing, at any time before the transaction actually closes
• c.orally, before the licensee makes or accepts the first written offer
• d.in writing, only when the other party is not represented by counsel

Regulation 10.11 forbids licensees to buy, sell, rent or lease property for themselves, or for an entity in which they have an interest, "without first making full disclosure to the buyer or seller, as the case may be, of the exact facts that they are licensed as a real estate broker or salesperson and are buying, renting or leasing the property for their own account or have an interest in the property." It then fixes both the form and the deadline: "All such disclosures must be made in writing before the sales, rental or lease contract is entered into." Closing is too late, an oral statement does not comply, and the duty does not turn on whether the other side has a lawyer.

Under Ark. Code Ann. § 17-42-104(a)(6), an unlicensed salaried employee working for a licensed principal broker may:

• a.negotiate the rent and lease term with a prospective tenant for the owner
• b.accept a share of the lease commission for each tenant the employee signs
• c.deliver a lease application and receive a rent payment payable to the broker✓
• d.set the security deposit amount for a unit at the employee's own discretion

Section 17-42-104(a)(6) exempts a person "employed only at a salaried or hourly rate" who performs only listed clerical functions: delivering a lease application, lease, or amendment; receiving one for delivery to the broker or owner; receiving a security deposit or rental payment "for delivery to and made payable to the principal broker, real estate firm, property management broker, or owner"; acting under direct written instructions to show a unit or assist in executing a preprinted lease on terms the broker set; and conveying information the broker prepared. Negotiating terms, being paid a commission, or exercising discretion over deposit amounts all fall outside the exemption and require a license.

Arkansas license law describes an associate broker or salesperson as a person who is employed by a principal broker or:

• a.associated with a principal broker as an independent contractor✓
• b.engaged by the firm's owner rather than by the principal broker
• c.operating under a temporary license issued for a single transaction
• d.associated with two or more principal brokers by written consent

Ark. Code Ann. § 17-42-103(1)(A) defines an associate broker, § 17-42-103(7)(A)(ii) an executive broker, and § 17-42-103(15)(B) a salesperson, each as a licensee who "is employed by a principal broker, or is associated with a principal broker as an independent contractor." The chapter is indifferent to which arrangement the firm uses; both are recognized, and the supervision duties in Regulation 10.4(b) apply either way. Section 17-42-311(9) makes it a violation to represent a broker other than the one the licensee is affiliated with, so a licensee cannot be attached to two principal brokers at once.

Regulation 10.4(b) makes Arkansas principal brokers and executive brokers responsible for:

• a.instructing their licensees in practice, ethics, and changes in the law✓
• b.certifying to the Commission each year that their licensees are competent
• c.paying for the pre-license education of anyone they sponsor for a license
• d.providing seven hours of continuing education to each affiliated licensee

Regulation 10.4(b) provides that principal brokers and executive brokers "have the duty and responsibility to instruct those brokers and salespersons licensed under them with regard to the fundamentals of real estate practice and the ethics of the profession, and to keep them informed and abreast of all changes and developments pertaining to the Arkansas Real Estate License Law and Commission Regulations. They shall also exercise strict supervision of the real estate activities of all those licensed under them." Regulation 10.4(c) then lists the factors used to judge whether that duty was discharged: frequency and manner of contact, type and frequency of educational activities, and method and frequency of monitoring. The rule does not make the broker the licensee's continuing education provider or paymaster.

Regulation 10.8(g)(1) requires trust funds delivered to the principal broker to be deposited, delivered to an escrow agent, or handled under the parties' written agreement no later than:

• a.ten days after both seller and buyer execute the contract
• b.three days after the principal broker first receives the funds
• c.three days after both seller and buyer execute the contract✓
• d.the next banking day after the offer is presented to the seller

Regulation 10.8(g)(1) sets the clock from execution, not from receipt: "no later than three (3) days following the execution of a real estate contract by both seller and buyer, all trust funds delivered to the principal broker shall be either deposited in the trust account, delivered to an escrow agent, or deposited pursuant to a written agreement by the seller and buyer." Funds delivered pending performance of some other act carry the same three-day limit. If the third day is a Saturday, Sunday, or legal holiday, it extends to the next day that is not. The broker must keep an accounting of all funds and a signed receipt for anything handed to an escrow agent.

Regulation 10.8(c) requires a principal broker's real estate trust account to be:

• a.non-interest bearing, named with "trust" or "escrow," and held out of state
• b.non-interest bearing, named with "trust" or "escrow," and federally insured✓
• c.non-interest bearing, named for the principal broker, and privately bonded
• d.interest bearing, named with "trust" or "escrow," and federally insured

Regulation 10.8(c) provides that "except as authorized by Regulations 10.8(i) and 12.2, the trust account shall be non-interest bearing. The name on the account shall include either 'trust' or 'escrow' and must be located in an institution insured by either the FDIC or some other insuring agency of the federal government." The exceptions are narrow: an interest-bearing account is allowed when required by law or valid regulation of a government agency, or while the broker participates in the voluntary Interest on Real Estate Brokers' Trust Account program under Ark. Code Ann. § 17-42-601 et seq. That program is voluntary with each broker, and § 17-42-602 requires a posted notice of at least four inches by seven inches when a broker takes part.

A principal broker may keep the broker's own clearly identified funds in the trust account to cover bank service charges in an amount not exceeding:

• a.three months of service charges
• b.one month of service charges
• c.six months of service charges✓
• d.twelve months of service charges

Regulation 10.8(b) forbids commingling as a general matter, and Regulation 10.8(d) allows only two narrow exceptions for the broker's own money, both requiring that it be clearly identified as the broker's deposit: the minimum balance the bank requires to keep the account open, and a reasonable amount to cover a required service charge "provided, however, that such amount shall not exceed the total of six (6) months service charges." Under Regulation 10.9(b), apart from those amounts the account balance must at all times equal the total of the trust funds for which the broker is accountable.

Which is NOT one of the circumstances in Regulation 10.9(c) under which an Arkansas principal broker may properly disburse trust funds?

• a.Upon the filing of an interpleader action in a court of competent jurisdiction
• b.Upon the buyer's oral instruction given to the listing agent by telephone✓
• c.Upon the rejection of an offer to buy, sell, rent, lease, or option real estate
• d.Upon a written agreement signed by all parties having an interest in the funds

Regulation 10.9(c) lists seven circumstances that discharge the broker's duty to account: rejection of an offer; withdrawal of an offer not yet accepted; the closing of the transaction; a written agreement signed by all parties having an interest in the funds and separate from the contract; the filing of an interpleader action; the order of a court of competent jurisdiction; and a reasonable interpretation of the contract that directed the deposit. An oral instruction from one side appears nowhere on that list. Regulation 10.9(d) adds that when the broker disburses without the express written agreement of all parties to the contract, the broker must immediately notify all parties in writing.

Regulation 10.8(g)(2) requires an Arkansas principal broker to reconcile trust account bank statements in writing:

• a.at least annually, keeping the reconciliations for at least three years
• b.at least quarterly, keeping the reconciliations for at least three years
• c.at least monthly, keeping the reconciliations for at least three years✓
• d.at least monthly, keeping the reconciliations for at least ninety days

Regulation 10.8(g)(2) provides that "all trust account bank statements shall be reconciled in writing at least monthly and balanced to the total amount of trust funds deposited in the account which have not been disbursed. Copies of such reconciliations shall be kept by the broker for at least three (3) years or for such time as may be required by law, whichever is greater." Regulation 10.8(g)(3) makes all trust fund records, including the reconciliations, open to inspection by the Commission's investigative staff at the firm's office or another location the Commission designates.

An Arkansas principal broker must maintain the firm's transaction records and trust-account records:

• a.only until the transaction closes, then discard
• b.for three years, and open to Commission inspection✓
• c.for ninety days after the transaction closes
• d.indefinitely, at the salesperson's home office

Regulation 10.7(b)(3) is specific: all records required by Regulation 10.7 "shall be maintained by the principal broker for three (3) years or such time as may be required by law, whichever is greater, and shall be open to inspection by and made available to the investigative staff of the Commission." Trust-account reconciliations carry the same three-year floor under Regulation 10.8(g)(2). Discarding files at closing would gut the requirement, since complaints and audits arrive after closing; ninety days falls far short. And the records are the firm's, not a salesperson's: Regulation 10.7(c) makes the last principal broker remaining with a firm responsible for them even after the firm ceases business.

Regulation 10.7(b)(1) requires a separate file for each transaction containing signed copies of the documents prepared for it. Those documents include:

• a.the listing contract, agency contract, offers, contracts, and closing statements✓
• b.the licensee's showing notes, marketing plan, and comparable-sales worksheets
• c.the listing contract and closing statement only, because offers are working papers
• d.the buyer's loan application, credit report, and the lender's underwriting approval

Regulation 10.7(b)(1) requires each principal broker to maintain complete records of all real estate business the firm handles, in separate files for each transaction containing signed copies of "(i) listing contract, (ii) agency contract, (iii) offers, (iv) offer and acceptance contracts and (v) closing statements, along with any additional documents as may be necessary to make a complete record of each transaction." Offers are named in the list, so they are not optional working papers. Regulation 10.7(b)(2) adds a parallel duty for property managed for others, and the records may be kept electronically if copies can be produced.

Regulation 7.1 provides that AREC will issue no principal broker's license where the proposed firm name is confusingly similar to another firm's, is misleading, or would confuse the public. Inquiring about a proposed name's acceptability is the duty of:

• a.the firm's attorney
• b.the Secretary of State
• c.the listing licensee
• d.the principal broker✓

Regulation 7.1 ends with the assignment of responsibility: "It shall be the duty of the principal broker to inquire of the Commission concerning the acceptability of the proposed firm name." Registering a name with the Secretary of State does not clear it with AREC; the two reviews are separate. Once a firm name is approved, Regulation 10.5(b) requires the principal broker and every licensee with the firm to advertise and conduct brokerage business only under the name in which the principal broker's license was issued, and Regulation 10.8(f)(1) and (2) require written notice to the Commission of the trust account details on firm name approval and on any change of firm name.

AREC Regulation 7.3(a) requires a principal broker's place of business to display:

• a.a building directory listing the firm name and each affiliated licensee's name
• b.a permanently attached sign with the firm name and words such as "real estate"✓
• c.a window decal with the firm name and the principal broker's license number
• d.a permanently attached sign with the principal broker's own name and address

Regulation 7.3(a) requires the principal broker to maintain a place of business displaying "a permanently attached sign bearing the name under which the principal broker conducts his/her business, and the words 'real estate,' 'realty,' 'REALTOR,' 'REALTIST' or other words approved by the Commission which clearly indicate to the public the principal broker is engaged in the real estate business." Ark. Code Ann. § 17-42-309(a) states the same requirement. Photographs of the sign must be furnished to the Commission, and the principal broker must also display his or her own license and the licenses of every executive broker, associate broker and salesperson at the place of business.

A duplicate license will not be issued for an Arkansas branch office at which licensees are assigned unless the principal broker has:

• a.opened a separate trust account for the branch office's earnest money
• b.filed a lease showing the branch is a permanent place of business
• c.designated an executive broker to supervise the licensees there✓
• d.obtained written approval of the branch location from the Commission

Ark. Code Ann. § 17-42-309(b)(2) provides that "a duplicate license shall not be issued for a branch office at which licensees are assigned unless the principal broker establishing the branch office has designated an executive broker to supervise the licensees." Regulation 7.4(a) adds that the designated executive broker is responsible for the licensees there under a written designation filed with the Commission and may not be gainfully employed in a non-real-estate field. A branch may but need not have its own trust account; Regulation 7.4(b) makes the principal broker responsible for any trust funds the branch receives either way.

Regulation 8.5(a) states that a licensee's obligation of absolute fidelity to the client's interest is primary, but does not relieve the licensee of:

• a.the duty to disclose the client's confidential information upon request
• b.the obligation to represent both sides of a transaction when asked to
• c.the duty to obtain the highest possible price for every listed property
• d.the equally binding obligation of dealing honestly with all parties✓

Regulation 8.5(a) provides that "in accepting employment as an agent, a licensee pledges to protect and promote the interests of the client or clients. This obligation of absolute fidelity to the interest of the client or clients is primary, but does not relieve a licensee from the equally binding obligation of dealing honestly with all parties to the transaction." Ark. Code Ann. § 17-42-316(b)(2)(J) runs the other way on confidences, requiring the licensee to refrain from disclosing confidential information. Nothing obliges a licensee to guarantee a price or to take on dual representation, which under Regulation 8.3(a) requires the written consent of every party.

When the buyer and seller select a third party to close the transaction, Regulation 10.4(d)(2) requires the principal broker or designated executive broker to:

• a.hold the earnest money until the closer returns a signed disbursement receipt
• b.attend the closing in person and sign the settlement statement as a witness
• c.select a replacement closer from the Commission's list of approved agents
• d.give the closer written closing instructions and review the client's statement✓

Regulation 10.4(d)(2) provides that if the buyer or seller selects a third party to close, the principal broker or designated executive broker, or their assigned licensee, "must provide written closing instructions, on behalf of their client(s), to the third party closing the transaction, and review the client's closing statement, if reasonably available, to insure that the closing is conducted in accordance with the agreement of their client." The rule also strongly recommends advising the client to ask the closing agent or title insurer about closing protection. Regulation 10.4(d)(1) separately requires that instruments prepared in connection with a rental or sale, and the closing of a sale by a licensee, be performed by or under the specific supervision of the principal broker.

Regulation 10.5(a) provides that a licensee may not advertise any property for sale or rent, or display a real estate sign, without including:

• a.the licensee's own name and Arkansas real estate license number
• b.the name of the firm with which that licensee is licensed✓
• c.the name and telephone number of the property's record owner
• d.the equal housing opportunity logo and fair housing statement

Regulation 10.5(a) provides that "a licensee may not advertise any property, including the licensee's own property, for sale or rent, or display a real estate sign without including in that advertisement or sign the name of the firm with whom that licensee is licensed." The phrase "including the licensee's own property" is the part most often missed. Regulation 10.5(b) bars conducting brokerage business under any name other than the one on the principal broker's license, and Regulation 10.5(c) warns against letting licensees use individual names or telephone numbers unless the connection with the broker is obvious. Ark. Code Ann. § 17-42-312(d)(1)(B)(ii) allows a citation of up to $250 for advertising in violation of the chapter or rules.

Under Arkansas license law, a salesperson or executive broker may lawfully accept compensation for a real estate transaction:

• a.directly from the seller's attorney
• b.from any party who offers it
• c.directly from the buyer in cash
• d.only from their principal broker✓

Regulation 8.3(b) is categorical: "a licensee shall not accept a commission, rebate, profit, payment, compensation or other valuable consideration in connection with a real estate transaction or real estate activity from any person or entity except the licensed principal broker under whom the licensee is licensed." Ark. Code Ann. § 17-42-311(8) makes accepting compensation from anyone other than that principal broker a ground for discipline. Ark. Code Ann. § 17-42-107(b) closes the loop in court: a salesperson, executive broker or associate broker may not sue in his or her own capacity for a commission except against the principal broker with whom he or she is licensed.

Arkansas requires an agent to disclose the agency relationship to the party the agent does NOT represent. Under AREC's rules, that disclosure must be made:

• a.only if that party asks the licensee who he or she represents
• b.within sixty days after the purchase agreement has been signed
• c.only once that party has signed the offer and acceptance contract
• d.in a timely manner, and before that party signs any document✓

Regulation 8.1(a)(1) requires a seller's agent to disclose "in a timely manner under the particular circumstances so as to avoid to the extent possible eliciting or receiving from the prospective buyer or lessee information which would reasonably be expected to remain confidential." Regulation 8.2(a)(1) puts the buyer's agent's disclosure at the first contact with the seller, lessor, or their agent. Both then set the same outer limit in subsection (c): the disclosure "must be made before the buyer or lessee signs any document related to the transaction." Making the duty depend on being asked puts the burden on the person least likely to know the question exists, and waiting until the contract is signed is past the rule's own deadline.

An Arkansas licensee representing the seller who also wants to represent the buyer in the same transaction may do so only if:

• a.the transaction price is below a dollar amount the rules set
• b.the buyer waives all rights to inspect the property before closing
• c.both parties give written consent before the contract is executed✓
• d.the principal broker files a new license application with AREC

Regulation 8.3(a) provides that a licensee representing both sides "shall make disclosure in the time and manner required by Regulations 8.1 and 8.2 and all parties to the transaction must have given their written consent to such dual representation prior to or at the time of execution of the agency contract, listing contract, property management contract, lease, rental agreement, offer and acceptance contract or other real estate contract." Ark. Code Ann. § 17-42-108(a)(2) permits representing more than one party subject to the Commission's rules. Nothing about dual agency calls for a new license application, an inspection waiver, or a dollar threshold.

Regulation 8.2(a)(1) requires a licensee acting solely as the buyer's agent to disclose that relationship to the seller or the seller's agent:

• a.at the first contact with the seller, lessor, or that party's agent✓
• b.at the time the buyer's written offer is delivered to the listing firm
• c.within three days after the buyer signs the representation agreement
• d.when the seller or the seller's agent asks whom the licensee represents

Regulation 8.2(a)(1) sets the buyer agent's trigger at "the first contact with the seller, lessor, or the agent of the seller or lessor." That is earlier and more definite than the seller agent's standard in Regulation 8.1(a)(1), which is "a timely manner under the particular circumstances." Under Regulation 8.2(b) the disclosure must be in writing, though it may be made orally first and reduced to writing at a convenient time, and evidence of it must be kept; Regulation 8.2(c) fixes the outer limit at before the seller or lessor signs any document related to the transaction.

Under Ark. Code Ann. § 17-42-317, a licensee representing a seller must accept delivery of and present an offer in a timely manner:

• a.only if the offer is at or above the listing price the seller established
• b.unless the seller has instructed the licensee in writing to stop showing
• c.whether or not the property is already subject to a contract of sale✓
• d.unless the property is already subject to a contract of sale or lease

Section 17-42-317(a)(2) requires the licensee to "accept delivery of and present an offer to the seller or lessor in a timely manner, regardless of whether or not the property is subject to a contract of sale, lease, or letter of intent to lease." Section 17-42-318(a)(4)(A) puts the same duty on the buyer's agent presenting to the seller's side. The related duty in § 17-42-317(a)(1)(B) is narrower and is about searching, not presenting: unless the seller requests it, the licensee need not seek additional offers once the property is under contract. Regulation 10.12(a) adds that all offers received must be promptly presented to the seller.

Ark. Code Ann. § 17-42-318(b) provides that after a dual or multiple agency is disclosed, a buyer's agent does not breach a duty to that buyer by:

• a.declining to present a counteroffer the seller made on the property
• b.showing property to other buyers or acting as an agent for sellers✓
• c.disclosing to the seller the highest price the buyer said he would pay
• d.refusing to write an offer at a price the agent thinks is far too low

Section 17-42-318(b) provides that if a dual or multiple agency relationship is disclosed under § 17-42-108, a licensee does not breach a duty to the buyer or lessee by "(1) showing property to other buyers or lessees; or (2) acting as an agent or subagent for other buyers or lessees or as an agent or subagent for sellers or lessors." The other three are breaches: § 17-42-318(a)(4)(B) requires the agent to accept delivery of and present counteroffers in a timely manner, § 17-42-316(b)(2)(J) forbids disclosing confidential information, and § 17-42-316(b)(2)(D) requires following the client's lawful instructions.

Ark. Code Ann. § 17-42-317(b) states that a licensee does NOT breach a duty owed to a seller by:

• a.accepting a bonus from the buyer without telling the seller
• b.advertising the property at a price the seller never approved
• c.showing alternative properties to a prospective buyer✓
• d.telling a buyer the least the seller would take for the house

Section 17-42-317(b) provides that "a licensee does not breach a duty or an obligation to a seller or lessor with whom the licensee has an agency relationship by showing alternative properties to a prospective buyer or by acting as an agent or subagent for other sellers or lessors." The three wrong answers are all violations: Regulation 8.5(c) and (d) require full written disclosure before accepting compensation from any source, § 17-42-316(b)(2)(J) forbids disclosing confidential information such as the seller's bottom line, and Regulation 8.5(b) provides that a licensee "shall not offer or advertise property without authority and in any offering or advertisement the price quoted must not be other than that agreed upon with the owners."

Among the duties Ark. Code Ann. § 17-42-316 places on a licensee toward a client is the obligation to disclose material facts of the transaction that:

• a.the licensee learned from a prior client under a closed agency
• b.the licensee believes might affect the property's assessed tax value
• c.the licensee knows or should know and that are not confidential✓
• d.any party to the transaction asks the licensee to put into writing

Section 17-42-316(b)(2)(G) requires the licensee to "disclose to the client material facts of the transaction that the licensee is aware of or should be aware of in the exercise of reasonable skill and care and that are not confidential information under a current or prior agency or dual agency relationship." The final clause is the point: information protected by a prior client's confidence is carved out, so it is not disclosed even to the current client. Section 17-42-316(a) makes the common law of agency in Arkansas apply as supplemented by the section, and § 17-42-316(b)(2)(H) adds a duty to advise the client to get expert advice on material matters when appropriate.

A client may waive the duties in Ark. Code Ann. §§ 17-42-317 and 17-42-318 only by signing a waiver of duties statement that includes:

• a.the principal broker's countersignature and the Commission's file number
• b.the fiduciary duties list and the client's initials beside the listing price
• c.a recitation that the client has consulted an attorney about the waiver
• d.the fiduciary duties list, each waivable duty marked, and set boldface text✓

Section 17-42-319(a) requires the waiver of duties statement to contain three things: a list of the fiduciary duties required of all licensees under § 17-42-316; a list of the duties in § 17-42-317 or § 17-42-318 "set forth in a manner that allows for the parties to indicate each duty that is being waived"; and prescribed "Agreement to Waive" language in at least 10-point boldface type, signed and dated by both client and licensee. That language itself tells the client that no other licensee will perform the waived duties and that the client may need to hire an attorney. Section 17-42-319(b) then requires reasonable efforts to inform other licensees that the waiving licensee will not transmit or keep earnest money, advance fees, or security deposits.

Under Ark. Code Ann. § 17-42-316(c), the duties that section imposes on a licensee:

• a.may not be waived at all, and no exception of any kind is provided
• b.may not be waived by a client, apart from two dual agency exceptions✓
• c.may be waived by a client at any time by an oral instruction given
• d.may be waived by the principal broker on the client's behalf in writing

Section 17-42-316(c) provides that "except as provided in subdivisions (b)(1)(B) and (b)(2)(J)(ii) of this section, the duties required of a licensee under this section may not be waived by a client." Those two exceptions are narrow and both concern dual agency: § 17-42-316(b)(1)(B) lets multiple clients who have consented to dual agency contractually waive the primary duty of absolute fidelity, and § 17-42-316(b)(2)(J)(ii) lets the disclosure of confidential information be limited by contract when the licensee is an authorized dual agent. The separate waiver mechanism in § 17-42-319 reaches only the §§ 17-42-317 and 17-42-318 duties, and it requires a signed written statement, never an oral instruction.

Regulation 10.13(b) says a licensee who has reason to believe an exclusive agency agreement is already in force must first:

• a.communicate with the other principal broker to confirm it exists✓
• b.wait until the earlier agreement expires under its own stated end date
• c.obtain the client's written release from the earlier agency agreement
• d.report the situation to the Commission as a possible license violation

Regulation 10.13(b) provides that "a licensee shall not knowingly enter into an agency agreement or contract when there is reason to believe that there is an existing exclusive agency agreement or contract in force without first communicating with the other principal broker who holds such agreement or contract to confirm its existence." If one is in force, the licensee still may not sign a new one "without first notifying the client in writing to consult with an attorney regarding the risk of being liable for two (2) separate commissions." The rule names exclusive listing agreements, exclusive buyer representation agreements and property management agreements as examples.

AREC Regulation 10.2 requires every written agency agreement or contract, and any extension of one, to carry:

• a.an acknowledgment that the client received a signed copy of it
• b.a statement of the commission rate expressed as a percentage
• c.a specific determinable duration or a specific expiration date✓
• d.the principal broker's signature in addition to the licensee's

Regulation 10.2 provides that "a licensee shall put a specific determinable duration or a specific expiration date on all written agency agreements or contracts or any extensions thereof," and it names listing and buyer representation agreements as examples. An agreement that runs indefinitely, or that renews automatically without a stated end, does not comply. Regulation 10.10(a) separately requires that clients and other parties receive copies signed by all parties, and Regulation 10.19(a)(7) imposes a parallel duration requirement on property management agreements, including rollover and renewal provisions.

A licensee who fails to disclose an agency relationship in the time and manner the AREC rules require is, under Regulation 8.4:

• a.subject to sanctions under Ark. Code Ann. § 17-42-312✓
• b.subject to automatic revocation of the license held
• c.subject to a civil penalty of no more than five thousand dollars
• d.subject to a criminal referral to the prosecuting attorney

Regulation 8.4 provides that "a licensee who fails to disclose the licensee's agency relationship in the time and manner required by these Regulations shall be subject to sanctions under Section 17 of Act 690 of 1993 [A.C.A. § 17-42-312]." Section 17-42-312(a)(4) then gives the Commission a menu rather than a single outcome: suspension, revocation or denial; a penalty of not more than $1,000 per violation; required education; required reexamination; conditions on the license; or restitution. Nothing is automatic. The $5,000 civil penalty in § 17-42-109 applies to unlicensed real estate activity, not to a licensee's disclosure failure.

Regulation 10.12 requires that every offer received be signed by the licensee who receives it and by:

• a.the buyer's lender or loan officer
• b.the seller's closing attorney
• c.that licensee's supervising broker✓
• d.an officer of the listing firm's owner

Regulation 10.12(b) provides that "every offer received must be signed by the licensee who receives it and by that licensee's supervising broker. Every acceptance must be signed by the listing licensee and that licensee's supervising broker." The rule acknowledges that both supervising brokers cannot always review a contract before it goes to the seller, but requires them to review and sign it as soon as possible after receipt and in all cases prior to closing. Under Regulation 10.4(a)(2), a designated executive broker may sign offer and acceptance forms as supervising broker.

Regulation 8.5 prohibits a licensee acting as agent in a sale or in management from accepting compensation from any source connected with the property unless there is:

• a.written approval from the Commission's executive director
• b.an oral disclosure made before the sale contract is signed
• c.full written disclosure to the party the licensee represents✓
• d.a provision permitting it in the firm's own policy manual

Regulation 8.5(c) provides that "when acting as agent in the sale or management of property, a licensee shall not accept any commission, rebate, profit, payment, compensation or other valuable consideration from any source in connection with the property without full written disclosure to the party represented by the licensee," and Regulation 8.5(d) adds that a licensee "shall not accept compensation from more than one party without full written disclosure to all parties to the transaction." Written disclosure is the condition; an oral statement, an internal policy, and Commission approval are not substitutes. Regulation 8.3(b) still limits where the compensation may actually come from, which is the licensee's own principal broker.

A built-in dishwasher a homeowner installed becomes part of the real property because it is:

• a.an emblement, a crop the owner may remove before closing
• b.a chattel, which passes only if a bill of sale lists it expressly
• c.a fixture, personal property permanently annexed to the realty✓
• d.a trade fixture, which the seller may always remove at closing

A fixture is an article of personal property that has been so attached to land or a building that it is treated as part of the real estate and passes with a deed unless the contract excludes it. Courts weigh the method of annexation, the adaptation of the item to the property, and the intent of the party who attached it. An emblement is an annual cultivated crop; a trade fixture is an article a commercial tenant attaches for use in a trade or business and may remove before the lease ends; and a chattel is personal property that does not pass with a deed at all.

Two unmarried co-owners hold title as joint tenants with right of survivorship. When one dies, that owner's interest:

• a.passes to the surviving joint tenant outside of probate✓
• b.passes to the deceased owner's heirs under the will
• c.converts to a tenancy in common held by the estate
• d.is sold by the probate court and the proceeds divided

The defining feature of a joint tenancy with right of survivorship is that on the death of one joint tenant the entire interest passes by operation of law to the survivors, so the interest never enters the deceased owner's probate estate and a will cannot redirect it. A tenancy in common has no survivorship: each owner's undivided share passes by will or by intestacy. A joint tenancy can be severed during life, for example by one joint tenant conveying his interest, which converts that share to a tenancy in common.

In the rectangular survey system a section contains 640 acres. A tract described as the NW 1/4 of the SE 1/4 of a section contains:

• a.80 acres
• b.20 acres
• c.160 acres
• d.40 acres✓

Work the description from right to left, dividing at each step. The SE 1/4 of a 640-acre section is 160 acres; the NW 1/4 of that quarter is 160 divided by 4, or 40 acres. A shortcut is to multiply the denominators and divide 640 by the product: 4 times 4 is 16, and 640 divided by 16 is 40. The same tract read the other way would give the wrong answer, which is why the order matters. A section is one mile square, and thirty-six sections make up a township.

An easement appurtenant differs from an easement in gross in that an easement appurtenant:

• a.gives its holder the right to possess the servient parcel outright
• b.benefits a named person only and ends when that person moves
• c.may be created only by a written grant recorded before any sale
• d.benefits a particular parcel and passes when that parcel is sold✓

An easement appurtenant attaches to and benefits a dominant parcel and burdens a servient parcel, and because it runs with the land it passes automatically to the next owner of the dominant parcel whether or not the deed mentions it. An easement in gross benefits a person or entity rather than a parcel, which is how utility easements are usually held. Easements can arise by grant, by reservation, by necessity, by prescription, or by implication, so a recorded written grant is not the only route. And an easement is a right of use, not a right of possession.

A neighbor's new garage extends two feet across the boundary onto the seller's lot. This condition is:

• a.an easement by necessity, which arises by operation of law alone
• b.a deed restriction, enforceable by any other owner in the subdivision
• c.a license, which the seller may revoke at will and without notice
• d.an encroachment, which a current survey would ordinarily reveal✓

An encroachment is an unauthorized physical intrusion of a building, fence, driveway or other improvement onto adjoining land. It is a title and marketability problem rather than a use right, and a current survey is the standard way to find one, which is why lenders and title insurers ask for a survey and why an owner's policy generally excepts matters a survey would disclose. An easement by necessity arises when a parcel is landlocked by a division of commonly owned land; a license is revocable permission to use land; and a deed restriction is a recorded private covenant limiting use.

A lawful use that predates a new zoning ordinance and does not conform to it may usually continue as:

• a.a nonconforming use✓
• b.a conditional use permit
• c.a use variance
• d.a spot zoning grant

When a zoning ordinance is adopted or amended, an existing lawful use that the new rules would not allow is generally permitted to continue as a legal nonconforming use, often called grandfathering. Ordinances typically limit it: the use may not be expanded, and it is usually lost if it is abandoned for a stated period or if the structure is destroyed. A variance is relief granted on a showing of hardship, a conditional or special use permit authorizes a use the ordinance allows subject to conditions, and spot zoning describes rezoning a single parcel inconsistently with the surrounding plan, which courts often strike down.

When a government body takes private property for a public use through eminent domain, the owner is constitutionally entitled to:

• a.the right to repurchase the parcel later
• b.a hearing before the zoning board of appeals
• c.just compensation for the property taken✓
• d.a replacement parcel of equal acreage

The Fifth Amendment's takings clause, applied to the states through the Fourteenth, provides that private property shall not be taken for public use without just compensation, which is measured by the fair market value of what was taken. Eminent domain is the government's power to take; condemnation is the proceeding through which the power is exercised; and inverse condemnation is an owner's suit alleging a taking has occurred without a proceeding. The Constitution requires payment, not a substitute parcel, a zoning appeal, or a right of repurchase.

AREC Regulation 10.6 requires a licensee to exert reasonable efforts to ascertain facts material to the value or desirability of every property for which the licensee accepts the agency, so that the licensee:

• a.may waive the buyer's right to inspect the property before closing
• b.is informed about its condition and avoids misrepresenting it✓
• c.can guarantee the property's condition to the buyer for a year
• d.can prepare a written appraisal of the property for the seller

Regulation 10.6 states the purpose in its own words: so that "in offering the property the licensee will be informed about its condition and thus able to avoid intentional or negligent misrepresentation to the public concerning such property." This is a duty of inquiry, not a warranty, and it is separate from the licensee's duty to the client under Ark. Code Ann. § 17-42-316(b)(2)(G) to disclose material facts. Preparing an appraisal is outside a licensee's authority under Ark. Code Ann. § 17-42-110(d), which bars the words market value, appraised value and appraisal from a licensee's price opinion.

A licensee tells a buyer the roof is new when the licensee has no basis for saying so. Under Ark. Code Ann. § 17-42-311, that is:

• a.a failure to supervise, a ground for disciplinary action
• b.a substantial misrepresentation, a ground for disciplinary action✓
• c.an act of self dealing, a ground for disciplinary action
• d.an act of independent dealing, a ground for disciplinary action

Section 17-42-311(a)(4) lists "making any substantial misrepresentation" among the prohibited acts, and § 17-42-311(a)(5) separately reaches false statements or promises of a character likely to induce a person to act on them. Section 17-42-311(a)(14) is a catch-all for improper, fraudulent, or dishonest dealing. Self dealing under Regulation 10.11 concerns a licensee transacting for the licensee's own account; independent dealing under Regulation 10.1 concerns working outside the principal broker; and failure to supervise concerns a broker's duty under Regulation 10.4. Regulation 10.6 is the companion duty to find out the facts before speaking about them.

Under AREC Regulation 10.10(c), real estate forms a licensee uses in the regular course of business must, before use, be approved by:

• a.a licensed Arkansas attorney✓
• b.the Arkansas Realtors Association
• c.the Commission's staff counsel
• d.the licensee's principal broker

Regulation 10.10(c) provides that "in compliance with the Arkansas Supreme Court decision in the case of Pope County Bar Association, Inc. vs. Suggs, 624 S.W. 2d 828 (1981), real estate forms used by licensees in the regular course of business shall be approved by a licensed Arkansas attorney prior to use. The licensee shall be responsible for providing evidence of such approval by a licensed Arkansas attorney upon request of the Commission." The rule exists to keep form preparation from becoming the unauthorized practice of law, and Ark. Code Ann. §§ 17-42-317(c) and 17-42-318(c) both add that nothing in the agency sections permits a licensee to perform any act that constitutes the practice of law.

Which deed gives the grantee the broadest protection, because the grantor covenants against defects arising at any time in the property's history?

• a.A general warranty deed✓
• b.A bargain and sale deed
• c.A quitclaim deed
• d.A special warranty deed

A general warranty deed carries the full set of covenants, including seisin, right to convey, against encumbrances, quiet enjoyment and warranty forever, and the grantor stands behind title defects arising at any point in the chain, not only during the grantor's own ownership. A special warranty deed warrants only against defects arising during the grantor's ownership, which is why fiduciaries and lenders commonly use it. A bargain and sale deed implies that the grantor holds title but adds no warranty, and a quitclaim deed conveys only whatever interest the grantor may have, with no warranty at all.

An owner's title insurance policy issued at closing protects the owner against:

• a.a decline in the property's market value after the purchase
• b.title defects that already existed when the policy was issued✓
• c.damage from a fire or storm occurring after the purchase
• d.liens the owner voluntarily grants after the policy is issued

Title insurance is retrospective rather than prospective: it indemnifies against defects, liens, encumbrances and adverse claims that existed as of the policy date but were not excepted, and it also pays the cost of defending the insured title. Matters the owner creates after closing, market movements, and physical casualty losses fall outside it; casualty is what a hazard policy covers. A lender's policy protects the lender's interest and declines with the loan balance, so a buyer who wants protection for the equity buys a separate owner's policy.