Arkansas Real Estate Broker Exam — All Questions

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.