Idaho Real Estate Broker Exam — All Questions

A buyer asks a broker to write a custom clause creating a seller-financed note with special default provisions. What is the broker's correct course of action?

• a.Draft the clause, since brokers prepare contracts
• b.Refuse and cancel the transaction entirely
• c.Fill in approved forms and refer the buyer to a lawyer✓
• d.Have the buyer write the clause and sign it

Drafting provisions that create new legal rights, such as a seller-financing note with special default terms, is the practice of law. A licensee may fill in the blanks on approved or commonly used preprinted forms but should send the client to an attorney for anything beyond that. Drafting it anyway risks an unauthorized practice claim plus liability if the clause fails. Refusing and canceling abandons the client when a lawyer could solve the problem. And telling the buyer to write the clause is the same legal problem in disguise, with the broker still recommending an untested provision.

A buyer and seller sign the same purchase agreement electronically, in separate counterparts, from different states. Under the federal E-SIGN Act and state UETA, the contract is:

• a.Invalid unless both signatures appear on one page
• b.Valid only for commercial, not residential, deals
• c.Valid only if a notary witnesses signing
• d.Enforceable despite the electronic signatures✓

The federal E-SIGN Act and state adoptions of UETA give electronic signatures and records the same legal effect as ink on paper when the parties have agreed to transact electronically, and a contract may be signed in counterparts that together form one agreement. So a single physical page bearing both signatures is unnecessary, and no notary is required for enforceability of the contract itself. These laws are not confined to commercial deals; residential contracts are routinely signed this way. Brokers should still document consent to electronic delivery and retain a complete audit trail of who signed what and when.

A seller and a broker talk over coffee and the seller says, 'You are my agent, go sell my house.' Nothing is signed. Under general agency principles, and assuming state law does not require a writing to create the relationship, what has been created?

• a.No agency of any kind, because agency demands a signed contract
• b.An implied agency arising only from the broker's later conduct
• c.An express agency created by the seller's spoken words✓
• d.A dual agency, since the relationship was never put in writing

Agency is express when the parties actually say or write that one will act for the other, and spoken words can do that. Note the separate point that most states require a writing before a broker can enforce a claim for compensation, so the relationship may exist while the fee claim fails. This is not implied agency, which arises from conduct rather than words. Nothing here offered cooperation to another firm, so no subagency appeared, and representing only the seller is single agency, not dual agency.

A licensee with no signed buyer agreement spends weeks advising a buyer on strategy, recommending an offer price, and negotiating terms on the buyer's behalf. A court would most likely find:

• a.No agency, since no fee was discussed
• b.An implied agency created by the licensee's conduct✓
• c.A transaction brokerage that carries no duties beyond honesty
• d.A subagency of the seller created through the listing brokerage

Courts look at what the parties actually did, not at what paperwork exists. Advising on strategy, recommending price, and negotiating are the acts of a representative, so an implied agency arises from conduct and brings fiduciary duties with it. Silence about a fee changes nothing, since agency comes from the relationship rather than from payment. Subagency would require the listing side to offer it and this firm to accept it. A non-agency transaction brokerage must be established deliberately; a licensee cannot back into it after behaving like an advocate.

An affiliated licensee signs a lease extension for an owner without any authority to do so. The owner learns of it, says nothing, and accepts the extended rent for two months. The agency arose by:

• a.Estoppel, since a third party relied on apparent authority
• b.Ratification of an act the owner had not authorized✓
• c.Express authority under the original management agreement
• d.Apparent authority from the licensee's own statements

Ratification is a principal's after-the-fact approval of an unauthorized act, and accepting the benefits with knowledge of what happened is the classic way to ratify. The owner knew and kept the rent, which adopts the extension. Estoppel is different: it bars a principal who created an appearance of authority from denying it, and here the owner did nothing before the signing. There was no express authority because the management agreement never covered this act. Apparent authority cannot be built by the agent's own claims; it must come from the principal's conduct.

For a year a broker has let a licensee sign documents for an owner, and the owner has never objected. A vendor reasonably relies on that appearance and performs work. The owner is barred from denying the agency by:

• a.Estoppel, since the owner's conduct created apparent authority✓
• b.Novation, which substitutes the licensee for the owner
• c.Ratification of the licensee's prior unauthorized acts
• d.Renunciation of the agency by the affiliated licensee

Agency by estoppel arises when a principal's own conduct leads a third party to believe someone is authorized, and the third party reasonably relies on that belief. The owner's year of silent acquiescence is exactly that conduct, so the owner cannot now deny the agency to defeat the vendor. Ratification would explain approval of one past act, not a standing appearance relied on in advance. Novation replaces a party or a contract entirely, which nobody did here. Renunciation is an agent quitting the relationship, the opposite of what the licensee was doing.

A seller agrees to pay a cooperating brokerage that has been working with the buyer throughout the transaction. What does that payment, standing alone, establish about the agency relationships?

• a.The seller automatically becomes the cooperating brokerage's client
• b.The cooperating brokerage becomes a subagent of the seller
• c.The cooperating brokerage now represents both parties equally
• d.Nothing; agency comes from agreement, not from who pays✓

Compensation and representation are separate questions. Agency is created by the agreement or conduct of the parties, so the source of the check tells you nothing about who is represented. Subagency arises only when the listing side offers it and the cooperating firm accepts it, not because money moves. Being paid by the seller does not make the seller a client, and it certainly does not put the cooperating firm on both sides. A broker who assumes payment equals representation risks an undisclosed dual agency claim later.

An owner moving abroad signs a general power of attorney letting one trusted person handle all of the owner's legal and business affairs indefinitely. That person is best described as:

• a.A special agent limited to one specific transaction
• b.A general agent confined to one continuing business
• c.A subagent appointed by the owner's listing brokerage to handle every legal and business matter
• d.A universal agent empowered to act in all of the principal's affairs✓

A universal agent has the broadest authority of the three classes and may act for the principal in all matters that can lawfully be delegated, which is what a general power of attorney creates. A general agent handles a continuing range of tasks within one business, such as a property manager running a building. A special agent is hired for one narrow assignment, such as a listing broker selling a single home. A subagent works for another agent rather than being appointed directly by the principal, so that label does not fit either.

A broker takes a listing to market one home for one seller while also running the day-to-day operations of the brokerage firm. How are the broker's two agency roles best characterized?

• a.A general agent of the seller and a special agent of the firm
• b.A subagent of the seller and an employee of the firm
• c.A universal agent of both the seller and the firm
• d.A special agent of the seller and a general agent of the firm✓

The pairing runs the other way from what candidates expect. Toward the client the broker is a special agent, engaged for one defined task, selling this property, with authority limited to that job. Toward the firm the broker is a general agent, with continuing authority over the business and its affiliated licensees. Reversing the two is the standard trap. Universal agency would mean handling every affair of both, which no listing does. Calling the broker a subagent of the seller misuses a term reserved for a cooperating firm working under the listing broker.

A buyer signs a representation agreement with a brokerage, and one affiliated licensee at that firm does all of the work. In agency terms, what is that licensee's position?

• a.The buyer's only agent, with the broker owing nothing
• b.An independent agent of the buyer, separate from the firm
• c.A subagent of the seller through the cooperating listing
• d.The broker's agent, so the licensee owes the buyer the firm's duties✓

Clients contract with the brokerage, not with the salesperson personally. The affiliated licensee is the broker's agent, and through that chain the licensee owes the client the same duties the firm owes. That is precisely why the broker is answerable for what the licensee does. Treating the licensee as the buyer's sole agent would leave the broker free of responsibility, which agency law does not allow. The licensee is not independent of the firm regardless of tax classification, and no subagency of the seller exists when the firm represents the buyer.

A seller instructs a listing agent not to show the home to families with children. What does the fiduciary duty of obedience require the agent to do with that instruction?

• a.Follow it, since the client controls the terms of the listing
• b.Refuse it; obedience extends only to lawful instructions✓
• c.Follow it quietly and simply document the seller's request in the file
• d.Ask the broker to obtain the seller's instruction in writing first

Obedience is bounded by law. An agent must follow the client's lawful instructions, and an instruction to discriminate against families with children violates the federal prohibition on familial status discrimination, so the agent must refuse and explain why, and should withdraw if the seller persists. The client's control over listing terms never extends to illegal terms. Documenting the request while carrying it out still makes the agent a participant in the violation. Getting the instruction in writing does not cure it; it merely creates evidence of a knowing violation by the firm.

A listing agent leaving for vacation urges the seller to accept a low offer today rather than wait for two well-qualified showings already scheduled for the weekend. Which fiduciary duty is most at risk?

• a.Accounting for funds and documents held for the client
• b.Confidentiality of the seller's bargaining position
• c.Loyalty, which puts the client's interest above the agent's✓
• d.Disclosure to the client of every material fact the agent knows

Loyalty requires the agent to subordinate personal convenience and profit to the client's interest. Pushing a weak offer so the agent can leave town serves the agent, not the seller, which is the core breach here. Accounting concerns money and documents entrusted to the agent, and nothing has been mishandled. Confidentiality would be at stake only if the agent leaked the seller's position to the other side. Disclosure is close, since the scheduled showings are material, but the driving problem is the agent's self-interest, which is the loyalty duty.

A listing agent overhears at a networking event that the buyer who just submitted a $400,000 offer has told friends he would go to $425,000. What does the duty of disclosure require?

• a.Disclose it to every cooperating brokerage in the listing service so all buyers compete fairly
• b.Keep it private to protect the buyer's negotiating position
• c.Reveal it only if the buyer's agent gives written permission
• d.Tell the seller, because material facts about the buyer belong to the client✓

An agent must pass to the principal all material facts that could affect the client's decision, including what the agent learns about the other side's willingness to pay. The seller is the client, so the information goes to the seller. Protecting the buyer's position would invert the relationship, since the buyer is a customer here and is owed honesty, not confidentiality. No permission from the buyer's agent is needed for information the listing agent lawfully acquired. Broadcasting it to other cooperating firms serves nobody's interest and is not what the duty requires.

Six months after a listing expired unsold, the former listing agent is working with a buyer interested in that same home. The seller's earlier statement about the lowest price she would take is:

• a.Freely usable, because the listing has already expired
• b.Disclosable only to the agent's current buyer client
• c.Still confidential, since the duty survives the agency✓
• d.Confidential for a period fixed by the listing agreement

Confidentiality outlives the agency relationship. Information a client shared in confidence, especially motivation and the lowest acceptable price, stays protected after the listing ends, which is why an agent cannot mine an old file for a new client's benefit. Expiration ends the agent's authority to act, not the obligation of silence. Sharing it with the current buyer client is exactly the disclosure the rule forbids, however tempting the loyalty owed to that buyer feels. And the duty is not switched off by a date written into the expired listing form.

A broker holds an earnest money deposit, the client's signed documents, and a set of keys to the client's property. The fiduciary duty of accounting requires the broker to:

• a.Deposit the money into the firm's operating account for tracking
• b.Report the money but not documents, which are not trust property
• c.Account for all funds and property entrusted to the firm✓
• d.Provide an accounting only if the client requests one in writing

Accounting reaches everything of value the client entrusts to the agent, not just cash. Deposits, documents, and even keys must be safeguarded, tracked, and returned or delivered as the relationship requires. Putting client money in the operating account is commingling, a violation rather than a form of accounting. Carving documents out of the duty misreads it, since records and instruments are client property too. And the obligation is affirmative: the broker must maintain records and report without waiting for the client to ask in writing.

A buyer sues both the seller and the listing licensee over a chronic drainage problem. The seller knew and never mentioned it, and the licensee, repeating the seller, assured the buyer the yard drained well.

• a.Only the seller, since the licensee merely repeated the owner's words
• b.Only the licensee, because the buyer relied on the trained professional
• c.Each may be liable: the seller for concealment, the licensee for the assertion✓
• d.Neither, since the licensee told the buyer to verify conditions himself

The two exposures run on separate tracks. A seller who knows of a hidden material defect and stays silent answers for the concealment, and a licensee who states a material fact with no reasonable basis answers for that statement, however the other defendant's case comes out. The seller's silence gives the licensee nothing to hide behind, because the licensee chose to make the assurance her own. Pinning everything on the professional ignores that the owner held the knowledge and withheld it. And a general suggestion that the buyer check conditions neither erases the seller's duty to disclose nor cures a specific false assurance the licensee has already given.

An affiliated licensee decides she wants to buy, for herself, a home her own firm currently has listed. Before the seller signs anything, what does agency law require of her?

• a.Disclose in writing that she is a licensee buying for herself✓
• b.Obtain an independent appraisal before making her offer
• c.Nothing, because she may bid like any other interested buyer
• d.Resign the listing and let another firm handle the sale

A fiduciary who deals with the principal on the fiduciary's own account must disclose that interest fully and in writing, so the seller can judge the offer knowing who is on the other side. Silence turns an ordinary purchase into self-dealing. Treating herself as just another bidder ignores the duty she already owes the seller. An appraisal is good practice but does not substitute for disclosure of her interest. Resigning the listing is not required, and abandoning the client mid-marketing could itself breach the duties the firm undertook.

A licensee forms a limited liability company with his brother and has the company submit an offer on a property his firm has listed, without ever naming himself. This is best described as:

• a.Acceptable, because the LLC is a separate legal person
• b.A lawful assignment of the licensee's purchase rights
• c.A permitted dual agency requiring only the seller's oral consent
• d.Undisclosed self-dealing that breaches the duty of loyalty✓

Buying through an entity the licensee owns or controls, or through a close relative, is still buying for the licensee's own benefit, and hiding it behind a company name is the classic concealment the disclosure rule targets. The separate legal existence of the company matters for liability, not for fiduciary duty. Labeling it dual agency misses the point, since the problem is the agent's own financial interest rather than representing two parties. Nothing has been assigned; no purchase right existed before the offer, so the assignment framing does not apply.

A property manager hires a roofer for $8,000, bills the owner $11,000 for the same work, and quietly keeps the difference. Under agency law, the extra $3,000 is:

• a.A secret profit the agent must surrender to the owner✓
• b.An acceptable markup if the total price is still reasonable
• c.A finder's fee the owner impliedly agreed to when hiring
• d.A permissible management fee under the industry custom

Any undisclosed benefit an agent takes out of the principal's transaction is a secret profit, and the remedy is disgorgement to the principal, often alongside loss of compensation and license discipline. Calling it a management fee does not help, because fees must come from the management agreement, not from a hidden markup. Reasonableness of the final price is irrelevant when the owner was never told. And nothing in hiring a manager implies consent to undisclosed vendor markups; consent must be informed and actual, not assumed.

A licensee has a signed exclusive representation agreement with a buyer client. The client then falls in love with a home that same licensee listed last month. Without anything further, the licensee faces:

• a.An inadvertent dual agency that must be addressed at once✓
• b.A subagency owed to the seller through the listing service alone
• c.No conflict, since the agreements were signed separately
• d.An automatic termination of the buyer representation agreement

Dual agency most often arrives by accident rather than by plan: one licensee ends up holding written agency agreements with both sides of the same deal. That is what happened the moment the buyer client targeted the licensee's own listing, and it must be resolved before the offer is written, through consent, designated agents, or withdrawal from one side where state law allows. Subagency is not involved because both clients are in-house. The separate signing dates do not cure the conflict, and neither agreement cancels itself automatically.

A firm is acting as a disclosed dual agent with informed written consent from both parties. The buyer now asks the dual agent to help him negotiate the price down. The agent may:

• a.Advocate for the buyer, who asked for the assistance
• b.Advocate for the seller, who signed the listing first
• c.Withdraw from both sides of the transaction and refund every fee collected so far
• d.Give facts and process help but not advocate price for either side✓

Consent to dual agency does not restore advocacy; it only permits the agent to work with both parties in a limited, neutral way. The dual agent may supply market data, explain forms, and move the process along, but may not argue price or terms for one side against the other. Helping the buyer press for a lower price would breach the loyalty still owed to the seller, and the reverse is equally true regardless of who signed first. Wholesale withdrawal with refunds is not required when both parties have properly consented.

During a properly consented dual agency, the seller privately tells the agent she would take $15,000 less than the list price. What may the agent do with that information?

• a.Never reveal it unless the seller authorizes disclosure✓
• b.Share it only if the buyer raises the price question first
• c.Record it in the file and disclose it after closing occurs
• d.Share it with the buyer, because both parties are clients of the firm

A dual agent must hold each party's confidential information for that party alone. Price flexibility, motivation, and financial capacity stay protected unless the party who owns the information authorizes release. Sharing it because both are clients inverts the rule; being a client is what earns the protection. Waiting for the buyer to ask changes nothing, since the trigger is consent, not curiosity. Disclosing after closing is no safer, because the confidentiality duty survives the transaction and a post-closing leak still exposes the firm to a claim.

A broker quietly represents both the buyer and the seller in one sale and never tells either party. Both discover the truth after closing. Which outcome is most likely?

• a.Rescission, forfeited commission, and license discipline✓
• b.The commission stands, because the closing already occurred
• c.Only a written warning, since no party suffered actual loss
• d.The broker keeps the listing side but repays the buyer side

Undisclosed dual agency is treated as a serious breach of loyalty, and the usual consequences stack: the injured party may rescind or sue for damages, the broker can lose the entire commission because compensation is not earned through disloyal service, and the license authority may discipline the firm. Closing does not sanitize the breach, since the harm is the concealment itself. Absence of provable loss does not reduce it to a warning. Splitting the fee is not a recognized remedy; courts strip disloyal agents of the whole compensation.

A firm's buyer client wants to tour a property that the same firm has listed. In a state that permits designated agency, how does the brokerage typically proceed?

• a.It requires the buyer to hire an unaffiliated brokerage instead
• b.It withdraws the listing so the buyer's agent can represent him
• c.It converts both licensees into transaction brokers automatically
• d.It appoints one licensee to each party as their designated agent✓

Designated agency solves the in-house conflict by assigning a different licensee to each side, so each party keeps a real advocate even though one firm is on both sides of the transaction. The appointments are made by the broker and disclosed to the parties. Pulling the listing would abandon the seller and is never the routine answer. Nothing converts licensees into non-agency transaction brokers by itself; that role requires its own agreement. Sending the buyer to another firm may be one option in some states, but it is not how designated agency works.

After a broker appoints separate designated agents for the buyer and the seller in an in-house sale, what is usually true of the appointing broker's own position in that transaction?

• a.The broker becomes a subagent of the seller's designated agent
• b.The broker steps out entirely and owes neither party any duty
• c.The broker often remains a dual agent and must stay neutral between them✓
• d.The broker must personally negotiate the price for both sides

The designations do not remove the broker from the transaction. In many designated-agency states the broker sits above both appointees as a dual agent and must remain impartial, though a minority provide by statute that the designating broker is not a dual agent, and some states bar dual agency outright. Either way the broker must keep each side's confidences from reaching the other, which is why firms wall off files, systems, and conversations. Saying the broker owes nothing ignores the supervisory relationship with both designated agents. A broker is never a subagent of the firm's own licensee. And personally negotiating for both sides is exactly the advocacy a neutral dual agent is barred from providing.

An affiliated licensee learns that a listed home's rear addition was built without a permit, but never mentions it to anyone in the office. Legally, the brokerage is treated as:

• a.Unaware, because the licensee kept the information private
• b.Knowing it, since a licensee's knowledge is imputed to the broker✓
• c.Liable only if the broker reviewed that particular file
• d.Protected, because the licensee is an independent contractor here

Knowledge acquired by an agent within the scope of the agency is imputed to the principal, so what the licensee knows the brokerage is deemed to know, whether or not it was ever reported. That is why an unpermitted addition becomes the firm's disclosure problem. Silence by the licensee does not preserve the firm's innocence, and liability does not hinge on whether the broker happened to open the file. Independent-contractor status is a tax classification and provides no shield against imputed knowledge or the duty to supervise.

A listing agent tells the buyer's agent that a sewer easement crosses the back yard, but the buyer's agent never passes it on. In a later dispute, the buyer is generally treated as:

• a.Uninformed, because the agent's failure cannot be blamed on him
• b.Informed only after the closing documents were signed by him
• c.Having notice, since the agent's knowledge is imputed✓
• d.Uninformed unless the easement appeared in the public records

Imputation runs both ways along the agency chain. Just as a licensee's knowledge is charged to the broker, an agent's knowledge is charged to the principal, so a buyer is deemed to know what his own agent learned within the scope of the representation. The buyer's real remedy is against his agent, not a claim of ignorance against the seller. The signing date does not control when notice attaches. And imputed notice is independent of constructive notice from recording, which is a separate route to the same result.

A brokerage adopts a firm policy that it will represent only one party in any given transaction and will never work both sides of the same sale. This describes:

• a.Designated agency, where two licensees split the sides
• b.Single agency, where the firm represents one side only✓
• c.Transaction brokerage, where nobody is represented
• d.Subagency, where cooperating firms serve the seller

Single agency means the firm represents one party, buyer or seller but never both in the same transaction, which eliminates dual-agency conflicts before they can arise. Designated agency is the opposite arrangement: the firm stays on both sides and assigns a different licensee to each. Transaction brokerage is a non-agency service model in which the licensee assists without representing anyone, which is not what this policy says. Subagency describes a cooperating firm working for the seller through the listing broker, a relationship this policy does not address.

In a state that authorizes the role, a licensee serves as a facilitator who helps a buyer and a seller reach agreement without representing either one. Which statement fits that role?

• a.The licensee owes honesty and competence but no fiduciary loyalty✓
• b.The licensee is a dual agent under a different name
• c.The licensee owes both parties the full fiduciary duties of loyalty and obedience
• d.The licensee must still obey the seller's lawful instructions on price and terms

A transaction broker or facilitator provides a non-agency service: honesty, fair dealing, competent handling of the paperwork, accounting for funds, and disclosure of known material defects, but no loyalty and no advocacy. Confidentiality is not erased: several transaction-broker states impose a statutory limited confidentiality that bars revealing that the seller will take less or the buyer will pay more. Owing both parties full fiduciary duties is impossible, which is why the role exists. It is not dual agency renamed, because no agency is created at all. And obedience is a fiduciary duty owed to a principal, which this licensee does not have.

A listing brokerage's offer of cooperation through the multiple listing service expressly includes an offer of subagency, and a cooperating firm accepts it. That cooperating firm now:

• a.Represents the buyer even though the seller pays its fee
• b.Represents the seller, owing the seller fiduciary duties✓
• c.Represents neither party and acts only as a neutral middleman
• d.Represents both parties as a consented dual agent

A subagent is an agent of the listing broker's principal, so accepting an offer of subagency puts the cooperating firm on the seller's side with full fiduciary duties to the seller, even though the firm found and drove the buyer around all weekend. That mismatch between who the firm works with and who it represents is why subagency confuses consumers. The firm is not the buyer's agent here, has not adopted a neutral non-agency role, and is not a dual agent because it represents only one party.

Why do many listing brokers today refuse to extend an offer of subagency through the multiple listing service?

• a.Subagency automatically creates an undisclosed dual agency situation
• b.Subagency requires the cooperating firm to be paid directly by the buyer
• c.A subagent's misconduct can expose the seller and listing broker✓
• d.The listing service prohibits any offer of cooperation with subagents

Vicarious liability is the reason subagency fell out of favor. A subagent acts for the seller through the listing broker, so a misrepresentation by a cooperating licensee the listing broker has never met can be traced back to the listing firm and the seller. Payment is not the issue; subagents are typically paid from the listing side. Subagency involves one principal, so it does not create dual agency, undisclosed or otherwise. And listing services generally allow cooperation with buyer agency instead, rather than banning subagency outright.

A licensee accepts a far smaller earnest money deposit than the seller authorized. The seller learns exactly what happened, says nothing, closes the sale, and then sues the firm for exceeding its authority. The seller most likely:

• a.Loses, having ratified the act with full knowledge of it✓
• b.Prevails, because the licensee acted beyond her written authority
• c.Prevails, since adopting an agent's unauthorized act requires a writing
• d.Loses only as to future acts

A principal who learns the material facts and then keeps the benefit of an unauthorized act adopts that act. Closing with full knowledge of the smaller deposit does exactly that, and the adoption relates back, so the deposit is treated as authorized from the start and the claim fails. Acting outside written authority would have mattered had the seller objected on learning of it instead of taking the benefit. No signed writing is needed, because conduct that accepts a known benefit is enough. And the effect is not merely forward-looking; the point of adopting a past act is to validate that act, not to license future ones.

A broker in one state refers a relocating client to a licensed broker in another state and, by written agreement, takes a share of the commission the second broker earns. This arrangement is:

• a.Illegal, because commission splitting violates antitrust law
• b.Illegal under RESPA as an unearned kickback for settlement services
• c.Permitted only if the referred client consents in writing
• d.Generally permitted, since a referral fee may go to a licensed broker✓

Broker-to-broker referral fees are a normal part of the business and are generally allowed, provided the receiving party is a licensed broker and the arrangement follows the states involved. Antitrust law targets agreements among competitors to fix prices or divide markets, not the negotiated sharing of one firm's fee. RESPA does treat real estate brokerage as a settlement service, but it expressly permits payments under cooperative brokerage and referral arrangements between brokers; what it forbids is an unearned fee for steering business to a different settlement provider such as title, mortgage, or insurance. Client consent is good practice and is often required by disclosure rules, but it is not what makes the fee lawful.

Two weeks into a 90-day exclusive right-to-sell listing, the seller unexpectedly dies. What is the effect on the listing agreement between the seller and the brokerage?

• a.It binds the estate for the remainder of the term
• b.It continues until the personal representative cancels it
• c.It terminates, because death of a party ends the agency✓
• d.It converts into an open listing with the seller's heirs

Agency is a personal relationship, so the death or incapacity of either the principal or the agent terminates it by operation of law, without notice and regardless of the term left to run. The listing simply ends. The estate is not bound to complete a personal service contract the deceased signed, so no obligation carries forward for the personal representative to cancel. Nor does the agreement quietly transform into an open listing with the heirs; if the estate wants representation, the representative must sign a new agreement with authority to do so.

A listed house burns to the ground before any offer is received, and the seller decides not to rebuild. What happens to the listing agreement between the seller and the brokerage?

• a.It survives and transfers automatically to the vacant land
• b.It terminates, since the subject matter was destroyed✓
• c.It survives until the seller gives the broker written notice
• d.It survives, and the broker earns a commission on the lot

Destruction of the subject matter ends the agency by operation of law, alongside death, incapacity, and bankruptcy, because there is nothing left for the agent to be authorized about. The agreement does not migrate to the bare lot, which is a different property the seller never listed. No commission arises on a sale the broker was not engaged to make. And termination is automatic, so the seller does not have to send written notice to end an agreement that the fire already ended.

Tired of a difficult client, a broker stops all marketing on an exclusive listing that still has two months to run and tells the seller he is finished. What is the broker's position?

• a.The agency continues until the stated listing term finally expires
• b.The broker may quit freely, since an agent serves at will
• c.The seller's only remedy is a complaint to the license authority
• d.The agency ends, and the broker may forfeit pay and owe damages✓

An agent has the power to renounce an agency at any time, so the relationship does end, but power is not right. Walking away from an exclusive listing mid-term breaks the broker's own promise to market the property, which can cost the firm any commission and expose it to the seller's damages, and abandoning a client is itself a disciplinable act under many states' license laws. The listing does not somehow keep running after the broker repudiates it. An agent cannot quit freely once he has promised performance for a term. And the seller is not confined to a regulatory complaint, since the contract claim belongs to the seller and is pursued in court.

A broker advances $40,000 for renovations and, in exchange, receives a recorded ownership interest in the property along with the exclusive right to sell it. The owner now tries to revoke. Why can the broker resist?

• a.The broker holds an exclusive right-to-sell listing agreement
• b.The broker has already performed part of the marketing work
• c.The agency is coupled with an interest, so it is not freely revocable✓
• d.The broker recorded the listing agreement in the public records

An agency coupled with an interest exists when the agent holds an actual stake in the property itself, not merely an expectation of a commission, and such an agency cannot be unilaterally revoked by the principal or terminated by the principal's death. The broker's ownership interest, secured by the advance, is that stake. An ordinary exclusive right-to-sell listing gives no property interest and remains revocable in power. Partial performance may support a damages claim but does not defeat revocation. Recording a listing does not convert a contract right into an interest in land.

A listing agreement authorizes the broker to market the property but says nothing about installing a lockbox or placing a yard sign. The broker's power to do those things is:

• a.Implied actual authority, reasonably necessary to the task✓
• b.Apparent authority arising from what the buyer reasonably believes
• c.Ratified authority the seller must approve after the fact
• d.Express authority stated in the marketing section of the form

Actual authority has two branches. Express authority is what the principal spelled out; implied actual authority covers the incidental acts reasonably necessary to carry out what was expressly authorized, which is where routine marketing steps like signage and a lockbox live. Apparent authority is a different concept entirely, measured by the principal's manifestations to a third party rather than by the agent's task. Ratification would require the seller to approve an unauthorized act afterward, but these acts are authorized now. And nothing express appears in the form.

A firm's business cards, office signage, and website all present a licensee as the office manager, although internally she holds no such authority. She signs a service contract with a vendor. The firm is likely:

• a.Free of the contract, because she lacked internal authority
• b.Bound, because the firm created apparent authority✓
• c.Free of the contract, since the vendor should have verified
• d.Bound only if the broker later ratifies the vendor contract

Apparent or ostensible authority is measured by what the principal leads third parties to believe. Cards, signage, and a website are the firm's own manifestations, so a vendor who reasonably relies on them can hold the firm to the contract even though the licensee had no actual authority. Internal limits the vendor never saw do not defeat that reliance. Ratification would be one way to become bound, but it is not the only way, so the contract does not depend on it. Shifting the burden to the vendor to investigate ignores that the firm created the appearance.

During a routine file review, a broker discovers that an agent failed to deliver a required disclosure to a buyer two weeks ago. What is the broker's best course of action?

• a.Close the file and note that the agent alone was responsible
• b.Wait and see whether the buyer raises the issue after the closing
• c.Correct the omission promptly and retrain the agent on the policy✓
• d.Direct the agent to backdate the disclosure to the original date

Supervision includes catching and curing violations, not just detecting them. The broker should deliver the missing disclosure at once, document the correction, and address the training gap so the office does not repeat it. Waiting for the buyer to complain lets the harm compound and looks like knowing acquiescence. Assigning blame to the agent in the file does not shift responsibility, because failure to supervise is charged to the broker independently. Backdating is falsification of a transaction record, converting a curable oversight into fraud by the firm.

An affiliated licensee commits a serious violation the broker genuinely knew nothing about. The firm has no written policy manual, and the broker has never reviewed a transaction file. What is the broker's exposure?

• a.None, because the broker had no knowledge of the violation
• b.Limited to a civil claim brought by the injured consumer
• c.Shared liability only if the agent is classified as an employee
• d.Discipline for failure to supervise, apart from the agent's violation✓

Failure to supervise is its own offense. A broker who maintains no written policies, provides no training, and never reviews files can be disciplined for that failure even though the underlying misconduct was the agent's and the broker never knew of it. Lack of knowledge is precisely what the supervisory duty is meant to prevent, so it is no defense. Exposure is not confined to a private lawsuit; the license authority can act separately. And employee versus independent-contractor status is a tax classification that does not switch the supervisory duty on or off.

An affiliated licensee buys a rental duplex for her own account from an owner she met socially, using none of the firm's listings, name, forms, or trust account. A dispute follows. Is the firm liable?

• a.Yes, since a broker answers for everything an affiliated licensee does
• b.No, because the purchase fell outside the scope of the agency✓
• c.Yes, because her license made the transaction licensed activity
• d.No, so long as she never mentions the deal to her broker

Vicarious liability reaches acts within the scope of the agency. A licensee investing on her own account, with none of the firm's listings, name, forms, or trust money involved, is acting as a private buyer, so the brokerage does not answer for that deal. This is a limit, not an exemption: the broker still owes supervision over brokerage activity, and state law commonly requires a licensee to disclose her licensed status when she buys or sells on her own account, so her personal duties continue. Saying a broker answers for everything states the rule far too broadly, holding a license does not convert a private purchase into brokerage business, and concealing the deal would aggravate matters rather than shield anyone.

A high-volume sales team inside a brokerage uses its own team name, its own marketing budget, and its own team leader. Who remains responsible for the team's advertising and transaction files?

• a.The broker, whose supervisory duty covers teams in the firm✓
• b.The team's individual members, each for their own transactions
• c.The team leader alone, since the team operates independently
• d.The listing service, which approves all cooperative advertising

A team is a marketing structure inside the brokerage, not a separate licensed entity, so the broker's supervisory duty reaches the team's advertising, files, funds, and use of a team name. Brokers typically require written team agreements and review team advertising for the firm-name and licensure requirements their state imposes. The team leader shares responsibility but does not absorb the broker's. Individual members are accountable for their own conduct without relieving the broker. The listing service enforces its own rules and does not supervise licensees for the state.

An unlicensed personal assistant at a brokerage asks the broker what she is allowed to handle. Which task is generally acceptable for an unlicensed person to perform?

• a.Scheduling appointments and preparing marketing materials✓
• b.Discussing the seller's lowest acceptable price with callers
• c.Showing a listed property to a prospect without the agent
• d.Explaining contract terms to a buyer over the telephone

Unlicensed staff may perform clerical, administrative, and marketing-support work: scheduling, ordering signs, assembling mailers, entering data, and handing out preprinted materials. What they may not do is anything requiring licensed judgment or negotiation. Explaining contract terms is advice about a legal document. Discussing what the seller will accept is negotiation and also risks a confidentiality breach. Independently showing property is the licensed activity itself. A broker who lets an assistant cross those lines can be charged with permitting unlicensed practice.

Under the federal statutory safe harbor for treating a real estate agent as an independent contractor rather than an employee, which combination of conditions must be satisfied?

• a.A license, an office key, and a signed noncompete with the firm
• b.A license, a desk fee, and a set weekly schedule of office hours
• c.A written agreement, employee benefits, and an hourly wage floor
• d.A license, a written agreement, and pay based on output rather than hours✓

The federal qualified real estate agent test has three parts: the person is licensed, substantially all compensation for services is directly related to sales or output rather than to hours worked, and a written agreement provides that the person will not be treated as an employee for federal tax purposes. A desk fee is neutral and is common in independent-contractor brokerages; what defeats that option is the set weekly schedule of office hours, since control over when a person works points to employment. Benefits and an hourly floor are hallmarks of employment. A noncompete and an office key have nothing to do with the tax safe harbor.

An affiliated licensee runs a rental advertisement describing the building as 'perfect for young professionals, no kids.' The broker never saw the ad before it was published. What is the broker's position?

• a.Insulated, because the broker did not review or approve the ad
• b.Liable only if a complaint is filed by an actual applicant
• c.Insulated, since the agent paid for the advertisement himself
• d.Exposed to fair housing liability for the firm's advertising✓

The wording expresses a preference based on familial status, which the federal prohibition on discriminatory advertising reaches whether or not anyone was actually turned away. Because the licensee acted within the scope of the agency, the brokerage is exposed, and the broker's failure to review advertising is itself a supervisory lapse. Not having seen the ad is the problem rather than the defense. No complaint from an applicant is needed for enforcement to follow. And who paid for the placement does not change whose licensed business the ad promoted.

A brokerage engages an unlicensed telemarketer to call prospects, and she tells several of them that a listed house 'will definitely appraise above the asking price.' Who bears responsibility for that statement?

• a.Nobody, because an unlicensed person owes no duty to prospects
• b.The seller, who benefits from the statement made to prospects
• c.The telemarketer alone, as the speaker of the false statement
• d.The broker, who is responsible for people the firm engages✓

A broker answers for the conduct of everyone the firm puts to work on its behalf, licensed or not, and using an unlicensed caller to make substantive claims about value adds a second problem: allowing unlicensed activity. Saying nobody is responsible would let a firm outsource its misrepresentations. Pinning it on the caller alone ignores that she was acting for the brokerage within the scope of what she was hired to do. The seller did not authorize the statement and is not the one who engaged her.

A seller signs a written instruction directing the listing broker not to present any offer below $600,000. How should the broker treat that instruction?

• a.Disregard it, since a seller may never restrict which offers are presented
• b.Honor the written instruction, unless state law makes presentation non-waivable✓
• c.Honor it, and screen offers this way on the seller's oral word alone
• d.Honor it, and let it cover an offer competing with the firm's own buyer

A client may narrow the broker's marketing instructions, and a broker may follow a limit on which offers to bring forward, provided the limit is in writing, sits in the file, and does not collide with a state rule making presentation of written offers a duty the seller cannot waive. Treating any such instruction as void overstates the law, since the seller controls the terms of the sale. An oral limitation leaves the broker nothing to show a regulator or a court later. And the instruction cannot be stretched to bury an outside offer that competes with one from the firm's own buyer, which turns the seller's convenience into the firm's self-dealing.

A listing agent holds a strong written offer from an outside brokerage but delays presenting it for two days while she works up a competing offer from her own buyer prospect. Which duties has she breached?

• a.None, because timing of presentation is left to the agent
• b.Confidentiality and accounting, by leaking the seller's position and mishandling deposit funds
• c.Obedience and care, by ignoring a written office procedure
• d.Loyalty and disclosure, by putting her own interest ahead of the seller's✓

Two duties fail at once. Loyalty is breached because the delay serves the agent's chance at both sides of the commission rather than the seller's interest, and disclosure is breached because a strong offer is a material fact the seller was entitled to receive without delay. Confidentiality and accounting are not implicated; nothing was leaked and no funds or documents were mishandled. Framing it as a mere procedure violation understates a fiduciary breach. And presentation timing is not the agent's discretionary call when a client's decision is being withheld.

A broker is drafting the office policy covering square footage, lot size, and tax figures that agents copy from public records and older listings. What should the policy require?

• a.Bar agents from publishing any figure the firm did not measure itself
• b.Treat government records as verified, since the assessor compiled them
• c.Rely on one blanket disclaimer at the bottom of the firm's marketing
• d.Attribute each figure to its source and urge independent verification✓

The workable rule is attribution plus verification: name where the number came from, state that the firm has not confirmed it, and tell the client to verify anything that matters to the decision, so the figure stays the source's representation instead of becoming the agent's own. Forbidding outside data altogether is unworkable, since listings cannot be built without it. Calling assessor data verified adopts the very error that gets firms sued, because tax records are compiled for valuation rather than for measurement. And boilerplate at the bottom of a page does not neutralize a specific figure an agent knew or should have known was wrong.