Tennessee Real Estate Broker Exam — All Questions

Under Tenn. Code Ann. section 62-13-401, until a Tennessee licensee enters into a specific written agreement establishing an agency relationship, the licensee is considered:

• a.a subagent of the listing broker in the transaction
• b.a facilitator, and not an agent or advocate of any party✓
• c.a dual agent of both the buyer and the seller
• d.an implied agent of the party who called first

Tenn. Code Ann. section 62-13-401 provides that a licensee may provide real estate services to any party with or without an agency relationship, and that until the licensee enters into a specific written agreement to establish an agency relationship the licensee shall be considered a facilitator and shall not be considered an agent or advocate of any party. The section adds that an agency or subagency relationship shall not be assumed, implied, or created without a written bilateral agreement establishing its terms, and that negotiating and executing an exclusive agency listing or an exclusive right to sell listing does establish an agency relationship with the seller. Section 62-13-102(9) confirms that a facilitator may advise either or both parties but cannot be considered a representative or advocate of either. Tennessee therefore has no implied or accidental agency.

A Tennessee licensee is assisting an unrepresented seller. Under Tenn. Code Ann. section 62-13-405, the written confirmation of the licensee's agency status must be made:

• a.at the closing table, together with the signed settlement statement
• b.within three business days after the property first goes under contract
• c.only when the unrepresented seller asks the licensee for it in writing
• d.before execution of a listing agreement or presentation of an offer to purchase, whichever comes first✓

Tenn. Code Ann. section 62-13-405(a) requires a licensee personally assisting an unrepresented buyer or seller to disclose verbally the licensee's facilitator, agent, subagent, or designated agent status before any real estate services are provided. Subsection (b) then fixes the written confirmation: with an unrepresented buyer, prior to the preparation of an offer to purchase; with an unrepresented seller, prior to execution of a listing agreement or presentation of an offer to purchase, whichever comes first. The licensee must obtain a signed receipt containing a statement that the party was informed complaints must be filed within the applicable statute of limitations, along with the Commission's address and telephone number. Subsection (c) warns that the disclosure is not a substitute for a written agency agreement, and subsection (d) requires immediate disclosure of the licensee's role to any other licensee in the transaction.

A house a Tennessee licensee has listed was the site of a suicide two years ago, and the buyer has not asked about it. Under Tenn. Code Ann. section 66-5-207:

• a.the licensee must disclose it in writing to every prospective purchaser before any showing
• b.no cause of action arises against the owner or the licensee for not disclosing it✓
• c.the licensee must disclose it only to purchasers who ask about the house
• d.the owner must record a notice of the event with the register of deeds

Tenn. Code Ann. section 66-5-207 provides that no cause of action shall arise against an owner or a real estate licensee for failure to disclose that an occupant was afflicted with human immunodeficiency virus or another disease medical evidence shows is highly unlikely to be transmitted through occupancy of a dwelling, or that the real property was the site of an act or occurrence that had no effect on the physical structure, its physical environment, or the improvements, or the site of a homicide, felony, or suicide. The protection is written to override the rest of the residential property disclosure part. It does not touch physical condition: section 62-13-403(2) still requires disclosure of adverse facts of which the licensee has actual notice or knowledge, and section 62-13-102(2) defines adverse facts as conditions that negatively affect value, significantly reduce structural integrity, or present a significant health risk to occupants.

Tenn. Comp. R. and Regs. 1260-02-.11 requires that all Tennessee licensees:

• a.obtain the Commission's written approval before buying any property listed with the firm
• b.identify themselves as a licensee when buying or selling property for themselves✓
• c.use a different firm whenever they sell property that they own themselves
• d.pay a full commission to their firm on every personal purchase they make

Tenn. Comp. R. and Regs. 1260-02-.11(2) requires all licensees to identify themselves as a licensee when buying or selling property for themselves. Paragraph (1) is the broader duty: no broker or affiliate broker shall, directly or indirectly through a third party, purchase for himself or acquire any interest in or option to purchase property listed with him or with his company, or property whose owner has approached him to act as broker, without first making full disclosure of his true position to the owner or to any prospective purchaser for whom he has acted, and he must disclose again to prospective purchasers who tender offers after he acquires the interest. Tenn. Code Ann. section 62-13-312(b)(18) supplies the discipline, and section 62-13-403(7)(A) forbids acting for the licensee's own account or that of an immediate family member without prior disclosure and the written consent of all parties. No Commission approval, separate firm, or commission payment is required.

Under Tenn. Code Ann. section 62-13-404, a Tennessee licensee acting as agent must receive all offers and counteroffers and forward them promptly to the client unless that duty has been:

• a.made inconsistent with the principal broker's written office policy
• b.suspended because the property is already under a binding contract
• c.specifically and individually waived by the client in writing✓
• d.excluded by the multiple listing service's rules of participation

Tenn. Code Ann. section 62-13-404(3)(A) requires a licensee acting as agent, unless the duties are specifically and individually waived in writing by the client, to schedule all property showings on the client's behalf, to receive all offers and counteroffers and forward them promptly to the client, to answer the client's questions in negotiating a purchase agreement within the scope of the licensee's expertise, and to advise the client on the forms, procedures, and steps needed after execution for a successful closing. Subdivision (3)(B) requires that on any waiver the consumer be advised in writing that no other licensee in the transaction can be expected to perform the waived duty. Subdivisions (1) and (2) add the duties to obey lawful instructions within the scope of the agency agreement and to be loyal to the client's interests. Office policy and multiple listing service rules cannot displace a statutory duty.

A Tennessee managing broker appoints one affiliated licensee as designated agent for the buyer and another as designated agent for the seller in the same transaction. Under Tenn. Code Ann. section 62-13-406, the managing broker:

• a.becomes a dual agent who owes both clients the identical statutory duties of loyalty and care
• b.must withdraw the firm from one side of the transaction before any offer can be presented
• c.must obtain a written order from a court of competent jurisdiction approving both appointments
• d.is not considered a dual agent, and knowledge is not imputed among the designated agents✓

Tenn. Code Ann. section 62-13-406(a) lets a managing broker appoint a licensee who has a written agreement to represent a party as that party's designated and individual agent, to the exclusion of all other licensees affiliated with the managing broker, and provides that the managing broker is not considered a dual agent if a designated agent, whether appointed specifically or by written company policy, does not represent the interests of any other party to the same transaction. Subsection (c) is the practical core: there shall be no imputation of knowledge or information among or between clients, the managing broker, and any designated agent or agents in a designated agency situation. Subsection (b) preserves the managing broker's contractual rights in the firm's listing agreements and the broker's duty to ensure that affiliated licensees follow the law. Rule 1260-02-.41(5) reserves the appointment power to the firm's principal broker, so a team may not designate its own members.

Under Tenn. Code Ann. section 62-13-312(b)(7), a Tennessee licensee may act for more than one party in the same transaction only with:

• a.the verbal consent of whichever party signed a written representation agreement first
• b.the principal broker's written approval placed in the transaction file
• c.the approval of the closing attorney handling the transaction
• d.the knowledge and consent in writing of all parties for whom the licensee acts✓

Tenn. Code Ann. section 62-13-312(b)(7) makes it a ground for discipline to act for more than one party in a transaction without the knowledge and consent in writing of all parties for whom the licensee acts. Section 62-13-102(8) defines dual agency as a situation in which the licensee has agreements to provide services as an agent to more than one party in a specific transaction and in which the interests of the parties are adverse. Tennessee gives licensees two ways to avoid that position: designated agency under section 62-13-406, and the facilitator election in section 62-13-102(9)(B), under which a written agency agreement may provide that the licensee becomes a facilitator rather than a dual agent, so long as notice of the change is given to buyer and seller immediately and confirmed in writing before the contract is executed. Neither the broker nor the closing attorney can supply the parties' consent.