North Dakota Real Estate Salesperson Exam — All Questions

A construction loan is typically structured so that:

• a.The full loan amount is disbursed in a lump sum at closing before any construction begins
• b.The lender takes and holds legal title to the completed home rather than a security interest
• c.Funds are advanced in stages (draws) as work is completed, with interest on amounts drawn✓
• d.No interest at all accrues on the borrowed funds until the finished home is eventually sold

Construction loans disburse in draws tied to completed stages of work, and the borrower pays interest only on the funds actually advanced. Because risk is high until the project is finished, lenders release money incrementally rather than all at once.

In an amortized loan, as opposed to a straight (term) loan:

• a.Each payment includes both interest and principal, so the balance is gradually retired✓
• b.No payments of any kind are due from the borrower until the loan reaches its maturity date
• c.Only the interest is paid during the term, with the entire principal due as a balloon at maturity
• d.The interest rate must be adjustable and is not permitted to remain fixed for the full term

A fully amortized loan is retired through regular payments that cover both interest and a growing share of principal, leaving a zero balance at the end of the term. A straight/term loan pays interest only during the term, with the entire principal due as a balloon at maturity.

Negative amortization occurs when:

• a.The lender agrees to forgive and permanently write off a portion of the loan's principal
• b.The outstanding loan balance decreases even faster than the amortization schedule requires
• c.The scheduled payment is less than the interest due, so unpaid interest is added to the balance✓
• d.The borrower voluntarily pays extra principal each month to retire the loan ahead of schedule

Negative amortization means the payment does not cover the interest owed, and the shortfall is added to principal, so the balance GROWS over time. It is the opposite of paying down a loan and can leave a borrower owing more than they originally borrowed.

A purchase-money mortgage most commonly refers to:

• a.Seller financing, in which the seller extends credit to the buyer toward the purchase✓
• b.A government cash grant provided to qualifying first-time home buyers toward a down payment
• c.A loan that is secured solely by the buyer's personal property rather than by the real estate
• d.A loan used only to refinance and replace an existing mortgage already on the property

A purchase-money mortgage is credit the seller extends to the buyer as part of the purchase price, letting the buyer take title while paying the seller over time. It is a financing tool created at the sale, not a refinance, grant, or chattel loan.

A prepayment penalty in a loan is intended to:

• a.Increase the loan's interest rate automatically after the borrower has fallen into default
• b.Punish the borrower for submitting a scheduled monthly payment after its due date has passed
• c.Require the borrower to purchase private mortgage insurance for the life of the mortgage
• d.Compensate the lender for interest lost when the loan is paid off early✓

A prepayment penalty charges the borrower for retiring the loan ahead of schedule, offsetting the interest the lender expected to earn. It is unrelated to late payments (a late fee) or default (acceleration), and it is restricted or barred on many consumer mortgages.

The Truth in Lending Act's right of rescission gives a borrower three business days to cancel:

• a.A commercial construction loan taken out by a developer to build an income-producing project
• b.Any real estate purchase and sale contract the borrower signs, whether financed or all cash
• c.Certain loans that place a new lien on the borrower's principal residence✓
• d.The purchase-money loan the borrower is using to buy or build a brand-new principal home

TILA grants a three-business-day right of rescission on many consumer credit transactions that create a lien on the borrower's principal dwelling, such as refinances and home-equity lines. It does NOT apply to the loan used to purchase or build the borrower's residence, which is why a home-purchase loan cannot be rescinded under this rule.

A balloon loan is one in which:

• a.The interest rate floats up and down with a published index throughout the entire loan term
• b.The lender advances additional funds to the borrower every year rather than collecting payments
• c.Each level payment fully amortizes the loan so that nothing at all remains owed at the end
• d.The payments do not fully retire the debt, leaving a large lump sum due at maturity✓

A balloon loan is only partially amortized (or interest-only), so the regular payments do not pay it off and a large final 'balloon' payment of the remaining principal is due at maturity. A fully amortized loan, by contrast, ends at a zero balance with no balloon.

The assignment of a contract generally means that:

• a.One party transfers its rights and often its duties to a third party✓
• b.A brand-new contract entirely replaces the old one and releases every original party from it
• c.A court reviews the agreement and formally declares the entire contract void and of no effect
• d.Both of the original parties mutually agree to cancel the contract and walk away from it

An assignment transfers a party's rights and interests in a contract to a third party (the assignee). Unless the other party agrees to release the original party, the assignor often remains secondarily liable. Replacing the contract and releasing the original party is a novation, not an assignment.

Novation differs from a simple assignment because novation:

• a.Cancels the existing contract entirely and puts no replacement agreement in its place at all
• b.Only transfers the contract rights while leaving the original party fully and primarily liable
• c.Substitutes a new party or contract and releases the original party✓
• d.Is required to be made orally between the parties and can never be reduced to a signed writing

In a novation, all parties agree to replace an original party (or the whole contract) with a new one, and the original obligor is released from further liability. A plain assignment transfers rights but usually leaves the assignor secondarily liable, which is the key distinction.

Under the statute of frauds, which of the following must generally be in writing to be enforceable?

• a.A lease for a term longer than one year✓
• b.A month-to-month oral rental agreement between a residential landlord and a tenant
• c.A verbal promise to split a commission that both parties have already fully performed
• d.A casual handshake agreement to paint a neighbor's backyard fence sometime next week

The statute of frauds requires contracts that cannot be performed within one year, and interests in real estate such as long-term leases, to be in writing. Short-term and month-to-month tenancies typically fall outside it, and everyday service agreements performable within a year need not be written.

In a purchase contract, earnest money is best understood as:

• a.A good-faith deposit showing serious intent, not required for validity✓
• b.The consideration without which no real estate contract could ever legally come into existence
• c.A payment that is always nonrefundable and that the seller keeps under every possible outcome
• d.A fee that the buyer must pay to the county recorder in order to have the deed put on record

Earnest money demonstrates the buyer's good faith and can become part of the down payment, but a contract is valid without it because the parties' mutual promises supply the consideration. Whether the seller may keep it on a buyer default depends on the contract terms, not an automatic forfeiture.

A liquidated damages clause in a real estate contract:

• a.Automatically voids the entire contract the moment either party is late on any deadline whatsoever
• b.Fixes in advance the amount payable on a breach, avoiding proof of actual loss✓
• c.Permits the injured party to recover unlimited punitive damages for even a minor or technical breach
• d.Requires the breaching party to specifically complete the sale and convey the property as agreed

Liquidated damages fix a reasonable, agreed-upon sum (often the earnest money) payable on breach, sparing the parties from litigating actual losses. It is not specific performance (which compels completion) and cannot be a penalty; grossly excessive amounts may be unenforceable.

When a contract states that 'time is of the essence,' it means:

• a.Only the seller, and never the buyer, is actually bound by the dates written into the agreement
• b.The parties may perform their obligations whenever it happens to be convenient for each of them
• c.The contract deliberately leaves the closing date open and unspecified for later determination
• d.Missing a stated deadline is itself a material breach of the contract✓

A 'time is of the essence' clause makes each specified date a strict, material term, so a party who misses a deadline is in breach and the other party may cancel or seek remedies. Without such a clause, courts may allow a reasonable extension for performance.

A financing contingency in a purchase agreement primarily protects the buyer by:

• a.Obligating the seller to personally provide the financing that the buyer was unable to obtain
• b.Requiring the buyer to come up with the full purchase price in cash if the mortgage is denied
• c.Letting the buyer cancel and usually recover the earnest money if the loan falls through✓
• d.Guaranteeing that the buyer will be approved for a mortgage from the chosen lending institution

A financing (mortgage) contingency lets the buyer back out without penalty, usually with the earnest money returned, if they are unable to secure the loan described in the contract by the deadline. It is a condition that must be satisfied for the buyer to be obligated to close.

An option to purchase real estate is best described as a:

• a.An agreement that immediately and automatically transfers legal title the moment it is signed
• b.A listing agreement between a property seller and the real estate broker hired to market it
• c.Unilateral contract binding the seller to sell if the optionee chooses to buy✓
• d.A bilateral contract that obligates both the buyer and the seller to complete the sale of the land

In an option, the optionor (seller) is bound to sell for the agreed price during the option period, but the optionee (buyer) has only the right, not the obligation, to buy, making it unilateral until exercised. Consideration paid for the option keeps it open.

A contract in which some acts still remain to be performed by one or both parties is classified as:

• a.Executory✓
• b.Unenforceable, meaning it was valid but cannot be enforced through the court system
• c.Executed, meaning every party has already fully carried out all of its promised obligations
• d.Void, meaning it never had any legal effect at all because it lacked an essential element

An executory contract is one still awaiting performance, such as a signed purchase agreement before closing. Once all parties have fully performed (for example, after closing and delivery of the deed), the contract is executed. Void and unenforceable describe validity, not the stage of performance.

A contract signed because of one party's intentional misrepresentation of a material fact (fraud) is generally:

• a.Automatically void from the very beginning, exactly as if it had never been formed at all
• b.Voidable at the option of the innocent, injured party✓
• c.Enforceable only after the document has been formally notarized and placed on public record
• d.Fully enforceable against the defrauded party despite the deception that induced the signing

Fraud (an intentional material misrepresentation relied upon to another's detriment) makes a contract voidable at the option of the innocent party, who may rescind or affirm it. It is not automatically void, and the wrongdoer cannot enforce it against the victim.

The parol evidence rule generally provides that:

• a.A signed written contract can never afterward be amended, changed, or supplemented in any way
• b.Every contract must be witnessed and signed in front of a notary public to be given any effect
• c.A prior oral agreement cannot contradict a complete, final written contract✓
• d.All oral contracts are automatically unenforceable no matter what their subject matter may be

The parol evidence rule bars using earlier oral or written statements to contradict or vary the terms of a final, integrated written contract. It promotes reliance on the written document; the parties can still amend the contract in a later signed writing.

Which of the following would discharge (terminate) a contract by operation of law rather than by the parties' own choice?

• a.One party choosing to assign its rights under the contract over to an unrelated third party
• b.Bankruptcy of a party or expiration of the statute of limitations✓
• c.Both parties simply completing full performance of everything the contract required of them
• d.The two parties mutually and voluntarily agreeing between themselves to rescind the contract

Discharge by operation of law includes events such as bankruptcy, illegality arising after formation, or the running of the statute of limitations. Mutual rescission, assignment, and full performance are ways the PARTIES end a contract, not automatic operation of law.

For an option contract to be binding on the optionor, the optionee usually must give:

• a.A completed and lender-approved mortgage loan application for the full purchase amount
• b.A firm and unconditional promise to purchase the property no matter what happens afterward
• c.Valuable consideration to keep the option open during its term✓
• d.A fully recorded deed to the property delivered into the optionee's own name before closing

An option must be supported by consideration (money or other value) paid to the optionor to hold the offer open; without consideration the optionor could simply revoke it. The optionee makes no promise to buy, which is what distinguishes an option from a bilateral purchase contract.

In an installment land contract (contract for deed), when does the buyer typically receive legal title?

• a.After completing the required payments, when the seller delivers the deed✓
• b.As soon as the buyer physically takes possession and moves into the property being purchased
• c.Immediately upon signing the installment contract, before making any of the scheduled payments
• d.Never, because legal title permanently remains vested in a neutral third-party trustee forever

In a land contract the buyer usually takes possession and holds equitable title while making installment payments, but the seller retains legal title and conveys the deed only after the buyer pays as agreed. This is a form of seller financing with delayed title transfer.

A right of first refusal differs from an option because a right of first refusal:

• a.Transfers ownership and legal title to the holder at the moment the agreement is first signed
• b.Fixes a set purchase price that the holder is free to exercise at absolutely any time it wishes
• c.Legally obligates the holder to go through with buying the property once the right is created
• d.Only lets the holder match a bona fide offer if the owner decides to sell✓

A right of first refusal is contingent: the owner is not committed to sell, but if the owner receives an acceptable offer, the holder gets the chance to match it. An option, by contrast, fixes a price and lets the holder compel a sale during the option period.

An offer to purchase automatically terminates if, before acceptance:

• a.The property that is the subject of the offer is professionally appraised for lending purposes
• b.The offeror decides to hire an attorney to review the transaction before it goes any further
• c.The offeree merely mentions the pending offer in conversation to a friend or family member
• d.The offeror dies or the time stated for acceptance expires✓

An offer ends on revocation, rejection or counteroffer, lapse of the stated (or a reasonable) time, or the death or incapacity of a party before acceptance. Merely discussing, appraising, or getting legal advice does not terminate an outstanding offer.

A counteroffer has what effect on the original offer?

• a.It has no legal effect whatsoever, so the offeree may still go back and accept the original terms
• b.It rejects the original offer and creates a new offer in its place✓
• c.It keeps the original offer fully open and alive while simply layering additional terms on top
• d.It automatically forms a binding contract the instant the counteroffer is communicated to the offeror

Any material change to an offer is a counteroffer, which terminates (rejects) the original offer and puts a new offer on the table. The original can no longer be accepted unless it is re-extended, because acceptance must mirror the offer exactly.

A contract entered into under duress or undue influence is generally:

• a.Voidable at the option of the victimized party✓
• b.Fully valid and completely enforceable against everyone who signed it, without any exception
• c.Void from the very outset, treated exactly like a contract formed for an illegal purpose
• d.Enforceable, but only after a full year has passed from the date the contract was signed

Duress (unlawful pressure) and undue influence (improper use of a position of trust) deprive a party of free will, making the contract voidable by the injured party, who may rescind it. It is treated like fraud in that the innocent party chooses whether to cancel.

For there to be genuine mutual assent, the parties must have a 'meeting of the minds.' A mutual mistake about a material fact:

• a.Has no effect at all on the contract, which remains fully binding despite the shared error
• b.May make the contract voidable because there was no true agreement on it✓
• c.Automatically converts the purchase contract into an option to buy at the same stated price
• d.Always makes the contract completely valid and enforceable exactly as it was written down

Mutual assent requires that the parties actually agree on the essential terms. A mutual mistake as to a material fact undermines that agreement and can render the contract voidable (or unenforceable) because the minds never truly met on that point.

If a seller breaches a purchase contract and the buyer wants the court to compel the seller to convey the property (rather than pay money), the buyer seeks:

• a.Liquidated damages equal to the amount of the earnest money deposited under the contract
• b.Specific performance, because each parcel of real estate is unique✓
• c.Rescission that would cancel the agreement and return both parties to their earlier positions
• d.A novation that would substitute an entirely new contract in place of the breached one

Specific performance is an equitable remedy forcing completion of the sale; courts grant it in real estate because land is unique and money damages may be inadequate. Liquidated damages and rescission are money or cancellation remedies, and novation replaces the contract rather than enforcing it.

A contract is classified as 'unenforceable' when it:

• a.Can be canceled at the sole option of one party who was defrauded or lacked capacity
• b.Never had any legal effect at all because it was formed for a plainly illegal purpose
• c.Has already been fully performed and completely carried out by both of the parties to it
• d.Was valid but cannot be enforced in court, like an oral land-sale contract✓

An unenforceable contract meets the basic requirements but cannot be enforced through the courts, often because it violates the statute of frauds (for example, an oral land-sale agreement). A void contract had no effect at all, and a voidable one can be rescinded by one party.

Under the doctrine of equitable conversion, once a valid purchase contract is signed but before closing:

• a.The buyer is regarded as holding equitable title while the seller keeps legal title✓
• b.Neither party holds any interest in the property until the closing is finished and funds are paid
• c.The seller retains both legal and equitable title until the buyer records the deed after closing
• d.Legal title passes instantly and completely to the buyer the moment the contract is signed

Under equitable conversion, signing an enforceable purchase contract gives the buyer equitable title (an ownership interest the courts will protect), while the seller holds legal title in trust until closing. This doctrine underlies why buyers often insist the seller keep the property insured until the deed is delivered.

Two competing brokerages agree to charge all sellers the same commission rate. This illegal antitrust practice is known as:

• a.Steering, the illegal channeling of buyers toward or away from areas by their protected class
• b.Blockbusting, inducing owners to sell by claiming a protected group is moving into the area
• c.Puffing, the legal, non-factual sales exaggeration that a reasonable buyer would not rely on
• d.Price fixing✓

Price fixing is an agreement among competitors to set prices (here, commission rates) rather than letting each firm compete independently, and it violates federal antitrust law. Commission rates must always be negotiated between a broker and client. Steering and blockbusting are fair-housing violations; puffing is legal sales talk.

Several brokerages agree to divide a city so each operates only in certain areas and none compete. This antitrust violation is called:

• a.A group boycott, a concerted refusal by competitors to deal with a particular targeted firm
• b.A tie-in arrangement, conditioning one product or service on the purchase of a separate one
• c.Market allocation (division of territories)✓
• d.Dual agency, representing both the buyer and the seller in a single real estate transaction

Market allocation is an illegal agreement among competitors to divide territories or customers, eliminating competition among them. A tie-in ties one product to another, a group boycott is a concerted refusal to deal, and dual agency is a representation issue, not an antitrust one.

Two or more competing firms agree to refuse to cooperate with a broker who discounts commissions. This illegal antitrust practice is a:

• a.A tie-in arrangement, linking the sale of one service to the required purchase of a second one
• b.Group boycott✓
• c.A price ceiling that state or federal law affirmatively requires competing brokerages to observe
• d.A legitimate and lawful independent business decision made separately by each individual firm

A group boycott is a concerted agreement among competitors to refuse to deal with another firm, and it violates antitrust law even if aimed at a discounter. Each firm may independently decide with whom to work, but agreeing together to exclude a competitor is illegal.

A broker will list a seller's property only if the seller also agrees to use the broker's affiliated mortgage company. This illegal antitrust practice is a:

• a.Tie-in (tying) arrangement✓
• b.A price-fixing agreement among competing brokerages to charge sellers identical commission rates
• c.A permissible package discount that lawfully bundles several optional services at a reduced price
• d.A net listing, in which the broker keeps any amount the sale brings above the seller's set price

A tie-in arrangement conditions the sale of one desired product or service (the listing) on the customer's purchase of a separate one (the mortgage service), unlawfully leveraging market power. It is different from price fixing and from a net listing, which concerns how commission is calculated.

An agent directs minority buyers only toward certain neighborhoods and away from others based on race. This fair-housing violation is:

• a.A permissible time-saving service the agent lawfully provides to help busy buyers narrow choices
• b.Redlining, a lending practice that denies loans or insurance within certain mapped neighborhoods
• c.Blockbusting, inducing owners to sell quickly by playing on fear about a protected group arriving
• d.Steering✓

Steering is channeling buyers toward or away from particular areas based on a protected characteristic such as race, and it violates the Fair Housing Act. It is never a permissible 'convenience.' Redlining is a lending practice, and blockbusting induces sales through fear.

An agent tells homeowners a particular ethnic group is moving in so they should sell before values fall, hoping to win listings. This is:

• a.Blockbusting (panic selling)✓
• b.Legal and accurate market forecasting that a diligent agent may lawfully share with area owners
• c.Redlining, the refusal of a lender to make loans or write insurance within specific neighborhoods
• d.Steering, the channeling of prospective buyers toward or away from areas by their protected class

Blockbusting is inducing owners to sell by exploiting fear about the entry of a protected class, and it violates fair-housing law. Steering directs buyers based on protected class, and redlining denies loans or insurance by area; none of these is legitimate market advice.

A lender refuses to make loans in certain neighborhoods based on their racial composition rather than the applicant's qualifications. This illegal practice is:

• a.Blockbusting, the inducing of panic sales by exploiting fear that a protected group is arriving
• b.Prudent, individualized underwriting that lawfully evaluates the specific borrower and property
• c.Redlining✓
• d.Steering, the directing of buyers toward or away from neighborhoods based on a protected class

Redlining is the discriminatory denial of loans, insurance, or other services in specific geographic areas based on the residents' protected characteristics. It violates fair-housing and fair-lending laws. Legitimate underwriting evaluates the individual applicant and property, not the neighborhood's demographics.

Under the general principles of the REALTOR Code of Ethics, when representing a client, the member's fundamental duty is to:

• a.Protect and promote the client's interests while treating all parties honestly✓
• b.Conceal known material defects from the other side whenever doing so would help the client
• c.Treat the customer and the client in exactly the same way, owing identical duties to each
• d.Advance the member's own personal financial interests ahead of everyone else's in the deal

The Code of Ethics directs a member to protect and promote the client's interests, but that duty is expressly limited by the obligation to treat ALL parties honestly. It does not license concealing material defects or putting the agent's own interests first.

The difference between illegal misrepresentation and legal 'puffing' is that:

• a.They are effectively the same thing, and both of them are illegal and actionable in every case
• b.Misrepresentation is a false statement of material fact; puffing is opinion✓
• c.Misrepresentation can only happen after closing, whereas puffing can only happen before it
• d.Puffing is any statement made in writing, while misrepresentation only ever occurs when spoken

Puffing is an obvious opinion or sales exaggeration ('the best view in town') that a reasonable person would not treat as a fact. Misrepresentation asserts a false material FACT that others rely on, which can be fraudulent or negligent and is actionable regardless of whether it is written or oral.

An agent carelessly tells a buyer the home has 2,500 square feet without checking, when it has 2,000. Even without intent to deceive, the agent may be liable for:

• a.Fraud, which here would require proof that the agent knew the figure was false and meant to deceive
• b.Negligent misrepresentation✓
• c.A permissible good-faith estimate that carries no legal liability of any kind for the agent
• d.Legal puffing, since square footage is just an obvious opinion a buyer would never truly rely on

Negligent misrepresentation occurs when an agent makes a false statement of material fact carelessly, without a reasonable basis, and another relies on it to their detriment. Intent is not required (that would be fraud), and a specific numeric claim like square footage is a fact, not mere puffing.

A 'stigmatized property' is one where events such as a death or crime occurred. As to the seller's confidential motivation and similar facts, the listing agent must:

• a.Volunteer to every prospective buyer the lowest price the seller has privately said they will take
• b.Feel free to lie about the property's physical condition if doing so would protect the seller
• c.Keep them confidential while honestly answering about known material facts✓
• d.Disclose to buyers the seller's personal and private reasons for deciding to sell the property

The agent owes the client confidentiality about facts like the seller's motivation and bottom-line price, yet must be honest about material facts affecting the property and never misrepresent its condition. Whether a stigma such as a past death must be disclosed varies, but a client's confidential financial information is protected.

A listing agent wants to buy the listed property personally. To satisfy the fiduciary duties, the agent must:

• a.Do nothing special at all, because a listing agent is always free to buy their own listing
• b.Buy the property quietly and discreetly so as not to upset the other prospective buyers in line
• c.Automatically raise the listing price before purchasing in order to protect the selling client
• d.Fully disclose the agent's licensee status and the conflict and deal honestly✓

An agent's fiduciary duty of loyalty prohibits undisclosed self-dealing; if the agent wants to purchase, the agent must disclose the conflict and licensee status and act with complete honesty, and often the client should be advised to seek independent counsel. Concealing the agent's interest breaches loyalty and disclosure duties.

A broker deposits a client's earnest-money check into the broker's own business operating account. This is an example of:

• a.Proper and fully compliant handling of trust funds exactly as the license law requires
• b.A permissible short-term interest-free loan that the client has effectively made to the brokerage
• c.Commingling, which is prohibited✓
• d.Conversion, the more serious act of actually spending the client's funds for the broker's own use

Commingling is mixing clients' trust funds with the broker's own operating or personal funds; it is a serious license-law violation even if none of the money is spent. Actually SPENDING the client's funds for the broker's benefit is the further offense of conversion.

Under the doctrine of vicarious liability, a broker may be held responsible for:

• a.A next-door neighbor's misrepresentation about the boundaries or condition of the property
• b.The buyer's unrelated personal debts and financial obligations owed to outside third parties
• c.The acts of salespeople performed within the scope of their agency✓
• d.Any and every crime that a client happens to commit at any point during the transaction

Vicarious liability makes a principal (the broker) responsible for the acts of agents (salespeople) done within the scope of their authority. It does not extend to unrelated parties such as clients, buyers' personal debts, or third parties outside the agency relationship.

In a commission dispute, 'procuring cause' generally refers to the broker who:

• a.Began the unbroken chain of events leading the ready buyer to purchase✓
• b.Merely showed the property a single time and then had no further involvement in the transaction
• c.Was simply the first brokerage to advertise the listing anywhere, regardless of who sold it
• d.Holds the signed listing agreement, no matter which cooperating broker actually found the buyer

Procuring cause is the broker whose efforts set in motion the continuous, unbroken series of events resulting in the sale. Simply opening a door once, being first to advertise, or holding the listing does not by itself establish procuring cause if another broker actually caused the purchase.

Even toward a customer (a party the agent does NOT represent), a licensee still owes the duty to:

• a.Keep all of the customer's confidential information secret from the agent's own client
• b.Deal honestly and disclose known material defects in the property✓
• c.Negotiate the lowest possible purchase price on the customer's behalf against the agent's client
• d.Actively promote the customer's interests and place them above those of the represented client

To a customer, the agent owes honesty, fair dealing, and disclosure of known material defects, but NOT the fiduciary duties of loyalty and confidentiality, which are reserved for the client. The agent cannot advocate for the customer's price or keep the customer's secrets at the client's expense.

In a lawful dual agency with both parties' informed written consent, the dual agent generally may NOT:

• a.Provide both parties with the known material facts and defects concerning the property being sold
• b.Reveal one party's confidential negotiating position to the other party✓
• c.Prepare and present the standard transaction documents that both parties need to complete the sale
• d.Treat both parties honestly and properly account to each of them for any funds being held in trust

Because a dual agent represents both sides, the agent must remain neutral on price and cannot reveal one party's confidential information (like a buyer's top price or a seller's floor) to the other. The agent may still handle paperwork, disclose material property facts, and deal honestly with both.

An agency relationship between a broker and a client is terminated by all of the following EXCEPT:

• a.A buyer submitting an offer the seller has not yet accepted✓
• b.The natural expiration of the agency agreement at the end of its stated and agreed-upon term
• c.The death or the legal incapacity of either the broker or the client during the listing period
• d.The mutual agreement of both the broker and the client to end the relationship early by consent

Agency ends by performance, mutual agreement, expiration, revocation, renunciation, or the death, incapacity, or bankruptcy of a party, among other events. A buyer merely submitting an offer during the listing does not terminate the agency; the relationship continues while the parties negotiate.

For an antitrust price-fixing violation to exist, there must be:

• a.A published suggested rate that one broker voluntarily chooses to follow without any agreement
• b.A client who successfully negotiates the commission rate downward before signing the listing
• c.An agreement or conspiracy between two or more independent competitors✓
• d.A single firm that, entirely on its own, independently decides what prices it will charge clients

Price fixing requires concerted action, meaning an agreement between two or more separate competitors to fix prices. A single firm setting its own rates independently, or a client negotiating a rate, is lawful competition, not a conspiracy.

An agency relationship can be created not only by an express agreement but also by:

• a.The mere payment of a commission by the seller, which alone conclusively proves an agency existed
• b.A recorded deed conveying the property, which by itself makes the grantee an agent of the seller
• c.A buyer touring an open house, which automatically makes the hosting agent the buyer's own agent
• d.Ratification or estoppel, when conduct implies or affirms the agency✓

Besides an express listing or buyer agreement, agency can arise by implication or ratification (a principal accepting the benefits of unauthorized acts) or by estoppel (when a principal's conduct leads a third party to reasonably believe agency exists). A deed, a commission payment alone, or touring an open house does not by itself create an agency relationship.

Under a gross lease, who typically pays the property's operating expenses such as taxes, insurance, and maintenance?

• a.The landlord pays them out of the fixed rent the tenant provides✓
• b.The operating expenses are automatically split fifty-fifty between the landlord and the tenant by law
• c.The tenant reimburses the landlord for all taxes, insurance, and maintenance on top of base rent
• d.A third-party property manager personally pays them out of the manager's own management fee

In a gross lease the tenant pays a flat rent and the landlord covers the operating expenses (taxes, insurance, maintenance) out of that rent. This is common for residential and many office leases, giving the tenant a predictable payment.