The agency relationship is defined by

In every state, a body of law, generally called the law of agency, defines and regulates the legal roles of this relationship. While the relationship is subject to contract law, agency law dictates how the relationship will achieve its purposes, regardless of what the listing contract states. Agency law, sometimes codified by state statute, defines and regulates the legal roles in a principal-agent relationship. A listing contract sets terms and promises, but agency law dictates how the relationship works and what duties apply, regardless of what the contract says.

the law of real estate contracts.

the agreement between a principal and an agent.

One of the parties to an agency relationship defaults, and the agreement terminates. Which of the following is true?

Involuntary termination of the relationship may create legal and financial liability for a party who defaults or cancels. For example, a client may renounce an agreement but then be held liable for the agent's expenses or commission. Involuntary termination of an agency relationship through default does not erase its consequences. A party who defaults or cancels may have to answer for the other party's expenses or earned commission, so termination ends future performance but not accrued legal and financial liability.

All obligations are extinguished.

Both parties must continue to perform all other obligations of the agreement.

The damaged party has no claim against the defaulting party.

Among the fiduciary duties imposed on a real estate agent is the requirement to

A conventional listing agreement does not authorize an agent to obligate the client to contracts, and it does not allow the agent to conceal offers to buy, sell, or lease coming from a customer or another agent. Further, since a client relies on a broker's representations, a broker must exercise care not to offer advice outside of his or her field of expertise. A fiduciary agent must present every offer to buy, sell, or lease that touches the client's interests, no matter the amount. The agent may not conceal offers or use deceptive tactics, and should avoid giving advice outside the agent's own field of expertise.

refuse offers the agent knows will be unacceptable to the principal.

advise the principal against accepting an offer that is below full price.

advise a prospect that the principal will not accept the prospect's offer in order to elicit a better offer.

Agent Gerry has executed an exclusive buyer broker agreement with the Andersons. The agent subsequently places an offer with Melinda, the exclusive selling agent for the Lincolns, to buy their lakefront property. The offer contains provisions for the Lincolns to pay the brokerage commission, which the Lincolns agree to. Given this set of circumstances, Gerry owes the full set of fiduciary duties to

Since Gerry executed an agency agreement with the Andersons, they become the client and the Lincolns the customer, regardless of who pays the commission. Fiduciary duties flow to the client, the party who signed the agency agreement. The Andersons executed the exclusive buyer broker agreement with Gerry, so they are the clients. The Lincolns are customers, even though they agreed to help pay the commission.

The duties of a transaction broker or facilitator include

In the role of facilitator, the broker's only fiduciary duties and standards of conduct are those of accounting; skill, care, and diligence; honesty and fair dealing; and disclosure to both parties of all material facts in residential sale transactions affecting the property's value. Some states do not allow for this form of relationship in a real estate transaction. A transaction broker or facilitator owes a limited set of duties: accounting, skill and care, honesty and fair dealing, and disclosure of all material facts affecting value to both parties. This neutral role does not carry the full fiduciary package, and some states do not allow it.

preserving the confidentiality of information received from either party.

helping the two parties achieve their respective objectives.

choosing to obey the instructions of one party and informing the other party of the decision.

The essential foundation of the agency relationship consists of

The essence of the agency relationship is trust, confidence, and mutual good faith. The principal trusts the agent to exercise the utmost skill and care in fulfilling the authorized activity, and to promote the principal's best interests. The agent undertakes to strive in good faith to achieve the desired objective, and to fulfill the fiduciary duties. The foundation of any agency relationship is trust, confidence, and mutual good faith. The principal trusts the agent to use skill and care and to promote the principal's interests, while the agent promises in good faith to pursue the desired objective and uphold fiduciary duties.

mutual respect, compensation, and confidentiality.

diligence, results, and compensation.

service, marketing, and respect.

Audrey wants to take a vacation. To do so, she authorizes an agent to conduct the operations of one of her business enterprises. The kind of agency she has established is

In a general agency, the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts. A general agency exists when the principal delegates ongoing tasks within a particular business or enterprise, and it may include authority to sign contracts. Universal agency covers all the principal's affairs, while special agency is limited to one specific act or transaction.

Implied agency arises when

An agency relationship can arise by implication, intentionally or unintentionally. Implication means that the parties act as if there were an agreement. For example, if an agent promises a buyer to do everything possible to find a property at the lowest possible price, and the buyer accepts the proposition, there may be an implied agency relationship even though there is no specific agreement. Implied agency arises from the conduct of the parties rather than from a written or oral express agreement. When the parties act as if there is an agency agreement, the relationship can be created by implication, sometimes without either party intending to form one.

an agent accepts an oral listing.

a principal accepts an oral listing.

a principal agrees to all terms of a written listing agreement, whether express or implied.

A principal discloses that she would sell a property for $500,000. During the listing period, the house is listed and marketed for $530,000. No offers come in, and the listing expires. Three weeks later, the agent confides to a customer that the seller would have sold for less than the listed price. Which of the following is true?

An agent may not disclose any information that would harm the client's interests or bargaining position, or anything else the client wishes to keep secret. The confidentiality standard is one of the duties that extends beyond the termination of the listing: at no time in the future may the agent disclose confidential information. Confidentiality is a fiduciary duty that continues after a listing ends. An agent may never disclose information that harms the client's bargaining position or that the client wants kept secret, and expiration of the listing does not release the agent from this duty.

The agent has fulfilled all fiduciary duties, since the listing has expired.

The agent is violating the duties owed this customer.

The agent has created a dual agency situation with the customer.

An owner's agent is showing a buyer a residential property for sale. The buyer notices water stains on the foundation walls and floor, and informs the agent. The appropriate course of action for the agent is to

An agent has the duty to inform the client of all material facts, reports, and rumors that might affect the client's interests in the property transaction. An agent owes the client the duty to report all material facts, reports, and rumors that could affect the client's interests in the transaction. Water stains the buyer spots are a material fact, so the listing agent must relay them to the seller rather than act independently.

immediately contract to paint the ceiling.

immediately contract to repair the roof.

suggest the buyer make a lower-price offer.

When must a listing agent disclose his or her agency relationship to prospective tenants or buyers?

A listing agent must disclose in writing to a buyer or tenant that the agent represents the owner in the transaction. This disclosure must occur before or at the first "substantive contact" with the customer prospect. In some states, buyer representatives must disclose the agency relationship to sellers or their agents upon initial contact. A listing agent must give a buyer or tenant written notice that the agent represents the owner. This disclosure must occur before or at the first substantive contact, meaning any communication beyond casual conversation that moves the transaction forward.

Immediately prior to the initial contact.

Immediately following any offer executed by the customer.

A buyer agent or tenant representative should disclose his or her agency relationship to the owner's agent

A buyer agent must disclose the agency relationship to the seller or seller's agent on first contact. Substantive contact is assumed to occur immediately in this circumstance. A buyer agent or tenant representative must disclose the agency relationship to the seller or the seller's agent on first contact. In this circumstance the law treats substantive contact as occurring right away, so the required disclosure cannot be postponed.

immediately prior to the initial contact.

immediately prior to substantive contact.

immediately following any offer executed by the landlord.

An agent informs a buyer that a provision in a contract is very commonplace. After explaining the clause, the agent assures the buyer that the clause does not mean anything significant. If something goes wrong with the transaction, the agent could be liable for

An agent should not act or speak outside the agent's area of expertise. A customer may rely on anything an agent says, and the agent will be held accountable. For example, an agent represents that a property will appreciate. The buyer interprets this as expert investment advice and buys the property. If the property does not appreciate, the buyer may hold the agent liable. An agent must stay inside the agent's area of expertise. Explaining or interpreting contract clauses to a buyer is giving legal advice, which amounts to practicing law without a license. A buyer may rely on the agent's words, and the agent can be held liable.

violating duties owed a customer.

The degree of authority granted by a residential brokerage listing agreement generally allows the agent to

Special agency limits the scope of the broker's authority to specific activities, generally those which generate customers and catalyze the transaction. A special agency agreement usually does not authorize a broker to obligate the client to a contract as a principal party. Normally, principals do not delegate the authority to negotiate price to an agent in a residential transaction. A residential listing creates a special agency, limiting the broker's authority to activities that generate customers and move the transaction forward, such as marketing, showing, and selling. It normally does not include binding the client to a contract or negotiating price.

create contractual obligations for the client.

negotiate the selling price between client and customer.

hire inspectors, and other individuals to prepare the property for marketing.

A salesperson, without an oral or written listing agreement, brings potential buyers to the seller. The seller says, "You can bring me buyers if you want, but I'm not paying you a commission." The salesperson then continues to direct buyers to the property. Which of the following is true about this situation?

Clients and agents may also create an implied agency listing based on substantive actions rather than on an express agreement. For example, if a seller allows a broker to undertake certain activities toward effecting a transaction without a specific authorization, but with full knowledge and consent, an implied agency may have been created. Even without a written or oral agreement, a seller who knowingly allows a broker to work toward a transaction can create an implied agency. The relationship rests on conduct and consent rather than an express listing, and it can carry duties and commission consequences for both parties.

There is no agency relationship, and therefore the seller will owe no commission if one of the salesperson's buyers buys the property.

The seller and agent have an illegal, undisclosed agency relationship.

The agent has an open exclusive agency listing with no commission agreement, and therefore owes no fiduciary duties to the seller.

What is a multiple listing?

Though not a distinct type of listing agreement, multiple listing is a significant feature of brokerage practice. Multiple listing is an authorization to enter a listing in a multiple listing service. Multiple listing is not a distinct type of listing agreement. It is an authorization to enter a listing in a multiple listing service so member brokers can cooperate in selling the property, and it is a central feature of everyday brokerage practice.

A listing shared by a listing agent and a selling agent.

A listing that a listing agent delegates to a subagent.

A listing that authorizes a listing agent to market more than one property for a seller.

Although a listing broker may delegate listing tasks to an employed licensee, the broker may not delegate the authority to

In the normal course of business, a listing broker delegates marketing responsibilities to salespeople. A salesperson may not, however, seek compensation directly from a client. Only the broker can obtain and disburse the compensation. A listing broker may delegate marketing tasks to employed licensees, but only the broker may obtain and disburse compensation. A salesperson may not collect a commission directly from the client, so the broker keeps control of the money side of the transaction.

provide cooperating brokers with information about the property.

inspect the property for hazardous substances.

A landlord promises to compensate a broker for procuring a tenant, provided the broker is the procuring cause. This is an example of a(n)

An open listing is a non-exclusive authorization to sell or lease a property. The owner may offer such agreements to any number of brokers in the marketplace. With an open listing, the broker who is the first to perform under the terms of the listing is the sole party entitled to a commission. An open listing is a non-exclusive authorization to sell or lease, offered to any number of brokers at the same time. With an open listing, only the broker who is the procuring cause, the first to perform under the listing's terms, earns the commission.

exclusive right-to rent agreement.

In the context of agency law, the legal difference between an owner representation agreement and a buyer representation agreement is

Generally, buyer and tenant representation agreements are subject to the same laws and regulations as those applying to owner listings. The only difference is the client and his or her transaction expectations. Owner representation and buyer representation agreements are governed by the same agency laws and regulations. The real legal difference is the client: who the agent represents and what that particular client wants to accomplish in the transaction.

Which of the following relationships characterizes a designated agency relationship?

The designated agency agreement allows a broker to select a salesperson and associate brokers to act as the client's agent. A designated agency agreement must contain the name of all associate brokers who are authorized to act as supervisory brokers. In designated agency, the broker appoints specific salespeople or associate brokers to represent each party, so one firm can serve both sides without the broker acting as a dual agent. The agreement must name the associate brokers authorized to act as supervisory brokers.

A broker assign a preferred subagent from other firms to represent each party.

There is no such duty as maintaining confidentiality.

The broker primarily represents the seller.

ApexAgent Practice Questions

Agency Law and Listing Agreements

Agency questions are decided by who represents whom and what the agent owes that person. The 20 questions below cover the agency relationship, fiduciary duties, the listing agreement types, and the ways an agency ends. Each one shows the answer, explains the rule, and works through the wrong options so the distinction sticks.

20 practice questions with answers and explanations. Written and reviewed by the ApexAgent team against the national exam content outline, updated 2026-10-04.

Answer these, then test yourself under time

The free practice test scores you instantly, with no signup, and tells you which topics cost you the most points.

Take the Free Practice Test

What this topic tests

Fiduciary duties run to the client who signed the agency agreement, regardless of who pays the commission.
Confidentiality survives the listing's expiration and bars disclosure of information that harms the client's bargaining position.
A listing agent must present every offer to the client, no matter the amount or the agent's opinion.
Residential listings create special agency, limited to marketing, showing, and selling rather than binding contracts or price negotiation.
Implied agency can arise from conduct and consent even without a written or oral listing agreement.

Jump to a question

1. The agency relationship is defined by
2. One of the parties to an agency relationship defaults,
3. Among the fiduciary duties imposed on a real estate
4. Agent Gerry has executed an exclusive buyer broker agreement
5. The duties of a transaction broker or facilitator include
6. The essential foundation of the agency relationship consists of
7. Audrey wants to take a vacation. To do so,
8. Implied agency arises when
9. A principal discloses that she would sell a property
10. An owner's agent is showing a buyer a residential
11. When must a listing agent disclose his or her
12. A buyer agent or tenant representative should disclose his
13. An agent informs a buyer that a provision in
14. The degree of authority granted by a residential brokerage
15. A salesperson, without an oral or written listing agreement,
16. What is a multiple listing?
17. Although a listing broker may delegate listing tasks to
18. A landlord promises to compensate a broker for procuring
19. In the context of agency law, the legal difference
20. Which of the following relationships characterizes a designated agency

20 real estate exam questions on this topic

Question 1 of 20
The agency relationship is defined by
- the Realtor Code of Ethics.
- the laws of agency, or in some states, by statute.Correct answer
- the law of real estate contracts.
- the agreement between a principal and an agent.
Correct answer: B. the laws of agency, or in some states, by statute.
Why: In every state, a body of law, generally called the law of agency, defines and regulates the legal roles of this relationship. While the relationship is subject to contract law, agency law dictates how the relationship will achieve its purposes, regardless of what the listing contract states.
The rule: Agency law, sometimes codified by state statute, defines and regulates the legal roles in a principal-agent relationship. A listing contract sets terms and promises, but agency law dictates how the relationship works and what duties apply, regardless of what the contract says.
Why the other options are wrong
- The Code of Ethics sets professional conduct standards, but it does not define the legal agency relationship.
- Contract law governs the listing agreement itself, not the underlying law that regulates the agency relationship.
- The agreement between principal and agent creates the relationship, but agency law defines its legal roles.
Question 2 of 20
One of the parties to an agency relationship defaults, and the agreement terminates. Which of the following is true?
- All obligations are extinguished.
- Both parties must continue to perform all other obligations of the agreement.
- The defaulting party may have a financial consequence.Correct answer
- The damaged party has no claim against the defaulting party.
Correct answer: C. The defaulting party may have a financial consequence.
Why: Involuntary termination of the relationship may create legal and financial liability for a party who defaults or cancels. For example, a client may renounce an agreement but then be held liable for the agent's expenses or commission.
The rule: Involuntary termination of an agency relationship through default does not erase its consequences. A party who defaults or cancels may have to answer for the other party's expenses or earned commission, so termination ends future performance but not accrued legal and financial liability.
Why the other options are wrong
- Termination does not wipe out accrued liability, so unpaid expenses or commission can still be owed after default.
- Remaining future obligations generally end on termination, and pressing both parties to keep performing ignores that rule.
- A defaulting party can face legal and financial liability, so the damaged party may still have a valid claim.
Question 3 of 20
Among the fiduciary duties imposed on a real estate agent is the requirement to
- refuse offers the agent knows will be unacceptable to the principal.
- present all offers to the principal regardless of their amount.Correct answer
- advise the principal against accepting an offer that is below full price.
- advise a prospect that the principal will not accept the prospect's offer in order to elicit a better offer.
Correct answer: B. present all offers to the principal regardless of their amount.
Why: A conventional listing agreement does not authorize an agent to obligate the client to contracts, and it does not allow the agent to conceal offers to buy, sell, or lease coming from a customer or another agent. Further, since a client relies on a broker's representations, a broker must exercise care not to offer advice outside of his or her field of expertise.
The rule: A fiduciary agent must present every offer to buy, sell, or lease that touches the client's interests, no matter the amount. The agent may not conceal offers or use deceptive tactics, and should avoid giving advice outside the agent's own field of expertise.
Why the other options are wrong
- An agent may not conceal offers the client might refuse; the duty is to present every offer received.
- The agent must not steer the client with advice outside the agent's expertise; presenting the offer is the obligation.
- Deceiving a customer to fetch a higher offer breaches the fiduciary duties of honesty, loyalty, and fair dealing.
Question 4 of 20
Agent Gerry has executed an exclusive buyer broker agreement with the Andersons. The agent subsequently places an offer with Melinda, the exclusive selling agent for the Lincolns, to buy their lakefront property. The offer contains provisions for the Lincolns to pay the brokerage commission, which the Lincolns agree to. Given this set of circumstances, Gerry owes the full set of fiduciary duties to
- the Andersons.Correct answer
- the Lincolns.
- Gerry's broker.
- Melinda's broker.
Correct answer: A. the Andersons.
Why: Since Gerry executed an agency agreement with the Andersons, they become the client and the Lincolns the customer, regardless of who pays the commission.
The rule: Fiduciary duties flow to the client, the party who signed the agency agreement. The Andersons executed the exclusive buyer broker agreement with Gerry, so they are the clients. The Lincolns are customers, even though they agreed to help pay the commission.
Why the other options are wrong
- The Lincolns are the sellers in this deal, which makes them customers here, not Gerry's clients.
- Gerry's broker is not a principal in this transaction; fiduciary duties run to the client, not up to the broker.
- Gerry owes no fiduciary duties to another firm's broker, so Melinda's broker is not the correct answer.
Question 5 of 20
The duties of a transaction broker or facilitator include
- preserving the confidentiality of information received from either party.
- helping the two parties achieve their respective objectives.
- disclosing material facts that affect the value of the property to both parties.Correct answer
- choosing to obey the instructions of one party and informing the other party of the decision.
Correct answer: C. disclosing material facts that affect the value of the property to both parties.
Why: In the role of facilitator, the broker's only fiduciary duties and standards of conduct are those of accounting; skill, care, and diligence; honesty and fair dealing; and disclosure to both parties of all material facts in residential sale transactions affecting the property's value. Some states do not allow for this form of relationship in a real estate transaction.
The rule: A transaction broker or facilitator owes a limited set of duties: accounting, skill and care, honesty and fair dealing, and disclosure of all material facts affecting value to both parties. This neutral role does not carry the full fiduciary package, and some states do not allow it.
Why the other options are wrong
- Full confidentiality is a client agent's fiduciary duty, not something a neutral facilitator owes to both sides.
- A facilitator treats both parties fairly and neutrally rather than championing each side's separate objectives.
- A transaction broker cannot simply obey one party's instructions and tell the other; that would abandon neutrality.
Question 6 of 20
The essential foundation of the agency relationship consists of
- mutual respect, compensation, and confidentiality.
- diligence, results, and compensation.
- service, marketing, and respect.
- good faith, trust and confidence.Correct answer
Correct answer: D. good faith, trust and confidence.
Why: The essence of the agency relationship is trust, confidence, and mutual good faith. The principal trusts the agent to exercise the utmost skill and care in fulfilling the authorized activity, and to promote the principal's best interests. The agent undertakes to strive in good faith to achieve the desired objective, and to fulfill the fiduciary duties.
The rule: The foundation of any agency relationship is trust, confidence, and mutual good faith. The principal trusts the agent to use skill and care and to promote the principal's interests, while the agent promises in good faith to pursue the desired objective and uphold fiduciary duties.
Why the other options are wrong
- Respect and compensation are not the foundation of agency; the core is trust, confidence, and mutual good faith.
- Results and pay are outcomes, not the essence; the relationship rests on trust rather than guaranteed results.
- Service, marketing, and respect are tasks the agent performs, not the underlying basis of the relationship.
Question 7 of 20
Audrey wants to take a vacation. To do so, she authorizes an agent to conduct the operations of one of her business enterprises. The kind of agency she has established is
- limited.
- general.Correct answer
- universal.
- special.
Correct answer: B. general.
Why: In a general agency, the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts.
The rule: A general agency exists when the principal delegates ongoing tasks within a particular business or enterprise, and it may include authority to sign contracts. Universal agency covers all the principal's affairs, while special agency is limited to one specific act or transaction.
Why the other options are wrong
- A limited agency covers a narrow, specific matter, not the ongoing operation of a whole business enterprise.
- A universal agency reaches all of the principal's affairs, which is broader than running one enterprise.
- A special agency is confined to a single act or transaction rather than continuing business operations.
Question 8 of 20
Implied agency arises when
- an agent accepts an oral listing.
- a principal accepts an oral listing.
- a party creates an agency relationship outside of an express agreement.Correct answer
- a principal agrees to all terms of a written listing agreement, whether express or implied.
Correct answer: C. a party creates an agency relationship outside of an express agreement.
Why: An agency relationship can arise by implication, intentionally or unintentionally. Implication means that the parties act as if there were an agreement. For example, if an agent promises a buyer to do everything possible to find a property at the lowest possible price, and the buyer accepts the proposition, there may be an implied agency relationship even though there is no specific agreement.
The rule: Implied agency arises from the conduct of the parties rather than from a written or oral express agreement. When the parties act as if there is an agency agreement, the relationship can be created by implication, sometimes without either party intending to form one.
Why the other options are wrong
- An oral listing can itself be express authority, while implied agency rests on conduct rather than spoken words.
- An oral listing accepted by a principal is still express, so it does not fit the definition of implied agency.
- A binding written agreement is express by nature, so it cannot be the source of an implied relationship.
Question 9 of 20
A principal discloses that she would sell a property for $500,000. During the listing period, the house is listed and marketed for $530,000. No offers come in, and the listing expires. Three weeks later, the agent confides to a customer that the seller would have sold for less than the listed price. Which of the following is true?
- The agent has violated the duty of confidentiality.Correct answer
- The agent has fulfilled all fiduciary duties, since the listing has expired.
- The agent is violating the duties owed this customer.
- The agent has created a dual agency situation with the customer.
Correct answer: A. The agent has violated the duty of confidentiality.
Why: An agent may not disclose any information that would harm the client's interests or bargaining position, or anything else the client wishes to keep secret. The confidentiality standard is one of the duties that extends beyond the termination of the listing: at no time in the future may the agent disclose confidential information.
The rule: Confidentiality is a fiduciary duty that continues after a listing ends. An agent may never disclose information that harms the client's bargaining position or that the client wants kept secret, and expiration of the listing does not release the agent from this duty.
Why the other options are wrong
- Confidentiality survives the listing's expiration, so ending the listing never releases the agent from this duty.
- The duty of confidentiality belongs to the former client, so the customer is not the party whose rights were breached.
- Sharing a secret with a customer does not create representation, so no dual agency relationship was formed.
Question 10 of 20
An owner's agent is showing a buyer a residential property for sale. The buyer notices water stains on the foundation walls and floor, and informs the agent. The appropriate course of action for the agent is to
- immediately contract to paint the ceiling.
- immediately contract to repair the roof.
- suggest the buyer make a lower-price offer.
- inform the seller.Correct answer
Correct answer: D. inform the seller.
Why: An agent has the duty to inform the client of all material facts, reports, and rumors that might affect the client's interests in the property transaction.
The rule: An agent owes the client the duty to report all material facts, reports, and rumors that could affect the client's interests in the transaction. Water stains the buyer spots are a material fact, so the listing agent must relay them to the seller rather than act independently.
Why the other options are wrong
- The agent has no authority to order repairs or spend the seller's money without the seller's direction.
- Contracting for a roof repair goes beyond the agent's limited listing authority and commits the seller improperly.
- The agent owes the seller the material fact, not price coaching aimed at helping the buyer pay less.
Question 11 of 20
When must a listing agent disclose his or her agency relationship to prospective tenants or buyers?
- Immediately prior to the initial contact.
- Upon initial contact.
- Whenever substantive communication is made beyond casual conversation.Correct answer
- Immediately following any offer executed by the customer.
Correct answer: C. Whenever substantive communication is made beyond casual conversation.
Why: A listing agent must disclose in writing to a buyer or tenant that the agent represents the owner in the transaction. This disclosure must occur before or at the first "substantive contact" with the customer prospect. In some states, buyer representatives must disclose the agency relationship to sellers or their agents upon initial contact.
The rule: A listing agent must give a buyer or tenant written notice that the agent represents the owner. This disclosure must occur before or at the first substantive contact, meaning any communication beyond casual conversation that moves the transaction forward.
Why the other options are wrong
- Disclosure is required at or before substantive contact, not before any contact of any kind occurs.
- A casual first contact may come before the written disclosure is due, so initial contact alone is too broad.
- Disclosure must come before substantive dealing begins, so waiting until after an offer is far too late.
Question 12 of 20
A buyer agent or tenant representative should disclose his or her agency relationship to the owner's agent
- immediately prior to the initial contact.
- upon initial contact.Correct answer
- immediately prior to substantive contact.
- immediately following any offer executed by the landlord.
Correct answer: B. upon initial contact.
Why: A buyer agent must disclose the agency relationship to the seller or seller's agent on first contact. Substantive contact is assumed to occur immediately in this circumstance.
The rule: A buyer agent or tenant representative must disclose the agency relationship to the seller or the seller's agent on first contact. In this circumstance the law treats substantive contact as occurring right away, so the required disclosure cannot be postponed.
Why the other options are wrong
- For a buyer agent, first contact itself satisfies the rule, so no notice before that contact is required.
- In this situation substantive contact is assumed at first contact, so waiting for substantive contact is wrong.
- Disclosure must happen at first contact, not after an offer, so this answer comes far too late.
Question 13 of 20
An agent informs a buyer that a provision in a contract is very commonplace. After explaining the clause, the agent assures the buyer that the clause does not mean anything significant. If something goes wrong with the transaction, the agent could be liable for
- violating duties owed a customer.
- misinterpreting the clause.
- intentional misrepresentation.
- practicing law without a license.Correct answer
Correct answer: D. practicing law without a license.
Why: An agent should not act or speak outside the agent's area of expertise. A customer may rely on anything an agent says, and the agent will be held accountable. For example, an agent represents that a property will appreciate. The buyer interprets this as expert investment advice and buys the property. If the property does not appreciate, the buyer may hold the agent liable.
The rule: An agent must stay inside the agent's area of expertise. Explaining or interpreting contract clauses to a buyer is giving legal advice, which amounts to practicing law without a license. A buyer may rely on the agent's words, and the agent can be held liable.
Why the other options are wrong
- The real problem is unauthorized legal advice, not a general breach of the duties owed to a customer.
- The issue is not a simple misreading of the clause but stepping into legal interpretation for the buyer.
- The agent was careless rather than deliberately deceiving anyone, so intentional misrepresentation does not fit.
Question 14 of 20
The degree of authority granted by a residential brokerage listing agreement generally allows the agent to
- create contractual obligations for the client.
- negotiate the selling price between client and customer.
- hire inspectors, and other individuals to prepare the property for marketing.
- market, sell and show the property.Correct answer
Correct answer: D. market, sell and show the property.
Why: Special agency limits the scope of the broker's authority to specific activities, generally those which generate customers and catalyze the transaction. A special agency agreement usually does not authorize a broker to obligate the client to a contract as a principal party. Normally, principals do not delegate the authority to negotiate price to an agent in a residential transaction.
The rule: A residential listing creates a special agency, limiting the broker's authority to activities that generate customers and move the transaction forward, such as marketing, showing, and selling. It normally does not include binding the client to a contract or negotiating price.
Why the other options are wrong
- A residential listing creates special agency, which does not let the broker bind the client to a contract.
- Principals normally keep price negotiation authority and do not delegate it to the listing agent in a residential deal.
- Hiring inspectors and committing the seller to spend money exceeds the limited authority a listing grants.
Question 15 of 20
A salesperson, without an oral or written listing agreement, brings potential buyers to the seller. The seller says, "You can bring me buyers if you want, but I'm not paying you a commission." The salesperson then continues to direct buyers to the property. Which of the following is true about this situation?
- There is no agency relationship, and therefore the seller will owe no commission if one of the salesperson's buyers buys the property.
- An implied agency may have been created, with obligations to perform for both seller and agent.Correct answer
- The seller and agent have an illegal, undisclosed agency relationship.
- The agent has an open exclusive agency listing with no commission agreement, and therefore owes no fiduciary duties to the seller.
Correct answer: B. An implied agency may have been created, with obligations to perform for both seller and agent.
Why: Clients and agents may also create an implied agency listing based on substantive actions rather than on an express agreement. For example, if a seller allows a broker to undertake certain activities toward effecting a transaction without a specific authorization, but with full knowledge and consent, an implied agency may have been created.
The rule: Even without a written or oral agreement, a seller who knowingly allows a broker to work toward a transaction can create an implied agency. The relationship rests on conduct and consent rather than an express listing, and it can carry duties and commission consequences for both parties.
Why the other options are wrong
- Knowingly allowing the salesperson to work can create implied agency, so the disclaimer does not escape liability.
- An implied agency created by conduct is lawful, so nothing here makes the relationship illegal or undisclosed.
- There is no written or exclusive agreement, and implied agency still imposes duties on the seller and agent alike.
Question 16 of 20
What is a multiple listing?
- A listing shared by a listing agent and a selling agent.
- A listing that a listing agent delegates to a subagent.
- A listing that is entered in a multiple listing service to enable cooperation with member brokers.Correct answer
- A listing that authorizes a listing agent to market more than one property for a seller.
Correct answer: C. A listing that is entered in a multiple listing service to enable cooperation with member brokers.
Why: Though not a distinct type of listing agreement, multiple listing is a significant feature of brokerage practice. Multiple listing is an authorization to enter a listing in a multiple listing service.
The rule: Multiple listing is not a distinct type of listing agreement. It is an authorization to enter a listing in a multiple listing service so member brokers can cooperate in selling the property, and it is a central feature of everyday brokerage practice.
Why the other options are wrong
- That describes cooperation between agents generally, not the authorization to place a listing in the service.
- Delegating to a subagent is a separate arrangement and not what the term multiple listing means.
- Multiple listing is about cooperation with other brokers, not about listing several properties for one seller.
Question 17 of 20
Although a listing broker may delegate listing tasks to an employed licensee, the broker may not delegate the authority to
- obtain and distribute compensation.Correct answer
- provide cooperating brokers with information about the property.
- advertise the property.
- inspect the property for hazardous substances.
Correct answer: A. obtain and distribute compensation.
Why: In the normal course of business, a listing broker delegates marketing responsibilities to salespeople. A salesperson may not, however, seek compensation directly from a client. Only the broker can obtain and disburse the compensation.
The rule: A listing broker may delegate marketing tasks to employed licensees, but only the broker may obtain and disburse compensation. A salesperson may not collect a commission directly from the client, so the broker keeps control of the money side of the transaction.
Why the other options are wrong
- Sharing property information with cooperating brokers is an ordinary marketing task the broker may delegate.
- Advertising the property is a normal marketing task routinely assigned to employed licensees.
- Inspecting a property is a task that can be delegated, not authority reserved exclusively to the broker.
Question 18 of 20
A landlord promises to compensate a broker for procuring a tenant, provided the broker is the procuring cause. This is an example of a(n)
- exclusive right-to rent agreement.
- exclusive agency agreement.
- open rental listing.Correct answer
- net lease listing.
Correct answer: C. open rental listing.
Why: An open listing is a non-exclusive authorization to sell or lease a property. The owner may offer such agreements to any number of brokers in the marketplace. With an open listing, the broker who is the first to perform under the terms of the listing is the sole party entitled to a commission.
The rule: An open listing is a non-exclusive authorization to sell or lease, offered to any number of brokers at the same time. With an open listing, only the broker who is the procuring cause, the first to perform under the listing's terms, earns the commission.
Why the other options are wrong
- An exclusive right-to-rent agreement guarantees payment even if the owner finds the tenant, unlike this procuring-cause deal.
- An exclusive agency agreement still bars the owner from using other brokers, so it is not this open arrangement.
- A net listing concerns the owner's net proceeds, not the promise to pay whoever procures a tenant.
Question 19 of 20
In the context of agency law, the legal difference between an owner representation agreement and a buyer representation agreement is
- the client.Correct answer
- the commission amount.
- fiduciary duties.
- regulatory approvals.
Correct answer: A. the client.
Why: Generally, buyer and tenant representation agreements are subject to the same laws and regulations as those applying to owner listings. The only difference is the client and his or her transaction expectations.
The rule: Owner representation and buyer representation agreements are governed by the same agency laws and regulations. The real legal difference is the client: who the agent represents and what that particular client wants to accomplish in the transaction.
Why the other options are wrong
- The commission amount is a negotiated contract term, not the legal distinction between the two agreements.
- Both types of agreement impose the same fiduciary duties, so duties are not the legal difference.
- The same laws and regulations govern both, so regulatory approval does not set them apart.
Question 20 of 20
Which of the following relationships characterizes a designated agency relationship?
- A broker assign a preferred subagent from other firms to represent each party.
- There is no such duty as maintaining confidentiality.
- The broker primarily represents the seller.
- The broker assigns who is to represent the buyer and seller.Correct answer
Correct answer: D. The broker assigns who is to represent the buyer and seller.
Why: The designated agency agreement allows a broker to select a salesperson and associate brokers to act as the client's agent. A designated agency agreement must contain the name of all associate brokers who are authorized to act as supervisory brokers.
The rule: In designated agency, the broker appoints specific salespeople or associate brokers to represent each party, so one firm can serve both sides without the broker acting as a dual agent. The agreement must name the associate brokers authorized to act as supervisory brokers.
Why the other options are wrong
- Designated agency uses the broker's own licensees, not a preferred subagent pulled in from another firm.
- Designated agents still owe confidentiality to their own client, so confidentiality duty does exist.
- Designated agency lets the broker's associates serve both sides separately rather than favoring the seller.

Want questions that keep you honest?

The free practice test adds a timer, a score and a plan for the topics you keep missing. No signup to see your result.

Take the Free Practice Test

Agency and Listing Agreements: frequently asked

What is the difference between a client and a customer?

A client is the party who signs an agency agreement with the broker, so the broker owes that person full fiduciary duties. A customer is the other party in the transaction, such as a buyer working with the seller's agent, who receives honesty and fair dealing but not fiduciary loyalty.

How long does the duty of confidentiality last after a listing expires?

Confidentiality does not end when the listing expires. A former client's secrets, including the lowest price the seller would accept, must never be disclosed in the future. The duty continues indefinitely and applies at any time, not just during the listing period.

Do I have to present an offer that my seller will not like?

Yes. A listing agent must present all offers to the client, regardless of the amount or whether the agent thinks it is unacceptable. Concealing an offer breaches the fiduciary duty of loyalty and could expose the agent to liability and license discipline.

Concepts behind these questions

Each definition includes the mnemonic, the trap the exam sets and a few practice questions of its own.

Practice another topic

Practicing for one state instead? See the state practice test pages.