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MO Real Estate practice questions

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Question 1Missouri Real Estate License Law, Commission Rules, and Licensee Duties

The Missouri Real Estate Commission is composed of how many members, and how are those seats allocated?

  1. Seven members: six licensed real estate professionals and one public member. Correct answer.
  2. Seven members: all of whom must hold an active Missouri broker license.
  3. Five members: four licensed real estate professionals and one public member.
  4. Nine members: seven licensed real estate professionals and two public members.

Explanation

Chapter 339 RSMo establishes a seven-member Missouri Real Estate Commission. Six members must be licensed under the real estate license law, and one member represents the public and is not licensed. Members are appointed by the governor.

Question 2Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A person must hold a Missouri real estate license to perform which of the following activities for another person for compensation?

  1. Selling a home that the person owns as a principal residence.
  2. Negotiating a lease of property owned by someone else. Correct answer.
  3. Giving a neighbor an informal opinion of value at no charge.
  4. Renting the person's own duplex to a tenant.

Explanation

A license is required when a person, for compensation, negotiates or performs brokerage services for another. Owners dealing with their own property and persons giving gratuitous, non-brokerage opinions fall outside the licensing requirement.

Question 3Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson license can be on active status only if the salesperson:

  1. has completed the broker pre-license course.
  2. has at least two years of experience in another state.
  3. works for a brokerage as an unlicensed assistant.
  4. is sponsored by a licensed Missouri broker. Correct answer.

Explanation

A salesperson is not authorized to operate independently. The license must be sponsored by a licensed broker, and if the sponsorship ends the salesperson's license becomes inactive until a new sponsor is recorded.

Question 4Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A licensed salesperson affiliated with XYZ Realty misrepresents a property's square footage to a buyer. Under Missouri law, who may be subject to discipline?

  1. Both the salesperson and the sponsoring broker, who is responsible for supervising licensees associated with the brokerage. Correct answer.
  2. Neither, because misstatements about square footage are not material.
  3. Only the brokerage firm, because a salesperson is not individually licensed.
  4. Only the salesperson, because the broker had no knowledge of the statement.

Explanation

A broker is required to supervise the licensees associated with the brokerage and can be disciplined for their licensed activities. The individual salesperson also remains accountable for his or her own misrepresentations.

Question 5Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Under Missouri law, when must a licensee make the written agency disclosure to a consumer?

  1. At the earliest practicable time, before the consumer discloses confidential information. Correct answer.
  2. Only after a purchase contract has been signed.
  3. Within ten days after the first showing of property.
  4. Only when the consumer asks whether the licensee represents them.

Explanation

Missouri requires a written agency disclosure at the earliest practicable time, before the consumer reveals confidential information. The disclosure identifies whom the licensee represents.

Question 6Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Missouri licensees may act as a dual agent in a transaction only when:

  1. the broker has at least five years of experience.
  2. the seller alone gives oral permission.
  3. all parties to the transaction give informed written consent. Correct answer.
  4. the Commission has approved the transaction in advance.

Explanation

Dual agency creates a conflict because the same brokerage represents both sides. Missouri permits it only with the informed written consent of all parties.

Question 7Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A salesperson learns during a listing that the seller is divorcing. The listing expires without a sale. The salesperson may:

  1. not reveal the information, because the duty of confidentiality continues after the agency relationship ends. Correct answer.
  2. disclose it only to other licensees in the office.
  3. use the information when representing a buyer who wants to purchase the home.
  4. share the information freely because the agency relationship has ended.

Explanation

Confidential information learned in the agency relationship remains protected after the relationship ends. The licensee may not use it against the former client or reveal it to others.

Question 8Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A broker deposits a buyer's earnest money into the brokerage's general operating account. This is best described as:

  1. a permitted practice if the broker records the deposit.
  2. lawful because earnest money belongs to the buyer.
  3. commingling, which is prohibited; client funds must be kept in a separate escrow account. Correct answer.
  4. acceptable if the funds are transferred within 30 days.

Explanation

Client funds such as earnest money must be held in a separate escrow or trust account. Placing them in the broker's operating account is commingling and is prohibited.

Question 9Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Under Commission rules, a broker who maintains an escrow account for client funds must:

  1. use the funds for office expenses as long as the balance is restored by closing.
  2. report each deposit to the Commission within 24 hours.
  3. deposit the funds in an interest-bearing account owned by the broker personally.
  4. keep records of the account and retain them for a specified period for inspection. Correct answer.

Explanation

Brokers must keep accurate records of trust funds and preserve them for Commission inspection, generally for at least three years. The funds must remain separate from the broker's own money.

Question 10Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson wants to run an online advertisement for a listing. The advertisement must:

  1. include the salesperson's home address.
  2. be approved in writing by the Commission before publication.
  3. omit the brokerage name so the salesperson can build a personal brand.
  4. identify the brokerage firm with which the salesperson is affiliated. Correct answer.

Explanation

Advertising by a salesperson must identify the affiliated brokerage firm. The salesperson may not advertise in a way that suggests he or she is an independent broker.

Question 11Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Missouri real estate licensees must complete continuing education:

  1. 6 hours every year.
  2. 12 hours every two-year license period. Correct answer.
  3. 24 hours every four years.
  4. No continuing education is required after the first renewal.

Explanation

Missouri requires 12 hours of continuing education during each two-year license period. The hours must be earned in approved courses.

Question 12Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Missouri real estate licenses are renewed:

  1. every three years.
  2. biennially, every two years. Correct answer.
  3. annually, on January 1.
  4. only when the licensee changes brokers.

Explanation

Missouri real estate licenses run on a two-year cycle and must be renewed biennially to remain active.

Question 13Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Before taking the Missouri salesperson licensing examination, an applicant generally must complete:

  1. 12 hours of continuing education.
  2. 48 hours of approved pre-license instruction. Correct answer.
  3. A four-year college degree in real estate.
  4. 24 months of experience as an unlicensed assistant.

Explanation

Applicants for a salesperson license must complete an approved 48-hour pre-license course before examination. Continuing education is for renewal, not initial licensure.

Question 14Missouri Real Estate License Law, Commission Rules, and Licensee Duties

To qualify for a Missouri broker license, an applicant generally must have:

  1. a master's degree in business.
  2. a recommendation from two licensed brokers in lieu of any experience.
  3. 24 months of active experience as a licensed salesperson, plus the required broker pre-license course. Correct answer.
  4. five years of experience as an unlicensed property manager.

Explanation

Broker applicants must complete broker pre-license education and document 24 months of active licensed experience. Unlicensed experience does not satisfy the requirement.

Question 15Missouri Real Estate License Law, Commission Rules, and Licensee Duties

An unlicensed assistant in a Missouri brokerage may:

  1. present a buyer's offer to the seller and explain counteroffer terms.
  2. negotiate the price and terms of a listing agreement.
  3. conduct an open house and discuss the seller's willingness to negotiate.
  4. answer the telephone, schedule appointments, and perform clerical work. Correct answer.

Explanation

Unlicensed assistants may perform clerical and administrative tasks but may not negotiate, discuss terms, or perform activities that require a license.

Question 16Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri licensee wants to pay a $500 referral fee to an unlicensed friend who referred a buyer. This is:

  1. prohibited, because compensation for real estate brokerage services may not be paid to an unlicensed person. Correct answer.
  2. permitted if the fee is disclosed to the buyer.
  3. permitted because referral fees are not regulated.
  4. permitted if the friend signs a referral agreement.

Explanation

Only licensed persons may be paid for brokerage services. Paying a referral fee to an unlicensed person for a real estate referral violates Missouri license law.

Question 17Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Which of the following is a ground for disciplinary action by the Missouri Real Estate Commission?

  1. Charging a commission higher than the local average.
  2. Making a substantial misrepresentation in a real estate transaction. Correct answer.
  3. Declining a listing because the seller's price is unrealistic.
  4. Refusing to work on Sundays.

Explanation

Substantial misrepresentation is expressly a disciplinary ground. Charging a lawful commission or declining a listing that does not fit the licensee's business is not disciplineable by itself.

Question 18Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A licensee representing a seller learns that the basement floods during heavy rain. The seller refuses to disclose it. The licensee should:

  1. say nothing unless the buyer specifically asks about the basement.
  2. disclose the material defect to the buyer, because the duty to disclose material facts outweighs confidentiality. Correct answer.
  3. keep the information confidential because the seller is the client.
  4. withdraw from the listing without telling anyone.

Explanation

A licensee may not conceal known material defects, even when the seller is the client. The duty to disclose material facts to the buyer takes precedence over confidentiality in this situation.

Question 19Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson who sells a home is entitled to be paid:

  1. directly by the seller at closing.
  2. by the title company without the broker's involvement.
  3. only by the buyer.
  4. by the sponsoring broker, who receives the commission and pays the salesperson under their agreement. Correct answer.

Explanation

A salesperson's compensation is paid through the sponsoring broker, not directly by the parties. The broker and salesperson divide the commission under their independent agreement.

Question 20Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri licensee is selling a home she owns personally. Before the buyer signs a contract, the licensee must:

  1. list the property on the MLS before selling it.
  2. disclose in writing that she is a licensed real estate agent. Correct answer.
  3. do nothing, because the transaction is personal and not brokerage.
  4. have another broker handle the entire transaction.

Explanation

A licensee who sells property in which she has an ownership interest must disclose her licensed status in writing before the buyer is bound. This prevents the buyer from assuming she is acting only as an agent.

Question 21Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A seller's agent receives three offers on a listing. The seller wants to wait a week before responding. The agent should:

  1. hold the offers until the seller is ready, then present only the highest.
  2. present all offers promptly and inform the seller of each offer's terms. Correct answer.
  3. reject the two lower offers without informing the seller.
  4. present only the offers from buyers represented by the same brokerage.

Explanation

The agent must promptly present all offers and keep the seller informed of their terms. The seller, not the agent, decides which offer to accept.

Question 22Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A seller instructs the licensee to advertise that the property has 'city sewer' even though the seller knows it uses a septic system. The licensee should:

  1. report the seller to the Commission before doing anything else.
  2. follow the instruction because the seller is the client.
  3. advertise it but add a small disclaimer.
  4. refuse to make the misrepresentation and explain that licensees may not knowingly misstate material facts. Correct answer.

Explanation

A licensee may not knowingly make a false statement about a property, even at a client's direction. The licensee should refuse and correct the advertising.

Question 23Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A buyer and seller dispute who is entitled to the earnest money. The broker holding the funds should:

  1. give the money to the buyer immediately.
  2. retain the funds in escrow and follow the Commission's dispute-resolution procedure, such as notifying the parties and holding funds until agreement or court order. Correct answer.
  3. give the money to the seller because the seller signed the contract first.
  4. apply the money to the broker's commission.

Explanation

When entitlement to earnest money is disputed, the broker should not choose a side. The broker holds the funds in escrow and follows the Commission's procedure until the parties agree or a court decides.

Question 24Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri broker opens a second office location. Under Commission rules, the broker must:

  1. close the original office to avoid dual supervision.
  2. do nothing, because one license covers all locations.
  3. use a salesperson's home address as the branch address.
  4. register or obtain a branch office license and have a broker responsible for that location. Correct answer.

Explanation

Each brokerage office must be licensed and under the supervision of a licensed broker. Opening an additional location requires Commission notification and proper branch licensing.

Question 25Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson leaves Broker A and joins Broker B. To keep an active license, the salesperson must:

  1. apply for a new salesperson license and retake the exam.
  2. submit the required transfer or change-of-sponsorship form to the Commission so the license reflects the new broker. Correct answer.
  3. continue using Broker A's name in advertisements until renewal.
  4. wait for Broker A to release the license at the next renewal.

Explanation

A salesperson's license is tied to the sponsoring broker. To remain active with a new broker, the licensee must file the required transfer or change form with the Commission.

Question 26Missouri Real Estate License Law, Commission Rules, and Licensee Duties

Which body has the authority to suspend or revoke a Missouri real estate license?

  1. The local board of realtors where the licensee works
  2. The Missouri Real Estate Commission Correct answer.
  3. The Missouri Housing Development Commission
  4. The Missouri Association of REALTORS

Explanation

The Missouri Real Estate Commission is the state agency created under Chapter 339 that issues, suspends, and revokes real estate licenses. Trade associations and local boards are private organizations that may enforce a code of ethics, but they cannot take a state license.

Question 27Missouri Real Estate License Law, Commission Rules, and Licensee Duties

What is the minimum age at which a person may be licensed as a Missouri real estate salesperson?

  1. 16 years, if a work permit is obtained
  2. 19 years
  3. 18 years Correct answer.
  4. 21 years

Explanation

Missouri requires salesperson applicants to be at least 18 years old. There is no higher age threshold, and a minor's work permit is not an alternative route to licensure; applicants must also complete the required pre-examination coursework and pass the exam.

Question 28Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson license remains active only while the salesperson is:

  1. a member of a local board of realtors
  2. working under a licensed Missouri broker Correct answer.
  3. enrolled in post-license continuing education courses
  4. carrying errors and omissions insurance

Explanation

A salesperson is licensed to provide brokerage services on behalf of a supervising broker and may not operate independently. Association membership and insurance coverage are business choices, not conditions placed on the license by the Commission.

Question 29Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri broker's friend owns a duplex and asks the broker to find tenants, collect rent, and arrange repairs for a monthly fee. Which statement is correct?

  1. Her real estate license covers leasing and managing property for others. Correct answer.
  2. She may act only if she charges no management fee.
  3. She needs a separate property management license from the Commission.
  4. No license is needed because the duplex is a residential property.

Explanation

Renting or leasing real property for another and collecting rents for compensation is brokerage activity covered by a Missouri real estate license; there is no separate property management license. Because the broker will handle the owner's money, those funds must be treated as trust funds rather than personal funds.

Question 30Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri salesperson's license expires on June 30 and she does not renew it. On July 15 she helps a buyer client write an offer and expects to be paid at closing. What is her status?

  1. She is fine because renewal relates back to July 1.
  2. She may be paid if the broker signs the contract as the licensee.
  3. She may finish this transaction because the buyer was already her client.
  4. She is engaged in unlicensed brokerage activity. Correct answer.

Explanation

A license must be in force at the time brokerage services are performed, and an expired license does not permit continued work. Providing brokerage services while unlicensed exposes the person to Commission discipline and statutory penalties, regardless of when the client relationship began.

Question 31Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A Missouri licensee refuses to show a listed apartment to a couple because they have two young children and the landlord prefers adult tenants. The licensee's conduct:

  1. is lawful if the lease term is shorter than six months
  2. is prohibited discrimination based on familial status Correct answer.
  3. is lawful because the landlord, not the licensee, made the decision
  4. is acceptable because the licensee is following the owner's instruction

Explanation

Federal and Missouri fair housing law prohibit discrimination based on familial status, and a licensee may not carry out an owner's discriminatory instruction. Acting at the owner's direction does not shield the licensee from liability.

Question 32Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A salesperson affiliated with Broker M collects a tenant's security deposit and uses the money for personal expenses. Which statement is correct?

  1. Only the salesperson may be disciplined, since the broker did not handle the money.
  2. The broker is protected if the brokerage has adopted a written policy manual.
  3. Both the salesperson and the broker may be disciplined by the Commission. Correct answer.
  4. The tenant must sue the salesperson in court before the Commission may act.

Explanation

A Missouri broker is responsible for supervising affiliated licensees and for the proper handling of trust funds, so the Commission may discipline the broker as well as the salesperson. A policy manual does not by itself satisfy the supervisory duty, and a private lawsuit is not a prerequisite to Commission action.

Question 33Missouri Real Estate License Law, Commission Rules, and Licensee Duties

The Commission notifies a Missouri broker that it intends to revoke his license, and the broker disputes the allegations. Where is the contested case heard?

  1. By the Commission's executive director, without a hearing
  2. By the circuit court of the county where the broker's office is located
  3. By the Missouri Administrative Hearing Commission Correct answer.
  4. By a panel of three local brokers selected by the Commission

Explanation

Contested licensing cases in Missouri are heard by the Administrative Hearing Commission, which makes findings of fact and conclusions of law that the Real Estate Commission then acts upon. Court review is available only after that administrative process is exhausted.

Question 34Missouri Real Estate License Law, Commission Rules, and Licensee Duties

A buyer's agent learns from county assessor records that the home her client is buying has 1,800 square feet, while the listing states 2,400. What should the agent do?

  1. Say nothing, because the listing agent is responsible for the accuracy of the listing.
  2. Report the discrepancy only to the seller's agent and let that agent handle it.
  3. Promptly tell the buyer client about the discrepancy. Correct answer.
  4. Withhold the information unless the buyer specifically asks about square footage.

Explanation

A buyer's agent owes the buyer loyalty and reasonable care, which includes sharing material information that affects the client's decision. The seller's side bears responsibility for the accuracy of the listing, but that does not relieve the buyer's agent of the duty to inform her own client.

Question 35Agency Relationships, Fiduciary Duties, and Brokerage Practice

Which duty requires a licensee to place the principal's interests ahead of the licensee's own interests and ahead of the interests of any other party?

  1. The duty of confidentiality
  2. The duty of reasonable care
  3. The duty of accounting for funds
  4. The duty of loyalty Correct answer.

Explanation

Loyalty is the fiduciary duty that forbids self-dealing and requires the agent to put the client's interests first. Accounting, care, and confidentiality are separate duties addressing money handling, competence, and non-disclosure of client information.

Question 36Agency Relationships, Fiduciary Duties, and Brokerage Practice

In Missouri, a transaction broker is best described as a licensee who:

  1. represents only the buyer and owes full fiduciary duties to the buyer
  2. assists the parties without representing either one as an agent Correct answer.
  3. represents both parties as an agent and owes fiduciary duties to both
  4. represents only the seller and owes full fiduciary duties to the seller

Explanation

A transaction broker helps buyers and sellers complete a transaction without becoming anyone's agent. Because no agency is created, the broker owes honesty, disclosure of material facts, and accounting, but not undivided loyalty to either side.

Question 37Agency Relationships, Fiduciary Duties, and Brokerage Practice

Before a licensee may act as a dual agent, the licensee must obtain:

  1. written informed consent of both parties Correct answer.
  2. verbal permission from the designated broker alone
  3. written approval from the Missouri Real Estate Commission
  4. a written waiver from the lender financing the sale

Explanation

Dual agency places the licensee in a conflict because two clients' interests must be balanced, so Missouri requires the informed consent of both parties in writing. Without that consent the licensee may not represent both sides.

Question 38Agency Relationships, Fiduciary Duties, and Brokerage Practice

Under an exclusive right-to-sell listing, the seller must pay the broker's commission if:

  1. only the broker personally finds a ready, willing, and able buyer
  2. the seller later sells to a buyer the broker never met, after the listing expires
  3. the property sells during the term, whoever finds the buyer Correct answer.
  4. the seller refuses every offer the broker presents during the term

Explanation

An exclusive right to sell entitles the broker to compensation whenever the property is sold during the listing period, even if the seller procures the buyer. An exclusive agency listing, by contrast, leaves the seller free to sell without paying the broker.

Question 39Agency Relationships, Fiduciary Duties, and Brokerage Practice

After an agency relationship ends, the licensee's duty of confidentiality:

  1. ends when the listing expires
  2. ends when the client signs a new listing with another firm
  3. continues unless the client releases the information Correct answer.
  4. ends at the closing of the transaction

Explanation

Confidentiality survives termination of the brokerage relationship and continues until the client releases the information or it becomes public. The duty protects negotiating information that could still harm the client after the transaction closes.

Question 40Agency Relationships, Fiduciary Duties, and Brokerage Practice

An agreement in which a seller promises to pay a broker a commission is enforceable only if it is:

  1. witnessed by a second licensed broker
  2. approved in advance by the local board of REALTORS
  3. recorded with the county recorder of deeds
  4. in writing and signed by the party to be charged Correct answer.

Explanation

A commission agreement falls within the statute of frauds, so it must be written and signed by the party who is obligated to pay. Oral promises to pay a commission are generally unenforceable.

Question 41Agency Relationships, Fiduciary Duties, and Brokerage Practice

Missouri advertising rules require a licensee's property advertisement to include:

  1. the licensee's home address
  2. the name of the brokerage firm Correct answer.
  3. the square footage of the property
  4. the listing price of the property

Explanation

Advertising by a licensee must identify the brokerage firm so the public knows which broker stands behind the advertisement. The individual licensee may be named as well, but the firm's name is the required element.

Question 42Agency Relationships, Fiduciary Duties, and Brokerage Practice

Commission rates charged by Missouri brokerage firms are:

  1. negotiable between the broker and the client Correct answer.
  2. set by statute at a statewide maximum
  3. fixed by the local multiple listing service
  4. set by the Missouri Real Estate Commission

Explanation

Compensation is a matter of private contract and must be negotiated between the broker and the client. Any rule fixing rates would raise antitrust concerns, so no regulator or MLS may dictate them.

Question 43Agency Relationships, Fiduciary Duties, and Brokerage Practice

A licensee shows homes to a buyer over several weekends but has signed no agreement with the buyer. Under Missouri practice, the licensee is:

  1. not the buyer's agent, because agency requires a written agreement Correct answer.
  2. the buyer's subagent through the listing broker
  3. a dual agent in the transaction until a written agreement is signed
  4. the buyer's agent by implication from the repeated showings

Explanation

Missouri does not presume an agency relationship from the mere fact that a licensee works with a buyer. The brokerage relationship must be established in writing, so showings alone do not make the licensee the buyer's fiduciary.

Question 44Agency Relationships, Fiduciary Duties, and Brokerage Practice

A licensee is a dual agent in a transaction. Which statement by the licensee is prohibited?

  1. The property is served by a private well and septic system.
  2. The seller has set a deadline for responding to offers.
  3. The roof was replaced two years ago according to the seller.
  4. The seller would probably accept less than the listed price. Correct answer.

Explanation

A dual agent may not reveal one party's negotiating position to the other, such as the seller's willingness to reduce price. The agent still passes along property condition facts and procedural information that both sides are entitled to know.

Question 45Agency Relationships, Fiduciary Duties, and Brokerage Practice

Which of these is confidential information that a seller's agent may not reveal to the buyer?

  1. The property's zoning classification under city ordinance
  2. The existence of a known foundation crack
  3. The age of the roof, as stated in the seller's disclosure
  4. The seller's willingness to accept a lower price Correct answer.

Explanation

Confidential information is information that would harm the client's negotiating position if disclosed, such as the seller's bottom line. Facts about the property's condition and public land-use records are not protected and must be shared when material.

Question 46Agency Relationships, Fiduciary Duties, and Brokerage Practice

A brokerage firm represents both the seller and the buyer with written consent, assigning one licensee to the seller and another to the buyer. This is:

  1. lawful only if the firm's broker also becomes a dual agent for both
  2. designated agency, with confidences kept by each licensee Correct answer.
  3. lawful, but only when the transaction is commercial
  4. prohibited, since one firm cannot serve both sides

Explanation

Designated agency lets one firm serve both sides by assigning separate licensees to each party after written consent. Each client then receives undivided loyalty from that client's own designated licensee.

Question 47Agency Relationships, Fiduciary Duties, and Brokerage Practice

A seller's agent learns from the seller that the basement floods every spring. The agent must:

  1. keep the information confidential because the seller disclosed it
  2. disclose the flooding to prospective buyers as an adverse material fact Correct answer.
  3. resign the listing rather than reveal the seller's information
  4. advise the seller to lower the price until the issue becomes moot

Explanation

A licensee owes buyers honesty and disclosure of known adverse material facts about the property's physical condition. Confidentiality protects negotiating information, not known defects, so the agent cannot conceal the flooding.

Question 48Agency Relationships, Fiduciary Duties, and Brokerage Practice

When a buyer gives a broker an earnest money check along with an offer, the broker must:

  1. hold the uncashed check in the file until the offer is accepted
  2. deposit it in the firm's general operating account until closing
  3. turn it over to the seller immediately upon receipt
  4. place it in a trust account separate from firm funds Correct answer.

Explanation

Earnest money belongs to the transaction parties, not the firm, and must be held in a trust or escrow account. Commingling client funds with the broker's own money is prohibited.

Question 49Agency Relationships, Fiduciary Duties, and Brokerage Practice

A broker wants to pay a $500 fee to an unlicensed friend who introduced a buyer to the firm. This payment is:

  1. prohibited, because referral fees require prior approval from the Commission
  2. allowed if the friend signs a written referral agreement and discloses the fee
  3. prohibited, because only licensees may be paid for brokerage activity Correct answer.
  4. allowed, because the fee comes out of the broker's own share of the commission

Explanation

Compensation for brokerage activity may not be shared with an unlicensed person, since the activity is reserved to licensees. Splitting a commission with an unlicensed referrer is therefore prohibited regardless of how the payment is documented.

Question 50Agency Relationships, Fiduciary Duties, and Brokerage Practice

Which event automatically ends a brokerage relationship created by a written listing agreement?

  1. The listing term stated in the agreement expires Correct answer.
  2. The licensee takes a two-week vacation
  3. The seller rejects the buyer's first offer
  4. The seller stops returning the licensee's telephone calls

Explanation

A brokerage relationship ends when the term of the written agreement expires, when the transaction closes, or by mutual agreement or revocation. Temporary conduct by either party does not terminate the relationship.