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TX RE Broker practice questions

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Question 1Real Estate Brokerage

Which of the following is a fiduciary duty that a Texas real estate broker owes to a client?

  1. Obedience to the client's lawful instructions Correct answer.
  2. A promise to reduce the commission if the sale does not close
  3. A guarantee that the property will appraise at the contract price
  4. Payment of the client's title insurance premium at closing

Explanation

A broker owes the client fiduciary duties that include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. Obedience means following the client's lawful instructions within the scope of the agency relationship; it does not create guarantees about value, financing, or closing costs.

Question 2Real Estate Brokerage

A sales agent sponsored by a brokerage closes a sale. Who may pay the agent the agent's share of the commission?

  1. The title company, acting as escrow agent
  2. Only the agent's sponsoring broker Correct answer.
  3. The seller, at the closing table
  4. Any cooperating broker in the transaction

Explanation

A sales agent must be compensated for brokerage services through the sponsoring broker. Funds flow to the broker, and the broker then pays the agent according to their agreement.

Question 3Real Estate Brokerage

A broker must provide the Information About Brokerage Services notice to a prospective client at what point?

  1. At the first substantive communication about a transaction Correct answer.
  2. Only when the client requests the notice in writing
  3. Before the broker submits an offer on the client's behalf
  4. Within three days after a contract is signed

Explanation

The Information About Brokerage Services notice must be given at the first substantive communication about a transaction so the consumer understands agency relationships and who represents whom. Waiting until an offer or a contract happens is too late.

Question 4Real Estate Brokerage

Which practice by a broker constitutes commingling?

  1. Crediting earnest money to the correct transaction in the trust ledger
  2. Keeping a separate trust account for tenant security deposits in a property management business
  3. Holding a client's earnest money in the broker's general operating account Correct answer.
  4. Depositing a buyer's earnest money into a designated trust account

Explanation

Commingling is mixing client trust funds with the broker's own business or personal funds. Earnest money and other client money must be held in a separate trust or escrow account and tracked to the correct transaction.

Question 5Real Estate Brokerage

A licensed sales agent's sponsorship is terminated. Until a new sponsoring broker files the sponsorship with TREC, the agent may:

  1. Not perform any act that requires a real estate license Correct answer.
  2. Complete transactions that were already under contract without a sponsor
  3. Perform brokerage activities if a title company supervises the work
  4. Continue advertising listings that were already in progress

Explanation

A sales agent may perform brokerage services only while sponsored by an active broker. When sponsorship ends, the license becomes inactive and the agent must stop all licensed activity until a new broker sponsors the license.

Question 6Real Estate Brokerage

In Texas, the commission a broker charges to list a home is:

  1. Set by the local board of REALTORS®
  2. Fixed by the Texas Real Estate Commission fee schedule
  3. Capped at six percent by state statute
  4. Negotiable between the broker and the client Correct answer.

Explanation

Commission rates are negotiable between the broker and the client and must be stated in the written representation agreement. Neither TREC nor any trade association sets brokerage fees.

Question 7Real Estate Brokerage

An unlicensed marketing assistant refers a buyer to a brokerage, and the broker pays the assistant $500 out of the closing commission. This payment is:

  1. Permitted, if the amount does not exceed 10 percent of the commission
  2. Permitted, if the assistant is a full-time employee
  3. Prohibited, because unlicensed persons cannot be paid for referrals Correct answer.
  4. Permitted, if the broker discloses the payment to the buyer in writing

Explanation

A person may not be paid a fee or other compensation for referring brokerage business unless the person holds a real estate license. An unlicensed assistant may be paid wages for clerical work, but not a referral fee or a share of a commission.

Question 8Real Estate Brokerage

To qualify for a Texas real estate broker license, an applicant must generally have:

  1. Two years of active experience as a licensed sales agent
  2. A passing score on the broker exam with no experience required
  3. Four years of active experience as a licensed sales agent Correct answer.
  4. A written recommendation from a sponsoring broker

Explanation

Broker applicants must document four years of active experience as a licensed sales agent within the five years preceding the application, along with the required qualifying coursework and examination. The experience requirement is measured in active licensed time, not simply time holding a license.

Question 9Real Estate Brokerage

A sales agent receives a buyer's earnest money check when the contract is signed. The agent should:

  1. Cash the check and hold the funds until the appraisal is complete
  2. Deliver the check to the sponsoring broker for deposit into trust Correct answer.
  3. Deposit the check into a trust account the agent maintains
  4. Hold the check in the transaction file until the option period ends

Explanation

Trust funds received by a sponsored agent belong in the sponsoring broker's trust account. The agent must promptly deliver the funds to the broker, who deposits and accounts for them; sales agents do not maintain their own trust accounts.

Question 10Real Estate Brokerage

TREC rules require a broker to keep transaction records and trust account records for at least:

  1. One year
  2. Until the license is renewed
  3. Ten years
  4. Four years Correct answer.

Explanation

A broker must retain records of transactions and trust account activity for at least four years so the records are available for inspection. A license renewal cycle is shorter than the retention period.

Question 11Real Estate Brokerage

A broker who maintains a real estate trust account must reconcile the account:

  1. At least monthly Correct answer.
  2. At the close of each transaction
  3. Only when TREC requests a reconciliation
  4. Once during each license period

Explanation

Trust accounts must be reconciled at least monthly, comparing the reconciled bank balance with the sum of the individual ledger balances. Monthly reconciliation catches shortages and errors before they grow.

Question 12Real Estate Brokerage

Buyer and seller both claim the earnest money held in the broker's trust account, and their contract does not resolve the dispute. The broker may release the funds when:

  1. The broker decides which party has the stronger legal position
  2. The broker's office manager approves the release
  3. The parties sign a written release or a court orders disbursement Correct answer.
  4. The seller demands release after the buyer misses a deadline

Explanation

A broker holding disputed trust funds may not choose sides. The funds may be disbursed when the parties agree in writing, when a court orders it, or through an interpleader action that lets a court decide ownership.

Question 13Real Estate Brokerage

A broker acting as an intermediary represents both the buyer and the seller. The broker learns the seller would accept $15,000 less than the list price. The broker:

  1. Must place the information in the listing file in writing
  2. May not reveal that information to the buyer Correct answer.
  3. Should tell the buyer so both sides are treated fairly
  4. Must disclose it because disclosure is a fiduciary duty

Explanation

An intermediary may not disclose confidential information obtained from one party that could harm that party's bargaining position, such as a seller's willingness to accept less than list price. The duty of confidentiality limits the duty of disclosure in this situation.

Question 14Real Estate Brokerage

A sales agent advertises a listing on social media. The advertisement must:

  1. Include the sponsoring broker's licensed name Correct answer.
  2. Show the agent's license number in the body of the ad
  3. Be submitted to TREC for approval before it runs
  4. Name the seller as the advertiser

Explanation

Advertising by a sponsored agent must identify the sponsoring broker by the broker's licensed name or registered assumed name so the public knows which brokerage stands behind the ad. The ad may include the agent's name, but the broker must be identified.

Question 15Real Estate Brokerage

A licensed Texas sales agent may be sponsored by:

  1. A broker and, in addition, a licensed real estate company
  2. Two brokers, if one is designated as primary
  3. Any number of brokers, if each agrees in writing
  4. Only one sponsoring broker at a time Correct answer.

Explanation

Each sales agent license is tied to a single sponsoring broker at any given time. A broker may sponsor many agents, but an agent may not be sponsored by more than one broker.

Question 16Real Estate Brokerage

A broker who manages rental property for an owner receives tenant security deposits. Those deposits are:

  1. Funds of the owner that must sit in the owner's personal account
  2. Trust funds that must be held in the broker's trust account Correct answer.
  3. Operating funds recorded on a spreadsheet until move-out
  4. The broker's own funds once the tenant moves in

Explanation

Security deposits held in connection with managed property are trust funds belonging to the tenant or owner, depending on the agreement. They must be kept in the broker's trust account and accounted for, not in the broker's operating funds.

Question 17Real Estate Brokerage

Under TRELA, the sponsoring broker's responsibility for a sponsored sales agent's conduct means the broker:

  1. Is liable only if the broker personally signed the contract
  2. May delegate all supervision to a team leader
  3. Is immune from discipline because the agent is separately licensed
  4. Must supervise the agent and can be disciplined for failing to do so Correct answer.

Explanation

A sponsoring broker must supervise the brokerage activities of sponsored agents and can be subject to disciplinary action for failing to supervise adequately. The broker's responsibility exists even though the agent also holds a license.

Question 18Real Estate Brokerage

A licensee wants to advertise another brokerage's listing on a social media page. The licensee may do so if:

  1. The licensee notes in a comment that the listing is not their own
  2. The price has not changed since the listing was posted
  3. The listing broker has given permission Correct answer.
  4. The other brokerage is closed for the weekend

Explanation

Advertising another broker's listing without the listing broker's permission is improper and can mislead consumers about who represents the seller. With permission, the ad must also properly identify the listing brokerage.

Question 19Real Estate Brokerage

Under the Texas Property Code, a landlord acting through a managing broker must generally refund a tenant's security deposit, less lawful deductions, within:

  1. 15 days after the tenant gives written notice to vacate
  2. 7 days after the tenant moves out
  3. 30 days after the tenant surrenders the premises and gives a forwarding address Correct answer.
  4. 60 days after the lease expires

Explanation

The Property Code requires the landlord to return the deposit and an itemized list of deductions within 30 days after the tenant surrenders possession and provides a forwarding address. The countdown does not start at the notice to vacate.

Question 20Real Estate Brokerage

Under the TREC-promulgated one-to-four family residential contract, the escrow agent must deposit the earnest money no later than:

  1. Second working day after execution Correct answer.
  2. Five business days after the effective date
  3. The date the buyer's loan is approved
  4. The end of the option period

Explanation

The promulgated contract requires the escrow agent to deposit the earnest money not later than the close of business of the second working day after both parties have executed the contract. Loan approval and the option period are unrelated deadlines.

Question 21Real Estate Brokerage

Two sales agents sponsored by the same broker each represent a different party in the same transaction. Which statement is correct?

  1. The broker is an intermediary and needs each party's written consent Correct answer.
  2. No intermediary status arises because the broker represents neither party personally
  3. The agents may negotiate freely because they work for the same broker
  4. The broker must refer one party to another brokerage

Explanation

When two agents of the same brokerage represent opposite sides of a transaction, the brokerage is acting as an intermediary and must obtain the written consent of each party. The written consent must be obtained before the broker acts as intermediary.

Question 22Real Estate Brokerage

A broker wants to pay an unlicensed assistant a percentage of every closing the assistant helps with. This arrangement is:

  1. Prohibited only if the assistant discusses listings with clients
  2. Acceptable if the assistant holds a notary commission
  3. Acceptable if the broker pays the share from the broker's own funds
  4. Prohibited, since an unlicensed person may not share in a commission Correct answer.

Explanation

An unlicensed person may not be paid a commission or a share of brokerage compensation. The assistant may be paid an hourly wage or flat fee for clerical work that does not require a license, but the pay cannot be tied to closings.

Question 23Real Estate Brokerage

A buyer's agent sponsored by Broker A is promised a $1,000 bonus by Broker B, the listing broker, for bringing a buyer. Under TRELA:

  1. Broker B may pay the bonus directly to the agent
  2. The bonus is unlawful under any arrangement
  3. Broker B must pay Broker A, which shares it with the agent Correct answer.
  4. Broker B may pay the bonus if the buyer agrees in writing

Explanation

Compensation in a brokerage transaction flows between brokers, and an agent may only be paid by the agent's own sponsoring broker. Broker B may pay the bonus to Broker A, and Broker A then pays the agent according to their agreement.

Question 24Real Estate Brokerage

A broker wants to personally buy a property that is listed with the broker's own seller-client. The broker must:

  1. Waive the commission because the broker is a party to the deal
  2. Have another licensee submit the offer without telling the seller
  3. Disclose the interest in writing and obtain the seller's consent Correct answer.
  4. Wait until the listing expires so no agency relationship exists

Explanation

A licensee who acquires an interest in a client's property acts in a conflict of interest and must disclose the licensee status and the intent to purchase in writing and obtain the client's informed consent. Waiving a commission does not substitute for disclosure.

Question 25Real Estate Brokerage

Which task may a broker's unlicensed assistant perform?

  1. Schedule showings and confirm appointments Correct answer.
  2. Hold an open house and discuss the listing terms with buyers
  3. Explain the inspection paragraph of the contract to a buyer
  4. Recommend a listing price after reviewing comparable sales

Explanation

Unlicensed assistants may perform clerical and administrative work such as scheduling showings and confirming appointments. Providing opinions on price, explaining contract terms, or discussing listing terms with consumers requires a license because those activities involve brokerage services.

Question 26Agency and Fiduciary Duties

Which fiduciary duty requires a broker to place the client's interests above the broker's own interests?

  1. Loyalty Correct answer.
  2. Disclosure
  3. Accounting
  4. Obedience

Explanation

Loyalty is the fiduciary duty that obligates a broker to put the client's interests ahead of the broker's personal or financial interests. It forbids self-dealing, secret profits, and undisclosed conflicts of interest. Obedience, accounting, and disclosure are separate duties that address following lawful instructions, handling funds, and sharing material information.

Question 27Agency and Fiduciary Duties

A seller instructs the listing broker to refuse to show the home to buyers of a particular national origin. What should the broker do?

  1. Follow the instruction but keep a written record of it in the file
  2. Decline, because the duty of obedience extends only to lawful instructions Correct answer.
  3. Follow the instruction because obedience is a fiduciary duty owed to the seller
  4. Ask the seller to restate the instruction in writing before complying

Explanation

The fiduciary duty of obedience covers only the client's lawful instructions. A directive to discriminate in the showing of a home violates fair housing law, so the broker must refuse it. Documenting or memorializing an unlawful directive does not make it permissible.

Question 28Agency and Fiduciary Duties

Under TREC rules, when must a license holder give the Information About Brokerage Services (IABS) form to a prospective client?

  1. Only when the prospect requests a written agency disclosure
  2. At the signing of the listing agreement
  3. At the first substantive communication with the prospect Correct answer.
  4. Before a buyer's offer is submitted to the seller

Explanation

TREC rules require the IABS form to be provided at the first substantive communication with a prospective client, which is when a broker or sales agent begins discussing a specific transaction. Waiting until a contract or offer is signed is too late. The disclosure is mandatory, not something provided only on request.

Question 29Agency and Fiduciary Duties

A licensed sales agent sponsored by a broker represents a buyer. Whose agent is the sales agent in that relationship?

  1. The buyer, because the sales agent signs the buyer representation agreement
  2. The Texas Real Estate Commission, under statutory appointment
  3. The other clients of the brokerage, under a general agency
  4. The sponsoring broker, who in turn represents the buyer Correct answer.

Explanation

A sponsored sales agent acts on behalf of the sponsoring broker, and the agency relationship with the client belongs to the broker. The sales agent is the broker's agent for purposes of serving the client. This is why the sponsoring broker is responsible for the sales agent's brokerage activities.

Question 30Agency and Fiduciary Duties

A broker receives a $5,000 earnest money check payable to the broker as escrow agent. Which fiduciary duty governs the broker's handling and reporting of these funds?

  1. Confidentiality
  2. Accounting Correct answer.
  3. Loyalty
  4. Obedience

Explanation

The duty of accounting requires a broker to safeguard funds entrusted by a client, keep them properly, and render an accurate accounting on request. Loyalty, confidentiality, and obedience address conflicts of interest, protected information, and lawful instructions rather than the handling of money.

Question 31Agency and Fiduciary Duties

A broker wants to represent both the seller and the buyer in the same transaction as an intermediary. What does Texas law require before the broker may do so?

  1. No extra steps, because Texas permits dual agency freely
  2. The written consent of both parties Correct answer.
  3. Verbal consent from each party obtained before the first showing
  4. Approval from TREC before the transaction closes

Explanation

A Texas broker may act as an intermediary between parties to a transaction only after disclosing the arrangement in writing and obtaining each party's written consent. Verbal consent is not enough, and TREC does not pre-approve individual transactions. Texas does not use the common-law dual agency label for this arrangement.

Question 32Agency and Fiduciary Duties

A broker is showing a home to a buyer who has no representation. Which obligation does the broker owe this buyer?

  1. Honesty and disclosure of known material facts about the property Correct answer.
  2. Full loyalty and confidentiality as though the buyer were a client
  3. Advice on negotiating the lowest possible price for the buyer
  4. A fiduciary duty to place the buyer's interests ahead of the seller's

Explanation

An unrepresented buyer is a customer rather than a client, so the broker owes honesty, fairness, and disclosure of known material facts, but not loyalty or confidentiality. The broker's fiduciary duties run to the seller-client. Giving negotiating advice to the buyer would amount to serving two masters without the required written consent.

Question 33Agency and Fiduciary Duties

A seller privately tells the listing broker that the seller would accept $20,000 below the list price. A buyer asks the broker whether the seller will negotiate. How should the broker respond?

  1. Reveal the amount, but only if the disclosure is made in writing
  2. Answer only after the buyer signs a buyer representation agreement
  3. Disclose the seller's bottom line because every buyer must be treated fairly
  4. Withhold the figure because it is confidential client information Correct answer.

Explanation

A seller's willingness to accept less is confidential information obtained through the agency relationship, and the broker may not use it against the client's negotiating position. The duty of fairness does not require disclosing a client's bargaining limits. Signing a buyer representation agreement with a different party would not authorize the leak either.

Question 34Agency and Fiduciary Duties

When a broker acts as an intermediary with appointments, how are the appointed licensees designated?

  1. The broker appoints one associated licensee to each party in writing Correct answer.
  2. The broker must personally represent one side while a licensee represents the other
  3. Each party selects an outside broker to supervise that side of the deal
  4. TREC assigns two licensees from the brokerage after the contract is signed

Explanation

In an intermediary arrangement with appointments, the broker designates, in writing, an associated licensee to communicate with and carry out the instructions of each party. This preserves a channel of communication and confidentiality for both sides. TREC does not make appointments, and outside brokers are not part of the mechanism.

Question 35Agency and Fiduciary Duties

How must an intermediary behave toward the parties during negotiations?

  1. The intermediary must withdraw from the transaction until one party hires a separate broker
  2. The intermediary must negotiate the best possible price for whichever party pays the larger commission
  3. The intermediary must treat both parties impartially and not advocate for either Correct answer.
  4. The intermediary must follow the seller's instructions because the seller customarily pays the fee

Explanation

An intermediary must be impartial and may not advocate for one party over the other. The broker's role is to facilitate the transaction and carry out instructions without favoring either side. Preferring the party who pays more, or the seller by default, would breach that impartiality.

Question 36Agency and Fiduciary Duties

A broker's listing agreement expires and the broker no longer represents the seller. What happens to the broker's duty of confidentiality?

  1. It ends when the seller lists with a different broker
  2. It ends along with the other fiduciary duties
  3. It expires one year after the closing date
  4. It continues after the agency relationship ends Correct answer.

Explanation

Confidentiality is one of the fiduciary duties that survives termination of the agency relationship. The former client's sensitive information must still be protected after the listing expires. The other fiduciary duties tied to active representation do not continue in the same way.

Question 37Agency and Fiduciary Duties

A listing broker wants to buy the seller's property personally. What does the broker's duty of loyalty require?

  1. Only the disclosures required of any other buyer in the transaction
  2. Disclosure of the broker's interest and the seller's written consent Correct answer.
  3. Selling through an unrelated broker to avoid the conflict of interest
  4. Resigning the listing and waiting until the listing term expires

Explanation

A broker who wants to acquire the client's property must make full written disclosure of the broker's position and obtain the client's written consent before proceeding. This resolves the conflict created by the broker acting on both sides of the purchase. Merely resigning or routing the deal through another broker does not address the conflict.

Question 38Agency and Fiduciary Duties

Under Texas law, when must a broker have a written representation agreement with a buyer before acting as the buyer's agent?

  1. Before acting as the buyer's agent Correct answer.
  2. Only for commercial rather than residential purchases
  3. Only if the buyer pays the broker directly
  4. Within 10 days after the first showing

Explanation

Texas requires a broker to obtain a written agreement before the broker acts as an agent for a buyer or tenant. The agreement establishes the agency relationship and its terms in advance rather than retroactively. It applies regardless of who pays the commission or the property type.

Question 39Agency and Fiduciary Duties

A listing agent knows the home has a foundation defect the seller has not mentioned. What does the agent's duty of disclosure require?

  1. The agent must disclose the known material defect to prospective buyers Correct answer.
  2. The agent must keep quiet because the seller is the client
  3. The agent must report the seller to TREC before saying anything
  4. The agent may disclose it only if a buyer asks about the foundation

Explanation

A license holder must disclose known material facts about the property to prospective buyers, even when the client would prefer silence. Confidentiality does not authorize concealing a known material defect. Waiting for a buyer to ask would defeat the purpose of the disclosure duty.

Question 40Agency and Fiduciary Duties

A seller signs an exclusive agency listing and then sells the property without any broker's assistance. What does the seller owe the listing broker?

  1. Half the commission as a cancellation charge
  2. The commission only if the broker first introduced the buyer
  3. The full commission, because all exclusive listings earn a fee
  4. No commission, because the seller procured the buyer Correct answer.

Explanation

In an exclusive agency listing the seller keeps the right to sell the property without representation and to owe no commission in that event. The broker is protected only when the broker or a cooperating broker procures the buyer. An exclusive right to sell, by contrast, would entitle the broker to a fee even if the seller sold alone.

Question 41Agency and Fiduciary Duties

A seller's broker promises the buyer's broker a $2,000 bonus if the transaction closes. What must the buyer's broker do?

  1. Keep the bonus without mentioning it because it comes from another broker
  2. Disclose the bonus to the buyer and obtain the buyer's consent Correct answer.
  3. Refuse the bonus in every case as an illegal kickback
  4. Accept it only on condition that the buyer is never told

Explanation

Compensation offered by another party must be disclosed to the broker's own client, and the client's consent obtained, because it creates a potential conflict with the client's interests. Inter-broker bonuses are not automatically unlawful. Concealing the payment from the buyer would breach the duty of loyalty and disclosure.

Question 42Agency and Fiduciary Duties

A seller decides to terminate a listing agreement before its term expires. What is the seller's legal position?

  1. The seller may revoke only if the broker has already breached a duty
  2. The seller may revoke the agency but may owe the broker damages for breach Correct answer.
  3. The seller cannot revoke the listing until the stated term expires
  4. The seller may revoke only after obtaining TREC's written approval

Explanation

A principal may revoke an agency relationship at any time, but exercising that right may create liability for breach of the listing contract. The broker may then seek damages such as lost commission where the contract supports it. TREC approval and a prior breach by the broker are not prerequisites to revocation.

Question 43Agency and Fiduciary Duties

Which action best reflects a broker's fiduciary duty of reasonable care to a buyer client?

  1. Guaranteeing the property will appraise at the contract price
  2. Telling the buyer to skip inspections to keep the offer competitive
  3. Assuring the buyer that the roof is sound based on the seller's assurances
  4. Advising the buyer to obtain an independent inspection of the property Correct answer.

Explanation

The duty of care requires the broker to exercise reasonable skill and diligence, which includes directing the client to qualified third parties for matters outside the broker's expertise such as property condition. Passing along a seller's assurances or guaranteeing outcomes exceeds the broker's role and creates liability. Discouraging inspections is the opposite of reasonable care.

Question 44Agency and Fiduciary Duties

A broker has listed a home. An unrepresented buyer asks the broker, "What price should I offer?" What may the broker do?

  1. Prepare and submit an offer on the buyer's behalf as the buyer's agent
  2. Refuse to communicate with the buyer until the buyer signs a representation agreement
  3. Advise the buyer on negotiating strategy as a courtesy
  4. Give factual information about the property without advising the buyer Correct answer.

Explanation

The broker already represents the seller and may not give the unrepresented buyer advice that amounts to representation without the required written consent. Providing factual, objective information about the property is appropriate, along with the IABS disclosure. Refusing all communication and advocating for the buyer are both improper.

Question 45Agency and Fiduciary Duties

A sponsored sales agent's own buyer client and seller client want the sales agent to handle both sides of the deal. Which statement is correct?

  1. The sales agent may act as an intermediary after notifying TREC of the transaction
  2. The sales agent may act as an intermediary if both parties consent in writing
  3. The sales agent may not act as an intermediary; that role belongs to the broker Correct answer.
  4. The sales agent may act as an intermediary without informing the sponsoring broker

Explanation

Intermediary status is available to the broker, who may appoint associated licensees to work with each party. A sponsored sales agent cannot itself become an intermediary between the parties. Written consent from the parties does not expand the sales agent's authority to serve in that role.

Question 46Agency and Fiduciary Duties

A broker never signed a listing agreement but advertises the home, negotiates with buyers, and writes an offer with the seller's knowledge. What is the most likely legal result?

  1. No agency exists because Texas requires a signed writing
  2. Agency may be implied from the parties' conduct Correct answer.
  3. The broker is acting only as a transaction coordinator
  4. The broker owes no duties until a listing is signed in writing

Explanation

An agency relationship can arise from the conduct of the parties, including a seller who knows of and accepts a broker's brokerage activity. Implied agency carries the same fiduciary duties as an express agency. The absence of a signed listing agreement may affect the broker's ability to collect a commission, but it does not erase the relationship created by the parties' actions.

Question 47Agency and Fiduciary Duties

A title company offers a listing broker $500 per closing for referring clients, and the broker does not tell the seller. This conduct is best characterized as:

  1. Lawful, because the seller pays the broker no additional fee
  2. An undisclosed benefit that breaches the duty of loyalty Correct answer.
  3. Permissible, provided the broker splits the money with the seller's agent
  4. Acceptable, because title company incentives are customary in the industry

Explanation

Receiving compensation from a third party in connection with the client's transaction without disclosure is a secret profit and violates the duty of loyalty. Custom in the industry does not override the fiduciary obligation. The client's cost of the broker's fee is irrelevant to whether the benefit must be disclosed.

Question 48Agency and Fiduciary Duties

A broker acts as intermediary and appoints licensee A for the seller and licensee B for the buyer. Licensee A learns the seller's bottom-line price. May licensee B use that information for the buyer?

  1. No, unless the seller repeats the figure in front of both parties
  2. No, because each appointed licensee owes that party confidentiality Correct answer.
  3. Yes, because both licensees work for the same broker
  4. Yes, because the broker's transaction file is open to all associated licensees

Explanation

Appointments exist to preserve confidentiality within an intermediary brokerage, so each appointed licensee must protect the information of the party they serve. The information cannot be shared across the appointment line just because the licensees share a sponsoring broker. Impartiality and confidentiality both forbid the buyer's licensee from using the seller's bottom line.

Question 49Agency and Fiduciary Duties

A broker lends a seller money and takes, as security, an assignment of a share of the sale proceeds along with the listing. This agency coupled with an interest is:

  1. Valid only if TREC reviews and approves the arrangement in advance
  2. Terminable by the seller at any time without any consequence
  3. Not freely revocable by the seller without the broker's consent Correct answer.
  4. Void, because a broker may never hold an interest in a client's property

Explanation

When an agency is coupled with an interest in the property that secures the broker's compensation, the principal cannot unilaterally revoke it without the broker's consent. The interest supports the enforceability of the agency. Ordinary agencies, by contrast, can be revoked by the principal subject to possible damages.

Question 50Agency and Fiduciary Duties

A seller is traveling abroad, so the listing broker signs the sales contract on the seller's behalf to keep the deal from collapsing. The broker's conduct is:

  1. Proper, because fiduciary duties require the broker to protect the transaction
  2. Acceptable, because the broker is the seller's agent for the transaction
  3. A breach of authority unless the broker holds a power of attorney Correct answer.
  4. Permissible, as long as the seller approves verbally afterward

Explanation

A broker's authority to act for a client is limited to the brokerage services authorized, and signing a contract binding the client requires actual authority such as a power of attorney. Acting beyond that authority breaches the duties of obedience and care and may bind the broker personally. Neither the agency relationship nor a verbal ratification substitutes for proper written authority.