Principles 1 Real Estate Champion
School 60 Practice Questions with
Correct Answers & Detailed Rationales
Agency Relationships & Fiduciary Duties (Questions 1-10)
Question 1
An agency relationship exists when one person acts for, or on behalf
of, another person. The person who hires the agent and gives
authority to the agent is known as the:
A) Customer
B) Client
C) Principal
D) Broker
Answer: C) Principal
Rationale: The principal is the person who hires the agent and gives
authority to the agent. This creates a fiduciary (trust) relationship
where the agent must act in the best interest of the principal. The
client is the principal, but "principal" is the correct term for this
relationship.
Question 2
Which type of agency has full authority to conduct business on behalf
of the client, similar to a power of attorney?
,A) Special Agency
B) General Agency
C) Universal Agency
D) Limited Agency
Answer: C) Universal Agency
Rationale: Universal agency grants the agent full authority to conduct
business on behalf of the client. This is the broadest form of agency
and is comparable to a power of attorney where the agent can
perform any act that the principal could perform personally.
Question 3
A listing agreement between a broker and a seller establishes which
type of agency relationship?
A) Universal Agency
B) General Agency
C) Special Agency
D) Implied Agency
Answer: C) Special Agency
Rationale: The listing agreement establishes a special agency
relationship between the broker and seller. Special agency is the most
limited form of agency where the agent is not able to bind the
principal or sign contracts on their behalf. The broker who sells
directly with a client with no agent under the broker operates under
special agency.
Question 4
The acronym "OLD CAR" is used to remember the duties an agent
,owes to their client. Which of the following is NOT one of these
duties?
A) Obedience
B) Loyalty
C) Trust
D) Disclosure
Answer: C) Trust
Rationale: The duties of an agent are Obedience, Loyalty, Disclosure,
Confidentiality, Accounting, and Reasonable Care (OLD CAR). Trust is
not a duty but rather the foundation of the fiduciary relationship. While
trust is important, it is not one of the specific duties listed in the
acronym.
Question 5
A potential buyer contacts an agent for information regarding a
property. This individual is considered a:
A) Client
B) Principal
C) Customer
D) Broker
Answer: C) Customer
Rationale: A customer is an individual with whom a license holder has
no agency relationship nor fiduciary duties, but to whom fairness and
honesty are still required. When a potential buyer simply contacts an
agent for information, they are a customer, not a client. A client
relationship requires an agreement with the broker and agency.
, Question 6
In Texas, when a broker represents both the buyer and the seller in the
same transaction, this is known as:
A) Dual Agency
B) Intermediary Relationship
C) Universal Agency
D) General Agency
Answer: B) Intermediary Relationship
Rationale: An intermediary relationship occurs when a broker
represents both the buyer and seller. The broker must remain neutral
and avoid negotiating. The broker must first obtain written consent
from both parties. This is a specific concept under Texas law and
differs from dual agency as practiced in other states.
Question 7
When a broker appoints one associate to assist the buyer and another
to assist the seller in an intermediary relationship, this is called:
A) Intermediary with appointments
B) Intermediary without appointments
C) Special agency
D) Universal agency
Answer: A) Intermediary with appointments
Rationale: In an intermediary with appointments, the appointed
associates can give advice and opinions (which means negotiate) to
their respective parties. The broker must make the appointments in
writing using the Intermediary Relationship Notice. This allows the
appointed agents to provide more robust representation to each party.
School 60 Practice Questions with
Correct Answers & Detailed Rationales
Agency Relationships & Fiduciary Duties (Questions 1-10)
Question 1
An agency relationship exists when one person acts for, or on behalf
of, another person. The person who hires the agent and gives
authority to the agent is known as the:
A) Customer
B) Client
C) Principal
D) Broker
Answer: C) Principal
Rationale: The principal is the person who hires the agent and gives
authority to the agent. This creates a fiduciary (trust) relationship
where the agent must act in the best interest of the principal. The
client is the principal, but "principal" is the correct term for this
relationship.
Question 2
Which type of agency has full authority to conduct business on behalf
of the client, similar to a power of attorney?
,A) Special Agency
B) General Agency
C) Universal Agency
D) Limited Agency
Answer: C) Universal Agency
Rationale: Universal agency grants the agent full authority to conduct
business on behalf of the client. This is the broadest form of agency
and is comparable to a power of attorney where the agent can
perform any act that the principal could perform personally.
Question 3
A listing agreement between a broker and a seller establishes which
type of agency relationship?
A) Universal Agency
B) General Agency
C) Special Agency
D) Implied Agency
Answer: C) Special Agency
Rationale: The listing agreement establishes a special agency
relationship between the broker and seller. Special agency is the most
limited form of agency where the agent is not able to bind the
principal or sign contracts on their behalf. The broker who sells
directly with a client with no agent under the broker operates under
special agency.
Question 4
The acronym "OLD CAR" is used to remember the duties an agent
,owes to their client. Which of the following is NOT one of these
duties?
A) Obedience
B) Loyalty
C) Trust
D) Disclosure
Answer: C) Trust
Rationale: The duties of an agent are Obedience, Loyalty, Disclosure,
Confidentiality, Accounting, and Reasonable Care (OLD CAR). Trust is
not a duty but rather the foundation of the fiduciary relationship. While
trust is important, it is not one of the specific duties listed in the
acronym.
Question 5
A potential buyer contacts an agent for information regarding a
property. This individual is considered a:
A) Client
B) Principal
C) Customer
D) Broker
Answer: C) Customer
Rationale: A customer is an individual with whom a license holder has
no agency relationship nor fiduciary duties, but to whom fairness and
honesty are still required. When a potential buyer simply contacts an
agent for information, they are a customer, not a client. A client
relationship requires an agreement with the broker and agency.
, Question 6
In Texas, when a broker represents both the buyer and the seller in the
same transaction, this is known as:
A) Dual Agency
B) Intermediary Relationship
C) Universal Agency
D) General Agency
Answer: B) Intermediary Relationship
Rationale: An intermediary relationship occurs when a broker
represents both the buyer and seller. The broker must remain neutral
and avoid negotiating. The broker must first obtain written consent
from both parties. This is a specific concept under Texas law and
differs from dual agency as practiced in other states.
Question 7
When a broker appoints one associate to assist the buyer and another
to assist the seller in an intermediary relationship, this is called:
A) Intermediary with appointments
B) Intermediary without appointments
C) Special agency
D) Universal agency
Answer: A) Intermediary with appointments
Rationale: In an intermediary with appointments, the appointed
associates can give advice and opinions (which means negotiate) to
their respective parties. The broker must make the appointments in
writing using the Intermediary Relationship Notice. This allows the
appointed agents to provide more robust representation to each party.
