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Champions Law of Agency Exam Questions
With Correct Answers 100% Verified.
Texas Real Estate License Act (TRELA) - Answer✔Passed in 1939. The Texas Real Estate
Commission was created to enforce and administer the act in 1949. The purpose of the Act is to
protect the public against unscrupulous brokers and sales agents. Makes it illegal to practice
any act of real estate brokerage without a license.
Fiduciary - Answer✔Based on trust.
Indemnification - Answer✔Protection against damage or loss. Means that the principal will
protect the agent from suffering a loss due to the agent's reliance on information received from
the principal. For example, if a seller gave a broker false information, which the broker passed
on to a prospective buyer, the broker would be justified in expecting indemnification from the
seller. For example, if the seller misrepresented the property in a Seller's Disclosure, the agent
will be indemnified if the agent was unaware of the misrepresentation.
Agency - Answer✔A relationship between two parties, the principal and an agent. The
relationship the agent has with his or her principal, or his or her broker.
Customer - Answer✔A person who receives limited brokerage services without establishing an
agency relationship.
Client - Answer✔Also known as the principal. A person who engages the professional advice or
services of another, called an agent, and whose interests are protected by the specific duties
and loyalties of an agency relationship. Many of these duties are outlined in a listing or
buyer/tenant representation agreement.
Two Types of Licenses - Answer✔A broker license and a sales agent license. No one may hold
both licenses at the same time; however, a licensed broker may act as a broker and as a sales
agent.
Sales Agent License - Answer✔May only be issued under the sponsorship of a licensed broker. A
broker is responsible for all of their professional acts. They must receive all compensation
through his or her sponsoring broker. In addition, they are prohibited from splitting fees with
anyone, except through the sponsoring broker. They are not considered licensed, and therefore
may not engage in the business until his or her license is received in the sponsoring broker's
office.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
Broker License - Answer✔They must maintain a fixed place of business in the state. If they have
more than one place of business, a branch office license is required for each location. It is not
necessary to have a licensed broker at each location.
Terminating a Sale Agent's Sponsorship - Answer✔If a broker wishes to terminate a sales
agent's sponsorship, it must be done in writing, and the license must be returned to the Texas
Real Estate Commission immediately. A sales agent whose license has been returned to the
Commission may not engage in the business until he or she has found a new sponsoring broker.
A sales agent license holder who wishes to terminate his or her association with a broker must
notify the broker in writing.
1101.353. Moral Character Determination - Answer✔(a) If before applying for a license under
this chapter a person requests that the commission determine whether the person's moral
character complies with the commission's moral character requirements for licensing under this
chapter and pays the fee prescribed by Section 1101.152, the commission shall make its
determination of the person's moral character.
(b) Not later than the 30th day after the date the commission makes its determination, the
commission shall notify the person of the determination.
(c) If a person applies for a license after receiving notice of a determination, the commission
may conduct a supplemental moral character determination of the person. e supplemental
determination may cover only the period after the date the person requests a moral character
determination under this section.
(d) The commission may issue a provisional moral character determination. The commission by
rule shall adopt reasonable terms for issuing a provisional moral character determination.
Section 1101.557 of TRELA - Answer✔Specifes that a broker who represents a party in a real
estate transaction or who lists real estate for sale under an exclusive agreement for a party is
an agent of the party. Therefore, to ensure compliance with TRELA, a good understanding of
agency relationships is a requirement for any practicing sales agent or broker. e act does not
provide for any other relationship between the broker and a principal to the transaction.
TRELA Section 1101.558. Representation Disclosure - Answer✔Mandates the disclosure of
representation and that potential buyers and sellers be provided with an agency information
form (discussed elsewhere). Agency relationships are often confusing to buyers and sellers, as
well as the license holders themselves. e Commission's intent is clear that all parties to a
transaction must understand their relationship with the broker.
TRELA Sec. 1101.651 Certain Practices Prohibited - Answer✔Lists 30 specific violations that can
result in the suspension or revocation of a real estate license. Many of these violations relate to
the license holder's conduct in agency relationships.
License Holder - Answer✔A person licensed by the Texas Real Estate Commission (TREC) to act
as a broker or sales agent in a real estate transaction.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
Agent - Answer✔(1) A broker who represents a seller, landlord, buyer or tenant. (2) Sales agent
or broker license holders who represent the broker with whom they are associated.
Subagent - Answer✔A license holder not associated with the seller's broker, but who is
representing the seller through a cooperative agreement, often through membership in a
Multiple Listing Service (MLS), with the seller's broker.
Cooperative Broker - Answer✔A broker selling the listing of another broker. A cooperative
broker may complete the transaction as a subagent of the listing broker, or may represent the
buyers under an agency agreement; he also known as the other broker.
Broker License Holder - Answer✔An individual holding a broker's license issued by TREC.
Brokers may act independently in conducting real estate transactions, or may engage other
broker or sales agent license holders to represent them in the conduct of their real estate
business.
Sales Agent License Holder - Answer✔An individual holding a license issued by TREC - an agent
of the sponsoring broker. He or she may conduct business only through his or her sponsoring
broker.
Broker Associate - Answer✔A broker associated with and conducting all of his or her business
as an agent of another broker.
Sales Associate - Answer✔A sales agent or broker license holder associated with and
conducting business as an agent of his or her sponsoring broker.
Seller's Agent - Answer✔A broker representing the seller in a real estate transaction, also
referred to as a Seller's Broker, Listing Broker, or Listing Agent.
Buyer's Agent - Answer✔A broker representing the buyer in a real estate transaction, also
referred to as a Buyer's Broker, Selling Broker, or Selling Agent.
Landlord's Agent - Answer✔A broker representing a landlord in a real estate transaction.
Tenant's Agent - Answer✔A broker representing a tenant in a real estate transaction.
Two Levels of Responsibility - Answer✔Public responsibility and fiduciary responsibility
Public Responsibility - Answer✔These are the duties to customers (third parties) in a
transaction:
a. Honesty
b. Disclosure of material facts
c. Handle all funds with care
d. Be responsible for written or oral statements
Fiduciary Responsibility - Answer✔These are the duties to a client.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
a. Put the interests of the client first
b. Give full disclosure to the client (advice and opinions in addition to disclosing all pertinent
facts - both material and other)
c. Exhibit trust and honesty
d. Exercise good business judgment
e. Be loyal to the principal
f. Be competent
Duties of a Principal to Agent - Answer✔• Compensation
• Reimbursement
• Indemnification
• Performance
Compensation - Answer✔Refers to the fact that the agent should be paid on completion of the
agency.
Reimbursement - Answer✔Refers to the fact that the agent should be reimbursed by the
principal for expenses incurred on behalf of the principal, above and beyond the expenses
related to the sale itself. For example, if the agent paid for a house to be cleaned or a lawn
mowed, reimbursement would be expected, assuming the client authorized the expenditure. e
prudent agent gets all authorizations in writing from the client.
Performance - Answer✔Means the principal is expected to perform as promised in the agency
agreement. If, for example, you have listed a property, it is reasonable to expect the property
to be available to be shown. e principal must cooperate with the agent to help meet their goals.
Special Agency - Answer✔The most limited of all the agency relationships. Sometimes, it is even
called "limited agency." The agent may perform only limited duties for the principal. The _____
agent is not able to bind (obligate) the principal because he or she is not allowed to sign or
accept any terms or conditions on behalf of the principal. The _____ agent must simply follow
the instructions of the principal.
General Agency - Answer✔The right to represent the principal in a particular type of
transaction or business. One common example of a general agent in real estate is the property
manager. The property manager is primarily responsible for preserving the value of an
investment property while generating income as an agent for the owners. Another common
example is the relationship between a broker and his or her associates.
Express Authority - Answer✔Authority that comes from specific instructions, either oral or
written.
Champions Law of Agency Exam Questions
With Correct Answers 100% Verified.
Texas Real Estate License Act (TRELA) - Answer✔Passed in 1939. The Texas Real Estate
Commission was created to enforce and administer the act in 1949. The purpose of the Act is to
protect the public against unscrupulous brokers and sales agents. Makes it illegal to practice
any act of real estate brokerage without a license.
Fiduciary - Answer✔Based on trust.
Indemnification - Answer✔Protection against damage or loss. Means that the principal will
protect the agent from suffering a loss due to the agent's reliance on information received from
the principal. For example, if a seller gave a broker false information, which the broker passed
on to a prospective buyer, the broker would be justified in expecting indemnification from the
seller. For example, if the seller misrepresented the property in a Seller's Disclosure, the agent
will be indemnified if the agent was unaware of the misrepresentation.
Agency - Answer✔A relationship between two parties, the principal and an agent. The
relationship the agent has with his or her principal, or his or her broker.
Customer - Answer✔A person who receives limited brokerage services without establishing an
agency relationship.
Client - Answer✔Also known as the principal. A person who engages the professional advice or
services of another, called an agent, and whose interests are protected by the specific duties
and loyalties of an agency relationship. Many of these duties are outlined in a listing or
buyer/tenant representation agreement.
Two Types of Licenses - Answer✔A broker license and a sales agent license. No one may hold
both licenses at the same time; however, a licensed broker may act as a broker and as a sales
agent.
Sales Agent License - Answer✔May only be issued under the sponsorship of a licensed broker. A
broker is responsible for all of their professional acts. They must receive all compensation
through his or her sponsoring broker. In addition, they are prohibited from splitting fees with
anyone, except through the sponsoring broker. They are not considered licensed, and therefore
may not engage in the business until his or her license is received in the sponsoring broker's
office.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
Broker License - Answer✔They must maintain a fixed place of business in the state. If they have
more than one place of business, a branch office license is required for each location. It is not
necessary to have a licensed broker at each location.
Terminating a Sale Agent's Sponsorship - Answer✔If a broker wishes to terminate a sales
agent's sponsorship, it must be done in writing, and the license must be returned to the Texas
Real Estate Commission immediately. A sales agent whose license has been returned to the
Commission may not engage in the business until he or she has found a new sponsoring broker.
A sales agent license holder who wishes to terminate his or her association with a broker must
notify the broker in writing.
1101.353. Moral Character Determination - Answer✔(a) If before applying for a license under
this chapter a person requests that the commission determine whether the person's moral
character complies with the commission's moral character requirements for licensing under this
chapter and pays the fee prescribed by Section 1101.152, the commission shall make its
determination of the person's moral character.
(b) Not later than the 30th day after the date the commission makes its determination, the
commission shall notify the person of the determination.
(c) If a person applies for a license after receiving notice of a determination, the commission
may conduct a supplemental moral character determination of the person. e supplemental
determination may cover only the period after the date the person requests a moral character
determination under this section.
(d) The commission may issue a provisional moral character determination. The commission by
rule shall adopt reasonable terms for issuing a provisional moral character determination.
Section 1101.557 of TRELA - Answer✔Specifes that a broker who represents a party in a real
estate transaction or who lists real estate for sale under an exclusive agreement for a party is
an agent of the party. Therefore, to ensure compliance with TRELA, a good understanding of
agency relationships is a requirement for any practicing sales agent or broker. e act does not
provide for any other relationship between the broker and a principal to the transaction.
TRELA Section 1101.558. Representation Disclosure - Answer✔Mandates the disclosure of
representation and that potential buyers and sellers be provided with an agency information
form (discussed elsewhere). Agency relationships are often confusing to buyers and sellers, as
well as the license holders themselves. e Commission's intent is clear that all parties to a
transaction must understand their relationship with the broker.
TRELA Sec. 1101.651 Certain Practices Prohibited - Answer✔Lists 30 specific violations that can
result in the suspension or revocation of a real estate license. Many of these violations relate to
the license holder's conduct in agency relationships.
License Holder - Answer✔A person licensed by the Texas Real Estate Commission (TREC) to act
as a broker or sales agent in a real estate transaction.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
Agent - Answer✔(1) A broker who represents a seller, landlord, buyer or tenant. (2) Sales agent
or broker license holders who represent the broker with whom they are associated.
Subagent - Answer✔A license holder not associated with the seller's broker, but who is
representing the seller through a cooperative agreement, often through membership in a
Multiple Listing Service (MLS), with the seller's broker.
Cooperative Broker - Answer✔A broker selling the listing of another broker. A cooperative
broker may complete the transaction as a subagent of the listing broker, or may represent the
buyers under an agency agreement; he also known as the other broker.
Broker License Holder - Answer✔An individual holding a broker's license issued by TREC.
Brokers may act independently in conducting real estate transactions, or may engage other
broker or sales agent license holders to represent them in the conduct of their real estate
business.
Sales Agent License Holder - Answer✔An individual holding a license issued by TREC - an agent
of the sponsoring broker. He or she may conduct business only through his or her sponsoring
broker.
Broker Associate - Answer✔A broker associated with and conducting all of his or her business
as an agent of another broker.
Sales Associate - Answer✔A sales agent or broker license holder associated with and
conducting business as an agent of his or her sponsoring broker.
Seller's Agent - Answer✔A broker representing the seller in a real estate transaction, also
referred to as a Seller's Broker, Listing Broker, or Listing Agent.
Buyer's Agent - Answer✔A broker representing the buyer in a real estate transaction, also
referred to as a Buyer's Broker, Selling Broker, or Selling Agent.
Landlord's Agent - Answer✔A broker representing a landlord in a real estate transaction.
Tenant's Agent - Answer✔A broker representing a tenant in a real estate transaction.
Two Levels of Responsibility - Answer✔Public responsibility and fiduciary responsibility
Public Responsibility - Answer✔These are the duties to customers (third parties) in a
transaction:
a. Honesty
b. Disclosure of material facts
c. Handle all funds with care
d. Be responsible for written or oral statements
Fiduciary Responsibility - Answer✔These are the duties to a client.
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED 1/29/2025. EY
a. Put the interests of the client first
b. Give full disclosure to the client (advice and opinions in addition to disclosing all pertinent
facts - both material and other)
c. Exhibit trust and honesty
d. Exercise good business judgment
e. Be loyal to the principal
f. Be competent
Duties of a Principal to Agent - Answer✔• Compensation
• Reimbursement
• Indemnification
• Performance
Compensation - Answer✔Refers to the fact that the agent should be paid on completion of the
agency.
Reimbursement - Answer✔Refers to the fact that the agent should be reimbursed by the
principal for expenses incurred on behalf of the principal, above and beyond the expenses
related to the sale itself. For example, if the agent paid for a house to be cleaned or a lawn
mowed, reimbursement would be expected, assuming the client authorized the expenditure. e
prudent agent gets all authorizations in writing from the client.
Performance - Answer✔Means the principal is expected to perform as promised in the agency
agreement. If, for example, you have listed a property, it is reasonable to expect the property
to be available to be shown. e principal must cooperate with the agent to help meet their goals.
Special Agency - Answer✔The most limited of all the agency relationships. Sometimes, it is even
called "limited agency." The agent may perform only limited duties for the principal. The _____
agent is not able to bind (obligate) the principal because he or she is not allowed to sign or
accept any terms or conditions on behalf of the principal. The _____ agent must simply follow
the instructions of the principal.
General Agency - Answer✔The right to represent the principal in a particular type of
transaction or business. One common example of a general agent in real estate is the property
manager. The property manager is primarily responsible for preserving the value of an
investment property while generating income as an agent for the owners. Another common
example is the relationship between a broker and his or her associates.
Express Authority - Answer✔Authority that comes from specific instructions, either oral or
written.
