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Study guide

Agency — Key Facts

Agency questions test who you represent, what you owe them, and how that relationship starts and ends. The fiduciary duties — remembered as OLD CAR — appear on nearly every exam, along with dual agency traps and the classic misconception that whoever pays the commission is the client. They aren't. Learn the agent types, the four ways agency is created, and the events that terminate it, and this high-weight topic becomes reliable points.

Fiduciary Duties (OLD CAR)

Types & Creation

Termination

Key vocabulary: Agency glossary (15 terms)

Practice Agency

Every Freehold question shows why the right answer is right — and cites its source.

Which of the following is NOT a fiduciary duty an agent owes to a principal?

  1. Loyalty to the principal's interests
  2. Guaranteeing the principal a minimum sale price
  3. Accounting for all funds received
  4. Disclosure of material facts
Show answer & explanation

Guaranteeing the principal a minimum sale price — Fiduciary duties include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care (OLD CAR). An agent never guarantees results such as a minimum price — only faithful representation of the principal's interests.

Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency

A broker hired under a listing agreement to sell one property is typically what kind of agent?

  1. A universal agent
  2. A general agent
  3. A special agent
  4. A designated principal
Show answer & explanation

A special agent — A special agent is authorized to perform one specific transaction for the principal, which is exactly what a listing agreement creates. A general agent handles a range of ongoing matters, like a property manager.

Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency

Which event terminates an agency relationship by operation of law?

  1. The death of the principal
  2. The agent presenting a full-price offer
  3. A verbal disagreement about marketing
  4. The buyer requesting repairs
Show answer & explanation

The death of the principal — Agency terminates by operation of law upon the death or incapacity of either party, destruction of the property, or bankruptcy affecting the transaction. A full-price offer alone does not end the agency.

Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency

An agency relationship created by the words and conduct of the parties, rather than a written or spoken agreement, is called:

  1. Express agency
  2. Implied agency
  3. Agency by ratification
  4. Agency coupled with an interest
Show answer & explanation

Implied agency — Implied agency arises from the parties' actions and conduct rather than an explicit agreement. Licensees must be careful, because acting like someone's agent can unintentionally create agency duties.

Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency

A buyer's agent owes fiduciary duties to:

  1. The seller who pays the commission
  2. The listing brokerage
  3. The buyer client
  4. Both buyer and seller equally
Show answer & explanation

The buyer client — Fiduciary duties flow to the client, not to whoever pays the fee. A buyer's agent represents the buyer, even when the commission is paid from the seller's proceeds through the listing broker.

Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency

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