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California Laws of Agency and Fiduciary Duties — Printable Practice Pack
California state portion · the Business and Professions Code, DRE trust-fund rules and California's disclosure regime · 20 questions · Answer key on the last page · agentexamcoach.com
1.Which agent has authority limited to one specific act or transaction?
(A)A special agent
(B)A general agent
(C)A universal agent
(D)An ostensible agent
2.A broker's salesperson signs a listing in the salesperson's own name rather than the broker's. Who holds the agency?
(A)The salesperson personally
(B)Both jointly
(C)Neither until ratified
(D)The employing broker
3.A buyer asks their agent to write an offer with a 'love letter' mentioning the buyer's family and religion. What should the agent advise?
(A)Caution against it — such letters raise fair housing concerns for the seller's decision
(B)Encourage it, because personal letters help buyers win bidding wars
(C)Refuse to submit the offer at all if a letter is attached to it
(D)Require the seller to respond to the letter in writing
4.A buyer's agent's commission comes from the seller through the MLS offer of compensation. Does this change whom the agent represents?
(A)Yes — payment by the seller makes them the seller's agent
(B)Yes — it creates an automatic dual agency in the transaction
(C)No — representation is fixed by agreement and disclosure, not payment
(D)Only if the buyer raises an objection in writing
5.A seller rejects a full-price offer from a buyer of a protected class and accepts a lower offer days later. Beyond fair-housing liability, what about the commission?
(A)Only a sale that actually closes escrow can generate a fee claim
(B)No commission claim is ever possible on an offer the seller rejects
(C)The commission is halved by statute when any offer is refused
(D)The broker earned it by producing a ready, willing and able buyer
6.A buyer asks their agent to submit an offer the agent believes is far too low. What should the agent do?
(A)Submit it with a note disowning it
(B)Submit it as instructed
(C)Refuse and explain why
(D)Raise the price before submitting
7.An agent accepts an undisclosed bonus from a contractor for steering the client's repair work. What has occurred?
(A)An ordinary referral arrangement
(B)A permitted business courtesy
(C)A conflict cured by later disclosure
(D)A secret profit breaching loyalty
8.Which is TRUE regarding a buyer representation agreement's termination date?
(A)Only the buyer may set the termination date
(B)Buyer agreements expire automatically after 30 days
(C)No termination date is required for buyer agreements
(D)An exclusive buyer agreement must state a definite termination date
9.What is 'agency by estoppel'?
(A)Agency created when the agent posts a surety bond
(B)Agency terminated by an order of the superior court
(C)Agency a principal cannot deny because conduct caused third-party reliance
(D)Agency created by a written agreement between the parties
10.Which best describes the term 'principal' in agency law?
(A)The amount of the loan on the property
(B)The buyer in every transaction
(C)The broker in charge of the office
(D)The person who authorises the agent to act on their behalf
11.What is the agency consequence when a salesperson's licence hangs under Broker A but they negotiate a deal 'on the side' through Broker B?
(A)A private business matter to be settled between the two brokers
(B)Unlawful — a salesperson acts only through one employing broker
(C)Permitted so long as both brokers are informed of it afterwards
(D)Permitted for commercial transactions though not residential ones
12.Which claim against an agent requires proving the agent KNEW a statement was false?
(A)Breach of an express contract term
(B)Breach of the visual inspection duty
(C)Negligent misrepresentation of a fact
(D)Intentional misrepresentation (fraud/deceit)
13.An undisclosed dual agency is discovered after closing. What is a likely consequence for the broker?
(A)No consequence once escrow has closed
(B)A written warning from the Commissioner
(C)Commission forfeited and damages to both sides
(D)Commission reduced to the standard rate
14.A seller signs a 6-month exclusive listing. After 2 months the seller accepts a job transfer and asks to cancel. What governs?
(A)Listings can never be cancelled before their stated expiry date
(B)The listing's cancellation terms; the broker may agree or claim damages
(C)The broker must refund all of the marketing costs already spent
(D)The seller may cancel freely at any time without any consequence
15.A broker holds a buyer's deposit while also representing the seller. What is the broker's role as to those funds?
(A)A trustee holding for the beneficiary
(B)A creditor of the buyer
(C)A guarantor of the sale
(D)The owner of the funds
16.What must a licensee do before representing a client in a language the client does not read well?
(A)Ensure the client actually understands
(B)Rely on the signatures obtained
(C)Have a relative sign on their behalf
(D)Decline the representation outright
17.A buyer's agent discovers the listing agent is the seller's adult child. The listing did not disclose it. What should the buyer's agent do?
(A)Report the listing agent to the DRE before presenting any offer
(B)Inform the buyer and treat the listing agent's statements with appropriate caution
(C)Refuse to proceed with the offer until the listing agent is replaced
(D)Nothing, because family relationships on the listing side do not affect the buyer
18.A buyer's agent learns the listing agent has a buyer of their own for the property. The buyer's agent is offered a referral fee to 'step aside.' What is this?
(A)A lawful cooperation fee provided it is disclosed to the MLS
(B)A professional courtesy the buyer's agent is free to accept
(C)An inducement to breach fiduciary duty — it must be refused outright
(D)A normal referral arrangement between two cooperating brokers
19.A buyer tells their agent they would pay $20,000 over list if needed. The listing agent asks 'is there any room above this offer?' What should the buyer's agent say?
(A)Disclose the $20,000 cushion to keep negotiations moving
(B)Decline to reveal the buyer's ceiling — it is confidential to the client
(C)State that the buyer has no flexibility whatsoever
(D)Ask the listing agent for the seller's bottom line first
20.A listing agreement is signed by only one of two spouses who hold title together. What is the effect?
(A)It is void entirely
(B)It binds both automatically
(C)It may not bind the non-signing co-owner
(D)It converts to an open listing
Answer key & explanations
1. A — A real estate licensee is normally a special agent, authorised for one transaction, rather than a general agent managing ongoing affairs.
2. D — Listings belong to the broker whatever name is signed. A salesperson cannot hold an agency in their own right.
3. A — Buyer letters revealing protected characteristics can taint the seller's decision; many brokerages discourage them.
4. C — California law explicitly separates compensation from representation.
5. D — Producing a full-price, able buyer generally earns the fee even if the seller refuses — and a discriminatory refusal adds separate liability.
6. B — Obedience requires following lawful instructions. The agent may advise against it, but the decision belongs to the client.
7. D — Taking an undisclosed benefit arising from the agency is a secret profit and breaches the duty of loyalty. Disclosure and consent are required beforehand.
8. D — Exclusive agreements — listings or buyer representation — must contain a definite end date.
9. C — Estoppel prevents a principal from denying an agency their own conduct suggested.
10. D — The principal is the party the agent represents.
11. B — A salesperson has exactly one employing broker; acting through another is unlicensed conduct for both salesperson and the accepting broker.
12. D — Deceit requires knowledge of falsity or reckless disregard; negligent misrepresentation needs only an unreasonable belief in truth.
13. C — Acting for both sides without informed written consent is a breach of loyalty. Courts commonly order forfeiture of commission alongside damages and discipline.
14. B — A listing is a contract; early termination follows its terms or mutual agreement.
15. A — Deposit money is trust funds held for whoever is entitled to it. The broker's agency role does not change that duty.
16. A — Informed consent requires actual understanding, and California requires a translated copy of certain agreements negotiated primarily in another language.
17. B — The buyer should know of the relationship; it bears on the weight of the listing agent's representations.
18. C — Accepting compensation to abandon a client's interest is a flagrant loyalty breach.
19. B — A client's maximum price is confidential; the agent must neither reveal it nor misrepresent it.
20. C — Every owner whose interest is being sold generally needs to sign. One owner's signature does not commit the other's interest.
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