Real Estate Broker License Exam Agency, Fiduciary Duties, and Brokerage Relationships Syllabus

How does MLS-based subagency traditionally arise?

When a listing broker offers subagency through the MLS, cooperating brokers who accept it become subagents of the seller—representing the seller rather than the buyer they are working with.

List the core fiduciary duties an agent owes a client (commonly OLD CAR).

Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and diligence.

What does the fiduciary duty of loyalty require?

The agent must place the client's interests above the agent's own and above all others, avoiding conflicts of interest and not profiting at the client's expense.

What does the fiduciary duty of obedience require?

The agent must follow all of the client's lawful instructions; the agent need not (and must not) obey instructions that are unlawful or unethical.

What does the fiduciary duty of disclosure require?

The agent must disclose to the client all material facts and information relevant to the transaction that could affect the client's decisions or interests.

What does the fiduciary duty of confidentiality require, and how long does it last?

The agent must not reveal the client's confidential information (e.g., motivation, financial position, lowest acceptable price); it typically survives the termination of the agency relationship indefinitely.

What does the fiduciary duty of accounting require?

The agent must accurately report and safeguard all of the client's money and property—such as earnest money—keeping client funds in a trust/escrow account and not commingling them.

What does the fiduciary duty of reasonable care and diligence require?

The agent must use the skill, expertise, and diligence expected of a competent professional and avoid errors, negligence, or careless advice that harm the client.

What duties does an agent owe to third parties (customers)?

Honesty and fair dealing, disclosure of known material facts about the property, and refraining from misrepresentation or fraud—but NOT the fiduciary duties owed to a client.

What is the difference between misrepresentation and puffing?

Misrepresentation is a false statement of material fact (actionable fraud if relied upon); puffing is non-factual opinion or sales exaggeration ("best view in town") that a reasonable person would not treat as fact.

What is "latent defect" and what duty does it create toward third parties?

A hidden material defect not discoverable by ordinary inspection; an agent (and seller) must disclose known latent defects that affect health, safety, or value, even to a customer they do not represent.

What is dual agency?

When one brokerage (or agent) represents both the buyer and the seller in the same transaction, owing fiduciary duties to both parties simultaneously.

Why does dual agency create a conflict of interest?

Because the agent cannot fully advocate for one party's best price/terms without harming the other, and cannot maintain full loyalty, disclosure, and confidentiality to both at once.

What makes dual agency lawful where permitted?

It must be disclosed to both parties and both must give informed written consent; undisclosed dual agency is illegal and a breach of fiduciary duty.

What is "informed consent" in the context of dual agency?

Both clients knowingly and voluntarily agree to the limited representation after being told how dual agency restricts the agent's duties (e.g., no undivided loyalty and limited confidentiality/advocacy).

In a disclosed dual agency, which fiduciary duties become limited?

Primarily loyalty, full disclosure, and confidentiality—the agent cannot disclose one party's confidential bargaining information to the other or advocate price/terms for one against the other.

What is designated (appointed) agency?

A model where the principal broker appoints one licensee in the firm to represent the buyer and a different licensee to represent the seller, so each client gets a dedicated single agent within the same brokerage.

How does designated agency manage the conflict that dual agency creates?

Each designated agent owes full fiduciary duties to their respective client; the conflict is contained because the two agents are different individuals, though the principal broker overseeing both is typically treated as a dual agent.

In designated agency, what is the status of the supervising/principal broker?

The principal broker who supervises both designated agents is generally considered a dual agent for the firm and must keep each client's confidential information separate ("firewall").

What is a listing agreement?

A written employment contract between a seller and a brokerage that authorizes the broker to market and sell the property and sets the broker's compensation and authority.

Compare exclusive-right-to-sell, exclusive-agency, and open listings.

Exclusive-right-to-sell: broker earns commission no matter who sells (even the owner). Exclusive-agency: one broker, but owner may sell themselves commission-free. Open: any broker may list, and only the one who procures the buyer is paid.

What is a buyer-representation (buyer-broker) agreement?

A written contract in which a buyer hires a brokerage to represent the buyer in finding and purchasing property, establishing agency duties and how the buyer's broker is compensated.

What is an exclusive buyer-agency agreement?

A buyer-representation contract under which the buyer agrees to work with only that broker for a set period and may owe that broker compensation regardless of who finds the property.

What is a mandatory agency disclosure form and what is its purpose?

A state-required document that informs consumers, in writing, whom the licensee represents and the available agency options; its purpose is to ensure consumers understand the agent's role and avoid undisclosed agency.

When must agency disclosure generally be made to a consumer?

At first substantive contact or before any confidential information is shared and before signing a contract—i.e., at the earliest practical opportunity, well before an offer is written.

What is transaction (facilitator/non-agency) brokerage?

A model in which the broker assists both parties in completing a transaction without representing or owing fiduciary duties to either party, acting as a neutral intermediary.

How does a transaction broker (facilitator) differ from a dual agent?

A dual agent represents both parties and owes (limited) fiduciary duties to both; a transaction broker/facilitator represents neither party and owes no fiduciary duties—only honesty, fairness, and required disclosures.

What duties does a transaction broker/facilitator typically owe the parties?

Honest and fair dealing, accounting for funds, disclosure of known material defects, reasonable skill and care, and confidentiality of specified information—but not loyalty or advocacy.

What is the rule regarding compensation disclosure between cooperating brokers and clients?

How a broker is compensated and the source of compensation must be disclosed; the amount or source of compensation does not by itself determine which party the broker represents.

What is "steering" and why must agents avoid it?

Directing prospective buyers toward or away from particular neighborhoods based on protected class characteristics (e.g., race, religion, familial status); it is illegal discrimination under the Fair Housing Act and a breach of duties of honesty and fair dealing.