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Laws of Agency

Agency relationships, fiduciary duties, and disclosure requirements

200 questions10 concepts
Laws of Agency — Study Card
Laws of Agency study card infographic showing key concepts, exam weight (12%), and memory aids
AI-generated study card for Laws of Agency. Covers 12% of the real estate exam.
Difficulty Breakdown
Easy57 (28%)
Medium110 (55%)
Hard33 (17%)
Study Tips for Agency
  • Memorize OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable Care
  • Know the difference between client (fiduciary duties) and customer (honesty and fairness)
  • Dual agency requires informed written consent from BOTH parties
  • Agency can be created unintentionally through implied or apparent agency

Key Concepts

Agency Relationship

A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.

Fiduciary Duty

The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.

Dual Agency

A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.

Designated Agency

An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.

Transaction Brokerage

A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.

Agency by Estoppel

An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.

Agency by Ratification

An agency relationship created when a principal approves or accepts an agent's previously unauthorized actions, effectively granting authority after the fact.

Express Agency

An agency relationship created by a clear, explicit agreement between the principal and agent, either orally or in writing.

Implied Agency

An agency relationship created by the conduct or actions of the parties rather than by a written or oral agreement.

Subagency

A relationship where a listing broker authorizes other brokers to act as agents of the seller, extending the seller's agency relationship to cooperating brokers.

Practice Questions

Agency(31)

For the Louisiana state portion, how should a candidate analyze a licensee representing a client receives money or property in which the client has or may have an interest?

MEDIUM

Which Louisiana rule applies when a dual agent knows confidential information about one client?

MEDIUM

Which Louisiana rule applies when information from a client could materially harm that client bargaining position if disclosed?

MEDIUM

A Louisiana salesperson asks about a dual agent knows latent material defects in the property. What is the best answer?

MEDIUM

For the Louisiana state portion, how should a candidate analyze a dual agent knows the buyer or tenant financial qualification?

MEDIUM

Which Louisiana rule applies when a licensee performs brokerage services for a client?

MEDIUM

A Louisiana salesperson asks about false information given to a customer came from the licensee client or client agent and the licensee lacked actual knowledge it was false. What is the best answer?

MEDIUM

Which Louisiana rule applies when a broker receives or is promised compensation?

MEDIUM

A Louisiana licensee encounters dual agency consent timing is tested. What should the licensee remember?

MEDIUM

A Louisiana salesperson asks about a licensee responds to a phone inquiry about availability, price, or location of property. What is the best answer?

MEDIUM

A Louisiana sponsoring broker reviews a dual agent knows a seller bottom-line price or buyer top price. Which answer follows Louisiana law?

MEDIUM

For the Louisiana state portion, how should a candidate analyze an agency relationship terminates, expires, or is completed?

MEDIUM

Which Louisiana rule applies when a licensee sets an appointment for a person to view property?

MEDIUM

In Louisiana, a licensee works with both buyer and seller or both landlord and tenant in the same transaction. Which statement is correct?

MEDIUM

In Louisiana, a licensee performs ministerial acts for a customer. Which statement is correct?

MEDIUM

A Louisiana licensee encounters a licensee is working with a client in a real estate transaction and there is no written agreement providing another relationship. What should the licensee remember?

MEDIUM

A Louisiana salesperson asks about a person engages professional advice and services of a licensee as an agent. What is the best answer?

MEDIUM

In Louisiana, a licensee acts as a dual agent. Which statement is correct?

MEDIUM

A Louisiana licensee encounters a client signs the LREC-prepared dual agency disclosure form. What should the licensee remember?

MEDIUM

A Louisiana licensee encounters a licensee represents a client. What should the licensee remember?

MEDIUM

+ 11 more questions

Agency_disclosure_form_requirements(11)

According to Indiana's Agency Relationships in Real Estate Transactions Act, when must a licensee first provide the written agency disclosure to a prospective buyer or seller?

EASY

Sarah, a licensed Indiana broker, meets a prospective buyer named Marcus at an open house. Marcus asks Sarah several questions about the neighborhood and the list price of the home. At what point during this interaction is Sarah required to provide Marcus with the Indiana written agency disclosure?

EASY

Indiana broker Priya is hosting an open house for a listed property. A visitor named Greg asks Priya detailed questions about the seller's motivation to sell and the lowest price the seller would accept. Priya has not yet provided Greg with the written agency disclosure. Which of the following best describes Priya's obligations and risks in this situation under Indiana law?

HARD

Under Indiana's Agency Relationships in Real Estate Transactions Act, which of the following statements correctly describes the relationship between the Indiana written agency disclosure and the establishment of an actual agency relationship?

MEDIUM

Broker Lisa calls a homeowner named Mr. Chen to discuss listing his property. During the call, they discuss the general market conditions, the approximate value of Mr. Chen's home, and the services Lisa's firm provides. Mr. Chen has not yet signed a listing agreement. Under Indiana law, which of the following is true regarding the written agency disclosure?

MEDIUM

Indiana broker Kevin is working with a buyer who is interested in a property listed by Kevin's own firm. Kevin's managing broker designates Kevin to represent the buyer and another broker in the firm to represent the seller. Under Indiana law, which of the following best describes this arrangement and its disclosure requirements?

MEDIUM

Indiana broker Rachel is a buyer's agent representing David in purchasing a home. At the first showing, Rachel provides David with the Indiana written agency disclosure, which David signs. Later, the transaction involves a seller who is represented by Broker Paul. Paul never provided his seller client with an written agency disclosure. Under Indiana law, what is the consequence of Paul's failure?

MEDIUM

Broker Michael is a licensed Indiana broker who also holds a real estate license in Ohio, where the entry-level license is called a 'salesperson.' Michael is working on an Indiana transaction and tells his client that he is a 'salesperson' acting as a buyer's agent. He provides the written agency disclosure listing his role as 'salesperson.' Which of the following is true under Indiana law?

HARD

Tom is a licensed Indiana broker working under Managing Broker Linda. Tom shows a home to a buyer client and provides the Indiana written agency disclosure. The buyer signs the form. Under Indiana law, who is responsible for retaining the signed disclosure form?

EASY

Under Indiana's Agency Relationships in Real Estate Transactions Act (IC 25-34.1-10), all of the following statements about the written agency disclosure are correct EXCEPT:

HARD

Broker Angela represents the seller in a residential transaction. Broker Derek, from a different firm, represents the buyer. When Derek brings his buyer client to view Angela's listing, which of the following correctly describes the agency disclosure obligations under Indiana law?

MEDIUM

Agency_disclosure_pamphlet_and_timing(18)

Under Washington's statutory agency framework (RCW 18.86), which of the following BEST describes the distinction between the duties owed to a 'client' versus the duties owed to a 'customer'?

MEDIUM

Broker Maria meets a prospective buyer, Tom, at an open house. During their conversation, Tom mentions he is looking for a three-bedroom home in the $450,000 range and asks Maria several questions about the neighborhood. Under RCW 18.86, what is Maria's obligation at this point?

EASY

Under Washington's Law of Real Estate Agency (RCW 18.86), when must a licensee first provide the agency disclosure pamphlet to a prospective buyer or seller?

EASY

Washington licensee Fiona is a buyer's agent representing client Hector. During negotiations, the seller's agent asks Fiona whether Hector would be willing to waive the inspection contingency to make the offer more competitive. Hector has told Fiona in confidence that he is willing to waive inspection if necessary. Under RCW 18.86, what should Fiona do?

HARD

Washington broker Lisa is representing buyer Greg in his search for a home. Greg tells Lisa that he is going through a difficult divorce and urgently needs to purchase a home before a court deadline, and that he would pay almost any price to close quickly. Later, Lisa finds a property listed by her own brokerage, creating a potential dual agency situation. Under RCW 18.86, what must Lisa do before proceeding as a dual agent?

HARD

Washington's agency disclosure requirement under RCW 18.86 differs significantly from the approach used in most other states. Which statement BEST captures this Washington-specific distinction?

MEDIUM

Washington broker Nina is a designated broker at a firm. Broker Alex, one of her affiliated brokers, represents seller Owen. Another affiliated broker at the same firm, Broker Beth, represents buyer Priya. Neither Alex nor Beth is representing both parties. Under RCW 18.86, which statement BEST describes this arrangement?

HARD

A Washington real estate licensee is working with a buyer who is looking for investment properties. The buyer has not signed a buyer-broker agreement. During their first meeting, the buyer shares his financial goals and asks the licensee to explain the difference between representing him as a client versus working with him as a customer. Under RCW 18.86, what is the licensee's FIRST obligation at this meeting?

EASY

Under Washington's Law of Real Estate Agency (RCW 18.86), which of the following is NOT a duty that a licensee owes to their client?

MEDIUM

Washington broker James represents seller Patricia in listing her Bellevue condominium. A buyer's broker, Diana, contacts James to schedule a showing. During their phone call, Diana mentions that her buyer client is highly motivated and must close within 30 days due to a job relocation. James relays this information to Patricia. Under RCW 18.86, which statement BEST describes James's conduct?

MEDIUM

Washington licensee Paul represents a buyer, Amy, under a written buyer-broker agreement. During a showing of a listed property, Paul meets the listing broker, Susan. Susan has never met Amy before and this is their first interaction about this specific transaction. Under RCW 18.86, what is Susan's obligation regarding the agency disclosure pamphlet?

MEDIUM

A Washington licensee named Kevin receives a phone call from a seller, Linda, who wants to list her home. During the call, Linda describes the property and asks Kevin about his marketing plan and commission structure. Kevin schedules a listing appointment for the following day. Under RCW 18.86, when must Kevin provide the agency disclosure pamphlet to Linda?

EASY

Licensee Rachel is working at a real estate brokerage open house. A couple, the Garcias, walk in and begin asking Rachel about the home's price, the school district, and whether the sellers would accept a lower offer. Rachel answers their questions but does not provide the agency disclosure pamphlet. Later, the Garcias decide to make an offer and ask Rachel to represent them as their buyer's agent. Which statement BEST describes Rachel's situation?

MEDIUM

In Washington State, the agency disclosure pamphlet required under RCW 18.86 is intended to inform consumers of which of the following?

EASY

Washington licensee Tom is contacted by email by a prospective seller, Helen, who asks general questions about the home selling process and current market conditions in her zip code. Tom responds with general market statistics and a description of the listing process. No specific property is discussed. Under RCW 18.86, has first substantive contact occurred that would require Tom to provide the agency disclosure pamphlet?

EASY

Washington licensee Carlos is a dual agent in a transaction where he represents both seller Maria and buyer David. David confides to Carlos that he is willing to pay up to $580,000 for the property, though his written offer is for $540,000. Maria has told Carlos she would accept $550,000. Under RCW 18.86, how must Carlos handle this confidential information?

HARD

Under Washington's Law of Real Estate Agency (RCW 18.86.060), which of the following is NOT a restriction placed on a licensee acting as a dual agent?

HARD

Broker Sandra is a seller's agent representing the Johnsons in the sale of their Seattle home. A prospective buyer, Mr. Chen, visits the property unrepresented and asks Sandra several questions about the home's condition and the sellers' motivation. Sandra shows him the property and discusses the neighborhood. Under Washington's agency law, which statement BEST describes Sandra's obligations to Mr. Chen?

MEDIUM

Agency_disclosures_and_compensation_policy_notices(32)

In January 2026, Blake Lopez is reviewing Illinois rules on agency disclosures and compensation policy notices in Oak Park. Each statement below reflects the current Illinois rule EXCEPT:

MEDIUM

During a brokerage meeting in Normal, Taylor Jenkins asks what Illinois requires a licensee to disclose to a client about compensation policy. What is the best answer under current Illinois law or practice?

EASY

In November 2026, Hayden Iverson asks when the dual-agency disclosure form must be presented to a client. What is the most accurate answer under current Illinois rules?

EASY

Which of the following statements about Illinois agency disclosure and compensation policy rules is NOT accurate?

EASY

In May 2026, Avery Foster plans to refer a client to a third-party service provider in which the licensee has an ownership interest. What is the most accurate answer under current Illinois rules?

HARD

For Illinois exam purposes, which statement about third party compensation and referral is correct in this agency disclosures and compensation policy notices context?

EASY

Under the Illinois Real Estate License Act, when is a sponsoring broker required to establish a brokerage relationship in a written brokerage agreement?

EASY

Under Illinois law, when must a sponsoring broker establish a brokerage relationship in writing?

MEDIUM

Drew Hayes is reviewing an Illinois issue in Chicago. The person plans to refer a client to a third-party service provider in which the licensee has an ownership interest. Which statement best applies?

MEDIUM

During a brokerage meeting in Decatur, Parker Foster is working with a consumer but no written agreement sets a different agency relationship. What is the best answer under current Illinois law or practice?

MEDIUM

Under Illinois law, what must a licensee disclose to a client regarding the sponsoring broker's compensation?

MEDIUM

Which of the following statements about Illinois agency disclosure and compensation requirements is NOT correct under current Illinois law?

HARD

During a brokerage meeting in Springfield, Riley Sullivan asks what Illinois requires a licensee to disclose to a client about compensation policy. What is the best answer under current Illinois law or practice?

MEDIUM

During a brokerage meeting in Rockford, Parker Lopez asks when the dual-agency disclosure form must be presented to a client. What is the best answer under current Illinois law or practice?

MEDIUM

In Peoria, an Illinois exam-prep memo in June 2026 gives this example: Morgan Diaz asks when a written brokerage agreement is required in Illinois. Which response is correct?

MEDIUM

At a brokerage compliance review focused on agency disclosures and compensation policy notices in Winnebago County, these statements are discussed. Which statement below is NOT accurate for current Illinois practice or law?

MEDIUM

Blake Owens is reviewing an Illinois issue in Bloomington. The person is working with a consumer but no written agreement sets a different agency relationship. Which statement best applies?

HARD

Which answer best states the Illinois rule on written brokerage agreement as tested in agency disclosures and compensation policy notices?

HARD

Blake Foster is reviewing an Illinois issue in Naperville. The person asks what Illinois requires a licensee to disclose to a client about compensation policy. Which statement best applies?

MEDIUM

Under Illinois law, when must a brokerage present the dual-agency disclosure form to a client?

MEDIUM

+ 12 more questions

Agency_relationships_and_written_brokerage_agreements(34)

Under Illinois real estate law, is every person who receives services from a licensee automatically considered a client?

MEDIUM

Each of the following statements accurately describes Illinois agency law EXCEPT:

MEDIUM

A sponsored licensee in Illinois begins working with a consumer, but no written brokerage agreement has been executed. Under the Illinois Real Estate License Act of 2000, how is that consumer classified by default?

MEDIUM

Under Illinois law, is a consumer who receives services from a licensee always considered a client?

MEDIUM

An Illinois licensee provides limited assistance that does not create an agency relationship. Which description identifies this type of ministerial act?

EASY

Under Illinois law, which statement most accurately describes the core duty structure a licensee owes to a represented client?

EASY

Each of the following statements accurately reflects Illinois law on agency relationships and written brokerage agreements EXCEPT:

MEDIUM

An Illinois sponsoring broker is about to list an owner’s property and represent the owner in the transaction. What written step is required to establish that brokerage relationship?

MEDIUM

Under the Illinois Real Estate License Act of 2000, which statement best defines a ministerial act?

MEDIUM

Under the Illinois Real Estate License Act, which statement correctly describes what a licensee owes to a customer who is not represented by that licensee?

MEDIUM

Under Illinois law, which statement best describes the core duties a licensee owes to a seller client?

MEDIUM

Under Illinois law, what is the default agency relationship when a sponsoring broker begins working with a consumer and no written brokerage agreement specifies a different arrangement?

MEDIUM

A brokerage office is reviewing statements about Illinois agency relationships and written brokerage agreements. Which of the following statements is NOT accurate under current Illinois law?

MEDIUM

Under Illinois law, is every consumer who receives services from a licensee automatically treated as a client?

MEDIUM

Under the Illinois Real Estate License Act, which of the following most accurately describes the core duties a licensee owes to a represented client?

MEDIUM

Under Illinois real estate law, when must a sponsoring broker's brokerage relationship be documented in a written brokerage agreement?

MEDIUM

Under Illinois law, what type of agency relationship applies by default when a sponsoring broker has not established a different relationship through a written brokerage agreement?

MEDIUM

Under current Illinois real estate law and practice, which of the following statements about written brokerage agreements and agency duties is NOT accurate?

HARD

Under the Illinois Real Estate License Act of 2000, which of the following best defines a 'ministerial act'?

HARD

Under the Illinois Real Estate License Act of 2000, which statement most accurately describes when a written brokerage agreement is required?

HARD

+ 14 more questions

Agency_types(46)

Under Alabama law, when must a licensee first disclose their agency status to a prospective buyer who contacts them about a listed property?

EASY

Sales Associate Beth works for Frontier Realty in Lawton, Oklahoma. Beth has a signed buyer representation agreement with buyer Tom. While searching for properties, Tom becomes interested in a home listed by Beth's own broker at Frontier Realty. Beth's broker has a listing agreement with the seller of that property. Beth's broker designates Beth to represent Tom and designates another Sales Associate, Ryan, to represent the seller. Both parties consent in writing. Which statement correctly describes the resulting agency arrangement?

MEDIUM

A buyer, Kenji, has signed a buyer's agency agreement with Salesperson Noa in Hawaii. Noa discovers that a property Kenji is interested in is a leasehold property with a ground lease expiring in 18 years. Noa knows that leasehold properties with short remaining terms can be difficult to finance and typically sell at a significant discount. What is Noa's obligation regarding this information?

MEDIUM

Agent Rebecca represents seller Frank in the sale of his Warwick home. Buyer Gina contacts Rebecca directly, expressing strong interest in Frank's property. Rebecca has not yet disclosed her agency relationship to Gina. Under Rhode Island law, which of the following best describes Rebecca's current obligation and the risk she faces?

MEDIUM

Buyer Tasha is working with Alabama licensee Victor, who has disclosed in writing that he represents the seller. Tasha has not signed any buyer agency agreement. Victor assists Tasha by answering her questions about the property and helping her schedule inspections, but he does not advocate for her negotiating position. Under Alabama law, what is Victor's relationship with Tasha?

EASY

Sales Associate Derek in Norman, Oklahoma is working with buyer Sandra to find a home. Derek has not signed a written buyer representation agreement with Sandra, but he has been showing her properties and providing advice for three weeks. Under Oklahoma agency law, which statement most accurately describes Derek's agency status with Sandra?

MEDIUM

Under Oklahoma's agency disclosure requirements, when must a licensee provide the written agency disclosure to a prospective buyer who is being shown a listed property for the first time?

MEDIUM

Under Alaska real estate regulations, what is the term for a licensee who represents BOTH the buyer and the seller in the same transaction with the written informed consent of both parties?

EASY

Salesperson Kai represents buyer Lena in Hawaii. During negotiations, Lena tells Kai that she is pre-approved for $800,000 but is willing to offer $750,000 first, hoping to negotiate up to $780,000 at most. The seller's agent, Broker Hana, asks Kai directly: 'What is the highest price your buyer will pay?' How should Kai respond?

MEDIUM

Under Rhode Island's Agency Disclosure Act (§ 5-20.6), all of the following statements about dual agency are accurate EXCEPT:

MEDIUM

Agent Diane at Oceanview Realty in Rhode Island represents buyer Kevin under a written buyer agency agreement. All of the following are fiduciary duties Diane owes Kevin as his buyer's agent EXCEPT:

MEDIUM

Salesperson Aloha works for Broker Sunset Realty in Hawaii. Aloha has a buyer's agency agreement with client Mei. Broker Sunset Realty also has a listing agreement with seller Koa for a property Mei wants to buy. Broker Sunset Realty wants to proceed with designated agency. Which of the following correctly describes a key limitation that applies to the designated agents in this arrangement under Hawaii law?

HARD

Under Hawaii law, which of the following situations would NOT require a licensee to obtain informed written consent from both parties before proceeding with the transaction?

HARD

Broker Ikaika in Hawaii is approached by a buyer, Chen, who wants to purchase a property that Ikaika has listed. Ikaika explains the dual agency situation and both the seller and Chen provide their informed written consent. During negotiations, Chen asks Ikaika: 'Does the seller have any motivation to sell quickly — like a financial hardship or divorce?' What is Ikaika's obligation as a dual agent?

MEDIUM

Broker Nani in Hawaii has a listing agreement with seller Tomoko. A buyer, Rafael, contacts Nani directly without any buyer's agent and wants to make an offer on Tomoko's property. Nani has not entered into a buyer's agency agreement with Rafael. After providing the required agency disclosure form, Rafael asks Nani to help him prepare an offer. In this situation, Nani is most likely acting in which capacity with respect to Rafael?

HARD

Agent Patel is a buyer's agent representing a couple relocating from Seattle to Anchorage. The couple asks Agent Patel to find them a property where they can elect into Alaska's optional community property system under the Alaska Community Property Act. The couple assumes Alaska is a mandatory community property state like Washington. What must Agent Patel communicate to the couple about Alaska's property ownership system?

HARD

Salesperson Keola is a buyer's agent in Hawaii. His client, buyer Priya, is interested in a leasehold property. The seller's agent informs Keola that the property is held under the Land Court system. Keola's client asks him to explain the difference between Land Court title and Regular System (Bureau of Conveyances) title. Which of the following statements most accurately reflects the distinction Keola should explain?

HARD

In Hawaii, Broker Alana's firm has a listing agreement with seller Makoa and a buyer's agency agreement with buyer Sasha. Both Makoa and Sasha are interested in the same property transaction. Alana wants to act as a dual agent. Under Hawaii law, which of the following steps is required BEFORE dual agency can proceed?

MEDIUM

Broker Connie at Redlands Realty in Edmond, Oklahoma is personally representing both the seller and the buyer in the same transaction. Both parties have provided written informed consent after full disclosure. Which of the following statements correctly describes Connie's obligations in this dual agency arrangement under Oklahoma law?

MEDIUM

Under South Dakota agency law, a seller's agent owes fiduciary duties to the seller. Which of the following is NOT a fiduciary duty owed by a seller's agent to the seller client?

MEDIUM

+ 26 more questions

Laws of Agency: What You Need to Know

Laws of Agency is one of the most important and heavily tested exam topics, covering the fiduciary relationship between agents and their clients. The concept of agency is fundamental to understanding an agent's legal obligations and forms the basis for professional conduct in real estate.

The cornerstone of agency law is the six fiduciary duties, easily remembered by the acronym OLD CAR: Obedience (following lawful instructions), Loyalty (putting the client's interests first), Disclosure (revealing all material facts), Confidentiality (protecting private information), Accountability (accounting for all funds), and Reasonable Care (exercising competence and diligence). These duties apply to every client relationship.

Know how agency relationships are created: express agency (written or oral agreement), implied agency (through actions or conduct), and apparent agency (through third-party perception). Also understand how they terminate: completion, expiration, mutual agreement, death or incapacity, destruction of property, or breach. Dual agency — representing both buyer and seller — requires informed written consent from both parties and is prohibited in some states.

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