56 Agency & Contracts Practice Questions & Answers
Every Agency & Contracts practice question from the Real Estate License Practice Test, with the correct answer and a short explanation.
Start practice test →1. A property owner hires a broker to manage an apartment building, collect rents, and handle repairs on an ongoing basis. What type of agent is the broker?
- A.Universal agent
- B.Subagent
- C.Special agent
- D.General agent✓ Answer
A general agent is authorized to perform an ongoing series of acts within a continuing relationship, such as a property manager. A special agent is limited to a single transaction.
Source: Law of agency — classification of agents (general vs. special vs. universal)Report a problem with this question
2. A seller signs a listing agreement authorizing a broker to find a buyer for one specific property. With respect to that transaction, the broker is best classified as a:
- A.Gratuitous agent
- B.Universal agent
- C.Special agent✓ Answer
- D.General agent
A listing broker is a special agent because the authority is limited to a single specific transaction rather than a continuing series of acts.
Source: Law of agency — special agent (single transaction)Report a problem with this question
3. An agency relationship is created when a principal, through words or conduct, accepts the benefits of an unauthorized act performed on their behalf. This method of creating agency is called:
- A.Express agreement
- B.Estoppel
- C.Ratification✓ Answer
- D.Novation
Ratification creates agency after the fact when the principal approves or accepts the benefits of an act that was originally unauthorized.
Source: Creation of agency — ratificationReport a problem with this question
4. A principal's own conduct leads a third party to reasonably believe that a person is the principal's agent, even though no actual authority was granted. This is an example of:
- A.Universal authority
- B.Ostensible (apparent) authority✓ Answer
- C.Express authority
- D.Actual authority
Ostensible or apparent authority arises from the principal's conduct that causes a third party to reasonably believe agency exists, even without an express grant.
Source: Agency authority — ostensible/apparent vs. actual authorityReport a problem with this question
5. A cooperating broker who works for the listing broker's principal (the seller) rather than for their own client is acting as a:
- A.Subagent✓ Answer
- B.Universal agent
- C.Designated agent
- D.Dual agent
A subagent owes the same fiduciary duties to the agent's principal because the subagent works for the principal through the agent, not for a separate customer.
Source: Agency — subagencyReport a problem with this question
6. In a real estate brokerage relationship, the person to whom full fiduciary duties are owed is best described as the:
- A.Client (principal)✓ Answer
- B.Customer
- C.Subagent
- D.Third party
The client, or principal, is the party the agent represents and to whom full fiduciary duties are owed; a customer is owed only honesty and fair dealing.
Source: Agency — client vs. customer distinctionReport a problem with this question
7. A buyer who is not represented by the agent but is shown a property by the listing agent is considered a:
- A.Fiduciary
- B.Principal
- C.Client
- D.Customer✓ Answer
An unrepresented buyer is a customer, owed only honesty, fair dealing, and disclosure of known material defects — not the full fiduciary duties owed to a client.
Source: Agency — customer relationship dutiesReport a problem with this question
8. An agent follows a seller's instruction to hold all offers until a certain date, even though the seller's reason is simply personal convenience. Assuming the instruction is lawful, which fiduciary duty requires the agent to comply?
- A.Accountability
- B.Disclosure
- C.Confidentiality
- D.Obedience✓ Answer
The duty of obedience requires the agent to follow all lawful instructions of the principal; only unlawful instructions may be refused.
Source: Fiduciary duties (OLD CAR) — obedience to lawful instructionsReport a problem with this question
9. A listing agent learns that a buyer is willing to pay more than the offered price but tells the seller only the amount actually offered, and privately arranges to buy the property for personal resale. Which fiduciary duty has the agent MOST clearly breached?
- A.Accountability
- B.Obedience
- C.Care
- D.Loyalty✓ Answer
Loyalty requires placing the principal's interest above all others and prohibits secret profit and undisclosed self-dealing, both of which occurred here.
Source: Fiduciary duties — loyalty (no secret profit, no self-dealing)Report a problem with this question
10. A broker deposits a client's earnest-money funds into the broker's own personal operating account. This improper act is known as:
- A.Accounting
- B.Consideration
- C.Commingling✓ Answer
- D.Subrogation
Commingling is mixing client trust funds with the broker's own funds; the duty of accountability requires trust funds be kept separate.
Source: Fiduciary duties — accountability / no commingling of trust fundsReport a problem with this question
11. After a listing expires, an agent reveals to a future buyer that the former seller had been going through a divorce and was desperate to sell quickly. Which fiduciary duty did the agent violate?
- A.Care
- B.Obedience
- C.Disclosure
- D.Confidentiality✓ Answer
The duty of confidentiality protects the principal's personal and financial information, and it survives the termination of the agency relationship.
Source: Fiduciary duties — confidentiality (survives termination)Report a problem with this question
12. Which of the following is a fiduciary duty owed to a principal (client) but NOT to a customer?
- A.Disclosure of known material defects
- B.Fair dealing
- C.Loyalty✓ Answer
- D.Honesty
Loyalty and confidentiality are owed only to the principal; honesty, fair dealing, and disclosure of known material defects are owed to all parties including customers.
Source: Duties to principal vs. duties to third partiesReport a problem with this question
13. An agent must disclose to the seller-principal a material fact the agent learns that could affect the seller's decision, such as the true financial strength of a prospective buyer. This obligation reflects the duty of:
- A.Confidentiality
- B.Care
- C.Accountability
- D.Disclosure✓ Answer
The duty of disclosure requires the agent to reveal to the principal all material facts relevant to the transaction that could influence the principal's decision.
Source: Fiduciary duties — disclosure of material facts to principalReport a problem with this question
14. A buyer's agent fails to research readily available public records and, as a result, the buyer overpays for a property in a flood zone. The agent has most likely breached the duty of:
- A.Confidentiality
- B.Reasonable care and skill✓ Answer
- C.Obedience
- D.Loyalty
The duty of reasonable care and skill requires the agent to use the competence and diligence expected of a professional, including investigating readily available information.
Source: Fiduciary duties — reasonable care and skillReport a problem with this question
15. An agent representing a seller accepts an undisclosed referral fee from a home inspector the agent recommends to the buyer. This is prohibited primarily because it constitutes:
- A.Consideration
- B.A secret profit✓ Answer
- C.Accountability
- D.Ratification
Taking an undisclosed benefit is a secret profit, which violates the duty of loyalty; any such benefit must be disclosed and consented to.
Source: Fiduciary duties — loyalty / no secret profitReport a problem with this question
16. Dual agency, in which one licensee represents both the buyer and the seller in the same transaction, is legally permissible only when:
- A.The broker discloses it only to the seller
- B.Both parties give informed written consent✓ Answer
- C.The agent treats both sides fairly
- D.The transaction price is above market value
Dual agency is legal only with the informed written consent of both parties; merely being fair to both sides does not satisfy the requirement.
Source: Dual agency — informed written consent of both partiesReport a problem with this question
17. In a properly disclosed dual agency, which of the following may the agent NOT do?
- A.Present all offers to the seller
- B.Explain financing options to both
- C.Disclose the seller's lowest acceptable price to the buyer✓ Answer
- D.Prepare documents for both parties
A dual agent must not disclose either party's confidential negotiating position, such as the lowest price a seller will accept or the highest a buyer will pay.
Source: Dual agency — no disclosure of confidential negotiating positionReport a problem with this question
18. A licensee represents a seller. While showing the home, the licensee tells an unrepresented buyer, "Offer $10,000 less than asking — they'll take it." This advice most likely creates:
- A.An undisclosed (implied) dual agency✓ Answer
- B.A properly disclosed dual agency
- C.A valid subagency
- D.A universal agency
Giving a customer negotiating advice can imply agency to that buyer while the licensee still represents the seller, silently creating an undisclosed dual agency and breaching loyalty to the seller.
Source: Implied agency / undisclosed dual agencyReport a problem with this question
19. Undisclosed dual agency is a serious violation primarily because it can result in:
- A.Automatic contract validity
- B.Forfeiture of commission and loss of license✓ Answer
- C.A larger commission for the broker
- D.Reduced fiduciary duties
Undisclosed dual agency is a breach of the agency relationship that can forfeit the agent's commission and jeopardize the license.
Source: Undisclosed dual agency — consequences (breach)Report a problem with this question
20. In a designated (appointed) agency arrangement, how is representation handled within a single brokerage when both buyer and seller are clients of that firm?
- A.The firm withdraws from the transaction
- B.One licensee openly represents both parties
- C.Different licensees in the firm are assigned to each party✓ Answer
- D.Neither party receives representation
Designated agency assigns different licensees within the same brokerage to represent each party, allowing individual representation despite the firm's dual role.
Source: Designated / appointed agencyReport a problem with this question
21. Agency disclosure laws generally require a licensee to inform the parties of whom the licensee represents. The main purpose of this disclosure is to:
- A.Guarantee the sale will close
- B.Eliminate the need for written contracts
- C.Set the commission rate
- D.Prevent confusion about who owes fiduciary duties to whom✓ Answer
Agency disclosure ensures the parties understand which party the licensee represents so they know to whom fiduciary duties are owed.
Source: Agency disclosure requirementReport a problem with this question
22. A seller who has listed with a broker sells the property personally to a friend before any buyer is found and revokes the listing. Which fiduciary duty does the SELLER owe the broker during the relationship?
- A.Loyalty to the broker's interests
- B.Compensation and good faith per the agreement✓ Answer
- C.Confidentiality of the broker's finances
- D.Full fiduciary duties
The principal owes the agent contractual duties such as compensation and good-faith cooperation per the agreement; fiduciary duties flow from agent to principal, not the reverse.
Source: Principal's duties to agentReport a problem with this question
23. An agency relationship ends automatically upon which of the following events?
- A.The buyer lowering an offer
- B.Death of the principal✓ Answer
- C.A slow real estate market
- D.The agent taking a vacation
Death or incapacity of either the principal or agent automatically terminates the agency relationship because the personal relationship can no longer be performed.
Source: Termination of agency — death or incapacity of a partyReport a problem with this question
24. Which of the following would terminate an agency by operation of law rather than by the act of a party?
- A.Mutual agreement to cancel
- B.Destruction of the listed property✓ Answer
- C.Renunciation by the agent
- D.Revocation by the principal
Destruction of the property terminates the agency by operation of law because its subject matter no longer exists; the other choices are terminations by act of a party.
Source: Termination of agency — destruction of property (operation of law)Report a problem with this question
25. A principal revokes a broker's listing without cause before its expiration and before any buyer is procured. What is the general legal result?
- A.The listing continues in force despite revocation
- B.The broker automatically earns the full commission
- C.The agency ends, but the principal may be liable for damages✓ Answer
- D.The agency cannot be revoked at all
A principal generally has the power to revoke, which ends the agency, but wrongful revocation without cause can create liability for damages to the broker.
Source: Termination of agency — revocation vs. wrongful terminationReport a problem with this question
26. Which of the following is one of the four essential elements required for a valid contract?
- A.A notarized signature
- B.A licensed broker
- C.Consideration✓ Answer
- D.A recorded deed
The four essentials are competent parties, mutual assent, lawful object, and consideration; a broker, notarization, and recording are not required for validity.
Source: Contract law — four essential elementsReport a problem with this question
27. A contract signed by a person who was legally declared mentally incompetent at the time of signing is:
- A.Voidable at the other party's option
- B.Void✓ Answer
- C.Unenforceable only after one year
- D.Fully valid and enforceable
A person adjudicated legally incompetent lacks capacity, so the contract is void and has no legal effect because a valid contract requires competent parties.
Source: Contract classifications — void (incompetent party)Report a problem with this question
28. A contract that a minor enters into is generally classified as which of the following, because the minor may disaffirm it?
- A.Voidable✓ Answer
- B.Unenforceable
- C.Void
- D.Executed
A minor's contract is voidable — it is valid until the minor with limited capacity chooses to disaffirm (rescind) it.
Source: Contract classifications — voidable (minor)Report a problem with this question
29. A contract required by law to be in writing, but which exists only as an oral agreement, is best described as:
- A.Ratified
- B.Void from inception
- C.Unenforceable✓ Answer
- D.Fully executed
A contract that fails a writing requirement under the Statute of Frauds is unenforceable — it may be otherwise valid but a court will not enforce it.
Source: Contract classifications — unenforceable / Statute of FraudsReport a problem with this question
30. A real estate sales contract in which the seller promises to convey and the buyer promises to pay is an example of what kind of contract?
- A.Unilateral
- B.Void
- C.Executed
- D.Bilateral✓ Answer
A bilateral contract is a promise exchanged for a promise; here both parties make enforceable promises, unlike a unilateral contract where only one party promises.
Source: Contract classifications — bilateral vs. unilateralReport a problem with this question
31. An option contract, in which the owner is bound to keep an offer open but the optionee is not obligated to buy, is an example of a:
- A.Executed contract
- B.Void contract
- C.Bilateral contract
- D.Unilateral contract✓ Answer
An option is a unilateral contract because only one party (the owner) is obligated; the optionee has a right, but no obligation, to perform.
Source: Contract classifications — unilateral (option)Report a problem with this question
32. A signed purchase agreement on which the closing has not yet occurred is best described as a(n):
- A.Void contract
- B.Unenforceable contract
- C.Executory contract✓ Answer
- D.Executed contract
An executory contract has obligations still to be performed; once all obligations are completed at closing it becomes an executed contract.
Source: Contract classifications — executory vs. executedReport a problem with this question
33. A buyer signs a purchase contract only because the seller intentionally lied about a major hidden defect. The buyer's consent was not genuine, making the contract:
- A.Void from the start
- B.Unenforceable by the seller only after recording
- C.Voidable by the buyer✓ Answer
- D.Fully enforceable against the buyer
Fraud destroys genuine assent, making the contract voidable at the option of the defrauded party, who may rescind or enforce it.
Source: Mutual assent — genuine consent (fraud makes contract voidable)Report a problem with this question
34. For a contract to have mutual assent, the offer and acceptance must reflect a genuine "meeting of the minds." Which of the following would NOT, by itself, destroy genuine assent?
- A.A hard but honest negotiation✓ Answer
- B.Undue influence
- C.Fraud
- D.Duress
Genuine assent is destroyed by fraud, duress, menace, undue influence, or mistake; ordinary hard but honest bargaining does not negate consent.
Source: Mutual assent — factors that negate genuine consentReport a problem with this question
35. A contract whose purpose is to accomplish something illegal is:
- A.Unenforceable but valid
- B.Void✓ Answer
- C.Executory
- D.Voidable
A contract lacking a lawful object is void from its inception and has no legal effect, since lawful object is an essential element.
Source: Contract elements — lawful object (void if unlawful)Report a problem with this question
36. Under the Statute of Frauds, which of the following must be in writing to be enforceable?
- A.A contract conveying real property✓ Answer
- B.A one-week apartment rental
- C.A verbal agreement to mow a lawn
- D.A month-to-month oral tenancy
The Statute of Frauds requires contracts conveying real property, and leases longer than one year, to be in writing to be enforceable.
Source: Statute of Frauds — real property conveyances in writingReport a problem with this question
37. Which lease, under the Statute of Frauds, must generally be in writing to be enforceable?
- A.A daily rental
- B.A lease with a term longer than one year✓ Answer
- C.A three-month lease
- D.A two-week vacation rental
The Statute of Frauds requires leases with a term longer than one year to be in writing; shorter leases may be enforceable orally.
Source: Statute of Frauds — leases longer than one yearReport a problem with this question
38. A buyer submits a written offer; the seller responds by changing the price and adding a condition, then signing. This response is legally a:
- A.Valid acceptance of the original offer
- B.Ratification of the original offer
- C.Counteroffer that terminates the original offer✓ Answer
- D.Assignment of the original offer
Changing any term is a counteroffer, which rejects and terminates the original offer; the original offer can no longer be accepted.
Source: Offer and acceptance — counteroffer terminates original offerReport a problem with this question
39. For an acceptance to create a binding contract, it must be:
- A.Kept private in the offeree's mind
- B.Made after the offer is revoked
- C.Unqualified and communicated to the offeror✓ Answer
- D.Conditioned on a new price
Acceptance must be unqualified (mirroring the offer) and communicated to the offeror; silent or internal acceptance does not form a contract.
Source: Offer and acceptance — must be unqualified and communicatedReport a problem with this question
40. Before a seller accepts a buyer's written offer, the buyer notifies the seller that the offer is withdrawn. This is a valid:
- A.Counteroffer by the seller
- B.Breach of contract
- C.Revocation of the offer✓ Answer
- D.Novation
An offer may be revoked by the offeror any time before it is accepted; because no contract had yet formed, the revocation is valid and not a breach.
Source: Offer and acceptance — revocation before acceptanceReport a problem with this question
41. Substituting a new contract or a new party for an existing one, thereby discharging the original obligation, is called:
- A.Assignment
- B.Ratification
- C.Novation✓ Answer
- D.Rescission
Novation substitutes a new contract or party and discharges the original obligation, distinguishing it from an assignment, which transfers rights without necessarily releasing the original party.
Source: Discharge of contracts — novationReport a problem with this question
42. A contract clause stating that both parties agree in advance to a set amount the buyer forfeits if the buyer defaults (such as the earnest money) is a provision for:
- A.Liquidated damages✓ Answer
- B.Novation
- C.Specific performance
- D.Rescission
Liquidated damages are an amount agreed in advance as compensation for a breach, such as forfeiture of the buyer's earnest money on default.
Source: Contract remedies — liquidated damagesReport a problem with this question
43. A seller breaches a signed purchase contract by refusing to convey a unique property. The buyer asks a court to force the seller to complete the sale. The buyer is seeking:
- A.Novation
- B.Liquidated damages
- C.Specific performance✓ Answer
- D.Rescission
Specific performance is a court order compelling the actual conveyance, available because real property is considered unique and money damages may be inadequate.
Source: Contract remedies — specific performanceReport a problem with this question
44. When a purchase contract states that "time is of the essence," the effect is that:
- A.The stated dates and deadlines are strictly binding✓ Answer
- B.Consideration is no longer required
- C.Deadlines become suggestions only
- D.The contract can never be enforced
"Time is of the essence" makes the specified dates strictly binding, so failure to perform by the deadline is a breach.
Source: Contract performance — time is of the essenceReport a problem with this question
45. Under an exclusive right to sell listing, when does the listing broker earn a commission during the listing term?
- A.No matter who procures the buyer, including the owner✓ Answer
- B.Never, because commission is illegal
- C.Only if another broker finds the buyer
- D.Only if the listing broker personally finds the buyer
In an exclusive right to sell listing, the broker earns a commission if the property sells during the term regardless of who procures the buyer, even the owner.
Source: Listing agreements — exclusive right to sellReport a problem with this question
46. Under an exclusive agency listing, the seller owes NO commission to the listing broker if:
- A.Any broker sells the property
- B.The property sells during the term at all
- C.The owner personally finds the buyer and sells✓ Answer
- D.The listing broker sells the property
In an exclusive agency listing, the owner reserves the right to sell personally without owing a commission, but owes one if any broker sells it.
Source: Listing agreements — exclusive agencyReport a problem with this question
47. Under an open listing, which broker is entitled to the commission?
- A.No broker, since open listings pay nothing
- B.The first broker to list it
- C.Every broker who advertised the property
- D.Only the broker who is the procuring cause of the sale✓ Answer
An open listing is non-exclusive, and only the broker who is the procuring cause of the sale earns the commission.
Source: Listing agreements — open listing / procuring causeReport a problem with this question
48. A listing arrangement in which the broker keeps any sale proceeds above a set net amount to the seller is a net listing. Why is it disfavored or illegal in many states?
- A.It always pays the seller more
- B.It is required by the Statute of Frauds
- C.It creates a conflict of interest between broker and seller✓ Answer
- D.It eliminates the need for a termination date
A net listing creates a conflict of interest because the broker profits by keeping the price low to the seller, so it is disfavored or illegal and allowed only with full disclosure.
Source: Listing agreements — net listing (conflict of interest)Report a problem with this question
49. An exclusive right to sell listing must contain which of the following to be proper?
- A.A promise of dual agency
- B.A guaranteed sale price
- C.A definite termination date✓ Answer
- D.An automatic renewal forever
An exclusive right to sell listing should specify a definite termination date; open-ended or automatically renewing listings are generally prohibited.
Source: Listing agreements — definite termination date requiredReport a problem with this question
50. Two competing brokerages agree to charge all clients the same commission rate in their market. This agreement most likely violates:
- A.Antitrust law (price fixing)✓ Answer
- B.The Statute of Frauds
- C.Fair housing law
- D.The parol evidence rule
Commissions are always negotiable and never set by law; competitors agreeing to fix rates is illegal price fixing under antitrust law.
Source: Antitrust — commission negotiable, no price fixingReport a problem with this question
51. The federal law that prohibits ALL racial discrimination in the sale or rental of property, with no exemptions, is the:
- A.Statute of Frauds
- B.Civil Rights Act of 1866✓ Answer
- C.Americans with Disabilities Act
- D.Fair Housing Act of 1968
The Civil Rights Act of 1866 bars all racial discrimination in property transactions with no exemptions, as affirmed in Jones v. Mayer (1968).
Source: Civil Rights Act of 1866 (Jones v. Mayer)Report a problem with this question
52. Which of the following is a protected class under the federal Fair Housing Act of 1968 (as amended)?
- A.Familial status✓ Answer
- B.Income level
- C.Political party
- D.Occupation
The federal protected classes are race, color, religion, national origin, sex, disability, and familial status; occupation, political party, and income are not federally protected.
Source: Fair Housing Act of 1968 — protected classesReport a problem with this question
53. An agent steers minority buyers only toward certain neighborhoods and white buyers toward others based on the buyers' race. This prohibited practice is called:
- A.Novation
- B.Steering✓ Answer
- C.Redlining
- D.Blockbusting
Steering is channeling buyers toward or away from particular areas based on a protected class, which is prohibited under the Fair Housing Act.
Source: Fair Housing Act — steeringReport a problem with this question
54. An agent tells homeowners they should sell quickly because families of a certain protected class are moving in and property values will fall. This illegal practice is:
- A.Commingling
- B.Redlining
- C.Blockbusting (panic peddling)✓ Answer
- D.Steering
Blockbusting, or panic peddling, is inducing owners to sell by claiming that entry of a protected class will lower property values; it is prohibited.
Source: Fair Housing Act — blockbusting/panic peddlingReport a problem with this question
55. A lender refuses to make mortgage loans in certain neighborhoods based on the racial makeup of the area rather than the individual applicant's qualifications. This practice is:
- A.Redlining✓ Answer
- B.Subrogation
- C.Blockbusting
- D.Steering
Redlining is the prohibited practice of lenders denying loans or insurance in geographic areas based on protected-class composition rather than the applicant's own creditworthiness.
Source: Fair Housing Act — redliningReport a problem with this question
56. A landlord has a facially neutral policy that unintentionally excludes a protected class at a much higher rate than others, with no business justification. Under fair housing law this may still be a violation under the theory of:
- A.Specific performance
- B.Disparate impact✓ Answer
- C.Novation
- D.Steering intent
Disparate impact means a neutral policy can violate the Fair Housing Act if it disproportionately harms a protected class, even without any discriminatory intent.
Source: Fair Housing Act — disparate impact (no intent required)Report a problem with this question
Practice questions cover the uniform national portion of the real estate exam. Your state adds a state-law portion — study your state's official materials before testing. Licensing info (ARELLO) →