Idaho Real Estate Practice Exam

In a transaction where the seller is a client of Firm A and the buyer is a client of Firm B, what is true about agency law?

1. The brokers may not communicate

2. The broker must act as a dual agent

3. The agents may negotiate freely

4. Each firm must represent its own client

The correct answer is: The broker must act as a dual agent

In a transaction where the seller is a client of one firm and the buyer is a client of another, agency law stipulates certain obligations and limitations that brokers must navigate. When the correct answer states that the broker must act as a dual agent, it highlights a specific scenario where a broker from one firm represents both the seller and the buyer in the same transaction, thereby creating a dual agency situation. In a dual agency scenario, the broker must maintain impartiality and cannot favor one client over the other. This arrangement is complex and requires informed consent from both parties, ensuring that both clients understand the implications of having the same broker represent their interests. The primary goal is to facilitate the transaction while adhering to legal and ethical standards. The other scenarios do not accurately reflect the principles of agency law. For instance, the assertion that brokers may not communicate contradicts the expectation of cooperation in real estate transactions. Furthermore, saying that agents may negotiate freely does not account for the limitations imposed by their agency responsibilities and obligations. Additionally, the idea that each firm must represent its own client omits the possibility of dual agency, which is a legal and viable option when both parties agree to it. Understanding dual agency is crucial for navigating the complexities of real estate transactions, emphasizing