California Real Estate Salesperson Exam Practice - Quesiton 23

Question

When a listing is signed by a seller and a broker, a fiduciary relationship is created between the broker and the:

Selections

A. Seller

B. Buyer

C. Seller and buyer

D. General public

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Answer: A

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5 Keys Summary

• The signing of a listing agreement formally establishes a legal agency relationship between the broker and the client.

• The seller is defined as the principal (client) who hires the broker to represent them for specific purposes.

• The fiduciary relationship, which requires a position of trust and confidence, is directly created between the broker (agent) and the seller (principal) upon execution of the listing agreement.

• The broker owes the highest fiduciary duties—including loyalty, obedience, and accounting—to the seller, prioritizing the seller's interests above everyone else's.

• While the broker must treat third parties (such as the buyer or general public) with fairness and honesty, the full fiduciary relationship and its highest duties are owed exclusively to the principal/seller who signed the employment contract.

Explanations

• When a listing agreement is signed, an agency relationship is officially created. In this relationship, the seller is the principal (client) who employs the broker.
• The broker (agent) owes a fiduciary duty to their principal. This duty requires the agent to act with utmost care, obedience, accounting, loyalty, and disclosure of material facts, prioritizing the client's best interests above their own.
• Therefore, the fiduciary relationship is established between the broker and the seller, who is their principal in a listing agreement.

Concepts Definitions

Agency Relationship: An association formed between a principal and an agent where the agent is authorized to act on the principal's behalf.

Fiduciary Duty: A legal obligation of trust and confidence that requires an agent to act in the best interests of their principal, showing loyalty, good faith, care, obedience, accounting, and disclosure.

Principal: The client or employer (in this case, the seller) to whom an agent owes fiduciary duties.

Listing Agreement: A written employment contract through which a seller formally employs a broker to sell their real property, establishing an agency relationship.