Oregon 30-Hour Real Estate Law Practice Test

In which case has the licensee violated duties of loyalty and disclosure?

1. Nate disclosed his client's financial situation

2. Nate informed his client about the property condition

3. Nate didn't disclose a conflict of interest

4. Nate was transparent about commission rates

The correct answer is: Nate didn't disclose a conflict of interest

The scenario in which Nate didn't disclose a conflict of interest exemplifies a violation of the duties of loyalty and disclosure required of a licensee. In real estate transactions, agents have a fiduciary duty to act in the best interest of their clients, which includes being honest and forthright about any potential conflicts that could affect their judgment or loyalty. Failing to disclose a conflict of interest compromises the trust essential to the agent-client relationship. Clients rely on their agents to protect their interests, and when an agent has a conflicting interest—such as having a stake in the property or a personal relationship with a party involved in the transaction—the agent must disclose this to ensure that decisions made are transparent and in the best interest of the client. In contrast, disclosing a client's financial situation, informing a client about the property condition, or being transparent about commission rates align with the duty of disclosure. These actions enhance the client's understanding and help them make informed decisions, thereby fulfilling the licensee's obligations rather than undermining them.