Iowa Real Estate Practice Exam

What has occurred if a licensed salesperson meets a prospective buyer and fails to disclose her agency relationship properly?

1. The buyer can sue for misrepresentation

2. The broker may face disciplinary action

3. The transaction is void

4. The salesperson is liable for damages

The correct answer is: The broker may face disciplinary action

When a licensed salesperson fails to properly disclose her agency relationship to a prospective buyer, it can lead to potential violations of real estate laws and regulations. The correct choice indicates that the broker may face disciplinary action because real estate agents operate under the authority of their brokers. Brokers are responsible for overseeing the actions of their salespersons, ensuring that all legal and ethical practices are upheld. If a salesperson does not appropriately disclose their agency relationship, it reflects on the broker as well, potentially leading to scrutiny from the state real estate commission or other governing bodies, resulting in penalties, fines, or additional disciplinary actions against the broker. The other options, while they may contain elements pertinent to the situation, do not directly address the broker's responsibility and the likelihood of disciplinary measures being taken against them. For instance, the buyer suing for misrepresentation or the transaction being void are possibilities; however, these do not capture the immediate consequences related to the actions not being properly supervised or disclosed by the broker. Liability for damages may also arise, but it would typically implicate the salesperson first, rather than emphasizing the broker's role in managing agency disclosures.