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Practice of Real Estate term

Misrepresentation

A false statement of fact, whether intentional or negligent, that induces another party to enter a transaction.

Why Misrepresentation matters on the exam

This term belongs to Practice of Real Estate. The questions below are real items from Freehold's bank that use it - each one cites its source.

Exam questions using Misrepresentation

Every Freehold question shows why the right answer is right — and cites its source.

A broker discovers that an affiliated agent has been telling buyers the brokerage represents them exclusively, when in fact the firm has a written dual agency policy. What is the broker's appropriate next step?

  1. Ignore the issue as long as the agent meant well
  2. Correct the misrepresentation and ensure the agent follows proper disclosure practices going forward
  3. Wait until a client files a formal complaint before acting
  4. Terminate the agent's real estate license, since only the broker can do so
Show answer & explanation

Correct the misrepresentation and ensure the agent follows proper disclosure practices going forward — Because supervision requires brokers to correct known compliance problems, a broker who learns of a misrepresentation must act promptly to fix it and prevent recurrence.

Source: PSI National Real Estate Exam Content Outline — Broker Supplement

A brokerage is sued after an agent misrepresents square footage to a buyer. The buyer's attorney names both the agent and the broker as defendants even though the broker never spoke with the buyer. This is most likely an application of:

  1. Vicarious liability
  2. Escheat
  3. Adverse possession of the property
  4. The doctrine of laches
Show answer & explanation

Vicarious liability — Because the agent's misrepresentation occurred while conducting brokerage business, the broker can be named as a defendant under vicarious liability principles even absent personal involvement.

Source: PSI National Real Estate Exam Content Outline — Broker Supplement

An agent advertises a property as having 'no known defects' despite being aware of a foundation issue disclosed by the seller. What is the most significant problem with this ad?

  1. It is simply too short in length to function as genuinely effective marketing copy
  2. It fails to include the listing agent's direct phone number in the advertisement
  3. It relies on too many superlative adjectives to describe the property's features
  4. It contains a misrepresentation that could mislead buyers and expose the agent and broker to liability
Show answer & explanation

It contains a misrepresentation that could mislead buyers and expose the agent and broker to liability — Advertising that misrepresents known material facts can mislead consumers and create liability exposure for both the agent and the supervising broker.

Source: PSI National Real Estate Exam Content Outline — Broker Supplement

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