1. Under Arizona Administrative Code, a real estate broker who manages a trust account and discovers that a check drawn on the trust account was returned for insufficient funds must notify the Arizona Department of Real Estate:
- A. Within 3 business days of receiving notice of the returned item from the bank ✓
- B. At the next annual license renewal, by disclosing the returned item on the renewal application
- C. Only if the returned check results in a shortage that is not cured within 30 days
- D. There is no ADRE notification requirement; only the client whose funds were affected need be notified
Arizona Administrative Code R4-28-1101 requires a broker to notify the Department within 3 business days upon learning that a trust account check has been returned for insufficient funds. This prompt notification requirement allows ADRE to investigate potential trust account violations quickly and protects clients from ongoing harm. Waiting until renewal or conditioning notice on whether the shortage is cured are not compliant responses.
2. Under Arizona law, a person who engages in the business of a real estate broker without a license is subject to which of the following criminal classifications for a FIRST offense?
- A. A class 1 misdemeanor.
- B. A class 6 felony. ✓
- C. A class 3 misdemeanor.
- D. A petty offense punishable only by a civil fine.
Under A.R.S. § 32-2165, engaging in real estate activities without a required license is classified as a class 6 felony in Arizona. This is not merely a misdemeanor or civil infraction. The felony classification reflects Arizona's strong statutory stance against unlicensed real estate practice, distinguishing it from the administrative penalties the ADRE may also impose separately.
3. Under Arizona law, when a seller enters into a listing agreement with a real estate broker, which of the following best describes the listing broker's independent disclosure duty regarding known material property defects?
- A. The listing broker's only disclosure duty flows through the seller; the broker has no independent duty to disclose known material defects to buyers.
- B. The listing broker has an independent statutory duty under A.R.S. § 32-2153 to disclose known material facts to all parties, and may not rely on the seller's silence or SPDS omissions to shield the broker from liability. ✓
- C. The listing broker's disclosure duty is limited to facts specifically included on the SPDS form; any additional known facts are outside the broker's legal obligation.
- D. The listing broker must disclose known material defects only to the buyer's agent, who then assumes full responsibility for informing the buyer.
A.R.S. § 32-2153 imposes an independent duty on Arizona real estate licensees—separate from the seller's duty—to disclose all known material facts to all parties in a transaction. A listing broker who has personal knowledge of a material defect cannot rely on the seller's omission from the SPDS to avoid liability. The licensee's duty exists independently and is not delegable to the buyer's agent.
4. Under the AAR Residential Resale Purchase Contract, which of the following correctly describes the 'Seller Warranty of Occupancy' provision at the close of escrow?
- A. The seller warrants that the property has been continuously owner-occupied for at least one year prior to closing
- B. The seller warrants that the property will be delivered vacant and free of all personal property not included in the sale, unless otherwise agreed in writing ✓
- C. The seller warrants that all tenants have received statutory 30-day eviction notices prior to contract acceptance
- D. No warranty of occupancy or delivery condition exists in the AAR contract; possession terms are left entirely to the parties to negotiate outside the form
The AAR Residential Resale Purchase Contract includes a provision under which the seller warrants that the property will be delivered to the buyer at close of escrow (or at possession, if different) in substantially the same condition as the date of contract acceptance, broom-clean, and free of all personal property and debris not included in the sale — unless the parties have agreed otherwise in writing. This is a standard delivery condition warranty, not a representation about prior owner-occupancy or tenant status.
5. Under Arizona law, if an employing broker learns during an in-house transaction that a designated seller's agent has been providing advice to the buyer that goes beyond ministerial acts, the employing broker's most appropriate immediate action is to:
- A. Terminate the designated seller's agent's license for acting outside the scope of representation.
- B. Allow the transaction to close and address the issue through post-closing disciplinary measures only.
- C. Take corrective action by clarifying the agent's role and ensuring proper agency boundaries are maintained, and consider whether dual agency disclosure and consent are required. ✓
- D. Immediately appoint the employing broker personally as dual agent without notifying the parties.
Under Arizona agency law and ADRE rules, the employing broker has supervisory responsibility over designated agents. If a designated seller's agent is providing buyer advocacy beyond permitted ministerial acts, the broker must take corrective action to restore proper agency boundaries. If the conduct rises to the level of representing both parties, the broker must ensure that written dual agency or designated agency disclosures and consents are obtained. Unilateral appointment of the broker as dual agent without party consent is not permissible.