Difficulty: Easy

Average Score: 100%

According to common law, an agency relationship is created when

Rationale

An agency relationship is created when a working agreement is reached between a licensee and a principal.

An agency relationship is established when both parties come to an agreement, typically formalized in a contract, outlining the responsibilities and expectations of the licensee in acting on behalf of the principal. This mutual understanding is crucial for the legal recognition of the agency.

A (a working agreement is reached between a licensee and a principal.) CORRECT

This choice accurately reflects the fundamental requirement for creating an agency relationship. An agreement signifies the consent of both parties to enter into a professional relationship, where the licensee acts on behalf of the principal in real estate transactions.

B (the licensee submits a written offer to the seller.) YOUR ANSWER

While submitting a written offer is a part of the transaction process, it does not itself create an agency relationship. The agency is formed prior to any offers being made and relies on the existence of an agreement between the licensee and the principal, not merely on the act of submitting offers.

C (a real estate firm registers with the state licensing department.) YOUR ANSWER

Registration with the state licensing department is a procedural requirement for operating as a licensed real estate firm, but it does not establish an agency relationship. Agency formation depends on the agreement between an individual licensee and the principal, not on the firm's registration status.

D (a licensee shows property that is listed with his responsible broker to a potential buyer.) YOUR ANSWER

Showing property is part of the duties a licensee may perform under an agency agreement, but this action alone does not create the agency relationship. The relationship must be established through an agreement before any property can be shown, making this choice insufficient for agency creation.

Conclusion

An agency relationship in real estate arises when a working agreement is made between a licensee and a principal, enabling the licensee to represent the principal's interests legally. The other options describe actions or requirements that occur during the agency process but do not, by themselves, create the relationship. Understanding this distinction is essential for proper practice within real estate law.

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