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 fundamentally established through mutual consent and agreement between the parties involved, specifically the licensee and the principal. This agreement outlines the responsibilities and expectations of both parties, forming the legal basis for the agency relationship in real estate transactions.

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

This choice correctly identifies the essential condition for creating an agency relationship. The mutual agreement signifies that the principal authorizes the agent (licensee) to act on their behalf, establishing legal obligations and duties.

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

While submitting a written offer is a part of the real estate process, it does not, in itself, create an agency relationship. The relationship is formed prior to submitting offers, based on the agreement between the licensee and the principal regarding representation and authority.

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

This action pertains to compliance with regulatory requirements rather than the formation of an agency relationship. Registration does not imply that a specific agency agreement exists between a licensee and a principal, as it merely establishes the firm's legal ability to operate.

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

Showing properties is an activity performed by the licensee but does not independently create an agency relationship. This action is part of the duties that may arise once an agency relationship is established through a working agreement between the licensee and the principal.

Conclusion

An agency relationship in real estate is formed when a licensee and a principal reach a mutual working agreement, establishing clear roles and responsibilities. The other choices, while related to the real estate process, do not fulfill the requirement for creating such a relationship. Understanding this principle is crucial for effective representation and legal compliance in real estate transactions.

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