Difficulty: Hard

Average Score: 36%

An agency relationship is created under which of the following circumstances?

Rationale

A broker and a seller execute a listing contract.

An agency relationship is established when a broker and a seller formalize their agreement through a listing contract, which grants the broker the authority to represent the seller in the sale of the property.

A (A broker and a seller execute a listing contract.) CORRECT

This choice correctly identifies the creation of an agency relationship, as the listing contract explicitly defines the broker's role and responsibilities in representing the seller's interests throughout the selling process.

B (A broker shows a prospective buyer a property that is listed with another broker.) YOUR ANSWER

In this scenario, the broker is acting as a facilitator rather than an agent for the seller. The relationship is not formalized through a contract, and the broker does not have the authority to represent the seller in this case, thus failing to establish an agency relationship.

C (A broker helps a buyer with his loan application.) YOUR ANSWER

While the broker may assist the buyer in securing financing, this action does not create an agency relationship between the broker and the seller. The broker's role here is more aligned with support services rather than representation in the sale of a property.

D (A prospective seller calls a broker and inquires about commission fees.) YOUR ANSWER

This situation does not constitute an agency relationship either, as merely inquiring about commission fees does not involve a formal agreement or commitment from the seller to engage the broker's services. Thus, no agency is established until a contract is signed.

Conclusion

An agency relationship is formally created when a broker and a seller execute a listing contract, clearly defining the broker's role in representing the seller's interests. Other scenarios presented do not lead to such a relationship, underscoring the necessity of a contractual agreement for agency to exist in real estate transactions.

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