Question 29

An agency relationship is created when a broker and a seller execute a listing contract.

An agency relationship is formally established when a broker and a seller execute a listing contract, which signifies the seller's consent for the broker to represent their interests in the sale of a property.

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

This option is correct because the execution of a listing contract clearly indicates a mutual agreement where the seller appoints the broker as their agent to act on their behalf in the transaction. This contractual relationship creates the fiduciary duties inherent in an agency relationship.

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

This option is incorrect as merely showing a property does not create an agency relationship. The broker is acting as a facilitator and does not have an agreement with the seller of the property listed with another broker, thus lacking the necessary consent to establish an agency.

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

This option is incorrect because assisting a buyer with a loan application does not establish an agency relationship between the broker and the buyer. The broker is providing a service rather than acting as an agent representing the buyer's interests in a property transaction.

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

This option is incorrect as simply inquiring about commission fees does not create an agency relationship. There is no formal agreement or acceptance of representation at this stage; thus, no agency is established.

Conclusion

In summary, the correct answer, A, reflects the essential requirement of a formal agreement to establish an agency relationship, which is fulfilled through the execution of a listing contract. All other options fail to meet the criteria for creating an agency relationship, as they lack the necessary elements of mutual consent and representation.