Iowa Real Estate Practice Exam

In what situation may a broker legally accept a commission from a client?

1. Without disclosing to the client

2. With formal written agreement

3. Only if referred by another agent

4. When the transaction is completed

The correct answer is: With formal written agreement

A broker may legally accept a commission from a client when there is a formal written agreement in place. This requirement ensures transparency and clarity regarding the terms and conditions of the broker's services and compensation. A written agreement protects both the broker and the client by explicitly outlining the expectations, including the scope of services provided, the amount of the commission, and the circumstances under which it is paid. Without a formal agreement, there can be misunderstandings and disputes regarding the broker's authority to collect a commission. It is essential for both parties to agree on the terms in writing to ensure that the process is legally binding and could stand up in a dispute if necessary. This practice not only adheres to legal standards but also fosters trust and professionalism in the real estate transaction process.