Iowa Real Estate Practice Exam

What is required for buyer-brokerage agreements to be enforceable?

1. Oral acceptance from both parties

2. Written documentation

3. A handshake agreement

4. A mutual friend as a witness

The correct answer is: Written documentation

Buyer-brokerage agreements must be in written documentation to be enforceable. This requirement is designed to protect the interests of both buyers and brokers by clearly outlining the terms and conditions of their relationship. A written agreement provides a clear record of what each party has agreed to, including important details such as the duration of the agreement, the commission structure, and any other obligations. Having a written document reduces ambiguity and provides a framework for resolving any disputes that may arise, as the specific terms are explicitly laid out. States often mandate this practice in their real estate laws to ensure transparency and accountability in real estate transactions. While oral agreements or informal arrangements like handshake deals may be used in day-to-day situations, they lack the legal enforceability that written agreements provide, making them unreliable in formal real estate dealings. Additionally, the involvement of a mutual friend as a witness does not substitute for the clarity and legal backing of a written contract, which is vital for both parties to safeguard their interests.