Iowa Real Estate Practice Exam

In a listing agreement, what is one legal component that can be included?

1. Broker's protection clause

2. Buyer's bidding clause

3. Not including the broker's protection clause

4. Automatic commission increase clause

The correct answer is: Not including the broker's protection clause

In a listing agreement, a broker’s protection clause is commonly included as it establishes the conditions under which the broker is entitled to compensation if a party who was introduced to the property during the listing period ultimately buys it, even if the sale occurs after the agreement has expired. This clause protects the broker's right to earn a commission based on their efforts in marketing the property. While it's accurate that a listing agreement could be crafted without including a broker's protection clause, the absence of this clause would typically not be advisable as it could leave the broker unprotected in certain circumstances. The options related to a buyer's bidding clause and an automatic commission increase clause are not standard in listing agreements and could lead to confusion or disputes. Listing agreements primarily focus on the relationship and terms between the seller and the broker, especially in terms of commission and agency responsibilities, rather than on the actions of buyers. Thus, while it is theoretically possible to exclude the broker's protection clause from a listing agreement, including it is a best practice to ensure clarity on the broker's commission entitlement.