Iowa Real Estate Practice Exam

What is required in a listing agreement regarding the commission?

1. It can be verbally stated

2. It must state an approximate fee

3. It must state the exact fee or percentage

4. It can be determined by market conditions

The correct answer is: It must state the exact fee or percentage

In a listing agreement, it is essential to clearly state the exact fee or percentage that will be paid as a commission. This requirement ensures transparency and clarity between the real estate agent and the seller. By specifying the commission structure, both parties have a mutual understanding of the financial obligation involved in the sale of the property. This not only helps to avoid potential disputes or misunderstandings later on but also complies with legal standards governing real estate transactions. While verbal agreements may occur in informal settings, they lack the legal standing and clarity that a written and detailed agreement provides. Similarly, stating an approximate fee may lead to ambiguity and confusion. Although market conditions can influence commission rates, relying on those to determine fees without a clear specification in the agreement is inadequate. Thus, including the exact fee or percentage in the listing agreement is a critical aspect of the real estate process.