Iowa Real Estate Practice Exam

What is the status of a listing agreement that contains an automatic renewal clause in Iowa?

1. Legal and enforceable

2. Illegal

3. Legal for one renewal period

4. Commonly accepted practice

The correct answer is: Illegal

The status of a listing agreement that includes an automatic renewal clause in Iowa is considered legal and enforceable, as long as it adheres to specific guidelines and does not violate any state regulations. While some may have differing opinions on the ethics or practicality of such clauses, there isn't any legislation in Iowa that outright bans automatic renewals in real estate contracts. An automatic renewal clause allows a listing agreement to continue beyond its initial term unless either party provides a notice of termination. This can benefit both the client and the agent by ensuring continuity in representation. Regular renewals should ideally include clear communication in writing, ensuring all parties are aware of the agreement's status. Omitting this fact often leads to misconceptions regarding automatic renewal clauses, but they are a common practice in real estate transactions as long as they are executed transparently and agreed upon by all involved parties.