Tennessee Realtor State Practice Exam

What is a key factor in determining whether an agency relationship exists?

1. Client's verbal agreement

2. Written contracts only

3. Payment of fees

4. Actions and conduct of the parties involved

The correct answer is: Actions and conduct of the parties involved

A key factor in determining whether an agency relationship exists is the actions and conduct of the parties involved. This principle emphasizes that an agency relationship can be established through the behavior of the individuals engaged in the relationship, rather than solely relying on formal agreements or verbal communication. Agency relationships are often implied by the actions taken by both the agent and the principal. For instance, if a person begins to act on behalf of another and that other person allows it, an agency relationship might be formed, even in the absence of a written contract or explicit verbal agreement. This is particularly relevant in real estate transactions where the interactions and reciprocal behaviors between agents and clients play a crucial role in establishing trust and defining the nature of their relationship. While verbal agreements, written contracts, and the payment of fees can be relevant in the context of formalizing an agency relationship, they are not the sole determinants. In practice, the ongoing actions, communications, and behaviors of the parties indicate their understanding and acceptance of the agency role, making this aspect fundamental in recognizing agency relationships.