California Real Estate Practice Exam

How is the agency of a real estate broker best created?

1. Estoppel

2. Expressed contract

3. Implied contract

4. Ratification

The correct answer is: Estoppel

The agency of a real estate broker is best created through an expressed contract. An expressed contract is a formal agreement in which the terms are clearly stated, either verbally or in writing, establishing the broker as the agent of the client. This type of contract explicitly outlines the responsibilities and duties of both the broker and the client, making it clear that the broker has the authority to act on behalf of the client in real estate transactions. In the realm of real estate, an expressed agency is essential because it provides legal protection for both parties and ensures that the broker has the actual authority to perform specific actions, such as listing a property, negotiating offers, and facilitating the sale. While other methods, such as implied contracts or agency by estoppel, can establish agency under certain circumstances, they do not provide the clarity and security of an expressed contract. Implied contracts arise from the actions or conduct of the parties rather than a formal agreement, and agency by estoppel involves situations where a broker may be perceived as an agent without an official contract. Ratification involves approving an act after it has been done, which is not how agency is typically established. Thus, the expressed contract is the most definitive and recognized means to create an agency relationship between a real estate broker and