Iowa Real Estate Practice Exam

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Under what circumstance can a brokerage agreement be invalidated?

If one party changes their mind
If the agreement lacks a written format
If circumstances surrounding the sale change
If the consideration (payment) is deemed unfair

The correct answer is: If circumstances surrounding the sale change

A brokerage agreement can become invalid under various circumstances, and one significant factor is the change in circumstances surrounding the sale. For example, if the property owner decides to take the property off the market or if external factors substantially affect the agreement—such as zoning changes, natural disasters, or legal issues—then the original terms may no longer be viable or enforceable. This reflects the principle that agreements are based on certain conditions that both parties have agreed upon, and any significant change in those conditions can fundamentally alter the agreement's framework. While there can be considerations regarding the other choices—such as whether a written format is necessary for enforceability or whether the payment is fair—these do not automatically invalidate an agreement to the extent that the external circumstances impacting the sale do. Changing one's mind does not negate an agreement unless formal procedures for cancellation are followed. Thus, external factors hold more substantial weight in determining the validity of a brokerage agreement.