Iowa Real Estate Practice Exam

What does the protective clause in a listing agreement primarily protect?

1. The buyer's rights

2. The broker's interests

3. The seller's equity

4. The property's market value

The correct answer is: The broker's interests

The protective clause in a listing agreement primarily safeguards the broker's interests, ensuring that they receive compensation for their efforts in marketing and facilitating the sale of the property. This clause typically outlines the terms under which the broker will be entitled to a commission, even if a sale occurs after the listing period, provided they were the procuring cause of that sale. By including this protective clause, the broker is protected against situations where a seller might choose to sell directly to a buyer introduced by the broker, thereby ensuring that the broker's professional services are compensated appropriately. In the context of other choices, while the buyer's rights, the seller's equity, and the property's market value are all important aspects in real estate transactions, they are not the main focus of the protective clause in a listing agreement. The clause is specifically tailored to create a financial safeguard for the broker's market efforts rather than addressing the interests of buyers or the financial conditions of the seller or property itself.