Iowa Real Estate Practice Exam

What is the term for an arrangement where a licensee conditions a sale on the listing of a buyer's existing home?

1. Dual agency

2. Escrow

3. Tying

4. Subordination

The correct answer is: Tying

The correct term for an arrangement in which a licensee conditions the sale of a property on the listing of a buyer's existing home is known as tying. Tying arrangements can raise concerns under antitrust laws because they may restrict competition by forcing buyers to engage in additional transactions that they may not have pursued otherwise. In real estate, this situation often occurs when a broker may suggest that a buyer can only purchase a new property if they also agree to list their current home with the same broker. This practice can limit the options available to buyers and may not align with the principle of fair competition in the marketplace. Dual agency refers to a situation where one licensee represents both the buyer and the seller in the same transaction, which relates to conflicts of interest but does not involve conditioning a sale based on the listing of another property. Escrow pertains to the neutral handling of funds or documents during a real estate transaction and again does not connect to the concept of conditioning a sale. Subordination typically refers to the priority of liens and debts rather than the conditions under which a sale is made. In summary, tying accurately describes the conditional relationship between the sale of a property and the requirement to list another, making it the appropriate term in this context.