California Real Estate Practice Exam

What is known as inherent authority in real estate?

1. The right to sign contracts on behalf of the seller

2. The right of an agent to do something not specified in the listing agreement but is accepted practice

3. The right to collect deposits without a listing agreement

4. The right to change commission rates without notice

The correct answer is: The right of an agent to do something not specified in the listing agreement but is accepted practice

Inherent authority in real estate refers to the agent's ability to take actions that are not explicitly laid out in the listing agreement but are considered standard practice within the industry. This concept acknowledges that certain actions may be necessary to fulfill the duties of an agent effectively, even if they are not detailed in the contract. For instance, if an agent needs to negotiate terms or make decisions that align with typical industry practices, they can do so under their inherent authority. For the other options, the right to sign contracts on behalf of the seller is specific authority and would generally need explicit authorization in a listing agreement. The right to collect deposits without a listing agreement is not commonly accepted and must typically be governed by a contractual relationship. Lastly, changing commission rates without notice would also fall outside the realm of inherent authority since it involves a significant change to the pre-agreed terms of the agreement.