Oregon Broker PSI Practice Exam

What is the role of written authorization in real estate transactions?

1. It ensures compliance with local laws

2. It prevents any future disputes

3. It formalizes agreements between brokers and clients

4. It allows for verbal agreements to be considered valid

The correct answer is: It formalizes agreements between brokers and clients

In real estate transactions, written authorization plays a critical role in formalizing agreements between brokers and clients. This written documentation is essential because it establishes clear terms and conditions that both parties can refer to throughout the transaction process. By having a written agreement, it helps ensure that both brokers and clients have a mutual understanding of their responsibilities, rights, and expectations. Written authorization serves to protect both parties involved in the transaction, as it provides a legal framework that can be referenced if any misunderstandings or disputes arise. Furthermore, having formalized agreements is often a legal requirement in various jurisdictions, adding to the validity and enforceability of the arrangement. While ensuring compliance with local laws is important, the primary function of written authorization specifically relates to the creation of formal agreements rather than simply adhering to legal standards. Preventing future disputes can also be a significant outcome of having written agreements; however, this is more of an indirect benefit. The idea of allowing verbal agreements to hold validity contradicts the necessity of written authorization in maintaining clear and binding commitments in real estate transactions. Therefore, the correct answer highlights the importance of formal agreements in facilitating effective and professional relationships in the real estate industry.