California Real Estate Practice Exam

Which of the following is most correct regarding termination of a listing by a principal?

1. The principal may terminate the listing without any consequences

2. The principal cannot terminate the listing once signed

3. The principal may terminate the listing but may be liable for the broker's expenses up to that point

4. Termination of the listing is solely at the broker's discretion

The correct answer is: The principal may terminate the listing but may be liable for the broker's expenses up to that point

When a principal (property owner) signs a listing agreement with a real estate broker, they are giving the broker the exclusive right to sell their property for a certain period of time. However, if the principal decides to terminate the listing before the agreed upon expiration date, they may be responsible for paying the broker's expenses up to that point. Option A is incorrect because terminating a listing without consequences would mean that the principal is not responsible for any expenses or fees owed to the broker. Option B is incorrect because a principal can terminate a listing but might face consequences, such as paying the broker's expenses. Option D is incorrect because termination of the listing is not solely at the broker's discretion, as the principal also has the right to terminate the agreement. Overall, option C is the most correct because it acknowledges the possibility of termination but also considers the potential consequences for the principal.