Iowa Real Estate Practice Exam

What is required for a broker who accepts a referral fee from an abstracting company?

1. No disclosure is necessary

2. Disclosure of the fee to both parties in writing

3. Only verbal disclosure to the seller

4. Payment of a fee to the state

The correct answer is: Disclosure of the fee to both parties in writing

For a broker who accepts a referral fee from an abstracting company, it is essential that they provide disclosure of the fee to both parties in writing. This requirement ensures transparency in real estate transactions and protects the interests of all involved parties. By disclosing the referral fee, the broker maintains ethical standards and fosters trust between themselves, the abstracting company, and the clients they represent. Providing written disclosure also helps in complying with legal obligations and regulations governing real estate practices. This measure is important as it informs the clients of any financial incentives that may influence the broker's recommendations or actions. The written acknowledgment acts as a safeguard, allowing both parties to make informed decisions based on the broker's financial relationships. Thus, this approach aligns with best practices for ethical conduct in real estate dealings.