Iowa Real Estate Practice Exam

What should a broker do if they want to pay an unlicensed assistant a commission for contribution to a transaction?

1. Legalize the commission through retrospective paperwork

2. Allow the assistant to negotiate the transaction

3. Not pay a commission for negotiations

4. Ensure the assistant is licensed

The correct answer is: Not pay a commission for negotiations

A broker should not pay a commission to an unlicensed assistant for negotiations or contributions that would require licensing. This is consistent with real estate laws that stipulate that anyone engaged in activities that involve negotiating terms or compensation must be properly licensed. By adhering to these regulations, the broker ensures compliance with the law and minimizes the risk of penalties or legal issues. The key reason for this is that commissions in real estate transactions generally are tied to the act of negotiating, which is a regulated activity that requires a real estate license. If an unlicensed person engages in negotiations or earns a commission based on a transaction, it could lead to serious ramifications for the broker, including fines or disciplinary action from regulatory bodies. The other options involve approaches that could potentially lead to legal violations or problems. For instance, trying to legalize the commission with paperwork after the fact does not rectify the underlying issue of unlicensed activity. Allowing the assistant to negotiate would also be unlawful, as only licensed professionals can legally engage in such negotiations. Ensuring the assistant is licensed is indeed the correct approach, but that option is not selected in this instance. Thus, the distinction making "not pay a commission for negotiations" correct stems from its alignment with legal standards governing real estate practices.