Massachusetts Real Estate License Practice Test

What is implied agency?

1. A written contract for representation

2. A situation where agency is assumed based on actions

3. A formal agreement with a real estate broker

4. An agreement made between two parties verbally

The correct answer is: A situation where agency is assumed based on actions

Implied agency refers to a situation where an agency relationship is understood to exist between parties based on their actions, behaviors, or the circumstances surrounding their interactions. This type of agency does not rely on a formal written contract or verbal agreement. Instead, it arises naturally when one party acts in a way that leads another party to reasonably believe that they are being represented by that first party. For example, if a potential buyer engages with a real estate agent by seeking advice and the agent provides specific guidance about properties, the actions of both parties may imply that an agency relationship exists, even if no formal documentation is signed. In contrast, the other options represent forms of agency that are explicitly defined through contracts or agreements. A written contract or a formal agreement with a real estate broker involves a clear, documented understanding of the representation, while a verbal agreement, while it may imply a commitment, still does not possess the same legal clarity that comes from written contracts. Thus, implied agency is specifically about the unwritten, inferred understanding developed through the conduct of the parties involved.