National Real Estate Exam (PSI)General Principles of AgencyMedium
A seller who listed a home for sale dies unexpectedly before closing on an accepted offer. What is the effect on the listing agreement?
- AIt automatically transfers to the seller's heirs unchanged
- BThe buyer must sue the estate to terminate it
- CIt terminates by operation of law
- DIt remains valid and enforceable until the listing period ends
Show answer & explanationAnswer & explanation
Correct answer: C. It terminates by operation of law
Agency agreements terminate automatically upon the death or incapacity of the principal, since the agent's authority to act flows from the living principal. This is termination by operation of law, distinct from mutual agreement or expiration.
Why the other options are wrong
- A. Agency does not automatically transfer to heirs; a new relationship would need to be established through the estate.
- B. No lawsuit is needed; termination occurs automatically upon death.
- D. The agreement does not remain enforceable once the principal has died; authority ends immediately.
Termination by Operation of Law
Agency relationships end automatically due to events like death, incapacity, bankruptcy, or destruction of the property, without any action by the parties.
- Death of either principal or agent typically ends agency
- Incapacity can also terminate agency
- No formal notice or lawsuit is required
Memory trick: Death ends the deal, by law's appeal