Oregon 30-Hour Real Estate Law Practice Test

What is the status of the agency agreement when a listed property, such as Alice's home, is destroyed?

1. It remains active until re-evaluated

2. It is terminated immediately

3. It can be transferred to another property

4. It stays active for a certain period

The correct answer is: It is terminated immediately

The agency agreement for a listed property, such as Alice's home, is typically terminated immediately if the property is destroyed. This is because the essential basis for the real estate transaction—namely, the physical property being sold—no longer exists. In real estate law, an agency relationship is contingent upon the subject property being available to buy or sell. Once the property is destroyed, the agreement loses its purpose and cannot be carried out. While it may seem conceivable that an agreement might stay active or be transferable, these options do not reflect the immediate legal realities faced when a property ceases to exist. Generally, destruction of the property effectively nullifies the ability to execute the sale under the terms of the original agreement, thus leading to its termination.