Real Estate Council of Alberta Fundamentals Practice Exam

Which term refers to the arrangement where a broker manages potential conflicts of interest?

1. Transaction brokerage

2. Designated agency

3. Exclusive representation

4. Referral agreement

The correct answer is: Transaction brokerage

The arrangement where a broker manages potential conflicts of interest is best referred to as transaction brokerage. In this context, transaction brokerage is a service provided by a broker who facilitates a transaction between a buyer and a seller without representing either party as an agent. This approach allows the broker to remain neutral and emphasizes their role in managing the transaction without favoring one side over the other. This is particularly important in real estate transactions where conflicts of interest may arise, allowing the broker to help both parties reach an agreement while adhering to ethical standards and maintaining transparency. Since the broker does not advocate for either party, this arrangement helps to alleviate any issues related to conflicting interests, making it a vital concept in the field. The other terms are distinct: designated agency refers to a situation where a broker appoints specific agents to represent one party in a transaction, exclusive representation implies a dedicated relationship between a client and the agent or broker with a focus on loyalty, and referral agreements are typically arrangements where one broker refers clients to another broker and may receive a fee for doing so. Each of these does not inherently manage conflicts of interest in the same neutral manner as transaction brokerage.