Wisconsin Real Estate Sales Practice Exam

What typically happens when a principal dies during an agency relationship?

1. Agency continues with the heirs

2. Agency is terminated

3. Agent takes ownership of property

4. Commission structure is modified

The correct answer is: Agency is terminated

When a principal dies during an agency relationship, the agency is typically terminated. This is because the agency relationship is fundamentally based on the trust and consent of both the principal and the agent. When the principal passes away, that consent is revoked, thereby ending the legal authority of the agent to act on behalf of the principal. This termination is generally applicable to most types of agency, unless there are specific provisions in a contract or other legal instrument stating otherwise. The termination of agency upon the principal's death protects the interests of the heirs and ensures that any actions related to the property align with their wishes or the probate process. Other options, such as agency continuing with the heirs or the agent gaining ownership of the property, do not adhere to the standard legal principles governing agency relationships. Additionally, modifications to commission structures do not typically arise in the event of the principal's death, as the agency itself is dissolved at that point.