2.3 Indiana Agency Agreement Requirements
Key Takeaways
- Every Indiana agency relationship requires a written agreement signed by the parties; verbal listings or buyer agreements create no agency.
- Listing agreements must state the price, the compensation, the broker's services, and a definite expiration date.
- Indiana prohibits automatic-renewal and self-extending clauses; an agreement may not run for an indefinite term.
- Buyer agency agreements must, post-2024, state buyer-broker compensation as a specific, conspicuous amount.
- Brokers must retain transaction and trust-account records for at least five years under 876 IAC 8.
Writing Is Mandatory
In Indiana, no agency relationship exists without a written agreement. A handshake, a verbal promise, or simply showing property never creates a listing or buyer agency. This rule supports the disclosure scheme in Section 2.1: the writing is what converts a customer into a client.
Elements Required in Every Agency Agreement
| Element | Why It Matters |
|---|---|
| Names of the parties | Identifies broker/firm and client |
| Execution date | Starts the term running |
| Property or transaction type | Defines the scope of representation |
| Compensation | How the broker is paid and by whom |
| Definite start and end dates | Indiana bans indefinite terms |
| Signatures of all parties | Binds the agreement |
Listing Agreement Types
The exam expects you to distinguish the three listing types by who owes a commission when.
| Type | Exclusivity | Commission Owed When... |
|---|---|---|
| Exclusive Right to Sell | Highest | The listing broker earns a fee no matter who finds the buyer - even the owner |
| Exclusive Agency | Medium | Only if a broker procures the buyer; the owner owes nothing if the owner sells it |
| Open Listing | Lowest | Only the broker who actually procures the buyer is paid; owner may list with many |
Worked example: A seller signs an exclusive agency listing, then sells to their own coworker with no broker involved. The broker earns no commission, because the owner produced the buyer. Under an exclusive right to sell, the same facts would still owe the broker the full fee.
Required Listing Elements (Indiana)
| Element | Detail |
|---|---|
| Property address / legal description | Identify the exact property |
| Listing price | Marketing price agreed with the seller |
| Commission amount or rate | A specific percentage or flat fee |
| Definite expiration date | A specific calendar date |
| Broker's services | Marketing, MLS, showings |
| Seller's obligations | Access, disclosures, cooperation |
Prohibited Clauses
| Prohibition | Reason |
|---|---|
| Automatic renewal | The agreement must end on a stated date |
| Indefinite duration | No "until sold" with no end date |
| Self-extending clauses | Cannot silently roll over |
Exam Trap: Indiana bans automatic-renewal clauses. A listing must have a definite termination date; if a seller wants more time, the parties sign a written extension. "Net listings" (broker keeps everything above a set seller net) are strongly discouraged for conflict-of-interest reasons and require full disclosure if used at all.
Buyer Agency Agreements
| Required Element | Detail |
|---|---|
| Property type | Residential, commercial, land |
| Geographic area | Counties or markets covered |
| Price range | Budget parameters |
| Compensation | A specific, conspicuous amount the buyer agrees to pay (post-2024 NAR settlement) |
| Definite term | Start and stated end date |
| Scope of services | What the broker will do |
Buyer-broker pay may come from the buyer directly, from the seller via a negotiated concession, or a combination - but the agreement must state the buyer's own obligation in a fixed, conspicuous figure rather than "whatever the MLS offers," because cooperative compensation offers are no longer posted in the MLS.
Property Management Agreements
| Required Element | Detail |
|---|---|
| Property description | Address and unit count |
| Management duties | Leasing, maintenance, accounting |
| Authority level | Spending and signing limits |
| Compensation | Percent of rents or flat fee |
| Trust handling | How rents and deposits are held |
| Definite term | Start and end dates |
Amending and Terminating Agreements
To amend: prepare a written amendment, have all parties sign and date it, attach it to the original, and give copies to all parties. Verbal changes to a written agency agreement are unenforceable.
Grounds for Termination
| Reason | Process |
|---|---|
| Expiration | Ends automatically on the stated date |
| Mutual rescission | Both parties agree in writing |
| Material breach | Non-breaching party may terminate |
| Death or incapacity of a party | May terminate the personal agency |
| Destruction of the property | Ends a single-property listing |
Exam Trap: A client can always fire the agent (revoke the agency), but doing so before expiration may leave the client liable for damages or an earned fee if the agreement so provides. Revocability of the relationship is not the same as freedom from financial liability.
Record Retention - Five Years
Indiana brokers must keep their files. Under 876 IAC 8-2-3, every listing and selling broker must deliver a complete closing statement and retain copies for at least five (5) years, and Commission rules apply the same retention period to brokerage and trust-account records.
| Document | Retention Period |
|---|---|
| Agency/brokerage agreements | 5 years |
| Closing statements and transaction files | 5 years |
| Trust/escrow account records | 5 years |
| Transaction correspondence | 5 years |
The managing broker is responsible for maintaining these records and producing them on Commission demand.
Which clause is prohibited in an Indiana listing agreement?
A seller signs an exclusive agency listing and then sells the home to a friend with no broker involved. What commission is owed to the listing broker?
For how long must an Indiana broker retain closing statements and transaction records?