Agency & Representation

Agency

A legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.

Full Definition

Agency is the legal relationship created when a principal authorizes an agent to represent their interests in a real estate transaction. In real estate, the agent is the licensed broker or salesperson, and the principal is the buyer or seller they represent. The agent owes the principal fiduciary duties (remembered as OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable care). Agency is typically created through a written agreement — a listing agreement for sellers, or a buyer representation agreement for buyers — though implied agency can arise unintentionally from conduct.

Real-World Example

When Maria signs a listing agreement with Broker Jones, an agency relationship is formed. Broker Jones must now act solely in Maria's best interest when negotiating with buyers.

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How Agency Appears on the Real Estate Exam

Common question types, tested concepts, and what to watch out for

Know the six fiduciary duties (OLD CAR). Also know the difference between express agency (written agreement) and implied agency (conduct). Agency questions appear on virtually every state exam.