11.1 The Agency Relationship

11.1 The Agency Relationship

The agency relationship in real estate is the legal bond between a principal (client) and an agent (broker). The principal hires the agent as a fiduciary to act in their best interest, typically for selling, buying, or leasing property. The customer is a third party (not represented) in the transaction.

• Basic roles: Principal/client, agent (broker), and customer/prospect.
• Types of agency:
  • Universal: Agent can act for principal in all matters (rare; power of attorney).
  • General: Agent has broad authority for ongoing business (e.g., property manager).
  • Special (limited): Agent has authority for one specific transaction (most brokerage relationships).
• Creating agency: By express agreement (oral/written) or by implication (actions).
• Terminating agency: By fulfillment, expiration, mutual agreement, incapacity, abandonment, property destruction, renunciation, breach, bankruptcy, or license revocation.

Check-In Question

• Which of the following is NOT a way an agency relationship can be terminated?
  Fulfillment of the agency’s purpose
  Expiration of the agency agreement
  Agent’s license revocation
  Agent buying a gift for the client
  Show Answer

  Correct Answer: Agent buying a gift for the client