Agency & Representation
Real Estate Agency Relationships Explained
Agency is one of the most heavily tested topics on the real estate exam. Here's how each relationship type works, what duties are owed, and what the exam expects you to know.
What Is Agency in Real Estate?
Agency is a legal relationship in which one party (the agent) is authorized to act on behalf of another party (the principal) in dealings with third parties. In real estate, the agent is the licensee and the principal is the client (buyer or seller).
An agency relationship creates fiduciary duties — the highest duty of loyalty under the law. The agent must put the client's interests first, above all others including the agent's own interests.
Agency relationships are created by agreement (usually a listing agreement or buyer representation agreement). Agents must disclose whom they represent before meaningful discussion of price, terms, or motivation.
Agency Relationship Types
Seller's Agent (Listing Agent)
Represents the seller. Owes fiduciary duties (OLDCAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care) to the seller. The buyer is a customer, not a client.
Buyer's Agent
Represents the buyer. Owes fiduciary duties to the buyer. Created by a signed Buyer Representation Agreement. The seller is a customer, not a client.
Dual Agency
One agent (or one brokerage) represents both buyer and seller in the same transaction. Requires written informed consent from both parties. Reduces fiduciary duties. Illegal in some states.
Designated Agency
The broker assigns one agent to represent the buyer and a different agent (within the same brokerage) to represent the seller. Each agent maintains full fiduciary duties to their client.
Transaction Broker / Facilitator
The licensee assists both parties without representing either as a client. Owes duties of honesty and competent service, but not full fiduciary duties.
Sub-Agent
An agent who works for the listing broker (and thus represents the seller) even while working with the buyer. Sub-agency is largely obsolete but still tested on the national exam.
Agency FAQ for the Exam
What are the fiduciary duties an agent owes a client?
The acronym OLDCAR covers the duties: Obedience (follow lawful instructions), Loyalty (put client's interests first), Disclosure (reveal all material facts), Confidentiality (protect client's personal information), Accounting (handle money properly), and Reasonable Care (use professional competence).
What is the difference between a client and a customer?
A client has a representation agreement with the agent and is owed fiduciary duties. A customer is the other party — they receive honest service but NOT fiduciary loyalty.
When must agency be disclosed?
Agents must disclose whom they represent before any substantive discussion of price, motivation, or terms. Most states require a written agency disclosure. Failure to disclose is a common source of license law violations.