In the context of real estate, what defines "agency"?

In real estate, "agency" refers to a legal relationship where one person, known as the agent, is authorized to act on behalf of another person, known as the principal. This relationship is fundamental because it establishes a fiduciary duty, which means that the agent must act in the best interests of the principal. This relationship can exist in various forms, such as listing agreements between sellers and real estate agents, buyers' agency agreements, and property management agreements.

The nature of this agency relationship includes responsibilities such as loyalty, disclosure, confidentiality, and accounting. These duties help ensure that the agent acts with the utmost care and respect for the principal's interests in transactions. Understanding agency is crucial for real estate professionals, as it shapes the interactions and obligations between agents and their clients throughout the buying, selling, or leasing process.