What is the principle of 'agency' in real estate?

The principle of 'agency' in real estate fundamentally refers to a relationship in which one party, known as the agent, is authorized to act on behalf of another party, known as the principal. This relationship is critical within the real estate profession because it establishes the legal duties and responsibilities that the agent must uphold towards the principal, which can greatly influence the outcome of real estate transactions.

In this context, the agent may be responsible for negotiating sales, marketing properties, or managing transactions, always with the principal's best interests in mind. This legal framework not only dictates how the agent interacts with the principal but also outlines responsibilities like loyalty, full disclosure, and accounting for funds. Understanding agency allows real estate professionals to navigate their duties effectively and ensure compliance with legal requirements, fostering trust and effective communication between parties involved in transactions.