Agency

When a person hires another to act on his or her behalf, an agency relationship is created. Agency is a legal relationship in which a principal authorizes an agent to act as the principal’s representative when dealing with third parties.
The simplest agency relationship involves three parties—the principal, the agent, and a third person or entity. Agency is an essential part of real estate transactions because of the complexities of buying and selling real property and the potentially devastating results of mishandling these transactions. Lay people usually do not feel knowledgeable and confident enough to handle these transactions without assistance. Therefore, real estate brokers—usually as agents of the sellers—step in.
Agency is an area with its own unique set of laws. Special and specific duties are owed by the agent to the principal and vice versa. Because legal ramifications attach to the principal for the decisions and actions the agent makes, there are substantial danger areas of which to be wary. This unit examines the law of agency and its legal effect on real estate licensees.