Real Estate Salesperson Exam: Agency Relationships Quick Review

Key Concepts

Agency is a relationship in which one party (the agent) is authorized to act on behalf of another (the principal). In a typical listing, the seller is the principal (client) and the buyer is a customer. Agency can be created by express agreement (written or oral), by implication from conduct, or by ratification of acts already performed.

Fiduciary duties — remember “OLD CAR”: Obedience, Loyalty, Disclosure, Confidentiality, Accounting and Reasonable care. These duties are owed to the client, while honesty and fair dealing are owed to all parties, including customers.

Practice Question

A listing agent learns that her seller client will accept $15,000 less than the list price. A buyer asks the agent, “What is the lowest price the seller will take?” What should the agent do?
A. Tell the buyer, because honesty is owed to all parties
B. Refuse to disclose the seller’s bottom line
C. Disclose it only if the buyer signs a written offer
D. Tell the buyer to ask the seller directly

Answer: B. The agent owes the seller confidentiality. Revealing the seller’s willingness to accept less would breach that fiduciary duty. Honesty toward customers means the agent may not misrepresent material facts — but it does not require disclosing a client’s negotiating position.

State-specific note: agency disclosure forms and dual-agency rules vary by state. Always review your state’s license law section before exam day.

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