Agency Relationships

Agency Relationships ## Why This Matters on the Exam Agency relationships account for 13% of the national exam — making it the second-highest priority topic — and it frequently overlaps with the Contracts section (17%), meaning a strong grasp of agency can help you earn points across nearly 30% of the test. --- ## What Is an Agency Relationship? An agency relationship is a legal arrangement in which one person (the agent) is authorized to act on behalf of another (the principal or client). In real estate, the agent is the licensee; the client is the person the agent legally represents. The key distinction you must master: clients receive full fiduciary duties; customers (the other party in a transaction) receive only limited, non-fiduciary duties. --- ## Fiduciary Duties: OLD CAR Every fiduciary duty owed to a client is captured in the mnemonic OLD CAR: | Letter | Duty | What It Means | |--------|------|---------------| | O | Obedience | Follow all lawful client instructions | | L | Loyalty | Put client's interests above everyone else's — including your own | | D | Disclosure | Reveal all material information the client would want to know | | C | Confidentiality | Protect client's motivations, price limits, and personal info | | A | Accounting | Safeguard and account for all funds (earnest money, etc.) | | R | Reasonable Care | Apply professional skill and competence | > Critical rule: OLD CAR duties are owed only to clients, not to customers. ### Duties Owed to Customers (Non-Clients) Even toward the other side, agents must provide: - Honesty and fair dealing - Disclosure of material facts about the property…