Real estate exam terms
14 terms, each with a plain definition, the term it is most often confused with, and how the license exam actually asks about it.
The relationship in which one person acts on another’s behalf and in their interest
Created by express agreement — a listing or buyer representation agreement — and occasionally implied from conduct. It is the source of the fiduciary duties, and it is what distinguishes a client from a customer.
Agency questions almost always turn on who the client is. Establish that first and the duties follow.
A person authorized by a power of attorney to act for someone else
Not a lawyer, and not required to be one. The authority comes from the written power of attorney and reaches exactly as far as that document says — a power drawn up for one closing authorizes that closing and nothing else.
An attorney at law is licensed to practice law. The shared word is the trap and the exam uses it deliberately.
Signing a deed on the principal’s behalf is the standard fact pattern, and the power itself is normally recorded so that it appears in the chain of title alongside the deed.
The party a brokerage represents and owes fiduciary duties to
Also called the principal. The relationship is created by agreement, and everything in the fiduciary list — loyalty, confidentiality, obedience — is owed here and nowhere else.
Set against customer in nearly every agency item. A person becomes a client by agreement, not by being helpful to or friendly with an agent.
A party a brokerage works with but does not represent
An unrepresented buyer dealing with the seller’s agent is a customer. They are owed honesty, fair dealing and disclosure of known material facts about the property — but not loyalty, and not confidentiality.
The classic item: an unrepresented buyer asks the listing agent for the seller’s lowest acceptable price. Confidentiality is owed to the seller, so the answer is no; honesty about the property is owed to the buyer, so questions about the roof are answered fully.
A broker appoints different licensees in the firm to represent each side
One licensee is designated for the buyer and another for the seller, each owing full fiduciary duties to their own client, while the broker supervises both. It is the structure many states adopted as an alternative to firm-wide dual agency.
The point is that the fiduciary duties survive intact at the individual level, which is exactly what dual agency cannot deliver.
One brokerage representing both buyer and seller in the same transaction
Full loyalty to both sides is impossible, so where it is permitted at all it requires informed written consent from both parties, and the agent’s ability to advise either side is sharply curtailed.
Some states prohibit it outright. Undisclosed dual agency is a serious violation everywhere, and the exam treats it as one.
The duties an agent owes their client: obedience, loyalty, disclosure, confidentiality, accounting, reasonable care
Commonly remembered as OLD CAR. They are owed to the client alone and they are demanding — loyalty means putting the client’s interest ahead of the agent’s own, and confidentiality survives the end of the relationship.
Obedience covers lawful instructions only. A client’s instruction to conceal a known material defect does not have to be followed, and following it is misrepresentation.
An agent authorized to act for a principal in a range of matters
A property manager is the standard real estate example — empowered to lease, collect rent, arrange repairs and handle the day-to-day across an ongoing relationship. A salesperson is a general agent of their broker.
Ranked against special agent (limited to one transaction, which is what a listing broker usually is) and universal agent (unlimited authority, typically under a power of attorney).
The written instrument creating authority to act for another person
It names the person authorized, states the scope of what they may do, and ends when it says it ends — or earlier, when the principal revokes it or dies. One drafted to survive the principal’s incapacity is called durable; an ordinary one is not.
Scope and termination are the two examinable points. Death of the principal ends the agency at once, and an act after that is unauthorized however sincere the agent was.
An agent authorized for one specific transaction
The usual position of a listing broker: authorized to find a buyer on stated terms, and not authorized to sign a contract on the seller’s behalf or to accept an offer for them.
The limit on authority is the point. A special agent who signs something for the principal has exceeded it.
A cooperating broker acting as an agent of the listing broker’s client
Under a traditional subagency arrangement the cooperating broker works with the buyer but represents the seller, owing fiduciary duties to a person they may never meet. The liability that created for listing brokers is why most markets moved away from it.
The examinable oddity is that the buyer in a subagency arrangement is a customer, not a client, however much time the cooperating agent spends with them.
A non-agency role: assisting a transaction without representing either party
Sometimes called a facilitator or intermediary. The licensee helps the deal along and owes honesty, accounting and disclosure of material facts — but no loyalty to anyone, because nobody is a client.
Recognize it as a non-agency relationship. That is the whole examinable idea, and it is why the fiduciary duties do not appear.
An agent authorized to act for the principal in all matters
The broadest of the three levels of agency and rare in real estate practice, because it is created by a general power of attorney rather than by a listing. The agent may do essentially anything the principal could do.
A general agent handles a continuing series of transactions inside one area of the principal’s affairs. A special agent handles one transaction and stops.
The ladder runs universal, general, special. A property manager is a general agent for that property; a listing broker is a special agent for one transaction.
Liability imposed on one party for another’s acts because of their relationship
A broker can be liable for a salesperson’s misrepresentation made in the course of their work. That is why supervision is a licensing obligation rather than a management preference, and why written office policies exist.
It sits in the risk management part of the outline alongside errors and omissions insurance and compliance with federal regulation.
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