What defines an agency relationship in real estate?

An agency relationship in real estate is defined as a fiduciary relationship where one party, known as the agent, acts on behalf of another party, known as the principal. This relationship is characterized by trust and confidence, as the agent is entrusted with the responsibilities of representing the principal’s interests in a transaction.

In the context of real estate, this typically involves a real estate agent representing a buyer or seller in the process of purchasing or selling property. The agent is expected to act in the best interests of the principal, providing advice, negotiating deals, and facilitating transactions. This fiduciary duty includes loyalty, confidentiality, full disclosure, and accountability, obligating the agent to prioritize the principal’s interests above their own.

The other options do not capture the essence of an agency relationship. A transaction between two buyers does not involve an agent representing a principal, thus lacking the agency element. An agreement for commission payment refers to compensation but does not define the relationship itself. A lease agreement between a tenant and a landlord involves a rental contract but does not encompass the fiduciary responsibilities inherent in agency relationships. Therefore, the focus on the fiduciary nature of the relationship in the correct answer accurately captures its definition in real estate.