Leasing License Practice Exam

Which of the following best describes an agency relationship?

1. A mutual beneficial relationship between tenant and landlord

2. An agent representing an owner in a transaction

3. A partnership between realtors

4. A sales arrangement between buyer and seller

The correct answer is: An agent representing an owner in a transaction

An agency relationship is established when one party, known as the agent, is authorized to act on behalf of another party, known as the principal, in business transactions. This concept is most clearly represented in the context of real estate, where an agent represents a property owner in a transaction to sell, lease, or manage the property. The agent has a fiduciary duty to act in the best interest of the principal, which can include responsibilities such as negotiating terms and ensuring compliance with relevant laws and regulations. In contrast, the other options describe different types of relationships or arrangements. A mutual beneficial relationship between a tenant and landlord focuses more on the lease agreement and the interests of both parties rather than the legal representation aspect. A partnership between realtors describes a collaboration among real estate professionals, which is not specifically an agency relationship. A sales arrangement between a buyer and seller outlines a transaction dynamic rather than the representation aspect inherent in an agency. Recognizing the specific role of the agent within an agency relationship helps clarify the responsibilities and obligations involved in real estate dealings.