Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What describes the principal-agent-third party relationship in real estate?

1. The agent works independently of the principal.

2. The third party negotiates only with the agent.

3. The agent works for the principal and communicates with the third party.

4. The principal bypasses the agent in negotiations.

The correct answer is: The agent works for the principal and communicates with the third party.

The principal-agent-third party relationship in real estate is accurately described by the understanding that the agent acts on behalf of the principal, effectively representing their interests and facilitating communication with the third party. In this dynamic, the agent is employed by the principal to perform tasks related to a real estate transaction, making decisions and negotiations that best serve the principal’s objectives. The third party, which could be a buyer, seller, or other entities involved in the transaction, interacts with the agent instead of directly communicating with the principal. This relationship establishes a clear line of authority and responsibility, ensuring that both the principal's interests and the needs of the third party are addressed in the negotiation process. The other choices fail to capture this fundamental structure. The notion that the agent works independently of the principal misrepresents the agency relationship, which is inherently collaborative. Suggesting that the third party negotiates only with the agent overlooks the principal's role in the transaction, while the idea that the principal bypasses the agent contradicts the agent's purpose of facilitating negotiations on behalf of the principal, which is the core function of agency in real estate.