PSI Virginia Real Estate Complete Practice Exam

In an agency relationship, the term 'principal' specifically refers to the individual or entity that is receiving services from the agent. This could be a seller in a real estate transaction, a buyer, or any party that enters into an agreement with an agent to represent their interests.

Understanding the role of the principal is critical; they give authority to the agent to act on their behalf and are ultimately the ones who benefit from the services provided. The agent has a fiduciary responsibility to the principal, which includes duties such as providing honest communication, acting in the principal's best interest, and maintaining confidentiality.

This definition is essential as it highlights the nature of the relationship: it is a client-driven relationship where the principal is the one whose interests the agent advocates for in various transactions. Other roles in the agency relationship, such as the agent or the real estate firm, serve different functions and responsibilities that do not embody the definition of a principal in this context.