Law of agency on the New York real estate exam

The subject every agent uses daily

Law of agency is the relationship between a licensee and the person they represent, and it sits at the center of both New York real estate exams. On our salesperson forms it is one of the largest sections. For brokers it comes back as supervision: making sure the agents under you get it right.

Who is the client?

The principal is the person the agent represents. A customer is someone the agent deals with but does not represent. Many questions describe a conversation and ask whether the agent owes this person the full set of duties or only honesty and fair dealing.

The fiduciary duties

An agent owes the client loyalty, obedience to lawful instructions, disclosure, confidentiality, accounting for money, and reasonable care. Questions test the edges: what confidentiality forbids an agent from telling the other side, and when loyalty means advising a client against a deal.

Kinds of agency

Expect questions on representing a seller, representing a buyer, and the situations where one firm represents both sides. Dual agency needs informed written consent, and the agent cannot then advocate for either side against the other. New York also allows designated sales agents within a dual agency firm. Learn what each arrangement permits.

Disclosure comes first

New York requires a written agency disclosure at the first substantive contact with a prospective buyer or seller in many residential transactions. Questions often ask when it must be given and what it does: it explains the relationship, it is not a contract.

Where candidates slip

• Treating the person paying the commission as the client. Payment and representation are separate.
• Telling the other side something the client said in confidence.
• Assuming dual agency can be agreed to verbally.