PSI Real Estate Exam: General
Principles of Agency
Principal - correct answer ✔✔1. A person who grants another person (an agent) authority to represent
him or her in dealings with third parties.
2. One of the parties to a transaction (such as a buyer or seller), as opposed to those who are involved as
agents or employees (such as a broker or scrow agent).
3. With regard to a loan, the amount originally borrowed, as opposed to the interest.
Customer - correct answer ✔✔A party in a transaction to whom an agent does not have a fiduciary duty
or relationship, but to whom an agent must still be fair and honest.
General Agent - correct answer ✔✔An agent authorized to handle all of the principal's affairs in one area
or in specified areas.
Subagent - correct answer ✔✔An agent of an agent; a person that an agent has delegated authority to,
so that the _____ can assist in carrying out the principal's orders.
Fraud - correct answer ✔✔An intentional or negligent misrepresentation or concealment of a material
fact; making statements that a person knows, or should realize, are false or misleading.
Commingling - correct answer ✔✔Illegally mixing money held in trust on behalf of a client with personal
funds.
Fiduciary - correct answer ✔✔Person in a position of trust, held by law to high standards of good faith
and loyalty.
Client - correct answer ✔✔Person who employs a broker, lawyer or other professional. Real estate _____
can be sellers, buyers, or both.
Principles of Agency
Principal - correct answer ✔✔1. A person who grants another person (an agent) authority to represent
him or her in dealings with third parties.
2. One of the parties to a transaction (such as a buyer or seller), as opposed to those who are involved as
agents or employees (such as a broker or scrow agent).
3. With regard to a loan, the amount originally borrowed, as opposed to the interest.
Customer - correct answer ✔✔A party in a transaction to whom an agent does not have a fiduciary duty
or relationship, but to whom an agent must still be fair and honest.
General Agent - correct answer ✔✔An agent authorized to handle all of the principal's affairs in one area
or in specified areas.
Subagent - correct answer ✔✔An agent of an agent; a person that an agent has delegated authority to,
so that the _____ can assist in carrying out the principal's orders.
Fraud - correct answer ✔✔An intentional or negligent misrepresentation or concealment of a material
fact; making statements that a person knows, or should realize, are false or misleading.
Commingling - correct answer ✔✔Illegally mixing money held in trust on behalf of a client with personal
funds.
Fiduciary - correct answer ✔✔Person in a position of trust, held by law to high standards of good faith
and loyalty.
Client - correct answer ✔✔Person who employs a broker, lawyer or other professional. Real estate _____
can be sellers, buyers, or both.
