What does "agency" refer to in real estate?

In real estate, "agency" refers to a legal arrangement in which an agent is empowered to act on behalf of a client in transactions, specifically related to real property. This relationship is pivotal because it establishes a fiduciary duty, meaning that the agent must act in the best interests of the client.

When a client engages an agent, they rely on that agent’s expertise and professionalism to negotiate and facilitate transactions which can include buying, selling, or leasing property. The principle of agency ensures that the agent represents the client's interests, effectively making decisions that align with their desires and objectives in the real estate market.

This concept forms the foundation of many real estate transactions and contracts, outlining the duties and responsibilities involved between the agent and the client, such as loyalty, confidentiality, and full disclosure. In contrast, the other options do not capture the essence of agency in real estate; they focus on partnerships, temporary agreements, or systems of collaboration, which do not adequately define the formal and legal nature of agency relationships.