PSI Virginia Real Estate Practice Exam

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Get ready for the PSI Virginia Real Estate Exam. Use multiple choice quizzes with hints and explanations to boost your confidence. Ace your exam!

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What does the term 'principal' refer to in an Agency Relationship?

The agent representing the seller
The individual or entity receiving services
The financial institution backing the loan
The real estate firm managing the transaction

The correct answer is: The individual or entity receiving services

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.