National Real Estate Practice Exam

Who is considered a client in a real estate transaction?

1. A third party without a contract

2. A person in an agency relationship with a licensee

3. The listing agent only

4. A customer of the licensee

The correct answer is: A person in an agency relationship with a licensee

In a real estate transaction, a client is defined as a person who has entered into an agency relationship with a licensee. This means that the client has a contractual agreement with the licensee, granting the licensee the authority to act on their behalf in negotiations and transactions related to real estate. This relationship establishes a fiduciary duty, where the licensee is obligated to act in the best interests of the client, providing loyalty, confidentiality, and full disclosure. The other choices highlight individuals who do not have this formal agency relationship. A third party without a contract does not have any obligations or rights within the context of the transaction. Similarly, the listing agent is a professional representing the property owner, not a client as they do not have an agency relationship with the listing agent in the context of representing themselves. Lastly, a customer of the licensee refers to someone who may receive services but has not entered into a formal agency relationship, therefore lacking the same level of representation and fiduciary duty that exists for a client. Thus, the correct answer highlights the importance of the agency relationship in defining who a client is within real estate transactions.