Scope of Authority
Definition
The extent of power and actions an agent is authorized to perform on behalf of the principal, as defined by the agency agreement.
Example
A listing agreement authorizes a broker to market and sell the property. This express authority implies the broker can place signs, advertise, and schedule showings. However, the broker cannot accept an offer on behalf of the seller unless specifically authorized to do so.
Exam Tip
Know the three types: EXPRESS (written/stated), IMPLIED (reasonably necessary), APPARENT (what others believe). An agent who exceeds their authority may be personally liable. The principal is NOT bound by unauthorized acts unless they ratify them.
Related Agency Terms
Agency Relationship
A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.
Fiduciary Duty
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
Dual Agency
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
Designated Agency
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
Transaction Brokerage
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
Agency by Estoppel
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
Frequently Asked Questions
Test Your Agency Knowledge
Practice with exam-style questions to make sure you can apply Scope of Authority and other agency concepts.