# Agency Relationships > Who an agent actually works for, the duties that relationship creates, and how it can change mid-transaction. **Source:** https://www.texasreprep.com/learn/texas-real-estate/national-agency-relationships **Published:** 2026-08-24 **Updated:** 2026-09-02 Texas RE PREP™ — independent practice for the Texas real estate license exam, National (Uniform) and Texas State portions. Not affiliated with, endorsed by or operated by the Texas Real Estate Commission (TREC) or Pearson VUE, who administer the actual exam. --- Every real estate transaction runs through an **agency relationship** — a legal relationship where one person (the agent) acts on behalf of another (the principal) in dealings with third parties. Get this wrong on the exam and you'll get every downstream question about duties, disclosure, and liability wrong too. ## How agency is created Agency is generally created by **mutual consent** between principal and agent — most often through a written listing agreement or buyer representation agreement, though agency can also arise by implication from the parties' conduct. What agency is *not*: something that happens automatically just because an agent shows a buyer a house or answers a seller's questions at an open house. Without an actual agency agreement, that visitor is generally a customer, not a client. ClientA party the agent represents, owed the full set of fiduciary duties. CustomerA party the agent is working with but not representing — owed honesty and fair dealing, not fiduciary duties. PrincipalThe person the agent acts on behalf of — the seller in a listing agreement, the buyer in a buyer representation agreement. ## Special agent vs. general agent Real estate agency is almost always a **special agency** — the agent is authorized to act for the principal in one specific transaction or a narrowly defined set of tasks (selling this one house), not to bind the principal generally. A **general agent**, by contrast, has broad authority to act across a whole range of the principal's business — a property manager running every aspect of a landlord's rental portfolio is closer to this model. The exam draws this distinction because the scope of an agent's authority to bind the principal legally depends on which kind of agency actually exists; a special agent generally can't bind the principal to matters outside the specific transaction they were engaged for. ## Subagency Before buyer representation became standard, a common structure was **subagency** — a cooperating brokerage working with a buyer while still legally representing the seller (through the listing broker), not the buyer at all. A subagent owes the same fiduciary duties to the seller as the listing agent does, even though the subagent is the one physically showing the buyer around. This structure still exists in principle, though buyer representation agreements have made it far less common in practice — the exam tests it because the fact pattern ("an agent worked closely with a buyer, so they must represent the buyer") is exactly the kind of assumption subagency proves wrong. Common trap Working closely with someone, spending hours showing them houses, and answering their questions doesn't by itself create agency. Under a subagency arrangement, an agent can do all of that for a buyer while legally owing fiduciary duties to the seller the whole time. The exam tests this exact mismatch between who an agent spends time with and who an agent actually represents. ## When agency disclosure has to happen Because a customer can mistake a helpful agent for their own advocate, most states require an agent to disclose which party they represent at or before a specific trigger point — commonly, at first substantive contact with a party the agent doesn't represent, or before that party discloses confidential information. The exact trigger and required form vary by state, but the underlying principle is consistent everywhere: a party is entitled to know whether they're being represented or simply assisted before they start relying on the agent's advice. ## The fiduciary duties Once agency exists, the agent owes the client a set of fiduciary duties, commonly remembered by the mnemonic **OLD CAR**: Obedience Loyalty Disclosure Confidentiality Accounting Reasonable care and diligence Loyalty is the one worth sitting with: it means the agent puts the client's interests ahead of everyone else's — including the agent's own commission. An agent who steers a buyer toward a listing that pays a bigger split, instead of the listing that actually fits the buyer's needs, has a loyalty problem regardless of what gets disclosed afterward. Dual agency When one brokerage represents both the buyer and the seller in the same deal, full loyalty to both is generally impossible — which is exactly why dual agency generally requires informed, written consent from both parties, and remains prohibited outright in some states regardless of consent. ## Agency can change mid-transaction A relationship that starts as customer-level service can become full agency the moment representation is actually established — and a relationship can also shift from single agency into dual agency if the same brokerage ends up representing the other side too. The exam likes to test this: a fact pattern where an agent's role changes partway through, and the question asks what duties now apply. Common trap "Undisclosed dual agency" — representing both sides without both parties knowing — is a serious violation precisely because it makes full loyalty structurally impossible while the client believes they have an advocate. Watch for scenario questions where consent was never actually obtained, not just where a form was in the file. ## How agency ends Agency doesn't last forever, and the exam tests the different ways it can terminate: - **Performance** — the transaction the agency was created for actually closes, or the listing term simply expires. - **Mutual agreement** — both principal and agent agree to end the relationship early. - **Revocation or renunciation** — the principal ends it (revocation) or the agent ends it (renunciation), which can happen before the agreed term is up but may create liability for breach of the underlying agreement even though the agency itself terminates. - **Operation of law** — agency ends automatically on the death or incapacity of either party, or on the bankruptcy of the principal, without anyone having to take an affirmative step. - **Destruction of the property** — if the subject property is destroyed, there's nothing left for the agency to operate on. Worth remembering Death or incapacity ends agency immediately and automatically — no notice, no paperwork, no waiting period. An agent who doesn't yet know their principal has died is still no longer that principal's agent from the moment of death, even if they keep acting as though the agency continues. Quick Check A buyer's agent shows a property listed by their own brokerage. The buyer isn't told the brokerage also represents the seller. What has generally happened here? Undisclosed dual agency — a duty violation, since the buyer wasn't informed Nothing improper — the agent simply did their job showing available listings Subagency, which requires no additional disclosure A customer relationship, since no fiduciary duties apply to either party Representing both sides of the same transaction without informed consent from both parties is undisclosed dual agency — a real violation, since it makes full loyalty to either side structurally impossible while the buyer believes they have an undivided advocate.