Who is referred to as the principal in an agency relationship?

In an agency relationship, the principal is the individual or entity that authorizes another party, known as the agent, to act on their behalf and make decisions in specific matters. In the context of a broker-client relationship, the client is the one who engages the broker's services to represent their interests.

By defining the client as the principal, it emphasizes that they hold the authority and control over the transaction or service being rendered. The agent (broker) serves to facilitate the client's objectives, whether it involves buying, selling, or leasing property. This relationship is foundational to understanding various dynamics in real estate and other agency-based interactions, where the agent’s actions are ultimately directed by the principal’s wishes and best interests.

While the other options may encompass parties involved in a real estate scenario, only the client fits the formal definition of a principal in the agency relationship. The broker manages listings, the seller is focused on selling the property, and the financial institution provides support through loans, but none of these entities embody the comprehensive role of the principal as does the client engaging the broker.