What does the term principal refer to in a real estate transaction?

In a real estate transaction, the term "principal" refers to someone who is a party to the transaction itself or an individual who acts on behalf of the agent. This definition is broad and encompasses both buyers and sellers, as well as anyone legally authorized to act on their behalf.

Having this understanding is crucial because it highlights the roles and responsibilities of different individuals involved in a real estate deal. For instance, a principal can be a buyer, a seller, or a representative like an attorney or a designated broker who is authorized to make decisions and sign contracts on behalf of the client. This inclusive approach helps to clarify the dynamics of the relationship between the agents, clients, and other parties involved in real estate transactions.

Recognizing that the term is not limited to just agents or buyers ensures comprehensive knowledge of the various roles and responsibilities in the industry, which is vital for effective practice in real estate.