National Agency relationship guide

Agency and non-agency relationships

Agency questions become manageable when you stop following the property and start mapping the people. Name the principal, the agent, the represented client, the unrepresented customer, and the source of authority. Then apply the relationship allowed by the jurisdiction in the question.

Last updated: August 1, 2026

What does this exam area cover?

Short answer: Agency is a consensual relationship in which an agent acts on a principal's behalf within granted authority. Seller, landlord, buyer, and tenant agency identify the represented side. Designated agency identifies the particular licensee assigned to a client. Dual agency places one agent with opposing clients and requires the consent and safeguards imposed by state law. A customer or consumer in a permitted non-agency relationship receives no client advocacy, though legal duties still apply. Illinois prohibits transaction brokers and facilitators, uses designated agency as its statutory starting model, and does not let compensation decide agency.

Official section: National VI.A.1, VI.A.4, and VI.A.5
Broker weight: Part of 13% of the national portion
Expected scored items: The current PSI broker outline assigns about 13 of 100 scored national items to Agency

Agency and Non-Agency Relationships exam weight
Official section	Broker weight	Expected scored items
National VI.A.1, VI.A.4, and VI.A.5	Part of 13% of the national portion	The current PSI broker outline assigns about 13 of 100 scored national items to Agency

This guide follows the national PSI outline effective June 24, 2026 and adds the Illinois rule set candidates need on the state portion. National relationship labels can vary by jurisdiction. The Illinois comparisons reflect Article 15 and Part 1450 through August 1, 2026. This is exam preparation, not a substitute for a managing broker's direction or legal advice in a transaction.

What is on the official outline?

Topic: The agency relationship
What to know: Principal, agent, client, consent, control, authorized action, fiduciary relationship, third party, transaction, brokerage service, purpose, scope, and legal duties
Best exam move: Identify who granted authority and who accepted it before deciding whose interests the licensee must promote.

Topic: How agency is established
What to know: Express agreement, written agreement, oral agreement where permitted, implied conduct, ratification, estoppel, actual authority, apparent authority, informed consent, statutory formality, and documentation
Best exam move: Use the jurisdiction's required creation method, then separate genuine authority from a third party's reasonable belief about authority.

Topic: Seller and landlord agency
What to know: Owner principal, listing brokerage, designated agent, marketing, showing, buyer qualification, offer presentation, negotiation, confidential price, lawful instruction, accounting, and property management
Best exam move: Treat the owner as client only when the relationship says so; listing activity does not make every cooperating licensee the seller's agent.

Topic: Buyer and tenant agency
What to know: Buyer client, tenant client, property search, showing, market analysis, offer preparation, lease negotiation, financing, inspection, confidential maximum, written representation agreement, and loyalty
Best exam move: Do not assume the person receiving property help is represented until the relationship has been established as the law requires.

Topic: Designated agency
What to know: Sponsoring broker, affiliated licensee, named agent, one or more designated agents, exclusion of other firm licensees, same-firm transaction, seller side, buyer side, confidentiality, supervision, and no automatic firmwide dual agency
Best exam move: Ask whether the same individual represents both parties or whether different licensees in the firm are separately designated.

Topic: Dual agency
What to know: One agent, opposing clients, informed consent, written consent, conflict, limited advocacy, neutral information, confidential negotiating position, transaction confirmation, withdrawal, and state prohibition or permission
Best exam move: Apply dual agency only when the jurisdiction allows it and every required consent and confirmation step appears in the facts.

Topic: Subagency and cooperating brokers
What to know: Listing broker, cooperating broker, subagent, principal, buyer customer, MLS cooperation, compensation offer, authority, duties, vicarious exposure, and state-specific practice
Best exam move: Never turn cooperation or payment into subagency automatically; find an accepted agency relationship.

Topic: Customers and other non-clients
What to know: Customer, consumer, unrepresented party, no advocacy, honesty, good faith, accurate information, material fact, ministerial act, form completion, showing access, disclosure, and no-agency notice
Best exam move: Withhold client advocacy, not basic honesty or information the law requires the licensee to disclose.

Topic: Transaction broker and facilitator models
What to know: Non-agent, neutral assistance, transaction broker, facilitator, limited duties, no fiduciary advocacy, state authorization, disclosure, compensation, contract terms, Illinois prohibition, and exam jurisdiction
Best exam move: Recognize the national label, then check whether the state in the scenario permits the relationship before assigning duties.

Topic: Actual authority
What to know: Express authority, implied authority, principal instruction, necessary and incidental acts, agreement scope, special agent, general agent, limits, lawful objective, revocation, and documentation
Best exam move: Ask what the principal communicated to the agent and whether the disputed act reasonably fits that grant.

Topic: Apparent authority and ratification
What to know: Principal manifestation, third-party belief, reasonable reliance, agent representation, unauthorized act, knowledge, acceptance of benefit, affirmance, rejection, and estoppel
Best exam move: For apparent authority, look from principal to third party. For ratification, look for later approval of an act done without prior authority.

Topic: Special, general, and universal agents
What to know: Limited transaction, brokerage listing, continuing operations, property manager, broad authority, attorney-in-fact, power of attorney, scope, duration, and legal effect
Best exam move: Match the agent category to the breadth of authorized acts, not the agent's job title alone.

Topic: Powers of attorney
What to know: Principal, agent, attorney-in-fact, property power, statutory form, specific authority, general authority, effective date, durability, incapacity, revocation, signature capacity, and reliance
Best exam move: Read the instrument for the exact power granted and do not infer authority to sign from a brokerage relationship.

Topic: Compensation and agency
What to know: Commission, fee, payment source, cooperative compensation, client obligation, third-party payment, written disclosure, informed consent, representation, sponsoring broker, and no automatic relationship
Best exam move: Trace agency from agreement and consent, then analyze compensation as a separate contract and disclosure issue.

Topic: Illinois relationship overlay
What to know: Designated agent, written brokerage agreement, client, customer, no-agency notice, dual agency, consent, transaction-specific confirmation, transaction broker prohibition, facilitator prohibition, actual knowledge, confidentiality, and Article 15
Best exam move: When the question says Illinois, replace generic relationship habits with the exact Article 15 model.

Agency and Non-Agency Relationships complete outline
Topic	What to know	Best exam move
The agency relationship	Principal, agent, client, consent, control, authorized action, fiduciary relationship, third party, transaction, brokerage service, purpose, scope, and legal duties	Identify who granted authority and who accepted it before deciding whose interests the licensee must promote.
How agency is established	Express agreement, written agreement, oral agreement where permitted, implied conduct, ratification, estoppel, actual authority, apparent authority, informed consent, statutory formality, and documentation	Use the jurisdiction's required creation method, then separate genuine authority from a third party's reasonable belief about authority.
Seller and landlord agency	Owner principal, listing brokerage, designated agent, marketing, showing, buyer qualification, offer presentation, negotiation, confidential price, lawful instruction, accounting, and property management	Treat the owner as client only when the relationship says so; listing activity does not make every cooperating licensee the seller's agent.
Buyer and tenant agency	Buyer client, tenant client, property search, showing, market analysis, offer preparation, lease negotiation, financing, inspection, confidential maximum, written representation agreement, and loyalty	Do not assume the person receiving property help is represented until the relationship has been established as the law requires.
Designated agency	Sponsoring broker, affiliated licensee, named agent, one or more designated agents, exclusion of other firm licensees, same-firm transaction, seller side, buyer side, confidentiality, supervision, and no automatic firmwide dual agency	Ask whether the same individual represents both parties or whether different licensees in the firm are separately designated.
Dual agency	One agent, opposing clients, informed consent, written consent, conflict, limited advocacy, neutral information, confidential negotiating position, transaction confirmation, withdrawal, and state prohibition or permission	Apply dual agency only when the jurisdiction allows it and every required consent and confirmation step appears in the facts.
Subagency and cooperating brokers	Listing broker, cooperating broker, subagent, principal, buyer customer, MLS cooperation, compensation offer, authority, duties, vicarious exposure, and state-specific practice	Never turn cooperation or payment into subagency automatically; find an accepted agency relationship.
Customers and other non-clients	Customer, consumer, unrepresented party, no advocacy, honesty, good faith, accurate information, material fact, ministerial act, form completion, showing access, disclosure, and no-agency notice	Withhold client advocacy, not basic honesty or information the law requires the licensee to disclose.
Transaction broker and facilitator models	Non-agent, neutral assistance, transaction broker, facilitator, limited duties, no fiduciary advocacy, state authorization, disclosure, compensation, contract terms, Illinois prohibition, and exam jurisdiction	Recognize the national label, then check whether the state in the scenario permits the relationship before assigning duties.
Actual authority	Express authority, implied authority, principal instruction, necessary and incidental acts, agreement scope, special agent, general agent, limits, lawful objective, revocation, and documentation	Ask what the principal communicated to the agent and whether the disputed act reasonably fits that grant.
Apparent authority and ratification	Principal manifestation, third-party belief, reasonable reliance, agent representation, unauthorized act, knowledge, acceptance of benefit, affirmance, rejection, and estoppel	For apparent authority, look from principal to third party. For ratification, look for later approval of an act done without prior authority.
Special, general, and universal agents	Limited transaction, brokerage listing, continuing operations, property manager, broad authority, attorney-in-fact, power of attorney, scope, duration, and legal effect	Match the agent category to the breadth of authorized acts, not the agent's job title alone.
Powers of attorney	Principal, agent, attorney-in-fact, property power, statutory form, specific authority, general authority, effective date, durability, incapacity, revocation, signature capacity, and reliance	Read the instrument for the exact power granted and do not infer authority to sign from a brokerage relationship.
Compensation and agency	Commission, fee, payment source, cooperative compensation, client obligation, third-party payment, written disclosure, informed consent, representation, sponsoring broker, and no automatic relationship	Trace agency from agreement and consent, then analyze compensation as a separate contract and disclosure issue.
Illinois relationship overlay	Designated agent, written brokerage agreement, client, customer, no-agency notice, dual agency, consent, transaction-specific confirmation, transaction broker prohibition, facilitator prohibition, actual knowledge, confidentiality, and Article 15	When the question says Illinois, replace generic relationship habits with the exact Article 15 model.

Which distinctions produce the most mistakes?

Terms: Principal vs. client
Difference: Principal is the broader agency-law term for the person who authorizes the agent. Client is the common brokerage term for the consumer represented by the licensee.
Question cue: Authority-giver in agency vocabulary versus represented consumer in brokerage vocabulary.

Terms: Client vs. customer
Difference: A client receives representation and the duties attached to it. A customer is unrepresented by that licensee but remains protected by duties imposed toward non-clients.
Question cue: Best-interest advocacy versus honest assistance without advocacy.

Terms: Seller's agent vs. buyer's agent
Difference: A seller's agent promotes the seller client's lawful interests. A buyer's agent promotes the buyer client's lawful interests, regardless of which side supplies compensation.
Question cue: Whose bargaining position is protected, not who writes the check.

Terms: Designated agency vs. dual agency
Difference: Designated agency assigns a particular licensee to one client. Dual agency occurs when one licensee represents opposing clients in the same transaction.
Question cue: Different same-firm agents on opposite sides versus one agent on both sides.

Terms: Customer vs. transaction broker
Difference: Customer describes the consumer's unrepresented status relative to a licensee. Transaction broker is a specific non-agency brokerage role created by the law of jurisdictions that allow it.
Question cue: Person's status versus licensee's statutory service model.

Terms: Cooperating broker vs. subagent
Difference: A cooperating broker participates in the transaction. A subagent owes agency duties to another agent's principal through a valid subagency relationship.
Question cue: Participation alone versus accepted derivative agency.

Terms: Express agency vs. implied agency
Difference: Express agency follows stated consent. Implied agency is inferred from conduct. Written brokerage requirements can prevent conduct alone from creating a compliant relationship in a particular state.
Question cue: Words or writing versus behavior, followed by a state-formality check.

Terms: Actual authority vs. apparent authority
Difference: Actual authority comes from principal to agent. Apparent authority comes from the principal's manifestations that reasonably influence a third party.
Question cue: What the agent was told versus what the outsider was led to believe.

Terms: Implied authority vs. implied agency
Difference: Implied authority concerns acts reasonably incidental to an existing agency. Implied agency concerns whether an agency relationship arose from conduct in the first place.
Question cue: Scope of an established relationship versus creation of a relationship.

Terms: Special agent vs. general agent
Difference: A special agent has authority for a limited matter or transaction. A general agent has authority over a continuing range of matters for the principal.
Question cue: Broker hired for one sale versus manager running recurring property operations.

Terms: Brokerage agreement vs. power of attorney
Difference: A brokerage agreement authorizes licensed services within its scope. A power of attorney gives an attorney-in-fact the legal authority stated in that instrument, which may include signing for the principal.
Question cue: Market and negotiate versus execute a document in the principal's name.

Terms: Compensation source vs. representation
Difference: Compensation identifies who funds or owes a fee. Representation identifies the client to whom agency duties are owed. One does not automatically establish the other.
Question cue: Money path versus duty path.

Agency and Non-Agency Relationships tested distinctions
Terms	Difference	Question cue
Principal vs. client	Principal is the broader agency-law term for the person who authorizes the agent. Client is the common brokerage term for the consumer represented by the licensee.	Authority-giver in agency vocabulary versus represented consumer in brokerage vocabulary.
Client vs. customer	A client receives representation and the duties attached to it. A customer is unrepresented by that licensee but remains protected by duties imposed toward non-clients.	Best-interest advocacy versus honest assistance without advocacy.
Seller's agent vs. buyer's agent	A seller's agent promotes the seller client's lawful interests. A buyer's agent promotes the buyer client's lawful interests, regardless of which side supplies compensation.	Whose bargaining position is protected, not who writes the check.
Designated agency vs. dual agency	Designated agency assigns a particular licensee to one client. Dual agency occurs when one licensee represents opposing clients in the same transaction.	Different same-firm agents on opposite sides versus one agent on both sides.
Customer vs. transaction broker	Customer describes the consumer's unrepresented status relative to a licensee. Transaction broker is a specific non-agency brokerage role created by the law of jurisdictions that allow it.	Person's status versus licensee's statutory service model.
Cooperating broker vs. subagent	A cooperating broker participates in the transaction. A subagent owes agency duties to another agent's principal through a valid subagency relationship.	Participation alone versus accepted derivative agency.
Express agency vs. implied agency	Express agency follows stated consent. Implied agency is inferred from conduct. Written brokerage requirements can prevent conduct alone from creating a compliant relationship in a particular state.	Words or writing versus behavior, followed by a state-formality check.
Actual authority vs. apparent authority	Actual authority comes from principal to agent. Apparent authority comes from the principal's manifestations that reasonably influence a third party.	What the agent was told versus what the outsider was led to believe.
Implied authority vs. implied agency	Implied authority concerns acts reasonably incidental to an existing agency. Implied agency concerns whether an agency relationship arose from conduct in the first place.	Scope of an established relationship versus creation of a relationship.
Special agent vs. general agent	A special agent has authority for a limited matter or transaction. A general agent has authority over a continuing range of matters for the principal.	Broker hired for one sale versus manager running recurring property operations.
Brokerage agreement vs. power of attorney	A brokerage agreement authorizes licensed services within its scope. A power of attorney gives an attorney-in-fact the legal authority stated in that instrument, which may include signing for the principal.	Market and negotiate versus execute a document in the principal's name.
Compensation source vs. representation	Compensation identifies who funds or owes a fee. Representation identifies the client to whom agency duties are owed. One does not automatically establish the other.	Money path versus duty path.

How do you classify an agency question?

Write down every person and brokerage before evaluating conduct.
Mark each consumer as client, customer, or not yet classified.
Find the agreement, conduct, statute, or instrument offered as the source of authority.
Identify the principal's objective and the exact scope of the agent's authority.
Separate the represented side from the source of compensation.
Check whether one agent, different designated agents, or a permitted non-agent is involved.
Apply the jurisdiction's relationship rules, especially any Illinois prohibition or writing requirement.
Choose the answer that preserves required loyalty and confidentiality without withholding a legally required disclosure.

Fact in the question: Owner signs with a listing brokerage
Relationship clue: Seller or landlord agency
Best exam move: Treat the owner as client within the agreement's scope

Fact in the question: Buyer signs for advocacy
Relationship clue: Buyer agency
Best exam move: Protect the buyer's lawful negotiating interests

Fact in the question: Two same-firm licensees represent opposite sides
Relationship clue: Possible designated agency
Best exam move: Ask who was individually designated to each client

Fact in the question: One licensee represents both sides
Relationship clue: Possible dual agency
Best exam move: Check state permission, disclosure, consent, and limits

Fact in the question: Licensee gives forms to an unrepresented party
Relationship clue: Customer assistance
Best exam move: Do not infer client advocacy from a ministerial act alone

Fact in the question: Cooperating broker is paid from listing side
Relationship clue: Compensation fact only
Best exam move: Find the accepted representation agreement separately

Fact in the question: Principal tells agent to market but not sign
Relationship clue: Limited actual authority
Best exam move: Do not let the agent bind the principal by signature

Fact in the question: Principal tells a buyer that agent may accept
Relationship clue: Possible apparent authority
Best exam move: Test reasonable third-party reliance on the principal's statement

Fact in the question: Principal accepts an unauthorized deal with full knowledge
Relationship clue: Possible ratification
Best exam move: Ask whether the principal affirmed the entire material act

Fact in the question: Question calls Illinois broker a facilitator
Relationship clue: Prohibited Illinois label
Best exam move: Reject facilitator status and apply Article 15

Fact in the question: Brokerage agreement authorizes sale services
Relationship clue: Brokerage authority
Best exam move: Do not infer authority to sign the owner's deed

Fact in the question: Valid property power authorizes conveyance
Relationship clue: Attorney-in-fact authority
Best exam move: Confirm scope, effectiveness, and signature capacity

Agency relationship sorting table
Fact in the question	Relationship clue	Best exam move
Owner signs with a listing brokerage	Seller or landlord agency	Treat the owner as client within the agreement's scope
Buyer signs for advocacy	Buyer agency	Protect the buyer's lawful negotiating interests
Two same-firm licensees represent opposite sides	Possible designated agency	Ask who was individually designated to each client
One licensee represents both sides	Possible dual agency	Check state permission, disclosure, consent, and limits
Licensee gives forms to an unrepresented party	Customer assistance	Do not infer client advocacy from a ministerial act alone
Cooperating broker is paid from listing side	Compensation fact only	Find the accepted representation agreement separately
Principal tells agent to market but not sign	Limited actual authority	Do not let the agent bind the principal by signature
Principal tells a buyer that agent may accept	Possible apparent authority	Test reasonable third-party reliance on the principal's statement
Principal accepts an unauthorized deal with full knowledge	Possible ratification	Ask whether the principal affirmed the entire material act
Question calls Illinois broker a facilitator	Prohibited Illinois label	Reject facilitator status and apply Article 15
Brokerage agreement authorizes sale services	Brokerage authority	Do not infer authority to sign the owner's deed
Valid property power authorizes conveyance	Attorney-in-fact authority	Confirm scope, effectiveness, and signature capacity

How do the rules work in scenarios?

The listing-side commission does not identify the buyer's agent

Scenario: A buyer signs a representation agreement with Broker B. The seller's listing agreement provides the funds from which Broker B will be paid. A question asks whom Broker B represents.

The buyer entered a representation relationship with Broker B.
The listing side's contribution to compensation is a separate money fact.
Payment does not convert Broker B into the seller's agent or subagent.

Answer: Broker B represents the buyer. Always trace the duty path before the money path.

Same company does not always mean one dual agent

Scenario: An Illinois seller is represented by Licensee S and the buyer is represented by Licensee B. Both licensees work for the same sponsoring broker and each was designated to a separate client.

Illinois designation identifies the individual legal agent or agents for each client.
Other affiliated licensees are excluded from that designation.
Neither Licensee S nor Licensee B represents both opposing clients on these facts.

Answer: This is designated agency within one firm, not automatic dual agency by each licensee.

Friendly help does not automatically make the customer a client

Scenario: A listing agent gives an unrepresented buyer a blank offer form, explains where factual property information appears, and reminds the buyer that the agent represents the seller.

The buyer has not been described as represented by the listing agent.
Providing neutral or ministerial help may be permitted without client advocacy.
The agent must maintain the seller agency and comply with the jurisdiction's no-agency disclosure rules.

Answer: The buyer remains a customer on these facts. Helpful service and agency representation are not synonyms.

The agent cannot manufacture apparent authority

Scenario: A listing agreement permits a broker to advertise and present offers. The broker tells a buyer, without the owner's involvement, that the broker can accept any full-price offer for the owner.

Actual authority does not include acceptance on the stated facts.
Apparent authority must arise from the principal's manifestations to the third party.
The broker's unsupported claim cannot enlarge the broker's own authority.

Answer: The broker lacks actual authority to accept and has not established apparent authority from the owner.

A national relationship label fails the Illinois overlay

Scenario: An Illinois licensee proposes to help a seller and buyer as a neutral facilitator, without representing either party and without using Illinois dual-agency procedures.

Facilitator is a relationship category included in the national outline because some jurisdictions use it.
Illinois expressly prohibits a licensee from acting as a facilitator or transaction broker.
Calling the service neutral does not remove the statutory prohibition.

Answer: The proposed Illinois facilitator relationship is not permitted. The licensee must use a lawful Illinois relationship and its required disclosures.

Marketing authority is not deed-signing authority

Scenario: A seller gives a broker an exclusive listing agreement. The seller leaves the country before closing, and the buyer asks the broker to sign the deed for the seller.

The listing agreement authorizes brokerage services, not every legal act related to the sale.
A deed signature transfers the principal's property interest and requires authority adequate for that act.
A power of attorney, if offered, must be valid, effective, and broad enough to cover the conveyance.

Answer: The broker cannot sign merely because the broker holds the listing. Confirm separate signing authority and obtain legal guidance.

What are the common exam traps?

Trap: The seller pays, so every broker represents the seller.
Correction: Payment does not determine agency. A buyer's broker may be paid through transaction funds while continuing to represent the buyer.

Trap: Anyone who receives help from a licensee becomes a client.
Correction: A licensee can provide permitted factual or ministerial assistance to a customer without undertaking client advocacy.

Trap: A cooperating broker is automatically the listing broker's subagent.
Correction: Cooperation and subagency are different. Find an accepted subagency relationship rather than assuming one from MLS participation or compensation.

Trap: All licensees in one brokerage represent every company client.
Correction: Under Illinois designated agency, named licensees represent the client to the exclusion of other affiliated licensees, subject to the statutory framework.

Trap: Two agents from one firm on opposite sides must each be dual agents.
Correction: Separately designated agents may represent opposing clients. Dual agency focuses on one licensee representing both sides.

Trap: A transaction broker is just another word for customer.
Correction: Customer describes an unrepresented consumer. Transaction broker describes a jurisdiction-specific non-agency role for a licensee.

Trap: Because PSI lists facilitators, an Illinois licensee may act as one.
Correction: The national outline covers models used across jurisdictions. Illinois prohibits transaction brokers and facilitators.

Trap: An agent can create apparent authority by announcing it.
Correction: Apparent authority rests on the principal's manifestations and the third party's reasonable belief, not the agent's claim alone.

Trap: Implied agency and implied authority mean the same thing.
Correction: Implied agency concerns creation of the relationship. Implied authority concerns incidental powers within an already existing relationship.

Trap: A listing agreement gives the broker power to sign for the seller.
Correction: Ordinary brokerage authority does not itself grant attorney-in-fact power to execute a deed or contract in the principal's name.

Trap: A power of attorney always grants unlimited authority.
Correction: The instrument's language, effective status, statutory requirements, and any express limits control the agent's power.

Trap: A customer is owed no duties because the customer has no agent.
Correction: Non-clients remain protected by duties such as honesty and required material-fact disclosure. They simply do not receive the full advocacy owed to a client.

Agency and Non-Agency Relationships trap corrections
Trap	Correction
The seller pays, so every broker represents the seller.	Payment does not determine agency. A buyer's broker may be paid through transaction funds while continuing to represent the buyer.
Anyone who receives help from a licensee becomes a client.	A licensee can provide permitted factual or ministerial assistance to a customer without undertaking client advocacy.
A cooperating broker is automatically the listing broker's subagent.	Cooperation and subagency are different. Find an accepted subagency relationship rather than assuming one from MLS participation or compensation.
All licensees in one brokerage represent every company client.	Under Illinois designated agency, named licensees represent the client to the exclusion of other affiliated licensees, subject to the statutory framework.
Two agents from one firm on opposite sides must each be dual agents.	Separately designated agents may represent opposing clients. Dual agency focuses on one licensee representing both sides.
A transaction broker is just another word for customer.	Customer describes an unrepresented consumer. Transaction broker describes a jurisdiction-specific non-agency role for a licensee.
Because PSI lists facilitators, an Illinois licensee may act as one.	The national outline covers models used across jurisdictions. Illinois prohibits transaction brokers and facilitators.
An agent can create apparent authority by announcing it.	Apparent authority rests on the principal's manifestations and the third party's reasonable belief, not the agent's claim alone.
Implied agency and implied authority mean the same thing.	Implied agency concerns creation of the relationship. Implied authority concerns incidental powers within an already existing relationship.
A listing agreement gives the broker power to sign for the seller.	Ordinary brokerage authority does not itself grant attorney-in-fact power to execute a deed or contract in the principal's name.
A power of attorney always grants unlimited authority.	The instrument's language, effective status, statutory requirements, and any express limits control the agent's power.
A customer is owed no duties because the customer has no agent.	Non-clients remain protected by duties such as honesty and required material-fact disclosure. They simply do not receive the full advocacy owed to a client.

Can you answer these original practice questions?

These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.

1. A seller's listing broker offers compensation to a buyer's broker. The buyer and buyer's broker have a valid representation agreement. Whom does the buyer's broker represent?

A. The buyer
B. The seller, because the listing side funds compensation
C. Both parties automatically
D. Neither party

Show answer and explanation

Answer: A

The representation agreement establishes the buyer as client. Compensation source does not by itself determine agency.

2. Which fact is most important when deciding whether a cooperating broker is a subagent of the seller?

A. The broker accessed the property through the MLS
B. The broker accepted a subagency relationship permitted by law
C. The broker attended the inspection
D. The listing brokerage offered compensation

Show answer and explanation

Answer: B

Subagency depends on a valid agency relationship. Cooperation, access, attendance, and compensation do not create it automatically.

3. An Illinois licensee offers to act as a neutral transaction broker for both sides without representing either. What is the best response?

A. Accept because neutrality eliminates all conflicts
B. Accept only if the seller pays no commission
C. Decline because Illinois prohibits transaction brokers and facilitators
D. Accept if the offer is below list price

Show answer and explanation

Answer: C

The Illinois state outline specifically tests the prohibition. National familiarity with transaction-broker models does not make the role lawful in Illinois.

4. A principal privately tells an agent not to accept offers. The principal then tells a buyer in the agent's presence that the agent has full authority to accept. Which doctrine is most relevant to the buyer's reasonable belief?

A. Apparent authority
B. Subagency
C. Universal agency
D. Customer status

Show answer and explanation

Answer: A

The principal's statement to the third party may create apparent authority even though the private instruction limits the agent's actual authority.

5. A property manager has continuing authority to collect rent, arrange routine maintenance, and negotiate renewals within stated limits. Which category best fits?

A. Special agent for one isolated act
B. General agent for a continuing range of matters
C. Customer
D. Subagent solely because rent is collected

Show answer and explanation

Answer: B

A property manager commonly illustrates general agency because the authority covers recurring matters in an ongoing operation. The written scope still controls the exact powers.

How should you study this area?

Session: Session 1
Focus: Build the people map
Proof you are ready: Classify principal, agent, client, customer, and third party correctly in 12 short scenarios.

Session: Session 2
Focus: Sort representation models
Proof you are ready: Explain seller, landlord, buyer, tenant, designated, dual, and subagency without using compensation as the deciding fact.

Session: Session 3
Focus: Master authority
Proof you are ready: Separate express actual, implied actual, apparent authority, and ratification in eight examples.

Session: Session 4
Focus: Compare non-agency roles
Proof you are ready: Distinguish customer, non-agent, transaction broker, facilitator, and ministerial assistance, including the Illinois prohibition.

Session: Session 5
Focus: Control brokerage and signing authority
Proof you are ready: Explain why a listing, representation agreement, and property power of attorney grant different kinds of authority.

Session: Session 6
Focus: Run mixed national and Illinois questions
Proof you are ready: Score at least 90% on a fresh agency set and justify each answer with relationship, authority, duty, and jurisdiction.

Agency and Non-Agency Relationships focused study plan
Session	Focus	Proof you are ready
Session 1	Build the people map	Classify principal, agent, client, customer, and third party correctly in 12 short scenarios.
Session 2	Sort representation models	Explain seller, landlord, buyer, tenant, designated, dual, and subagency without using compensation as the deciding fact.
Session 3	Master authority	Separate express actual, implied actual, apparent authority, and ratification in eight examples.
Session 4	Compare non-agency roles	Distinguish customer, non-agent, transaction broker, facilitator, and ministerial assistance, including the Illinois prohibition.
Session 5	Control brokerage and signing authority	Explain why a listing, representation agreement, and property power of attorney grant different kinds of authority.
Session 6	Run mixed national and Illinois questions	Score at least 90% on a fresh agency set and justify each answer with relationship, authority, duty, and jurisdiction.

Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.

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Questions students ask about Agency and Non-Agency Relationships

What is an agency relationship in real estate?

An agency relationship exists when a principal authorizes an agent to act on the principal's behalf and the agent consents to do so. In a brokerage transaction, the represented principal is usually called the client. The agreement and governing law define the agent's authority and duties.

What is a non-agency relationship?

A non-agency relationship is one in which the licensee provides only the services the jurisdiction permits without representing the consumer as an agent. Common national-outline labels include transaction broker, facilitator, and non-agent. Availability and duties vary by state. Illinois prohibits licensees from acting as transaction brokers or facilitators.

What is the difference between a client and a customer?

A client is represented by the licensee and receives the duties attached to that agency relationship. A customer is not represented by that licensee. An Illinois customer is still owed honesty and good faith, protection from negligent or knowing false information, and disclosure of certain actually known latent material adverse physical facts.

Does the person who pays the commission determine agency?

No. Compensation and representation are separate questions. Illinois Section 15-40 expressly says payment or a promise of payment does not determine whether an agency relationship exists. Read the brokerage relationship and disclosures before following the money.

What is designated agency in Illinois?

Designated agency means one or more licensees sponsored by a broker are named as the client's legal agents to the exclusion of the sponsoring broker and other affiliated licensees. Illinois uses this as its statutory starting model unless a written agreement with the sponsoring broker provides for a different relationship.

Is a cooperating broker automatically a subagent of the seller?

No. Cooperation, MLS participation, access to a listing, or an offer of compensation does not by itself establish whom a broker represents. A cooperating broker may represent the buyer, serve in another relationship allowed by local law, or in some jurisdictions accept subagency. The agreement and law control.

What is the difference between actual and apparent authority?

Actual authority comes from the principal's communication to the agent. Apparent authority comes from the principal's words or conduct that reasonably cause a third party to believe the agent has authority. The agent cannot create apparent authority merely by claiming to have it.

Can an Illinois broker act as a transaction broker or facilitator?

No. The current Illinois Act prohibits a licensee from serving as a transaction broker or facilitator. On a national question, apply the relationship described by that question's jurisdiction. On an Illinois question, reject those labels and use the relationships Illinois permits.

Does a brokerage agreement let a broker sign a deed for the client?

Not by itself. A brokerage agreement authorizes brokerage services within its terms. Authority to sign a principal's deed or other legal instrument requires separate authority, often a valid power of attorney with adequate scope and execution. Never treat marketing authority as signing authority.

Are these official PSI Illinois broker exam questions?

No. The questions are original and aligned to the national Agency outline effective June 24, 2026. The Illinois comparisons were checked against current Illinois primary sources through August 1, 2026.

Primary sources

The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.

Editorial status

Checked against primary sources

The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.

Read our editorial and corrections process

Agency and non-agency relationships

What does this exam area cover?

What is on the official outline?

Which distinctions produce the most mistakes?

How do you classify an agency question?

How do the rules work in scenarios?

The listing-side commission does not identify the buyer's agent

Same company does not always mean one dual agent

Friendly help does not automatically make the customer a client

The agent cannot manufacture apparent authority

A national relationship label fails the Illinois overlay

Marketing authority is not deed-signing authority

What are the common exam traps?

Can you answer these original practice questions?

1. A seller's listing broker offers compensation to a buyer's broker. The buyer and buyer's broker have a valid representation agreement. Whom does the buyer's broker represent?

2. Which fact is most important when deciding whether a cooperating broker is a subagent of the seller?

3. An Illinois licensee offers to act as a neutral transaction broker for both sides without representing either. What is the best response?

4. A principal privately tells an agent not to accept offers. The principal then tells a buyer in the agent's presence that the agent has full authority to accept. Which doctrine is most relevant to the buyer's reasonable belief?

5. A property manager has continuing authority to collect rent, arrange routine maintenance, and negotiate renewals within stated limits. Which category best fits?

How should you study this area?

Practice the topic in Pass Illinois

Drill this topic, then review the explanation

What should you study next?

Questions students ask about Agency and Non-Agency Relationships

Primary sources

Checked against primary sources

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