National Real Estate Exam (PSI)General Principles of AgencyHard
A developer sells lots and, as part of the financing arrangement, appoints the lender's agent to also collect payments and release deeds, giving that agent a personal financial interest in the property itself as security for a debt. Even if the developer later tries to cancel this arrangement, it cannot be revoked unilaterally. What type of agency is this?
- AOstensible agency
- BAgency coupled with an interest
- CImplied agency
- DGeneral agency
Show answer & explanationAnswer & explanation
Correct answer: B. Agency coupled with an interest
An agency coupled with an interest exists when the agent has a genuine financial or property interest in the subject matter of the agency itself, not just a fee for services. This type of agency cannot be revoked by the principal alone and does not terminate upon the principal's death.
Why the other options are wrong
- A. Ostensible (apparent) agency arises from the principal's conduct suggesting authority, not from a financial interest.
- C. Implied agency arises from the parties' actions, not from a security interest in property.
- D. General agency refers to scope of authority over ongoing matters, unrelated to irrevocability.
Agency Coupled with an Interest
A special agency where the agent has an actual financial or ownership interest in the subject property, making the agency irrevocable by the principal alone.
- Cannot be terminated by principal's unilateral act
- Survives the principal's death
- Rare in typical real estate brokerage relationships
Memory trick: Coupled = agent's own money is tied in