New York Real Estate Salesperson ExaminationLaws of AgencyMedium
A real estate broker is approached by a potential buyer who wishes to remain anonymous and wants to purchase a property without the seller knowing their identity. The broker agrees to represent this buyer. What type of agency has been created?
- AUndisclosed Agency
- BSpecial Agency
- CGeneral Agency
- DUniversal Agency
Show answer & explanationAnswer & explanation
Correct answer: A. Undisclosed Agency
Undisclosed agency occurs when the principal's identity is not revealed to the third party (the seller, in this case). While the agent knows the principal, the third party does not know they are dealing with an agent or the principal's identity. This is generally disfavored and potentially problematic in real estate.
Why the other options are wrong
- B. Special agency is for a single, specific transaction with limited authority, but doesn't inherently involve an undisclosed principal.
- C. General agency gives the agent authority to manage the principal's affairs in a specific area, not typically for a single transaction.
- D. Universal agency grants the agent broad authority to act on behalf of the principal in all matters, which is much wider than this scenario.
Undisclosed Agency
A type of agency where the agent acts on behalf of a principal whose identity is not revealed to the third party. The third party may not even know an agency relationship exists.
- Principal's identity is hidden.
- Agent acts in their own name.
- Often carries legal risks and is generally discouraged in real estate.
Memory trick: U.G.S.S. — Universal, General, Special, Secret (Undisclosed).