Hawaii Pre-Licensing National Practice Exam

In real estate terminology, a principal is the person who engages the services of an agent, often referred to as the client in a transaction. This includes both buyers and sellers who are involved in a real estate deal. When a principal hires an agent, they grant that agent the authority to act on their behalf to negotiate and facilitate the transaction, making decisions within the scope of the agreed-upon representation.

Understanding the role of a principal is crucial, as they are the party whose interests the agent is obligated to represent and protect. This relationship establishes fiduciary duties, where the agent must act in the best interests of the principal.

The other parties mentioned—such as lenders, title companies, and agents representing buyers—play supportive roles but are not classified as principals themselves. Lenders provide financing and support the transaction financially, title companies handle the legal aspects of property transfer, and agents represent the principals but do not qualify as principals in their own right. Thus, the definition of a principal is clear in the context of real estate transactions.