Direct answer
What does Principal mean?
The person who authorizes an agent to act and to whom the agent owes agency duties.
Exam cue: In a brokerage question, principal and client usually identify the represented party.
What does it look like in a question?
New York example
A landlord hires a broker to locate a tenant and becomes the broker's principal.
Common exam trap
What should you not confuse it with?
Principal can also mean a loan amount in finance. Context controls the meaning.
Related agency terms
AccountingThe fiduciary duty to safeguard and properly account for money, documents and property entrusted to the agent.AgencyA relationship in which an agent is authorized to act for a principal and owes duties within that relationship.Broker's agentAn agent who cooperates with or is engaged by another agent without becoming a subagent of that agent's principal.ClientA principal who is represented by a real estate agent.CustomerA person who receives services from a licensee but is not represented by that licensee as an agent.Designated sales agentA sales agent appointed within a disclosed dual agency arrangement to advocate for one principal in negotiations.
Sources used2 references with section locators
The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.
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