Direct answer
What does principal mean?
A principal is 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?
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
AccountingAccounting is the fiduciary duty to safeguard and properly account for money, documents and property entrusted to the agent.AgencyAgency is a relationship in which an agent is authorized to act for a principal and owes duties within that relationship.Broker's agentA broker's agent is an agent from another firm engaged by a listing, buyer's or tenant's agent to help serve that agent's principal, with no direct relationship to the principal.ClientA client is a principal who is represented by a real estate agent.CustomerA customer is a person who receives services from a licensee but is not represented by that licensee as an agent.Designated sales agentA designated sales agent is a salesperson or associate broker assigned by the broker to represent one client when the same broker also represents another client in the deal.
Sources used2 references with section locators
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Put the term back into its full subject.
A definition helps with recall. The subject guide shows how the rule interacts with documents, scenarios, calculations and practice questions.