Define "agency" in the context of real estate relationships.

In the context of real estate relationships, "agency" refers to a legal relationship where one party, known as the agent, acts on behalf of another party, referred to as the principal. This relationship is fundamental to real estate transactions because it establishes a fiduciary duty, where the agent is obligated to act in the best interests of the principal.

This dynamic can manifest in various forms, such as a seller's agent who represents the interests of the seller in a property transaction, or a buyer's agent who represents the interests of the buyer. The essence of this relationship is built on trust and loyalty, ensuring that the agent advocates for and facilitates the needs and goals of the principal throughout the process of buying or selling property.

The other options do not fully capture the comprehensive nature of agency in real estate. While partnerships, buyer-seller relationships, and financial agreements may involve agents, they do not constitute the fundamental definition of agency as a legal representation.