Final answer:
In a real estate transaction, the “agent” is the broker, who represents either the buyer or the seller. The principal can be the seller or buyer, and the third party is the party on the other side of the transaction. Understanding Escrow can be important for buyers as it simplifies paying home insurance and property taxes.
Step-by-step explanation:
In a real estate transaction within an agency relationship, the agent is typically the broker. The broker acts on behalf of the principal, who can be either the buyer or the seller, depending on whom the broker represents. If the broker represents the seller, they work towards selling the property for the best possible price and terms; conversely, if the broker represents the buyer, they seek to purchase a property at the lowest possible price and with favorable terms for the buyer. A third party in these transactions is typically the other party involved in the sale, either the buyer if the agent is representing the seller, or vice versa.
As part of the buying process, buyers should be aware of the concept of Escrow. This is a financial arrangement where a neutral third party holds and regulates payment of the funds required for two parties involved in a given transaction. It ensures that the buyer's home insurance and property taxes are paid as part of their normal monthly mortgage payment, simplifying the financial obligations associated with home ownership.