Agency by estoppel in real estate is best explained through an example. So, let’s go through a quick one to help you understand what it is exactly.
Suppose you want to sell your house. So, you consciously allow a real estate agent (let’s call him agent X) to purport that he is your agent. Now, the agent goes out and finds you a buyer. The buyer is relying on the word of the agent X, who says that he represents the owner. And now suppose that the buyer goes out and borrows money so that he can purchase your home.
If you refuse to sell to the potential buyer by saying that the agent X is not actually your agent, you could be found at fault in a court of law. This is because you consciously allowed the agent to purport to be your agent, even though no formal agency contract or agreement was ever made between you and Agent X. So, agency was “assumed”, although there was no formal contract.