What Is a Sub-Agent in Real Estate?

Real estate transactions involve various relationships between agents, sellers, and buyers. These arrangements define who represents whom and what duties are owed to each party. Understanding these agency relationships is important for anyone participating in a property transaction. Among the historical forms of agency, sub-agency played a significant role in how properties were bought and sold.

Understanding the Sub-Agent’s Role

A sub-agent in real estate is a licensed professional who operates under the authority of a listing broker. This means the sub-agent represents the seller’s interests in a transaction. Their primary responsibility is to the seller, even when working directly with a potential buyer. This relationship establishes a fiduciary duty, meaning the sub-agent must act in the best interests of the seller.

Historically, sub-agency was a common model where all agents involved in a transaction, regardless of who they interacted with, ultimately represented the seller. This approach emerged before the widespread adoption of buyer representation, serving as a way to expand the reach of the listing agent and find buyers for properties.

How Sub-Agents Operate

When a sub-agent works with a potential buyer, their actions are always directed towards achieving the seller’s objectives. The sub-agent may show properties to interested buyers, providing access and information about the listing. They facilitate the communication process, such as presenting offers from the buyer to the seller.

For instance, they might help a buyer prepare an offer, but their underlying aim is to secure the best possible terms and price for the property owner. They help navigate the transaction, ensuring that all steps align with the seller’s contractual and financial interests.

Compensation and Disclosure in Sub-Agency

Sub-agents are typically compensated through a portion of the commission paid by the seller to the listing broker. The commission amount can vary, often ranging from 1% to 3% of the property value, depending on the agreement with the listing broker.

A key aspect of sub-agency involves transparent disclosure to the buyer. The sub-agent must inform the buyer that they represent the seller’s interests, not the buyer’s. Buyers working with a sub-agent are advised against sharing confidential information that could negatively impact their negotiating position, as this information could be relayed to the seller.

Sub-Agency vs. Buyer Agency

The distinction between sub-agency and buyer agency lies in who receives the agent’s loyalty and fiduciary duties. A buyer’s agent is hired by and represents the buyer, working exclusively in the buyer’s best interest throughout the transaction. This relationship involves fiduciary duties such as loyalty, confidentiality, full disclosure, and obedience owed solely to the buyer.

In contrast, a sub-agent’s loyalty is directed towards the seller. While a sub-agent interacts with the buyer, their legal obligation is to the seller, and they cannot provide advice or negotiate on behalf of the buyer. This difference in representation is significant for handling confidential information; a buyer’s agent safeguards the buyer’s information, while a sub-agent protects the seller’s. Buyers often prefer their own agent who advocates for their interests, negotiates terms, and provides tailored advice during the purchasing process.