What Is Subagency in Real Estate?

Real estate agency broadly refers to a professional acting on behalf of another in a property transaction. This framework includes several types of representation, with subagency being a historical form that shaped how properties were bought and sold.

Defining Real Estate Subagency

Subagency in real estate occurs when an agent, typically a cooperating broker who is not the listing agent, works to find a buyer for a property but formally represents the seller. This arrangement means the subagent is an agent of an agent, extending the reach of the listing agent’s representation of the seller. The subagent’s primary allegiance is to the seller, not the buyer they are assisting.

Historically, this model was common, especially before the widespread adoption of buyer representation. It allowed listing agents to share commissions with other brokers who brought buyers, expanding marketing efforts while maintaining seller-centric representation. However, the prevalence of subagency has declined significantly due to evolving agency laws and the rise of buyer agency agreements that prioritize buyer representation.

The Subagent’s Fiduciary Duties

A subagent owes specific legal and ethical obligations, known as fiduciary duties, directly to the seller. These duties are the same as those owed by the listing agent to their seller-client. The obligations include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care.

The duty of loyalty requires the subagent to always act in the seller’s best interest, even if it conflicts with their own or the buyer’s interests. Obedience means the subagent must follow all lawful instructions from the seller. Disclosure compels the subagent to reveal all material facts about the transaction to the seller, including any information learned about the buyer.

Confidentiality dictates that the subagent must keep the seller’s private information secret, unless authorized to disclose it or legally required. Accounting involves meticulously tracking all money and property related to the transaction. Finally, reasonable care mandates that the subagent perform their duties competently and skillfully.

Implications for Transaction Parties

The subagency relationship carries distinct implications for both buyers and sellers in a real estate transaction. For the buyer, it is important to understand that a subagent, despite working with them to view properties and facilitate offers, does not represent the buyer’s interests. The subagent’s loyalty is solely to the seller, meaning they cannot provide advice or strategies that would disadvantage the seller. Any information shared by a buyer with a subagent, such as financial details or motivations, may be disclosed to the seller because the subagent owes the seller a duty of full disclosure.

For the seller, subagency effectively broadens their representation in the market. Both the listing agent and the subagent are working on the seller’s behalf, expanding the pool of potential buyers. This arrangement means the seller benefits from multiple licensed professionals actively promoting their property and negotiating terms in their favor. However, the seller can also be held responsible for a subagent’s actions, including any misrepresentations or omissions, due to the nature of the agency relationship.