What is a subagent in real estate?

In real estate transactions, understanding the nuances of agency relationships is crucial for real estate agents and their clients. One such role is that of a subagent, a concept that can sometimes be misunderstood or overlooked. This guide aims to clarify the roles of the subagent, their fiduciary duties, the handling of confidential information, and the implications for buyers, sellers, and real estate professionals alike.

What is a Subagent in Real Estate?

A subagent in real estate is a licensed agent who assists a buyer but legally represents the seller. This arrangement often occurs when a buyer works with an agent who is affiliated with the listing agent (representing the seller). While the subagent helps the buyer find properties, navigate negotiations, and handle paperwork, they owe fiduciary duties to the seller. These duties include loyalty, confidentiality, disclosure, obedience, and reasonable care.

What is an example of a subagent?

An example of a subagent in real estate would be when a buyer’s agent collaborates with a seller’s agent who is representing a property. In this scenario, the buyer’s agent acts as a subagent of the seller’s agent and represents the seller’s interests to the buyer.

For instance, John is a licensed real estate agent representing a seller, Sarah, who is listing her property for sale. Meanwhile, Emily is a buyer looking for a home and seeks assistance from another agent, Mike, who is affiliated with John’s brokerage. In this scenario, Mike becomes a subagent of John and is obligated to prioritize Sarah’s interests, even though he is assisting Emily in finding a suitable property.

What is the difference between an agent and a sub-agent?

The main difference between an agent and a subagent in real estate lies in whom they represent and to whom they owe fiduciary duties:

Agent

Is typically hired by and represents either the buyer or the seller exclusively in a real estate transaction. They owe fiduciary duties, including loyalty, confidentiality, disclosure, obedience, and reasonable care, to their client.

Subagent

Is a licensed agent who works with a buyer but represents the seller. While assisting the buyer, the subagent owes fiduciary duties to the seller, including loyalty, confidentiality, disclosure, obedience, and reasonable care.

In essence, an agent directly represents one party (either the buyer or the seller), while a subagent assists a party (usually the buyer) but legally represents the opposing party (the seller).

What is the difference between a sub-agent and a dual agent?

The key difference between a subagent and a dual agent in real estate lies in their relationships and responsibilities to the parties involved in a transaction:

Subagent

• Represents the opposite party. A subagent is a licensed agent who assists a buyer but legally represents the seller. They owe fiduciary duties to the seller, including loyalty, confidentiality, disclosure, obedience, and reasonable care.
• Indirect representation. The subagent indirectly represents the seller’s interests while assisting the buyer. They work under the supervision of the seller’s agent (listing agent) and act following the seller’s instructions and best interests.

Dual agent

• Represents both parties. Represents both the buyer and the seller in the same transaction. This dual representation can occur when an agent’s brokerage firm represents both parties or when a single agent represents both parties with their informed consent.
• Fiduciary duties to both parties. As a dual agent, the agent owes fiduciary duties, including loyalty, confidentiality, disclosure, obedience, and reasonable care, to both the buyer and the seller.
• Potential conflicts of interest. Dual agency can present potential conflicts of interest because the agent must balance the interests of both parties fairly and impartially. This requires transparent communication, informed consent, and ethical handling of confidential information.

In summary, a subagent represents the opposing party (seller) while assisting the buyer, whereas a dual agent represents both the buyer and the seller directly in the same transaction, navigating potential conflicts of interest more directly.

Is a sub-agent the same as a cooperating agent?

No, a subagent is not the same as a cooperating agent in real estate. Here’s the difference between the two:

Subagent

Represents the opposite party. A subagent is a licensed agent who assists a buyer but legally represents the seller. They owe fiduciary duties to the seller, including loyalty, confidentiality, disclosure, obedience, and reasonable care.

Indirect representation. The subagent indirectly represents the seller’s interests while assisting the buyer. They work under the supervision of the seller’s agent (listing agent) and act following the seller’s instructions and best interests.

Cooperating agent

Represents their client. A cooperating agent, also known as a selling agent or buyer’s agent, represents their own client’s interests in a real estate transaction. If they are working with a buyer, they advocate for the buyer’s interests.

Collaboration with the listing agent. A cooperating agent collaborates with the listing agent (representing the seller) to facilitate the transaction. They work together to negotiate terms, handle paperwork, and ensure a smooth process for their respective clients.

Finally, a subagent represents the seller while assisting the buyer, whereas a cooperating agent represents the buyer’s interests and collaborates with the listing agent (representing the seller) to complete the real estate transaction.

Potential conflicts and best practices

In real estate transactions involving subagents, potential conflicts of interest can arise, especially concerning pricing, negotiations, and disclosure. To navigate these challenges effectively, real estate professionals should consider the following best practices:

1. Clear Communication. Maintain open and transparent communication with all parties involved, clarifying agency relationships, roles, and responsibilities.
2. Informed Consent. Ensure that clients understand and consent to the agency relationships and any potential dual agency or subagency situations.
3. Ethical Conduct. Uphold professional standards and integrity, prioritizing client interests and avoiding actions that could compromise trust or fairness.

Read more: What is estoppel in real estate?

Bottom line

Finally, understanding the role of subagents in real estate transactions is essential for all parties involved.

Real estate agents must manage subagency relationships, whether representing the buyer or the seller. Ethics and professionalism ensure compliance with fiduciary duties, confidentiality requirements, and legal obligations. Real estate professionals can facilitate successful transactions. They uphold client interests and industry standards by prioritizing clear communication, informed consent and ethical conduct.

Written by Vanessa Gallanti. June 6, 2024

Enthusiast about planning, project management, construction materials and technology, and construction. A civil engineer from Los Andes University and a content writer for Kukun.