A subagent in the context of a real estate transaction is another agent working on behalf of the listing agent or brokerage. A subagent may bring in a buyer or show houses to potential buyers. However, they technically represent the seller and are still bound by the same fiduciary duties and responsibilities as the seller’s agent. Subagents are becoming less common, as most buyers will hire their own agents.
Buying a home can be an emotional experience. Maybe you have been working all your life to finally afford your own home with a backyard so that your German Shepherd can enjoy chasing squirrels and rabbits. Maybe you are selling the home you grew up in, plastered with memories from your long-lost childhood. Any way you shake it, buying or selling a home is full of both financial and emotional capital expenditures.
When making such a big life decision, you want to have a trusted agent by your side. These days, most buyers and sellers hire their own agents to represent them. But in some cases, a listing agent may hire what is called a subagent to reach out to buyers and help close a sale. While the subagent may be working with a buyer in this scenario, their loyalty and fiduciary duty lie with the seller. Keep reading to learn more about how subagents fit into real estate transactions.
What is a real estate subagent?
The dictionary definition of a subagent is an agent (such as a real estate broker) who is authorized by another agent to act in that person’s place. If you use this broad meaning, several real estate players could be considered a subagent. However, the most common meaning of subagent is another licensed agent who has been sent to help with the transaction on behalf of the listing agent or broker.
A listing agent may hire a subagent to show a listing to potential buyers or to find a buyer. Subagents are more prevalent in U.S. real estate transactions than in the international market. But they are less common now that most buyers have their own buyer’s agent to walk them through a transaction.
A subagent can be a licensed real estate agent working solo or a company that has been appointed to oversee certain elements of the transaction. The subagent acts under the authority of the agent who appointed them and thus is bound by the same laws, morals, and ethics.
Subagents and fiduciary duty
Just like agents, subagents are bound by fiduciary duties when handling a real estate transaction. Fiduciary duty is legal speak for taking care of clients and offering loyalty, good faith, and confidentiality, among other obligations. In short, it’s making sure their client’s best interests are represented. In the case of a subagent, their duty is to the seller, even if they are there to show a house to a buyer. For example, Minnesota law states:
If the subagent breaks any of the fiduciary duty codes, they could get in legal trouble. Subagents are party to vicarious liability, meaning the agents or brokerages that hire them are responsible for their subagents’ actions. In some cases, the client (the seller) could actually be held liable for the subagent’s actions. These legal issues are part of the reason subagents have become less common.
Real estate transactions 101
Most real estate transactions involve the following characters: a buyer, seller, listing agent, buyer’s agent, title company, and potentially a subagent. Here is a breakdown of who they are and what they do.
The person who is selling the home. The seller will typically use a listing agent or broker to represent the sale of the home on their behalf. They might also hire a subagent.
The person who buys the property. These days, most buyers will have a buyer’s agent to help them find the property they are looking to purchase.
A buyer’s agent is someone representing the buyer in the transaction. They are usually tasked with working with various listing agents to find a suitable home based on the buyer’s requirements.
The agent that the seller hires to list their property for sale. This is also known as a seller’s agent. They will usually market the property with a list price. This can be negotiated to go higher or lower than the actual sales price, depending on the market.
A subagent is appointed by the listing agent but cannot have the title of listing broker. The listing agent may appoint them to show a house when the actual listing agent can’t make an appointment. A subagent can work with a buyer, but their fiduciary duty is to the seller.
The title company is the final piece of this real estate transaction puzzle. The title company acts as an intermediary between the seller and the buyer. They are bound to search aspects of the title so that they confirm it’s clean with no encumbrances. Secondly, they serve as an escrow agent between the buyer and seller.
The wonderful world of subagents
The subagent cannot be the listing broker or replace them. They are merely there to work underneath the listing broker in some respect. Here are some reasons a subagent might be involved in a real estate transaction.
The agent is too busy
Many times, agents handle hundreds of calls a day and travel across their designated sales area to do multiple showings. In this case, the listing broker might have several subagents working underneath them to show properties to prospective buyers. The subagent might handle some aspects of the paperwork as well.
A buyer finds a home online
Most prospective buyers will constantly scour the internet to see if a surprise listing that meets their requirements pops up. At this point, they might not be working with a buyer’s agent yet. When the prospective buyer calls the listing agent and arranges a viewing, someone else may show up. This is a subagent representing the interests of the listing agent and the seller.
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The subagent brings in a buyer
A subagent can also bring in a buyer to close the deal on a property. The listing agent controls the listing and represents the seller. That doesn’t mean that they control all the leads, though. A cooperating sales associate from another brokerage may want to show a piece of real estate to the prospective buyer. This is not the buyer’s appointed agent. It’s simply another licensed real estate professional, and their obligations lie in the interests of the listing agent and seller, not the buyer.
This is why an agency relationship is important for real estate brokers. Another brokerage can use their own team to bring in a subagent to increase the lead generation and achieve a close.
How do subagents earn money?
Subagents will earn a portion of the commission. Typically, a commission is around 6% of the purchase price and will be split evenly between the buyer’s agent and the seller’s agent. However, if a subagent is used in place of a buyer’s agent, they would receive a portion of the commission from the listing agent.
Should you work with a subagent?
As a buyer, you would be better off working with your own buyer’s agent, who has a fiduciary duty to you. A subagent is obligated to share information with the seller. So if you tell the subagent that you are willing to pay more than your offer, they can share that information with the seller.
What is an example of a subagent?
A subagent might be a person who meets you at a house for a showing but who is not the listing agent or broker.
What is a subagent relationship?
In a subagent relationship, the subagent works on behalf of the seller and the seller’s listing agent. They might work with a buyer or bring in a buyer, but they are not the buyer’s agent. Their duty is to the seller.
Is a salesperson a subagent?
A salesperson can be a subagent or an agent. If they are working on behalf of the listing agent, they may be helping to sell the house but their name is not the one on the listing.
What duties does a subagent owe to a customer?
A subagent owes fiduciary duties to the seller. These include duties of care, loyalty, confidentiality, obedience, and accounting.
- A subagent works on behalf of a listing agent or brokerage in a real estate transaction. They often conduct showings or bring in buyers to view a listing.
- A subagent represents the interests of the seller and the listing agent. They may work with a buyer, but they are not the buyer’s agent.
- Subagents are bound by fiduciary duties, including care, loyalty, and confidentiality. They owe these duties to the seller in the transaction.
- A subagent will take a slice of the commission paid out to the listing agent or brokerage.
View Article Sources
- What is a Subagent? – Maryland Realtors
- Vicarious Liability – Cornell Law School
- Fiduciary Duties – National Association of Realtors
- Agency Disclosure Requirements – State of Minnesota
- How Real Estate Agents Get Paid – SuperMoney