sub agent real estate example

3 min read 26-01-2025

The real estate world isn't just about buyers and sellers; it's a complex network of agents, brokers, and, importantly, sub-agents. Understanding the role of a sub-agent is crucial for both aspiring real estate professionals and those navigating the property market. This guide will provide a clear explanation of sub-agency in real estate, using real-world examples to illustrate the complexities and benefits.

What is a Sub-Agent in Real Estate?

A sub-agent is a real estate licensee who represents the seller (or listing agent's broker) in a real estate transaction, but isn't directly employed by the listing broker. They work with the listing agent, not for them, operating under the umbrella of their brokerage. This means they are acting on behalf of the seller, even though they may not have the same direct contractual relationship as the listing agent. The key difference is in their agency relationship.

How Sub-Agency Works: A Step-by-Step Example

Let's imagine Sarah, a buyer, is looking for a new home. She works with Agent A, who represents her as her buyer's agent. Agent A finds a suitable listing held by Agent B, who is representing the seller.

Now, Agent B's brokerage might have a policy of sub-agency. This means that Agent A, even though working for Sarah, becomes a sub-agent of Agent B's brokerage and therefore owes a fiduciary duty to the seller. This dual agency relationship is where things get complex.

Here's a breakdown:

Sarah (Buyer) contracts with Agent A (Buyer's Agent): This establishes a clear agency relationship where Agent A is legally and ethically bound to represent Sarah's best interests.
Agent A finds a listing with Agent B (Listing Agent): Agent A now needs to work within the framework of their brokerage's policies regarding sub-agency.
Sub-Agency Activated (if applicable): If the brokerage has a sub-agency agreement in place, Agent A now acts as a sub-agent for Agent B's brokerage and the seller. This means Agent A's primary responsibility shifts, at least partially, to representing the seller's interests alongside the buyer's. This can lead to potential conflicts of interest.
Transaction Completion: The transaction proceeds, and all parties – Sarah, Agent A, Agent B, and the seller – fulfil their contractual obligations. The commission is typically split between the buyer's and seller's brokerages.

Sub-Agency vs. Buyer Agency vs. Dual Agency

It's vital to differentiate sub-agency from other agency relationships in real estate.

Buyer Agency: The agent directly represents the buyer's interests, working to secure the best possible deal for them. This is a straightforward and usually preferable scenario for buyers.
Dual Agency: This occurs when one agent represents both the buyer and the seller in the same transaction. Strict disclosure and consent are required, and potential conflicts of interest must be carefully managed. Many jurisdictions are moving away from this model due to the inherent challenges.
Sub-Agency: As explained above, the buyer's agent acts as a sub-agent of the seller's brokerage, creating a complex arrangement with potential conflicts.

Potential Conflicts of Interest in Sub-Agency

The primary concern with sub-agency lies in the potential for conflicts of interest. Agent A, while working with Sarah, might be hesitant to push for the best possible deal for Sarah if it compromises the seller's interests. For example, Agent A might not advocate as strongly for a lower price or better terms than they would if they were a purely buyer's agent.

Alternatives to Sub-Agency: Buyer Agency Representation

To avoid these conflicts, many brokerages are moving towards a buyer agency representation model. In this model, the buyer's agent exclusively represents the buyer, creating a clear and straightforward agency relationship without the potential conflicts inherent in sub-agency.

Conclusion

Understanding sub-agency is critical for anyone involved in real estate transactions. While it might be a legally permissible arrangement, the potential for conflicts of interest should be carefully considered. Buyers should inquire about their agent’s brokerage policy on agency and ensure they are receiving the full, unbiased representation they deserve. The shift towards buyer agency models underscores the growing preference for clear and conflict-free representation in the real estate market.