Subagency

Overview of Subagency

Subagency in real estate refers to a relationship where a sales agent, often not the listing agent, works to sell a property that is listed by another broker. This practice is most common within Multiple Listing Services (MLS), where properties are listed and shared among member brokers to increase the chances of selling a property by exposing it to a wider pool of potential buyers.

Key Features of Subagency:

Involvement of Multiple Parties: Subagency commonly involves a listing broker who initially lists the property and a cooperating broker (the subagent) who finds a buyer.
Commission Split: Upon a successful sale, the listing broker and the subagent typically share the commission, according to a predetermined ratio.
Mutual Agreement: The subagency relationship arises out of mutual consent between brokers participating in MLS.

Examples

Example 1: A homeowner hires Broker A to list their home. Broker A then enters the property into the MLS, making it available to all member brokers. Broker B, who is also a member of the MLS, finds a potential buyer and facilitates the sale. Broker A and Broker B split the commission according to the terms of their subagency agreement.

Example 2: An investor lists an apartment complex with Broker C under an exclusive right-to-sell agreement. An agent from a different brokerage, Broker D, comes across the listing in the MLS and finds an interested buyer. Once the sale is completed, Broker C (the listing broker) and Broker D (the selling broker) share the sales commission.

Frequently Asked Questions (FAQs)

What is a subagency agreement?

A subagency agreement is a contractual relationship where the listing broker allows other brokers to assist in selling the property, sharing the commission once a deal is closed.

Is subagency still common in real estate transactions?

While subagency was more common in the past, it has become less prevalent due to the rise of buyer’s agency, where the buyer’s agent represents the buyer’s interests exclusively.

How is the commission split in a subagency?

The commission split in subagency relationships is generally determined by the listing agreement and the cooperating brokerage’s policies within the MLS.

What are the roles of a subagent?

A subagent works to find a buyer for a property listed by another broker. They provide potential buyers with information about the property and assist them through the buying process.

Are subagents liable for the actions of the principal broker?

Subagents usually owe fiduciary duties to the property seller and must abide by the rules and regulations governing real estate transactions, just like the principal broker.

Multiple Listing Service (MLS)

Definition: A database established by cooperating real estate brokers to provide data about properties for sale. The system enables brokers to work together, increasing the selection of available properties to potential buyers.

Listing Agreement

Definition: A contract between a property owner and a real estate broker that authorizes the broker to find a buyer or tenant for the property.

Exclusive Right-To-Sell Agreement

Definition: A type of listing agreement in which the listing broker is given exclusive rights to sell the property for a specified period. No commission is due if the property is sold by someone other than the listing broker within this timeframe.

Commission

Definition: The fee paid to real estate agents or brokers for their services in facilitating a property sale or purchase. It is usually a percentage of the property’s sale price.

Online Resources

National Association of Realtors (NAR): Realtor.org
Multiple Listing Service (MLS): MLS Websites
Real Estate Regulatory Agencies: Real Estate Commission by State

References

Still, Norman. “The Real Estate Agent’s Guide to MLS and Subagency Agreements.” Real Estate Professional, 2nd Edition, 2018.
Johnson, Mark. “Navigating Subagency in Real Estate.” Journal of Real Estate Practice, 2020.

Suggested Books for Further Studies

“Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
“The Language of Real Estate” by John W. Reilly
“Modern Real Estate Practice” by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle

Real Estate Basics: Subagency Fundamentals Quiz

### Who typically initiates a subagency relationship? - [ ] The buyer - [ ] The seller - [x] The listing broker - [ ] The subagent > **Explanation:** The listing broker initiates a subagency relationship by allowing other brokers the right to assist in selling the property. ### What platform commonly facilitates subagency relationships? - [ ] Private Listings - [x] Multiple Listing Service (MLS) - [ ] Social Media - [ ] Public Auctions > **Explanation:** The Multiple Listing Service (MLS) facilitates subagency relationships by providing a platform where listing brokers can share property details with member brokers. ### Which type of agreement is most likely involved in a subagency? - [ ] Oral Contract - [x] Listing Agreement - [ ] Lease Agreement - [ ] Rental Agreement > **Explanation:** A listing agreement is typically involved in a subagency relationship, authorizing the listing broker to list the property and cooperate with other brokers. ### How is the commission usually split in a subagency relationship? - [x] Based on the terms of the listing agreement - [ ] Equally among all brokers involved - [ ] Only the listing broker receives the commission - [ ] The commission is donated to charity > **Explanation:** The commission in a subagency relationship is split based on the terms laid out in the listing agreement and the policies of the cooperating brokerages. ### In modern real estate, what has largely replaced subagency? - [ ] Direct Sales - [ ] Wholesale Agreements - [x] Buyer’s Agency - [ ] Sale by Owner > **Explanation:** Buyer's agency, where the buyer's agent represents the interests of the buyer exclusively, has largely replaced the traditional subagency role. ### What duty does a subagent owe to the seller? - [x] Fiduciary duties, including loyalty and confidentiality - [ ] Responsibilities of a manager - [ ] Duties of a tenant - [ ] No duties > **Explanation:** A subagent owes fiduciary duties to the seller, such as loyalty, confidentiality, and disclosure. ### Can a subagent represent the buyer? - [ ] Yes, without restrictions - [ ] Yes, but only under dual agency - [x] No, their primary duty is to the seller - [ ] Yes, in any situation > **Explanation:** In a traditional subagency, the subagent's primary duty is to the seller, not the buyer. ### What is a common benefit of subagency relationships for sellers? - [ ] Increased property tax deductions - [ ] Direct customer interactions - [x] Wider pool of potential buyers - [ ] Easier principal payments > **Explanation:** One significant benefit of subagency relationships for sellers is access to a wider pool of potential buyers through the MLS. ### Do subagents need to disclose their role to potential buyers? - [x] Yes, they must disclose their role and who they represent - [ ] No, disclosure is not required - [ ] Only if explicitly asked by a buyer - [ ] Only if the seller requests it > **Explanation:** Subagents must disclose their role to potential buyers, including whom they represent in the transaction. ### Which agreement type allows potential subagency participation? - [x] Exclusive Right-To-Sell Agreement - [ ] Rental Agreement - [ ] Lease Option Agreement - [ ] Purchase Contract > **Explanation:** An exclusive right-to-sell agreement often allows for subagency participation, where other brokers can assist in selling the property.