The Role of Subagents in Real Estate Transactions

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Just because a real estate agent is helping you find a house, doesn't mean the agent is working in your best interests. In this lesson, you'll learn about subagents and their role in real estate transactions.

Subagent Defined

Katie has been looking for a house without a real estate agent to help her with the search. Instead, she's been looking at listings online for several months. She finally finds a good prospect and calls up one of the large real estate brokers in town to see the property. The broker hooks Katie up with one of its salespersons, Mary, who's happy to show Katie the property.

Mary sees the salesperson on the property is Tracey who works for another broker in town. So Mary calls Tracey to arrange a time for Katie to see the property. The following day, Mary meets Katie at the house, but before going in, she asks Katie to review and sign an agency disclosure form that informs Katie that Mary is working as a subagent.

A subagent doesn't work for a buyer, like Katie, but rather works for the seller as an agent for the seller's agent. In other words, Mary isn't working for Katie but for the seller by helping the seller's agent by presenting Katie as a potential buyer. This is very important for buyers like Katie to understand. Let's see why.

Subagent's Duty

An agent has a fiduciary duty to their principal. A principle is the person who hires an agent to represent the principle. A fiduciary duty is a special relationship recognized in law. If you hold owe a fiduciary duty to someone, you must act in the best interest of the person to which you owe the duty - even if it's contrary to your own best interest. Importantly, a subagent owes a fiduciary duty to the agent's seller, not to the buyer that the subagent is working with. Subagents in real estate transactions are not permitted in some states.

Now, Mary can't commit a fraud to induce Katie to buy the house, but Mary doesn't have to look out for Katie's best interest either. In fact, a subagent is prohibited in helping buyers like Katie in any way that may hurt the seller because doing so would be a violation of the subagent's fiduciary duty. There's really no meaningful difference for Katie working with a subagent opposed to working directly with the seller's listing agent. If Katie wants someone that is legally required to look out for her best interests, she's not going to want to work with a subagent. Luckily for Katie, there is an alternative.

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