“Sub agency” is a Real Estate topic that is very confusing for most people and I myself had a lot of trouble understanding it during my pre-licensing course. What I found helpful for understanding this topic was to understand the history of “sub-agency.”
Today in Real Estate we have “buyer agency” and “seller agency”. A buyer has a written agreement with their agent, which guarantees them a commission, and the listing agent has a written agreement with their seller, which guarantees them a part of the commission.
Before the mid 1990’s we only had “seller agency.” Unfortunately, “buyer agency” had not yet been introduced. During these times the seller had an agent to represent them, which formed a “client” relationship. The buyer did not have anybody to represent him or her and this is where the subagent comes into the picture. The listing agent would need a buyer so the house could be sold. The subagent would be the one to bring the buyer but since the buyer and subagent did not have a buyer’s agreement, this created a “customer” relationship. For the subagent to get a commission then the subagent would have to have an agency agreement with the listing agent.
Today, “subagency” is rarely used in transactions since buyer agency has been introduced.
“Sub Agency” is less desirable because it has downsides to it such as:
- Subagency does not owe any fiduciary duties to the buyer and owes their duties to the seller, which can be detrimental to the buyer’s interests.
- The listing agent is responsible for the sub agent’s actions since they have an agency agreement together.
Why do you still have to learn sub-agency?
That is a good question. Subagency has been banned in some states and not practiced in most of them. The reason could be that because it was practiced in the past, rising real estate agents should still be knowledgeable of the history of buying and selling in the United States.