An agency relationship where a cooperating broker works on behalf of the listing broker's principal, the seller.
Why Subagency matters on the exam
This term belongs to Agency. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Subagency
Every Freehold question shows why the right answer is right — and cites its source.
A broker shows a property and helps negotiate price for a seller without a signed listing agreement, and the seller allows this to continue over several weeks. This ongoing conduct is most likely to create:
A universal agency, since the broker acted broadly
No agency at all exists, since nothing was signed
A subagency automatically
An implied agency, based on the parties' conduct
Show answer & explanation
An implied agency, based on the parties' conduct — When parties act as though an agency exists over time, without objection, courts often find an implied agency was created through their conduct rather than a formal agreement.
Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency
Historically, when a cooperating broker showed an MLS-listed property to a buyer without a separate buyer-agency agreement, that cooperating broker was often treated, absent other arrangements, as:
A subagent of the seller, owing fiduciary duties to the seller
An agent of the buyer, owing fiduciary duties directly and exclusively to the buyer
A dual agent automatically, owing divided loyalty to both the seller and the buyer
A transaction broker for both parties, owing neither party full fiduciary duties
Show answer & explanation
A subagent of the seller, owing fiduciary duties to the seller — Traditional MLS cooperation offered subagency, meaning the cooperating broker's fiduciary duties ran to the listing seller through the listing broker, even while working directly with the buyer.
Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency
A significant risk of subagency for buyers is that:
Buyers pay a higher commission than under buyer agency
Buyers may mistakenly believe the cooperating agent represents their interests
Subagents cannot show any properties to buyers
Subagency automatically voids the listing agreement
Show answer & explanation
Buyers may mistakenly believe the cooperating agent represents their interests — Because a subagent's loyalty legally runs to the seller, buyers who assume the cooperating agent is looking out for them can be misled about who is actually being represented.
Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency
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