A real estate transaction involves legal relationships where an agent acts on behalf of a principal. Understanding who represents whom is paramount because the law imposes a high standard of conduct, known as fiduciary duties, on these professionals. These agency relationships are governed strictly by state laws, defining the obligations and liabilities for everyone involved. For decades, the dominant model for cooperative transactions was sub-agency, a concept that fundamentally shaped how buyers and sellers interacted with real estate professionals. The evolution of this model, and its eventual decline, provides a clear lens through which to view the industry’s progression toward greater consumer protection.
Defining Sub-Agency in Real Estate
Sub-agency describes a relationship where a broker who is not the listing agent is authorized to act on behalf of the seller to find a buyer. The sub-agent works for the listing broker, establishing a chain of representation where the sub-agent becomes an agent of the agent. Both owe their allegiance directly to the property seller. Historically, this model was the default for transactions facilitated through the Multiple Listing Service (MLS), meaning all cooperating brokers were essentially working on the seller’s team.
The crucial point of sub-agency is that the cooperating broker, while assisting a prospective buyer, owes all fiduciary duties exclusively to the seller, not the buyer. The buyer, in this scenario, is considered a “customer” to whom the sub-agent owes only honesty and fair dealing, but not client-level representation. The sub-agent must secure the best price and terms for the seller, even if it means using information gathered from the buyer to the seller’s advantage. This setup meant that for decades, most buyers had no dedicated representation.
The Fiduciary Duties of a Sub-Agent
A sub-agent is bound by the same set of fiduciary duties to the seller as the listing broker who hired them. These duties, often summarized by the acronym OLDCAR, impose high standards of trust and loyalty. The duties include:
- Obedience
- Loyalty
- Disclosure
- Confidentiality
- Accounting
- Reasonable Care
The sub-agent must obey the seller’s lawful instructions, exercise reasonable care, and properly account for all funds related to the transaction.
The duty of Loyalty requires the sub-agent to place the seller’s interests above all others, including their own and the buyer’s. This means the sub-agent must secure the highest possible price and most favorable terms for the seller. Paired with the duty of Disclosure, this obligation legally requires the sub-agent to reveal any material information learned from the buyer that could strengthen the seller’s negotiating position. For instance, if a sub-agent discovers that the buyer is willing to pay more than their initial offer or is under a tight deadline, they are legally obligated to convey this to the seller or the listing broker.
Conversely, the duty of Confidentiality requires the sub-agent to protect all confidential information belonging to the seller, such as the minimum acceptable price or the seller’s motivation for moving. These duties create a significant conflict of interest for a buyer working with a sub-agent, as the person helping them search for a home is legally required to use any shared information against their negotiating position. This inherent conflict highlights why the sub-agency model often left buyers vulnerable in the transaction.
How Sub-Agency Differs from Buyer Agency
The primary distinction between sub-agency and the modern Buyer Agency model lies in the direction of the fiduciary obligations. In a sub-agency relationship, the cooperating agent works with a buyer but owes all duties to the seller. The buyer is treated as a customer, receiving only basic fairness but no confidential representation.
The Buyer Agency model, which became prevalent in the 1990s, altered this dynamic by establishing a direct, contractual relationship between the cooperating broker and the buyer. Under Buyer Agency, the broker is formally engaged by the buyer and owes all fiduciary duties—including Loyalty and Confidentiality—exclusively to the buyer. This agent is legally bound to advocate for the buyer’s financial interests, striving for the lowest possible price and the most favorable terms.
This shift ensures that the agent is obligated to keep the buyer’s negotiating strategy and financial limits confidential from the seller and the listing agent. Unlike the sub-agent, the buyer’s agent is prohibited from disclosing that their client is willing to pay more than the offer price or is desperate to buy quickly. The transition to buyer representation provided consumers with dedicated advocacy.
Why Sub-Agency Has Largely Disappeared
The decline of the sub-agency model was driven primarily by two forces: increasing legal liability for real estate brokers and a growing consumer demand for dedicated representation. Historically, many buyers mistakenly believed the agent helping them was working in their interest, leading to an increase in lawsuits against brokers when transactions went poorly. Courts began to recognize that agents could inadvertently create an agency relationship with a buyer through their actions and advice, making the listing broker and the sub-agent liable for undisclosed dual agency.
This legal threat spurred the real estate industry to seek clearer, legally defensible models of representation. State legislatures and MLS rule changes played a role in phasing out the automatic assumption of sub-agency. Many states either abolished the practice entirely or mandated strict written disclosures to ensure buyers understood the sub-agent’s allegiance to the seller. Consumer protection movements also pushed for a more equitable system, arguing that buyers should have an advocate in this significant financial transaction.
As an alternative, models such as designated agency and dual agency emerged to manage in-house representation conflicts more transparently. Designated agency allows different agents within the same brokerage to represent the buyer and the seller separately, maintaining full fiduciary duties to their respective clients.
Implications for Consumers Today
While sub-agency has largely been replaced by buyer representation, it has not vanished completely and may still exist in limited contexts, often in rural or less regulated markets. A buyer may encounter a sub-agency situation if they choose to work with a listing agent who also represents the seller, and the state permits this form of representation. In some areas, an agent may choose to work with a buyer as a “customer” without a written buyer agency agreement, which defaults the agent to a sub-agent or transaction broker status depending on state law.
For consumers, it is important to understand and demand clear, written agency disclosure forms before sharing any confidential information. These documents explicitly state who the broker and agent represent and what duties they owe, preventing ambiguity about the relationship. A buyer working with a sub-agent must understand that any detail shared—such as financial limits, negotiating strategy, or personal motivations—can legally be passed on to the seller. Engaging a buyer’s agent who owes them a fiduciary duty of confidentiality and loyalty remains the most effective way for a buyer to protect their interests and secure dedicated advocacy.