Page 109 - Principals of Real Estate

Unit 5 Agency Relationships 109

Is the Cooperating Broker a Subagent?
Most property is sold through a local association of brokers called a multiple
listing service. A multiple listing service (MLS) is a cooperative listing
service conducted by a group of brokers, usually members of a real estate
association. Listings are submitted to a central bureau where they are entered
into a computerized system and printed regularly in a multiple listing book
that is available to the members. The MLS maintains an inventory of all the
available, listed properties in the area. Any MLS member may view the listed
properties and obtain offers from buyers for these properties even though he
or she is not the listing broker.

A broker who brings an offer to the listing broker in this way is called a
cooperating broker. The cooperating broker receives a part of the commission
at the close of escrow.

Since a cooperating broker finds the buyer, an issue that can be confusing is
the question of whether the cooperating broker represents the seller or the
buyer. Buyers commonly believe that the cooperating broker represents the
buyer. Others assume that the cooperating broker is a subagent of the listing
broker and represents the seller.

A subagent is defined as the agent of someone who is already the agent of the
principal. If authorized by the seller, the listing agent can delegate another
broker to be a subagent who will also represent the seller. Therefore, subagents
take on the same fiduciary duties as primary agents. If the cooperating broker
is a subagent for the seller, then the cooperating broker owes a fiduciary duty
and loyalty to the seller. If the cooperating broker represents the buyer, the
fiduciary duty is to the buyer.

Nothing in the listing agreement compels the cooperating broker to represent
the seller. A seller authorizes the listing broker to cooperate in any manner
with other brokers in showing the property, but the seller must give specific
authorization for subagency. If authorized, the listing broker may offer
subagency to a cooperating broker, and the cooperating broker may accept or
decline the offer. (Acceptance could be in writing or by the conduct of the
cooperating broker).

Thus, a cooperating broker does not automatically become a subagent when he
or she shows a listed property. As long as complete disclosure is made about
agency relationships, the cooperating broker can represent either the seller or
the buyer.