Law Of Agency Chapter 6

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The broker acting as a subagent of the seller owes fiduciary duties and
primary allegiance to the seller. As an agent of the listing broker, the subagent must
also obey the instructions of the listing broker.

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Back 2

TRELA permits brokers to choose the rolls they wish to play in a real
estate transaction to include agent of the buyer/tenant or seller/landlord. A broker
already acting as an agent of a buyer however would of necessity reject offers of
subagency from a listing broker.

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Back 3

Although no rule establishes exactly when the subagency offer is accepted, it
can be assumed that Jeff of South Side accepted Sally of Bay Realty’s offer of
subagency when Jeff not only showed the property but procured the offer to purchase
without disclaiming subagency. Jeff and South Side Realty therefore represent the
owner George.

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Back 4

The MLS® is a system formulated by the National Association of
REALTORS® for use by members of the national, state, and local boards. Each local
board restricts MLS® access to board members.

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A listing broker may work with a number of subagents over the period of the
listing; only the subagent who procures the sale however is entitled to a share of the
commission as the procuring cause

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Actually TRELA 15F.(c) states that a party (seller) is not liable for a
misrepresentation of a subagent unless the party knew of the misrepresentation and
failed to disclose. Sellers enjoy several benefits when using subagents: All brokers
acting as subagents will owe the seller their fiduciary duties and professional skills
and this increased exposure may hasten the sale of the property

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A subagent’s fiduciary duties to the client are the same as the listing broker’s
duties; TRELA makes no distinction.

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An MLS is a convenient way to offer cooperation and compensation to other
brokers. Neither TRELA nor the Texas Administrative Code (TAC) (i.e., the Rules
of the Commission) addresses contractual issues between designated brokers.

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A licensee is not liable for a misrepresentation by a subagent unless the
licensee had knowledge and failed to disclose. [TRELA 15F(c)]

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A subagent has a fiduciary duty to their client (in this case the seller). 22
TAC 535.156(a) states that a licensee shall “convey to the principal all known
information which would affect the principal’s decision on whether or not to make,
accept or reject offers”. Confidential information such as the seller’s willingness to
accept less than the list price cannot be revealed to a buyer-customer without the
seller-client’s consent.. Asking for a $1,000 bonus is implying willingness to
negotiate a favorable deal for the buyer which is in direct conflict with the fiduciary
duty to obtain the best price for the seller-client.

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Brokers Seeking Buyers for Seller’s Property as

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Listing Broker or
Cooperating Brokers

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Buyer’s Agents Seek ----------

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Buyer’s Agents Seek Property for Buyer

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Establishing Status
Subagent

Back 13

Buyer is Customer
Fiduciary Duties to Seller
Agency Not Necessary to Find Property

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Establishing Status

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Buyer’s Broker

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Creation of Subagency -

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Overview
Selective Offers
Blanket Offer of Subagency
Rejecting Subagency
When NO Offer of Subagency
Subagency Optional (MLS)
Sellers and Subagency

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Selective Offers of Subagency

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May be created outside MLS Framework
Small Towns, Rural Have No MLS
Commercial, New Homes, Farm/Ranch, Rentals, Frequently Not MLS
Informal Understandings Dangerous

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Blanket Offers of Subagency

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Seller May Authorize, Not Automatic
Once Accepted, Other Broker Owes Fiduciary Duty to Seller
Must Not Act Contrary to Seller’s Negotiating Position

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Rejecting Subagency

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Entry in MLS Does Not Create/Offer Subagency
Other Broker May Reject
Must disclose true status
Must discuss compensation

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No Offer of Subagency

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Some Sellers Object
Common Seller Perception: Other Broker Represents Buyer

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Subagency Optional

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Sellers May Direct Broker Not To Offer
If in MLS, Listing Broker Must Offer
Cooperation
Compensation

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If Authorized, Subagents Act On --------------

Back 21

If Authorized, Subagents Act On Behalf of Seller

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Subagents Owe Fiduciary Duty to -----------

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Subagents Owe Fiduciary Duty to Seller

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Liability & Ethics - Overview

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S.B. 489 and Vicarious Liability
Subagent’s Liability to Seller
Ethical Concerns

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S.B. 489 &Vicarious Liability

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Unless They Knew of Falsity and Failed to Disclose:
Party Not Liable For Licensee
Licensee Not Liable for Party
Party/Licensee Not Liable for Subagent
S.B. 489 Prevails Over Common Law
Sponsoring Broker Responsible For Salespersons

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Subagent’s Liability To Seller

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Legal and Ethical Responsibility
Advise & Opinion Owed to Seller

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Ethical Concerns

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Ethical issues

Example 1: Knowledge of buyer’s ultimate objective: assemblage

Example 2: Seller-client becomes buyer-customer

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Deciding On Subagency -Overview

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Factors to Consider
Level of Service
Advantages
Disadvantages

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Subagency Factors To Consider…

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Difficult to Explain to Buyers
Hard to Avoid Advancing Buyer’s Interests
Must Disclose Buyer Info to Listing Broker
Incomplete Info On Property
No Contract With Seller
Proven Method of Compensation
Must Give Buyer Clear Disclosure

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Level of Service Subagency

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Subagents Establish Rapport With Buyer
Must Clearly Distinguish Between Client/Customer Service Level

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Subagency Pro’s/Con’s…
Advantages

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Established Basis
No Writing from Buyer
Buyers Not Bound to One Broker
Sellers Get More Representation

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Subagency: Pro’s/Con’s
Disadvantages

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Buyers May Go Elsewhere
Listing Broker & Seller May be Liable for Subagent’s Acts
Fiduciary Duties to Listing Broker & Unknown Seller

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Subagent Owes ------ to Seller

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Subagent Owes Fiduciary Duties to Seller

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Subagent Owes ------- to Buyer Customer

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Subagent Owes Fairness & Honesty to Buyer Customer

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-------No Longer Mandatory under MLS Rules

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Subagency No Longer Mandatory under MLS Rules

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Clarify Subagency Status of ------

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Clarify Subagency Status of Other Broker

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Suggestions for Brokers

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Office Policy: Are your buyers customers or clients when showing other office listings?
Listing Brokers: Explain to Sellers Risks Involved in Subagency