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A Primer on Real Estate Agency

Ramit Sethi

This is a guest post by Owen Johnson.

Part 4 in a series of 7 on real estate.

1. The Real Scoop on Real Estate
2. Starting Down the Real Estate Investment Path
3. The Transaction Mechanics
4. A Primer on Real Estate Agency
5. Leveraging Yourself to Grow Your Wealth
6. Management Infrastructure
7. The Week in Review

In general, an agent is someone who acts on your behalf, someone who is supposed to represent your interests. Because of this, in transactions where real estate agents are involved, it is crucial to understand for whom these agents work.

Here are the common forms of agency:

Seller’s Agency
A seller’s agent, as the name would imply, represents the seller. In general, they are legally and ethically obligated to protect the interests of the seller, and seller alone, and are only obligated to treat other parties fairly. A listing agent for a property is a seller’s agent.

Buyer’s Agency
Again, pretty straightforward, a buyer’s agent has the same set of obligations and responsibilities that a seller’s agent has, but instead of representing the seller and protecting the seller’s interest, a buyer’s agent is tasked with protecting the buyer’s interest.

Seller’s Sub-agency
Sub-agency is the concept that an agent can “work” under another agent’s responsibility. Seems pretty straightforward, but in the real estate world, it’s not. In real estate, a seller’s sub-agent can be an agent that brings a buyer to a listing agent, but instead of representing the buyer, the agent represents the seller! Seems a little odd, doesn’t it?

Well, sub-agency has been firmly imbedded in the real estate infrastructure of the US for years but is currently being displaced by buyer’s agency, which is good for both buyers and sellers.

If you are using a real estate agent to buy property, make sure you are using a buyer’s agent! If the agent with whom you are working doesn’t provide this service, or claims that buyer’s agency doesn’t exist in their state, check with the state’s board of Realtors®.

You typically should not have to pay the buyer’s agent for their services, but again, these standards change from locality to locality, so you’ll have to do your own research. Also *never sign a buyer’s agency contract!* A good buyer’s agent is forming a long term relationship with you and shouldn’t need a contract to keep you with them. Lastly, *always treat your agent with respect!* This is important from an interpersonal standpoint, but also from a professional standpoint. Whenever you are working with a buyer’s agent, make it clear to other agents, especially at open houses, that you are working with that agent. This will make everyone’s lives easier and will make your agent more loyal to you.

In the highly unlikely event that buyer’s agency doesn’t exist in a state, use a sub-agent to gain access to listing information, but remember that they are legally and ethically obligated to represent the *seller*! This means that you should not share information with the sub-agent that you don’t want shared with the seller. A key point, particularly in the negotiation phase of the deal.

Every state has distinct real estate licensing and agency laws, and the state association of Realtors® or the state government licensing agency is a good place to call to clarify any questions you may have.

Action Items

  • Call your state association of Realtors® and ask about buyer’s agency in the state. (association directory)
  • Write me at and include the name of the association you called, its contact information, and what you discovered. I’ll use this information to create a resource page for people to use in the future.
  • Look in the paper and find some open houses to go to this weekend. When you go, don’t leave your name, and if the agent asks if you are working with a Realtor, say yes, or say, “yes, I’m interviewing Buyer’s Agent’s now.” You want your own representation, you don’t want the listing agent to handle your business.

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  1. avatar
    M D

    thanks for easy-to-understand definitions – after taking RE classes, your site finally clearly explained subagency!

  2. avatar

    Do you prefer getting a real estate license or investing directly as an investor?

  3. avatar
    Della Clark

    Great post.
    Glad to hear about the different forms of real estate agency. After reading your article, i realized the need of a real estate agent in buying a property. You mentioned about the state wise distinct real estate licensing and agency laws, which was very informative. Keep sharing more informative posts.

  4. avatar
    Ryan Vargas

    Your ideas are easy and understandable.I am actually planning to buy a House since last month but was so much confused about buying priorities . your article is very helpful to solve my confusions about Buyer’s agent. Keep sharing more informative posts.
    Thanks for the article.

  5. avatar
    Todd J Garrigus

    It’s funny how sub-agency is one of the most misunderstood concepts in real estate. Unfortunately even many agents don’t fully grasp the concept. Great article! Thanks!

  6. avatar
    Joy Butler

    It was surprising to me to hear that signing a buyer’s agency contract is bad idea. I’m grateful for the tip because I currently have been searching for a real estate agent to sell my condo. I have had several encounters with agents in trying to decipher whether or not they are genuine. Now I know that the couple that informed me that they require a buyer’s agency contract are not genuine.