National Real Estate Exam (PSI)General Principles of AgencyHard
A cooperating broker from a different firm shows a listed home to a buyer and acts as a subagent of the seller through the MLS offer of subagency. If this subagent breaches a fiduciary duty owed to the seller, who may be held liable to the seller?
- AOnly the subagent personally
- BNo one, since subagents act independently of the listing broker
- COnly the buyer who was shown the property
- DBoth the subagent and the listing broker, who may be vicariously liable
Show answer & explanationAnswer & explanation
Correct answer: D. Both the subagent and the listing broker, who may be vicariously liable
A subagent owes fiduciary duties directly to the seller (the principal), and the listing broker who extended the offer of subagency can be held vicariously liable for the subagent's breaches under agency law principles. This is a key risk that has led many brokerages to avoid offering subagency.
Why the other options are wrong
- A. The subagent alone is not solely liable; the listing broker who created the subagency relationship shares responsibility.
- B. Subagents are not fully independent; they act on behalf of the seller through the listing broker's offer of subagency.
- C. The buyer is not a principal in this scenario and bears no fiduciary liability.
Subagency and Vicarious Liability
A subagent owes fiduciary duties to the seller, and the listing broker who offers subagency can be held vicariously liable for the subagent's misconduct.
- Subagent works for the seller, not the buyer
- Vicarious liability extends up to the listing broker
- Many brokerages now avoid offering subagency to limit this risk
Memory trick: Chain of duty, chain of liability