BARRY NYSTEDT
Market conversion

Nearly six months after a new real estate law took effect, many firms in Massachusetts have abandoned the practice of acting as subagents for sellers who have listed their homes with other companies.

Large and mid-sized real estate firms, including Coldwell Banker Residential Brokerage, are no longer offering compensation to agents who want to perform as sellers’ subagents in a home sale transaction.

The shift in business practice is not unexpected. Longtime real estate professionals anticipated that the common use of subagency – where agents working with buyers are actually representing sellers – would gradually be eliminated after a new law spelling out the types of agency relationships that agents and brokers can forge with consumers took effect in July.

Under the new law, agents are supposed to get a home seller’s permission to allow subagency to occur.

Instead of using subagents, many firms have now trained agents to represent buyers in the transaction or to work as facilitators, which means they help to put the deal together but represent neither buyer nor seller during the process.

“[Subagency] just doesn’t get practiced in the marketplace,” said Richard F. Cahill, president of Norwell-based Jack Conway & Co., the state’s largest independent real estate firm.

Out of the 23,759 single-family homes listed for sale last week in the MLS Property Information Network, the largest listing service in Massachusetts, only 2,407 offer subagency relationship.

Jack Conway & Co. announced in the spring that its agents would begin to represent buyers instead of working as subagents for sellers – a significant change in its business practice.

Cahill said the company made the move because the new law offers clear guidance on agency relationships.

“We never offered buyer’s agency before because we thought the law was ambiguous on it,” he said. “It’s our point of view that the new law makes things more clear-cut and a precise message is given to sellers and buyers about who’s representing whom.”

Cahill said most agents working for other companies are representing buyers and are no longer working as subagents. But he said if an agent came into a transaction wanting to act as a subagent, he would “consider whether it would be in the best interest of the seller.”

ERA Key Realty Services, a Whitinsville-based firm with 10 offices in central Massachusetts, also has dropped subagency because of the liability risks involved, explained company President Bruce Taylor.

“We just don’t need the liability from someone we don’t know acting as a subagent for a seller of ours,” he said.

Critics of subagency warn of the vicarious liability that’s extended to sellers who are liable for any misrepresentations made by subagents, even though the sellers may have few or no dealings with the subagents that supposedly represent their interests. Subagency has come under intense scrutiny over the years, with several states dropping the practice altogether.

Taylor explained that ERA Key cooperates and offers compensation to other agents as long as they “don’t call themselves subagents.”

“Most of what we’re seeing is buyer agency in the marketplace,” said Taylor.

With in-house transactions, ERA Key agents are designated to work for either the buyer or seller, which is known as designated agency in the industry.

Taylor said the switch hasn’t created any problems thus far for clients or for cooperating agencies.

“We’re working just fine with it,” he said. “We’ve had zero complaints. It just isn’t a problem.”

‘All but Disappeared’
While several real estate brokers who were interviewed indicated that subagency is rare nowadays, Cambridge Realtor Fred Meyer says the option has not disappeared.

“I’m glad to report there’s still a lot of it in Cambridge,” said Meyer, owner of University Real Estate, which represents sellers exclusively.

Meyer said when subagency is “properly explained” many sellers will choose the option.

“In my opinion, the risk of so-called vicarious liability is overblown because I have never heard of a case of that in Cambridge,” he said.

Companies that don’t offer subagency should offer not only buyer representation but facilitation, said Meyer, because not all firms are representing buyers.

“My view is that the client should decide and if either the client or wrongly the company decided not to offer subagency than people should be sure to offer facilitation along with buyer brokerage so that they reach the full range of offices,” he said.

Hughes & Hughes Real Estate in Natick is also still offering subagency, and the majority of sellers with which the company has dealt want subagency, said Ralph Miller, one of the firm’s broker-owners.

Miller noted that if his company didn’t offer subagency to sellers it would be limiting their property’s exposure.

“We don’t feel we should impose something on an individual client that would in fact shut some people out,” he said.

Barry Nystedt, owner of Buyer Brokerage Realty in Newton and president of the Massachusetts Association of Buyer Agents, also feels that companies that aren’t offering subagency may be limiting the exposure of home listings because some firms aren’t comfortable representing buyers or acting as facilitators.

“I think subagency Â… has all but disappeared,” said Nystedt.

In fact, large companies like Coldwell Banker Residential Brokerage, which has a big share of home listings in eastern Massachusetts, is now offering no compensation to subagents.

Carlson GMAC, Hammond GMAC and Kinlin Grover GMAC Real Estate dropped subagency last year to offer buyer representation exclusively.

Nystedt said he isn’t surprised by the changes because he said the new agency law was crafted in such a way as to discourage subagency.

“I felt like the law, as it was constructed, in part was intended to convert the market to designated agency if you will and to make it harder to do subagency,” he said.