When you’re ready to buy a home, list your current home for sale, or take part in any real estate transaction, be sure you take the time to fully understand whose side your real estate professional is on. If you’re new to the process, you may not realize there are several ways they represent their clients. They might represent:
- Only you
- Only the other parties in the real estate transaction
- Both the buyer and the seller
Whether you’re buying or selling a home, it’s important to make informed decisions. If you want to obtain the highest level of service or protect your legal rights in the event of a dispute, understanding how your agent or broker represents you is a step in the right direction.
How Your Real Estate ‘Agent’ Represents You
In Colorado, a real estate licensee must be either an agent or a transaction broker. The term ‘agent’ causes confusion, as it’s often used synonymously for any real estate licensee. In this article, we’ll use the real estate law definition of agent – a real estate licensee who has signed an agency agreement with a “client” (aka the buyer or seller).
There must be a written contract to establish agency, otherwise a licensee can only be a “transaction broker.” Let’s take a deeper look at how each type represents your interests:
1. Buyer’s or Seller’s Agent
An agent represents you—and only you—when you buy or sell a home. They use their expertise to negotiate on your behalf, fighting for your best interest with “utmost faith, loyalty and fidelity.”
While agents and transaction brokers share a list of “uniform duties,” an agent has a fiduciary relationship to their client where the agent is held in a position of special trust and confidence by the client. An agent also then has the following duties that are in addition to the ones they share with a transaction broker:
- Promoting the interests of buyer or seller with the utmost good faith, loyalty and fidelity.
- Seeking a price or lease rate and terms that are acceptable to buyer or seller.
- Counseling buyer or seller as to any material benefits or risks of a transaction that are known by broker.
2. Transaction Broker
A transaction broker is a real estate licensee who provides services to the buyer, the seller or both in a ‘non-agency’ relationship. A transaction broker is a facilitator in the transaction – someone who explains procedure and assists one or both parties without taking sides. They cannot offer advice – for instance telling the buyer what amount to offer, or telling the seller how to respond to the offer.
Colorado’s default status is a transaction broker. Unless you sign a contract or have been advised that you’re just a “customer” and the licensee is an agent for the other party, your relationship with be that of a transaction broker. Colorado law requires that the licensee reveal at the outset what type of relationship they have with the buyer or seller.
Can A Buyer Use The Seller’s Agent?
If you’re buying a home, and don’t have an agent to represent you, there are two ways that a listing agent can serve you. In the first scenario you become a “customer.” This means that the agent has no professional or working relationship with you, and hence no duties or obligations. While real estate law requires the agent to be fair and honest with the customer (which includes full disclosure of material facts about the house and not taking unfair advantage of the buyer) their loyalty remains with the seller in any negotiation.
In the second scenario, the agent who is under a written agreement, may change his or her status to that of a transaction broker. The ability to change status will be specified in the written listing or agency contract. If that happens, then the broker is required to give both parties a written notice of the change in status.
Transaction Broker or Agent?
Ultimately, unless you are a seasoned real estate investor, you’re interests are best represented by having a written contract with an agent. The home buying or selling process can involve many twists and turns- having the expertise and support of a loyal adviser will help you make an informed decision.
Now that you have a better understanding of just whose side your real estate agent is on, you can now confide and strategize with confidence as you move forward.