When working with a Real Estate Agent in the selling or purchase of your home, it is very important to
understand what type of representation your Agent will provide to you. Specifically, it is important for Buyers
and Sellers to understand the new agency laws that have changed as of this year and how those changes affect the
limited scope of representation that they may fall into.
For many years, Colorado Real Estate brokers worked with the public under the common law of agency and there
were no choices to be made by the consumer as to the working relationship. The Colorado Association of Realtors
sought sponsorship of Senate Bill 223 in the 2003 session of the Colorado General Assembly. Both the Colorado
Real Estate Commission and the Colorado Bar Association supported the bill and its codification of the common
law of agency. The bill allowed the public to also choose a non-agency relationship knows as "Transaction
Broker". The
"Brokerage Relationships in Real Estate" act became Part 8 of the license law effective
January 1, 2004 and set legal principals relating to Brokers duties and obligations to the public.
Two important facets of this act to the consumer is that; A) The bill declared that a person hiring a Broker
could not be held liable for acts or omissions of Brokers which were not approved, directed, or ratified by such
individuals, and; B) The elimination of "dual agency" and "sub agency" from license law. Leaving only single
agency or transaction brokerage as legal Colorado relationships.
This means that a designated broker may work as a single Agent for a Seller and treat the Buyer as a Customer or
as a single Agent for the Buyer and treat the Seller as a Customer - but may never act as a single Agent for both.
A good example of this is - assume you are a Buyer. You find a home that you like and contact the Broker who has
his or her sign in the yard (the Listing Agent). The Listing Agent represents the Seller as Seller's Agent. This
means that the Listing Agent cannot also represent you as a Buyers Agent. He or she must treat you as a Customer
only.
As another example - suppose you are selling your home "For Sale By Owner" and you are advertising a commission
paid to a Broker who brings you a buyer. A Buyer Broker presents you with a contract that requests the
commission as you advertised. Because the Broker has entered into a Buyer-Broker relationship with the Buyer,
he or she cannot now enter into a Seller's Agency with you. You are treated as a Customer.
A Customer is defined as: A party to a real estate transaction with whom the Broker has no brokerage
relationship because such party has not engaged or employed the Broker, either as the party's Agent or as the
party's Transaction-Broker.
Many Buyers have expressed their hesitation over retaining a Buyer Broker to represent them, because they are
under the misunderstanding that they are automatically responsible for payment of the Buyer's Agent commission
or fees. This is not the case. If you are a Buyer, hiring a Buyer Broker is an excellent way for you to obtain
your own representation. The majority of homes listed for sale in the MLS (Multiple Listing Service) offers a
cooperative commission to be paid to your Buyer Broker from the Listing Agent.
Many Sellers and Buyers are under the false impression that the person who pays the Broker is the one with
representation. This, as noted above, is not the case.
Helpful definitions of Agency Relationships:
Transaction Broker: Assists the Buyer or Seller or both throughout a real estate transaction by
performing terms of any written or oral agreement, fully informing the parties, presenting all offers and
assisting the parties with any contracts, including the closing of the transaction, without being an agent
or advocate for any of the parties. A Transaction-Broker must use reasonable skill and care in the performance
of any oral or written agreement, and must make the same disclosures as agents about all adverse material
facts actually known by the Transaction-Broker concerning a property or a Buyer's financial ability to
perform the terms of a transaction and, if a residential property, whether the buyer intends to occupy the
property. No written agreement is requred.
Seller's Agent: Serves the same role as Listing Agent and works solely on behalf of the Seller to promote
the interests of the Seller with the utmost good faith, loyalty and fidelity. The Agent negotiates on behalf of
and acts as an advocate for the Seller. The Seller's Agent must disclose to potential Buyers all adverse
material facts actually known by the Seller's Agent about the property. A separate written Listing Agreement
is required which sets forth the duties and obligations of the Broker and Seller.
Buyer's Agent: Works solely on behalf of the Buyer to promote the interests of the Buyer with the utmost
good faith, loyalty and fidelity. The Agent negotiates on behalf of and acts as an advocate for the Buyer. The
Buyer's Agent must disclose to potential Sellers all adverse material facts actually known by the Buyer's Agent
including the Buyer's financial ability to perform the terms of the transaction and, if a residential property,
whether the Buyer intends to occupy the property. A separate written Buyer-Agency agreement is required which
sets forth the duties and obligations of the Broker and Buyer.
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