I belong to our local Pikes Peak Toast Masters group. I gave this speech this morning and was surprised by how many people in the group had no idea about our State's agency laws. I received positive feedback and a request for my business card. Here it goes:
Here are some interesting facts about agency law in Colorado. There are four ways that a Realtor can represent someone in a transaction. Colorado law requires that Realtors provide a Definitions of Working Relationships to individuals upon first contact.
The first type of relationship is the seller's agent, is the easiest to explain and the most understood. The Realtor sits at the sellers kitchen table, negotiates commission, price, terms, advertising, etc. A listing agreement or contract is signed. During the term of the agreement, the house & the seller "belong" to the agent. A seller's agent works solely on behalf of the seller to promote the interest of the seller with the utmost good faith loyalty and fidelity. The agent negotiates and acts as an advocate for the seller.
The second way an individual can be represented is as a transaction broker. The transaction broker assists the buyer or seller, or both, in a transaction as a neutral third party. They cannot and must not act as an agent or advocate for the parties. Their role is to provide honest and fair business dealings.
The third role, which is most difficult to explain and least understood, is the role of Buyer Agent. In this role, the agent works solely on behalf of the buyer with the utmost good faith loyalty and fidelity. The agent acts as an advocate and negotiates for the buyer.
In order to receive client level services, all buyers should hire a Realtor to become their agent. However, that is not often the case. Today's buyers drive around neighborhoods, pick up flyers, surf the internet. Then they call the Seller's Agent for additional information! Now remember, the person they are calling is working for the SELLER!
But, here is the twist. In the contract with the seller, there is loophole. If checked, it states that in the event the Seller's Agent finds the buyer, they can become a transaction broker. What this means is that the advocate for the seller just became a neutral third party to the seller and the buyer. Although the Realtor is obligated to keep the information confidential, all that conversation conducted at the kitchen table must be forgotten.
Buyers think they will get a better deal if they don't have an agent. Not true. The commission is negotiated at the kitchen table and is a part of the listing agreement and does not change. The commission is paid to the Seller's Agent's or Transaction Broker's Company, in my case CENTURY 21 Curbow Realty. Then that company distributes the commission to the other parties to the transaction. In this case, the seller's agent became a transaction broker, or a neutral third party, and earned the entire commission, while being an advocate for NO ONE. The transaction broker cannot offer advice on price, terms, anything. They can only offer suggestions.
The fourth way a Realtor can represent someone is as a customer. This definition has no representation. The seller's agent could write the contract and act as an advocate of the seller and not have a relationship with the customer.
It is quite clear that all buyers should hire a buyers agent to insure they are properly represented.
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