Published October 2021
When discussing a real estate transaction, people often refer to their real estate “agent”. But is that person really your Agent? The terms “Agent” and “Agency” are based on Common Law, i.e. the body of unwritten laws established by legal precedents in courts. Agency indicates certain duties performed by an Agent for the client or principal, which include things like obedience, loyalty, fidelity and trust. An Agent works as an advocate for their principal, often rendering advice and counsel about the benefits and risks of a transaction.
In Colorado, all those licensed to perform real estate services are referred to as “brokers”. (There is no longer such as thing as a real estate “salesman”.) There are three levels of brokers recognized by the Colorado Real Estate Commission (CREC):
• those requiring supervision by an “Employing Broker”,
• those allowed to work on their own without supervision, and
• those authorized to oversee and supervise other broker associates of a company as an Employing Broker.
Not all Brokers are Agents.
The CREC requires real estate brokers to disclose to buyers and sellers their mutual brokerage relationship. The disclosures must be in writing at the beginning of the services rendered. A broker’s relationship to a buyer or seller can be either as an “Agent” or as a “Transaction Broker”. (NOTE: brokers aren’t permitted to be Agents for both buyer and seller in the same transaction.) A Transaction Broker is defined as a broker who assists one or more parties in a real estate transaction without being an advocate for any of the parties. The difference between an Agent and a Transaction Broker is often compared to the difference between a coach (e.g. Agent) and a referee (e.g. Transaction Broker).
Having an Agency relationship is usually considered to be more advantageous to a buyer or seller, due to the enhanced service levels of advice and counsel.
The Transaction Broker relationship is favored sometimes by brokers due to the decreased liability they incur with buyers and sellers.
In order to work as an Agent for a buyer or seller, Colorado law requires a written agreement, or contract. This written agreement is either a seller Listing Contract, or a Buyer Agency contract. These contracts each contain the required written disclosure that defines the brokerage relationship.
If no written agreement exists, the broker is working as a Transaction Broker, which is considered the “default” relationship. Lacking that written agreement, the Transaction Broker relationship must be disclosed on CREC-approved disclosure forms.
Lastly, and to add another level of complication, while the broker is an Agent for one party, the broker can work with the other party too. Since the other party has NO Agency relationship with the broker, that other party is labeled a “Customer”. The broker has no duties to a Customer other than to abide by the law and to treat the Customer honestly, fairly and ethically.
So: the word Agent is a loaded one, in a real estate context. Your licensed Colorado real estate agent is always a broker but s/he might not be your Agent. If you have questions about this topic, you can always call our offices for more information!