Who Does My Agent Represent, Again?

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by Osman Parvez
Remember when you could just call up a real estate agent and you KNEW she represented the seller?     Those were the good old days.

Today's real estate relationships can be confusing to the consumer.   What's the difference between Agency, Transaction Broker (TB), and Customer?    How do those relationships play out in the real world?    

It's important to understand the nature of these relationships.   Remember, we're talking about transactions that involve hundreds of thousands, potentially millions of dollars.  Take a look at the following chart.

I put this together while attending a continuing education course for managing brokers.

Agency refers to relationships with buyers agents and listing agents.    To be in this position, you need to sign an agreement with your Realtor.     Under Agency, you're in an exclusive relationship and the Realtor owes you a very high degree of service.    Essentially, they're supposed to be your advocate, trying to find you the best possible deal and negotiating on your behalf.

I haven't done a deal in Colorado during the last 8 years that wasn't an agency relationship.    If you want my advice, this is the relationship you want, but you should shop agents very carefully.  If you'd like to interview me as your Realtor, call 303.746.6896.  

Transaction Brokerage (TB) is the default position.   Without a signed agency contract, this is the relationship you end up with in Colorado.    In theory, this Realtor is a neutral facilitator.    If confidential information is disclosed by the seller, the TB can't tell the buyer (or vice versa).    That confidential information often includes motivating factors ("we need to sell")  and even the bottom line price ("My payoff is $500K, I'd take that if pushed").    Pretty important stuff, don't you think?   Further, TB's are not loyal to you and they don't actually have to do what you've asked them to do.     Does this sound like the relationship you want?

Let's add fuel to the fire.  Although the service to you is radically different,  the commissions to TBs and Buyers Agents are usually the same.    Here in Boulder, the commission is usually 2.8% and established by the Seller and the Listing Agent.  So not only are you getting a lower level of service, your agent gets paid the same, either way.

The position with the lowest level of service is where you're a Customer.    Think of this as where you walk into a retail store and a salesman in a shiny suit saunters over to talk to you.    They've got a product and you're lining up to buy it, just like at the car dealership.    Maybe they'll answer a few of your questions but don't kid yourself, they're trying to sell you something.

The Colorado Real Estate Commission thinks so little of customer relationships that they require agents to disclose they're NOT a Transaction Broker.     When you're a customer, the agent will provide accounting for the transaction and give you all the required disclosures, but that's about it.   You're not entitled to support for your due diligence, no negotiation skills trying to get you a better deal, no market data to compare historical sales.  

So, who does your agent represent?

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---Note: Our goal is to provide exceptional service to our clients. The ideas and strategies in this blog post are the opinion of the writer at the time of publication. Silver Fern Homes recommends careful and complete due diligence before buying or selling real estate or other investments. Consult with your professional advisers before making financial decisions. This article is not intended as legal, tax, or investment advice. Silver Fern Homes will not be held liable for investment choices derived from this article.