When Is Your Real Estate Agent a ‘Transaction Broker’ and Not an ‘Agent’?

Although it’s common (including by me) to talk about real estate professionals as “agents,” the proper term is “brokers,” because the term “agent,” at least here in Colorado, has a specific legal meaning which is important to understand.

One reason most of us call each other “agents” instead of “brokers” is that here in Colorado the term “broker” is commonly used when referring to the employing broker or managing broker in a real estate company.  For example, I’m the “broker” at Golden Real Estate, and my agents are “broker associates.” It’s just simpler (and more common) to call them “agents.”

So what is an “agent” in the legal sense? An agent is an advocate for his or her client, serving with “the utmost good faith, loyalty and fidelity.” An agent will share with his client anything that helps in negotiating the best deal in a transaction. For example, if a broker were to reveal that his buyer is desperate to buy a home or that his seller is desperate to sell his home, an “agent” on the other side of the transaction could (and should) use that information to his client’s advantage. A good “agent” would never let that kind of information slip!

A “transaction broker,” on the other hand, has no such responsibility to his or her client and functions only to facilitate a transaction. Indeed, he is barred from disclosing to one party anything about the other party that would favor that party in negotiating a transaction.

At Golden Real Estate, as at most brokerages, it is our office policy to always function as “agents” for our buyers and sellers. The only exception is when we find ourselves on both sides of a transaction because one of our pre-existing buyer clients (for whom we’re an agent) wants to buy a property from one of our sellers (for whom we’re also an agent). Then we’re obligated to serve as a transaction broker and advise each party that we’re now a neutral facilitator of the transaction and can no longer coach either party regarding price or any other transaction issue.

So what happens when an unrepresented buyer approaches a listing agent about buying his or her listing for which he is functioning as an “agent”? The agent could choose to have the buyer sign an agency agreement, but that would require him to sacrifice his “agent” relationship with the seller and become a transaction broker.  It is Golden Real Estate’s policy always to treat an unrepresented buyer of our listings as a “customer,” thereby retaining our “agent” relationship with the seller.

Did I confuse you more? I hope not! Hopefully the broker you employ knows the rules of agency relationship, as we certainly do.