If you are looking for a home or want to invest in real estate, it’s important to understand the working relationships with real estate agents. For example, if you are looking to buy a house and see an ad in the newspaper for a house that meets all your needs, you might decide to contact the real estate agent listed in the ad to see the property. What you might not realize is that although the listing agent can handle the transaction if you decide to buy the property, it’s better to hire an agent to represent you as the buyer. There is a difference between a listing agent and a selling agent, and here are some working relationships you should be aware of.
The client will need to choose what type of relationship they want to have with a real estate agent based on the services they are looking for. There are three types of representation: Buyer’s Agent, Seller’s Agent, and Transaction Broker. Most real estate agents perform all three roles, but it’s still important for the client to understand the differences between them.
A Buyer’s Agent is legally obligated to promote the buyer’s interests with "the utmost good faith, loyalty, and fidelity," according to the Colorado “Exclusive Right to Buy Listing Contract.” Essentially, a Buyer’s Agent is loyal to the buyer and will work on their behalf to ensure they get the best possible deal on a property they want to buy. This means they will seek a price and terms acceptable to the buyer. They will also advise the buyer throughout the process, especially regarding the contract and everything they need to consider before closing the transaction and purchasing a home.
The Seller’s Agent, in turn, will be loyal to the Seller. Their job is to promote the seller’s interests, again, with "the utmost good faith, loyalty, and fidelity," according to the Colorado “Exclusive Right to Sell Listing Contract.” They will do their best to determine a price and terms that best benefit the seller. Like a buyer’s agent, a seller’s agent will also provide advice throughout the process, especially regarding the contract terms and what is expected in the transaction and closing terms.
A Transaction Broker handles both sides of the transaction but does not advocate for either side specifically. This is often referred to by brokers as a "double-sided closing." It may be attractive to some brokers because they also get double the commission. In most cases, I advise my clients against this, even if they want me to be the transaction broker, as I would not be able to represent the best interests of both parties. The only time this would be appropriate is when the client and the broker have a long working relationship and mutual trust, and with a client who has experience in real estate transactions and knows enough to protect themselves.
It’s important for the client to understand these three different types of working relationships with brokers and determine which relationship with their real estate agent will be the best for them. I always remind people that their relationship with their agent will be very personal. Your agent will know many aspects of your personal life as you go through the process of buying or selling a home. It is equally important to understand these working relationships and the different roles brokers can play in choosing the agent and representation that is best for you. Whether you are buying or selling, you want to work with someone who will work for you and your benefit.