Despite all of the articles written lately, one of the most misunderstood aspects of the real estate industry is agency.
A brief history may help. Before 1994, all real estate brokers were agents or subagents for the seller. Buyers had no legal representation because the seller paid the commission.
Practically speaking, this is not how the business worked. Inevitably, brokers working with buyers built relationships and worked hard to help their buyers attain their goals. Unfortunately the law didn’t match the practice.
In 1994, legislation passed in Colorado defining working relationships as buyer’s agent, seller’s agent, dual agents and transaction brokers. In 2003, dual agency was removed as an option.
Colorado also defined the duties required to be performed by these relationships. These changes allowed buyers the same type of representation that sellers had been receiving and evened the playing field. Who paid the commission was no longer the determining factor.
An agent represents the interests of their buyer or seller with “the utmost good faith, loyalty and fidelity” and advocates solely for the interest of their client. A transaction broker assists the party (or parties) with the transaction, providing “fair and honest business dealings” and disclosing any “adverse material facts”.
So how does this work in real life?
The best description I have heard came from local real-estate instructor John Gillam using a football analogy. An agent is similar to the coach of the team. The coach represents only the best interests of his team and advises the players through the process. A transaction broker is the referee and is there to see that the transaction is fair and that both “teams” play according to the rules.
By law, brokers are required to explain the difference in working relationships before the customer has a chance to share any confidential information. Disclosure of and determination of the type of representation available is important and should be explained early in any communications with a broker.
Gina Piccoli is a Realtor at Coldwell Banker Heritage House Realtors in Durango. She can be reached at gina@realestatedurango.com.
