Until 1994, all brokers in Colorado were deemed to be either the agent (or sub-agent, if working with the buyer) of the seller. For lots of legal reasons, this exposed both sellers and brokers to unreasonable liability, while providing that the buyer would not be represented in the transaction.
In 1994, Colorado created alternative working relationships for the public in working with real estate brokers. These include seller’s agent (advocating for the seller), buyer’s agent (advocating for the buyer), dual agent (advocates equally for buyer and seller) and transaction-broker (a neutral facilitator who advocates for neither party).
Starting in 2003, the State eliminated dual-agency and sub-agency as allowable working relationships. Today, if a broker has a working relationship with the public, he/she is either the agent or transaction broker. The working relationship is established with the individual real estate broker, not with the company. The company, however, is still responsible for supervision of its brokers to ensure a proper transaction.
At Leonard Leonard & Associates, an individual broker may offer the following working relationships:
A seller’s agent works solely on behalf of the seller and owes duties to the seller which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of, and act as an advocate for the seller. The seller is not legally responsible (vicariously liable) for the actions of the agent when that agent is acting within the scope of the agency, unless the agent is acting on the seller’s instructions, or if the seller knows of the action and fails to repudiate it (ratification).
The agent must disclose to potential buyers or tenants all adverse material facts about the property actually known by the broker. A separate written listing agreement is required by State law which sets forth the duties and obligations of the parties.
A buyer’s agent works solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The buyer is not legally responsible (vicariously liable) for the actions of the agent when that agent is acting within the scope of the agency, unless the agent is acting on the buyer’s instructions, or if the buyer knows of the action and fails to repudiate it (ratification).
The agent must disclose to potential sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyer listing agreement is required by State law which sets forth the duties and obligations of the parties.
A transaction-broker assists the buyer or seller (or both) throughout a real estate transaction with communication, advice, negotiation, contracting and closing without being an agent or advocate for any of the parties. The parties to a transaction are not legally responsible (vicariously liable) for the actions of a transaction-broker, and a transaction-broker does not owe those parties the fiduciary duties of an agent. However, a transaction broker does owe the parties a number of statutory obligations and responsibilities, including honesty and using reasonable skill and care in the performance of any oral or written agreement. A transaction-broker must also make the same disclosures as agents about adverse material facts concerning a property or a buyer’s financial ability to perform the terms of a transaction and whether the buyer intends to occupy the property, if pertinent to loan approval. No written agreement is required, although one is available.
Note 1: For purposes of these Definitions, buyer also means “tenant” and seller also means “landlord”.
Note 2: The concept of vicarious liability, present in agency relationships, provides that the Principal is legally responsible for the acts and omissions of his Agent when acting within the scope of the agency relationship. For example, if an Agent misrepresents something, the seller or buyer (whichever is the Principal) could be held liable to the other party for that misrepresentation. This is one reason why you want a good agent, if you choose an agency relationship, rather than the transaction-broker relationship. Colorado law has limited the vicarious liability of the public to those instances where the agent is acting on the instructions of the Principal, or where the Principal knows of the agent’s acts and does nothing about it (ratifies the agent’s acts by inaction).
Which Relationship Should You Pick?
Leonard Leonard & Associates recommend that buyers choose a short-term (30-45 days) exclusive working relationship (either agency or transaction-broker) with our brokers. A ready buyer will locate a suitable property quickly (1-2 weeks), and the transaction is typically closed in 30-45 days. When seeking a specialty property, a longer relationship may be appropriate. The broker’s fee should be negotiated at the time of the listing.
To ensure the best chance of success in selling sellers’ properties, we only work with sellers under an exclusive working relationship (either agency or transaction-broker), as this is required in order to place the seller’s property into the various computer/internet databases that will expose it to the world.
The length of the listing should reflect the average length of time similar properties are taking to sell, plus a few weeks. Typical time frames are 60-90 days for homes and 90-180 days for land. Commercial, commercial land and farm & ranch properties typically list for one year, as they often require more time to sell.
The broker’s fee should be negotiated at the time of the listing. Because the working relationship is established with the individual broker and not the company, one Leonard Leonard broker can represent the seller and another the buyer without conflict. In the event that one individual Leonard Leonard broker works with both the buyer and the seller in the same transaction, that broker will act as a neutral transaction-broker for both, regardless of the relationships in existence with each prior to that transaction. This is spelled out in the listing agreement.
This may all sound confusing, and we would be pleased to spend more time explaining it if you wish. It is important to us that our clients understand working relationships, and are comfortable with our policies.
Regardless of which relationship you choose, we will do our best to provide you with the quality of service you expect.
Agency, Agent, and Fiduciary
The person hired by a principal to act for and in behalf of, or to represent the principal, and always acting in the principal’s best interest.
A relationship between two parties wherein the principal hires another person to represent him or her.
The word which describes the responsibility of an agent toward the principal, involving trust, loyalty, confidence, care and diligence.
In Colorado, it is against the law to receive compensation for a Real Estate transaction unless it is in writing.