How Can a Broker Represent the Buyer and the Seller in the Same Real Estate Deal?

Littleton Real Estate Law and Family Law Blog

(Vol 1. 72)  March 4, 2016 by Craig Franklin Chambers, Esquire.

The Littleton Lawyer

Providing legal representation in all Denver-Metro areas including Denver, Littleton, Lakewood, Conifer, Roxborough Park, South Jeffco, and Highlands Ranch

How can my real estate agent represent both the buyer and seller in the same real estate transaction?

The answer is: he can’t. A real estate agent can’t represent both the buyer and seller in the same real estate transaction. Any more than a lawyer can’t represent a husband and wife directly adverse to each other in a dissolution of marriage.

A real estate agent can function as a transaction broker—in which case he can work with both the buyer and the seller in the same transaction. In that capacity, he is not representing either party as an agent or an advocate. A transaction broker is not an agent for either party.

The relationships and responsibilities of the broker to the consumer have become confusing. Under the common vernacular of real estate, there’s the listing broker and the buyer’s broker, the seller’s broker and the selling broker, and then there is a buyer’s agent, a seller’s agent, or a transaction broker. All of these terms have different meanings.

In the ’90’s the legislature over-hauled the law regarding the relationships between real estate brokers and the public. Prior to this overhaul, both the buyer’s real estate broker and the seller’s real estate broker in a real estate transaction were fiduciaries of the Seller, and the buyer was entering the transaction, often unknowingly, unrepresented.

Under the current dynamic, a broker can be a Seller’s Agent OR  a Buyer’s Agent. In either case he has a fiduciary duty to promote the interests of his principal with the utmost duty, loyalty, and fidelity.  He is an advocate and a fiduciary for his principal, either the Buyer or the Seller.

Or as a broker he can act as a transaction broker. As a Transaction Broker, he must use reasonable skill or care in completing the transaction but he is not advocating the interests for either side. A broker can also treat one side of the deal as a Customer in which case he has no brokerage relationship with that consumer. But he can’t be a fiduciary for one party, say for the example, the seller, and a transaction broker for the buyer. He is either a transaction broker for both parties or he can only represent and advocate for one side.

This statutory scheme was created to allow real estate brokers, in their limited authority to practice law without a license as professional real estate brokers,  to sell their own listings.

Real estate brokers often prefer to work as transaction brokers because they make more money if they sell their own listing. The real estate commission in the listing agreement is paid to the listing brokerage firm who then pays an agreed-upon portion of the commission to the selling brokerage firm.

When the broker “double-ends” a deal” the broker earns the whole commission—both the listing brokerage firm’s and selling broker’s portion  of the real estate commission. In addition, as a transaction broker, a real estate broker’s duty to the consumer—and therefore his liability to the consumer–is limited as a transaction broker.

Consumers like the option of the Colorado broker to be permitted sell his own listing.  Often as part of the negotiation for the real estate commission for the listing, the consumer is given a discount when a broker brings his own ready, willing, and able buyer.

But if something goes wrong in the deal, it is harder to pursue litigation against a transaction broker than either a buyer’s agent or a seller’s agent because a transaction broker is not a fiduciary and has less of a duty to the consumer. His liability is often limited to acts of gross negligence, willful misconduct or dishonesty.

Transaction-broker relationships are the default broker-relationship in Colorado. The consumer needs to sign an agreement, establishing and setting forth in detail these higher duties to become a fiduciary.  If  you haven’t signed an agreement with your broker either as a buyer or a seller, your broker is acting as a transaction broker. The Colorado Real Estate Commission approved forms explain in more detail the consequences of these options.

For a broker to change his status from a fiduciary relationship to a transaction broker relationship to sell his own listing, both the Buyer and the Seller must consent in writing to the change of status.  A broker can also simply sell his own listing to a buyer as a customer without sacrificing or reducing the quality and level of his services as a fiduciary.

Real estate brokers are required to inform the consumer of these options prior to even working with the consumer. The consumer is entitled to negotiate the scope of the real estate services the broker is providing. If his broker is working as a transaction broker, the consumer has the right to be informed that “his broker” is not his advocate at all.

5  Tips on How to Save Money in Attorney Fees in a Divorce

Denver Real Estate Lawyer and Family Law Blog (Vol. 1.71)  February 12, 2016

Family Law/Divorce and Real Estate Legal Services in Denver, Lakewood, Littleton, Highlands Ranch and all surrounding areas

.by Craig Franklin Chambers, Esq. 7851 S. Elati Street #204, Littleton, CO 80120

The Littleton Lawyer

Here are 5 quick tips to save money on attorneys fees to get through the legal process of a divorce efficiently and cost-effectively. First, hire someone you trust. He or she is the legal expert, and you need to trust him to do his job. You should not micro-manage him. Each attorney has own style and that style should be compatible with your personality.

Second, be honest with your attorney. Your communications with him are confidential and privileged under the attorney-client privilege. Your lawyer needs to know the facts to properly strategize your case. Third, don’t treat your attorney as a marriage counselor, therapist, priest, or a friend.  An attorney charges for his time and his expertise. Not only for his higher education, but for his experience in front of the very same judges and magistrates who will hear your case. Don’t run up fees on phone calls on unrelated or irrelevant matters.

Fourth, help your attorney by being responsive and precise and by creating time-lines and organizing your documents. The case is being presented first in a well-organized manner to other side with the hopes the evidence will convince the other side to settle, and ultimately, to the judge. It is your case, after all, and the simpler to understand you can make the case, and the more compelling the story, the easier and less expensive the case will become.

Lastly, be reasonable in your demands and expectations. Understand that getting thorough the divorce with minimum stress is also important, especially in a divorce where children are involved.  If there are children involved, they are the first priority. You have deal with your Ex until the child turns 19, and you may want to be invited to your daughter’s graduation or wedding or have a relationship with your grandchildren.

Don’t argue over small amounts of money. Don’t make demands that are based on spite. Don’t pursue claims you are unlikely to win. Most importantly, don’t bully the other side and make them look like a victim.

The judge doesn’t want to hear this case anymore than you do, and the judges are generally unmoved by emotional outbursts, hyperbole, or exaggerations. The party who is reasonable and rationale usually gains the most credibility with the judge.

3 Things to Know About Roof and Furnace Certifications

Denver Real Estate Lawyer and Family Law Blog (Vol. 1.70)

January 24, 2016

By Craig Franklin Chambers, Esq. 7851 S. Elati Street #204, Littleton, CO 80120

The Littleton Lawyer

In my role as a real estate attorney, family law attorney, and real estate broker in Denver, Lakewood, Littleton, Highlands Ranch and the surrounding areas,  I run across terms I think could be better explained.  Furnace or roof “Certification” is one of them.

In the Colorado Real E.state Commission contract for the purchase of a home, the residential real estate contract allows for a home inspection, and it is a good idea to have as many types of inspections as the buyer feels are appropriate given the age and condition of the home.

It is important to know what you are buying. An independent and professional set of eyes is useful in determining if the buyer should proceed with the transaction. The buyer’s recourse, if the home fails inspection, is to terminate the contract,, waive the inspection defect, or renegotiate the real estate transaction.

If there is doubt as to the condition and the future longevity  of a component of a home–usually the roof or the furnace–a home inspector will suggest –or a lender will require– a “certification” of that component.  The five a year requirement is the general practice of lenders ot require that a roof or a furnace have five years of life in order to give the buyer a loan.

Licensed contractors even charge to inspect either the roof or the furnace and certify that it has five years of life remaining. The problem is that the real estate brokers and the lender treat the certification as just another form for the file. Many of the buyers are led to believe the certification is a warranty.

First thing to know, a certification is not a warranty. It is an opinion for a fee–usually made by a contractor with whom the seller or the real estate broker is familiar–that the component is functioning properly on the day of inspection. Although the “certification” is for five years, the buyer has no recourse against the contractor should the component fail within five years..

Second point,  the buyer should beware that if a certification is required or suggested, the underlining meaning in that the roof and furnace  affected component is likely in need of replacement.

Lastly,  the buyer should conduct further investigation and not rely on the certification as anything other than a purchased opinion for the real estate broker to put in the file.

The buyer should go into a real estate transaction eyes open, fulling understanding all the terms of a residential real estate transaction.

How Do Real Estate Commissions Work?

Denver Real Estate Law and Family Law Blog. (Vol 1.69 ) January 2, 2016 

By Craig Franklin Chambers  Esq. 7851 S. Elati Street #204, Littleton,  CO 80120

The Littleton Lawyer

As a long-time Littleton real estate broker and real estate lawyer practicing family law, divorce and real estate law in Littleton, Lakewood, Highlands Ranch, Denver, and the surrounding areas, I run across clients who are confused as to how real estate brokers are paid and how real estate commissions work.

In a real estate transaction there is the broker known as the “Listing Broker” who works with the seller in marketing the home, and the “Selling broker” who works with the buyer in finding you a home. Colorado real estate brokers are licensed by the Colorado Real Estate Commission who promulgate standardized forms to contemplate how brokers get paid in residential real estate transactions.

These forms as written by the Commission are exclusive contracts between you, (the buyer or the seller)  and the broker. That means that you are obligated to the broker–either working for you as a Selling Broker or a Listing Broker– if you enter a real estate transaction during the length of the contract.

Although each broker can be paid by their principle, traditionally the Listing Broker charges the Seller a “sales commission” that includes the compensation for both brokers as contemplated in the listing agreement. Although this amount is negotiable from broker to broker, this amount usually runs at 5-6% of the sales price. This set-up is counter-intuitive because the Seller is paying the brokerage fee for both his broker and the Selling broker ho works for the Buyer.

As part of the marketing of the home, the Listing Broker advertises a “co-op” fee or “success fee” for the cooperating or Selling Broker in the Multiple Listing Service, resulting in that portion of the sales commission in the listing being paid to the Selling Broker.

This co-op usually runs at 2.8% of the final sales price. However, there are no “standardized” fees for real estate services in Colorado. The Listing Broker’s fees (his portion of the sales commission) are negotiable, and the fees vary depending on the real estate company and the services and advertising the particular broker offers.

The title company pays the brokers these commissions at the closing of the real estate transaction, and the fees are generally only owed if the transaction closes.

Real estate commissions  are based on contracts–first on the contract between the Seller and the Listing Broker; second,  the co-op is a contract between the Listing Broker’s real estate company and the Selling Broker’s real estate company. If the property is not subject to a listing agreement,  such as in for-sale-by-owner (FSBO) situation, no real estate commissions are owed, and it’s up to the buyers and sellers if they want their real estate advisors paid.

What I recommend is that if all you are looking for is someone to do the paperwork for a real estate transaction and to overseer the transaction through closing, consider using a Colorado real estate lawyer . The legal paperwork is fairly simple and a lawyer can charge by the hour or offer a low, flat-fee rather than charge a percentage of the sales price.

If, on the other hand, you want real estate market advice, and desire the full services of a real estate broker, make sure that both the scope of the broker’s services and the compensation are spelled out in the Colorado Real Commission Approved forms.

3 Things to Know About Temporary Orders

Real Estate Lawyer and Denver Divorce Blog. (Vol 1.68) December 6, 2015

By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton, CO 80120

The Littleton Lawyer. 

As a lawyer  focusing  in real estate law and divorce and family law in Littleton,  Lakewood, Highlands Ranch,  Roxborough Park,  South Jeffco,  and the surrounding areas, I often run into the issue of temporary orders.   

If the case is simply a Colorado child custody case, the temporary orders concerns temporary parenting time, visitation, decision-making and child support.  If it is a divorce, the case also includes temporary alimony or spousal support, temporary division of the parties personal property, assets and debts. Either way, the case may be subject to Temporary Orders.

The first thing  to know, if you want temporary orders, you have to ask them for. Usually by written motion, and usually early on in the case, preferably at the initial status conference. No one is pushing your legal action through the court system, and if you want relief from the court in the form of temporary relief, you need to ask for it in a motion and follow-up and pursue it.

The second thing to know is that temporary orders are supposed to be temporary, to maintain the status quo until the case settles or the final permanent orders hearing date. The orders are “without prejudice” which means they are not binding on the court for permanent orders.

The purpose of the temporary orders is to help the parties survive financially temporarily. In  a Colorado divorce,  the permanent orders hearing could be seven or eight  months down the road so temporary orders are significant part of the divorce process.

The third thing to know,  although the temporary orders are legally temporary, they can easily become the basis for permanent orders. A divorce is an equitable proceeding. That means the court will apply the statutory factors as well as consider issues of fairness in rendering its decisions. While the temporary orders are not binding, the court can consider whatever evidence is brought up at the temporary orders hearing.

For example, if the child is placed with one parent over the other temporarily, and the child gets accustomed to that environment, gets used to his new school, and appears to thrive in his new environment, that becomes the status quo for the child.

Even if the parenting plan was supposed to be temporary, in applying the best interest standards as set forth in C.R.S. 14-10-124 and C.R.S. 14-10-129, the court is reluctant to change a parenting plan that it seems to be working.

In that sense, practically speaking, temporary orders may be legally temporary or without prejudice but in practice they often become the basis for permanent orders. It is important to properly investigate, negotiate, or litigate temporary order issues early on, and set  a desirable pattern  and precedent for the child. When it comes to disputes of custody, visitation, allocation of parental responsibilities, decision-making  and parenting time, these types of cases are often lost or won on temporary orders.


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