Denver Real Estate Law and Family Law Blog. (Vol 1.45) October 16, 2014
By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton, CO 80120
The Littleton Lawyer
As a Littleton attorney practicing real estate law and divorce and family law in Littleton and South Jeffco, Denver, Highlands Ranch and Lone Tree and the surrounding areas, I am often asked: What kind of real estate broker should I chose?
There are three types of relationships available to the public when your work with a real estate broker: Fiduciary, Transaction Broker, or Customer.
The fiduciary real estate broker is the traditional real estate broker who acts in your best interest, whether as a listing broker to sell a home or as a buyer's broker to help you buy a home. This broker represents you throughout the real estate transaction. He will give you his best advice and insights when he represents you in the real estate transaction. This relationship requires that the parties complete a standard written Colorado Real Estate agreement setting forth the terms of the agreement between you and the broker.
The second type of broker is a transaction broker. This is the default in Colorado, and if you do not have a written agreement with your broker, this is your relationship by default. A transaction broker is not an agent. He has no duty to you except to act honestly. He is limited to completing the appropriate forms, not to give you real estate advice. This type of relationship is useful if the broker is not invested or involved with either side.
Conflicts arise if the broker is trying to sell a buyer one of his own listings. In that scenario, he cannot represent either side as a fiduciary so he has to represent neither side as a transaction broker. As a transaction broker he has no duty to either side, and inevitably there is a conflict as to the representation. There is also the issue of liability. A transaction broker is a harder to sue than a fiduciary if the transaction goes awry because the broker has no duty to the consumer.
The last type of relationship is that of a customer. Basically, this situation applies if you have no relationship with the broker, and he is acting as a representative of the opposing side. Such as if you walked into an open house and wished to buy a home through the listing broker.
When I work as real estate broker, I prefer to have a fiduciary relationship with my client, just as I do as a lawyer. Just as a lawyer can't represent both sides in a divorce proceeding, I feel I can't easily represent neither side in a real estate transaction. Inevitably there will be circumstances where the parties interests collide and where the parties look to me for advice.
Most of my clients prefer me to be a fiduciary because the value of a real estate broker --or any adviser -- is in the insight, advice, and experience he brings to you as your broker. I am either all in or not in at all.
Real estate brokers are supposed to explain the various types of brokerage relationships prior to entering into a real estate transaction. If there are forms to be filed out, it is best that the terms of the agreement are presented and negotiated up front . And if the forms deviate from the standard Colorado Real Estate Commission forms, that might be a red flag to investigate the expectations of the consumer and the legal limitations of the broker proceeding with the real estate transaction.