Durango Colorado Real Estate

The legal requirements for brokerage relationships in Colorado between buyers or sellers and their Realtor is one of the somewhat confusing areas of Colorado real estate law. In order to aid in understanding, we will define each of the relationships and their roles below.

Sometimes historical perspective helps in understanding why the current system is in place. Prior to the Brokerage Relationship Act in 1994, every real estate agent in Colorado was assumed to be an agent or a subagent for the Seller. This obviously could cause confusion, conflict of interest and frustration in transactions. As an example, if a real estate agent showed property to a potential buyer and that buyer disclosed a maximum price s/he would pay for a home (and perhaps even offered a lower price), then technically, the real estate agent as the seller's agent and fiduciary for the seller was required to disclose the buyer’s position to the seller. This was an untenable legal situation and looking back twenty years later, it is hard to believe that was how real estate agents were required to conduct business between buyers and sellers.

The 1994 law was enacted to allow for Buyer's Agency, Seller's Agency, and Transaction Brokerage. Today Real estate brokers and their clients can choose which capacity works best for them among the following options.

Sellers Agency. A seller’s agent (or listing agent) works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the seller. The seller’s agent must disclose to potential buyers all adverse material facts actually known by the seller’s agent about the property. A separate written listing agreement is required which sets forth the duties and obligations of the broker and the seller.

Buyers Agency. A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the buyer. The buyer’s agent must disclose to potential sellers all adverse material facts actually known by the buyer’s agent including the buyer’s financial ability to perform the terms of the transaction and, if a residential property, whether the buyer intends to occupy the property. A separate written buyer agency agreement is required which sets forth the duties and obligations of the broker and the buyer.

Transaction-Broker: A transaction-broker assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction without being an agent or advocate for any of the parties. A transaction-broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about all adverse material facts actually known by the transaction-broker concerning a property or a buyer’s financial ability to perform the terms of a transaction and, if a residential property, whether the buyer intends to occupy the property. No written agreement is required.

The Wells Group has specific standard procedures regarding disclosures to buyers and sellers regarding the above brokerage relationships. Overall, understanding how your real estate agent may assist you is important prior to entering into real estate transactions. Please call our office if we may assist in explaining further, or if you have additional questions or scenarios you would like to discuss. As always, we are not providing legal advice, and if you have specific questions, please seek appropriate legal advice from your attorney.

Don Ricedorff, Broker Associate, GRI, CRS, CCIM, ABR, RSPS, CDPE

E-Mail: don@durangorealproperty.com

Direct: 970-375-7014

Fax: 970-259-5007

Web: www.DurangoRealProperty.com