Like a listing contyract, where the Seller employs the REALTOR, the Buyer Agency contract creates an agreement where the Buyer employs the REALTOR to represent.
In Part 1 of this two-part series, I discussed the history and evolution of seller agencies, buyer agencies and commissions in real estate. The Division of Real Estate in Colorado wants the public to have a clear understanding of agency relationships in real estate transactions. To that end, a Definitions of Working Relationships form was developed that clearly explains the different types of agency relationships.
Definitions of Working Relationships
Seller Listing Agreement Compensation Section. In Colorado, we have some of the best Standard Forms for buying and selling homes, in the country. The Compensation section of the Contract, clearly explains what the fee is, when it is paid, and how it is divided up. This is stated in the Colorado Seller Listing Agreement.
Buyer Agency Contract Compensation Section. Like a listing contract, where the Seller employs the REALTOR, the Buyer Agency contract, creates an agreement where the Buyer employs the REALTOR to represent. Again, there is a whole paragraph clearly explaining how, why and when the REALTOR gets paid.
Not only did Agency evolve into the real estate transactions in 1994, but one year later, the arrival of the internet, (circa1995) simplified and accelerated everything. We, in the industry, wondered (worried) could the broker go the way of the travel agent. Now, almost 30 years later, the broker is still here, working with sellers and buyers. Brokers help with the biggest transaction of most people’s lives: the purchase and sale of their home. Buyers and sellers want a trusted advisor.
Today, the world is instantaneous. Once a broker has all the information collected about a property, with the push of a button, he or she sends out the information to the entire globe. Once the information is in the digital marketplace, transactions happen very fast. Digital transaction management systems, standard fill-in-the-blank contracts, and electronic signatures accelerate the process. Almost too fast, as the click-to-sign process often causes a lack of review of the contract details.
The Future
In Colorado, we are lucky that the standard forms and disclosures we already use have created an excellent platform for transparency about compensation — and who represents whom. If there are any necessary changes to our standard forms, the Colorado Division of Real Estate will make adjustments to those forms, or a Colorado-licensed attorney may do so on a transaction-by-transaction basis.
The current system allows sellers to expose their property to the greatest number of buyers. Through the Multiple Listing System (MLS), buyers have access to the majority of available listings from which to choose. The current nature of the relationship between sellers, buyers, and their brokers will likely have a few modifications as the real estate business continues to evolve, including how real estate brokers are compensated. Commissions to be paid by sellers and buyers to brokers involved in their transactions will continue to be as negotiable as the parties are creative in entering into a deal, which feels fair to all involved.
By Duane Duggan. Contributing editor: Matthew S. Finberg, Esq..
Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail duaneduggan@boulderco.com, call 303.441.5611 or visit BoulderPropertyNetwork.com.