Common Colorado Real Estate Contracts – Buyer Agency Contract
As a licensed real estate agent and a Realtor® with the state of Colorado, I am here to help you sell and purchase real estate. One of the main things I do is to help you handle the many contracts and documents that are needed to buy and sell real estate.
Note – Realtor®, Broker, Agent all refer to state licensed real estate broker. In common conversation, they are interchangeable.
Throughout the process, there are a LOT of contracts, disclosures and other documents you will be signing and working with. To familiarize yourself, this post looks at the Exclusive Right to Buy Listing Contract. This contract will also be referred to as a Buyer Agency Contract, or just Buyer Contract. This document defines the relationship that a Buyer (you) has with a Realtor® or licensed real estate agent (I’d love for that to be me :).
Important Details of the Buyer Agency Contract
Approved by Department of Regulatory Agencies and Colorado Division of Real Estate
When working with a form approved by the Division of Real Estate, the contract will be a form that has a box like this at the top:
Section 3.6 of the Contract defines the length of the agreement. During the Listing Period, you are represented by this agent and no others. During this period, all of the terms laid out in the contract are in effect.
Bottom Line – If you purchase a property while party to this type of contract, the agent you signed with can and probably will be owed a commission.
Type of Representation – Buyer Agency or Transaction Broker?
Okay, football reference…Buyer Agency is compared to a coach, Transaction Broker is compared to a referee. A coach gives opinions, maps out strategy, and has opinions on what is a good idea, and what is a bad idea. A referee calls fouls and makes sure the game is played by the rules. A Buyer’s Agent is like a coach, an advisor, and a Transaction Broker is like a referee or facilitator. The job of the Transaction Broker is to make sure the transaction follows guidelines, uses paperwork and other communications properly and abides by the terms set forth in the deal.
You can pick either one. It’s your choice how you want your agent to work for you.
Defining the Working Relationship with your Colorado Real Estate Agent
Here is how another document you may be signing, Definitions of Working Relationships (see copy here), describes them.
Buyer’s Agent: 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.
Source – Definitions of Working Relationships
Within the contract are specific duties that will be carried out by the agent. It lists things like:
Broker must exercise reasonable skill and care for Buyer, including but not limited to the following:
Performing the terms of any written or oral agreement with Buyer;
Presenting all offers to and from Buyer in a timely manner regardless of whether Buyer is already a party to a contract to Purchase the Property;
Disclosing to Buyer adverse material facts actually known by Broker;
Source – Exclusive Right to Buy Listing Contract
It also lists things that the agent will not do, or will not do without their clients’ permission. Such as:
Broker must not disclose the following information without the informed consent of Buyer:
That Buyer is willing to pay more than the purchase price offered for the Property;
What Buyer’s motivating factors are;
That Buyer will agree to financing terms other than those offered;
Who Pays Your Agent?
When buying a home in Colorado, the seller generally pays the buyer’s agent. It’s a cost the seller bears as an expense of selling their home. Does this mean that when you hire me as your Buyer’s Agent, I work for you, and when you buy, you don’t even pay me? Essentially, yes, that is what it means.
There are exceptions to this but they are very rare. When working with a Realtor®, the seller generally bears the expense of the compensation to the buyer’s broker.
This image (below) is a screen grab from our Multiple Listing Service that shows the amount of compensation the agent who brings the buyer can expect for this property.
The amount of compensation is known, in a general sense, to people in the real estate market. It is listed, in specifics, with the property details on the MLS, as pictured above.
In the event of serious dispute between the broker and buyer this contract binds the parties to seek mediation before proceeding to arbitration or litigation.
When Do I Sign It?
With me, you sign it at the beginning of our relationship. As your agent, I’m able to work in YOUR best interest and promote a plan from start to closing that has YOUR needs and goals in mind. I am your fiduciary.
Essentially, though, you sign this contract when you are comfortable hiring a particular agent to work for you for a particular period of time. Once you sign it, you are bound to them for the duration of the contract.
Well, explaining this contract is a big part of my job, so with further questions on this contract, please feel free to contact me directly. When I work with buyers, we have a few introductory meetings, and during one of these, we will go over, in its entirety, this contract, and other documents. I will explain it line by line so that you understand what you are signing. It’s a big step in purchasing property in Fort Collins and the rest of Colorado, so be sure that a potential agent explains everything to your full understanding.
Once you have your Buyer Agency agreement in place, then the real fun starts…the fun of finding your next property!
See also – Colorado Real Estate Commission
I am never too busy for you or your referrals. My job is to communicate, and answer questions, so if you have any, please ask!