People relocating to Denver and first-timer home buyers frequently ask “Who pays my real estate agent’s commission”? The short answer in Denver real estate: the seller usually pays.
Here’s How it Works:
The home-seller and the seller’s listing agent establish the terms of the listing agreement and also negotiate the overall commission rate – usually in the form of a percentage. A portion of this overall commission is reserved to pay the “co-op” or cooperating broker fee to the agent who brings the buyer.
Know What Kind of Relationship You Have With Any Agent:
In Colorado real estate transactions, there are different types of relationships a buyer can enter into with an agent. It matters that buyers understand the differences as it plays a large impact on your transaction. Notice that I didn’t say “negotiate your transaction”? Only an exclusive buyer’s agent has the duty to negotiate price in favor of your best interests. Here’s a look at the different relationships depending on the type of agent you choose to use and how they will impact your home purchase:
1. Seller’s agent – The seller’s agent’s sole duty is to represent the seller’s best interest – not yours. The listing agent must disclose to you any adverse material facts actually known by them about the home. Depending on the situation, and with your agreement, they can treat you as a customer or enter into a transaction broker arrangement with you.
- 2. Customer – No duties to represent you other than to treat you fairly.
- 3. Transaction Broker – Acts as a neutral 3rd party between you and the seller – does have some duties to you, the buyer, but is not your exclusive agent so cannot negotiate on your behalf.
4. Exclusive Buyer’s Agent – The Colorado Real Estate Commission outlines additional duties of a buyer’s agent to include: “Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity; Seeking a price and terms that are acceptable to the Buyer; and Counseling Buyer as to any material benefits or risks of a transaction that are actually known by the Broker”. In non-legal speak – a good buyer’s agent can go to the mat for you!
Please see the complete disclosures from the Colorado Real Estate Commission here: Colorado Real Estate Definition of Working Relationships and Colorado Real Estate: Brokerage Disclosure to the Buyer
This Might Seem Like a Lot of Information to Get to the Point:
In select cases, and usually pertaining to “For Sale By Owners” or FSBO properties, the buyer and the buyer’s agent agree upfront in writing that the buyer will pay up to x amount or x percentage in the event that the FSBO or any other party refuse to pay the agents commission. Knock on wood here – but the seller via the listing brokerage firm has always come through on paying my commission.
Bottom line: Completely understand not only who is paying the agent’s commission but what type of agency relationship you have with any real estate agent. Oh, and this is specific to Colorado real estate and your state might have major differences. When in doubt, seek legal counsel.
Michelle A. Potter
Broker Associate
RE/Max Professionals
(303) 489-4035
This is based on “typical” residential real estate scenario in Denver. It is no way intended as legal or tax advice.
