Working with a Realtor – Buyers Agent vs. Transaction Broker

Working with a Realtor – Buyers Agent vs. Transaction Broker

When a buyer is working with a real estate agent in Colorado there are two ways in which to work, as a Buyers Agent or as a Transaction Broker.  It may seem to make sense to a buyer that if they are working with a Realtor that they are “their agent” and will automatically be working on their behalf.  This ins’t true.  In order to have a true agent a buyer must take that next step sign a buyers agent agreement.  If there is no written agreement you still have someone working with you but not necessarily for you.  In this post I will outline the differences between the two relationships.

Working With A Buyers Agent

  • You can liken working with a buyers agent as working with a coach who has your best interests in mind.  Think fiduciary, advocate or agency.
  • Working with a Realtor as a buyers agent requires a written contract.  This contract set’s forth loyalty and compensation.  Loyalty is the promise of the buyer to work with just one agent, and depending upon how the contract is completed the buyer may be guaranteeing a commission to their agent upon completion of a purchase.  See the note on compensation below.
  • A buyers agent works as a fiduciary to their client.  They owe duties of care including: obedience, accountability, loyalty (including confidentiality) and disclosure.
  • In addition to the uniform duties owed to all clients (see the list under the “Transaction Broker” section, a real estate agent working as a buyers agent is obligated to:
    • Promote the interests of their client with the utmost good faith, loyalty and fidelity.
    • Seek a price or lease rate and terms that are acceptable to their client.
    • Counsel their client as to any material benefits or risks of a transaction.

Working With A Transaction Broker

  • You can liken working with a buyers agent as working with a referee who helps you through a transaction.
  • In Colorado, unless there is a buyers agency contract signed, it is presumed that a Realtor is working as a transaction broker. There is no written contract needed.
  • A transaction broker assists one or more parties through a real estate transaction with communication, interposition, negotiation, advisement, contract terms and help at the closing table, all without being an agent or an advocate.
  • The uniform duties due to all parties a real estate agent comes into contact with are:
    • Perform the terms of any written or oral agreement with Seller
    • Present all offers to and from Seller in a timely manner regardless of whether the property is subject to a contract for sale
    • Disclose to Seller adverse material facts actually known by Broker
    • Advise Seller regarding the transaction and advise Seller to obtain expert advice as to material matters about which Broker knows but the specifics of which are beyond the expertise of the Broker
    • Account in a timely manner for all money and property received
    • Keep Seller fully informed regarding the transaction
    • Broker must not disclose the following information without the informed consent of Seller:
    • – That Seller is willing to accept less than the asking price for the property
    • – What the motivating factors are for Seller to sell the property
    • – That Seller will agree to financing terms other than those offered
    • – Any material information about Seller unless disclosure is required by law or failure to disclose such information would constitute fraud or dishonest dealing, or
    • – Any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the property.
    • Seller consents to Broker’s disclosure of Seller’s confidential information to the supervising broker or designee for the purpose of proper supervision, provided such supervising broker or designee does not further disclose such information without consent of Seller, or use such information to the detriment of Seller
    • Brokerage firm may have agreements with other Sellers to market and sell their property
    • Broker may show alternative properties not owned by Seller to other prospective buyers and list competing properties for sale
    • Broker is not obligated to seek additional offers to purchase the property while the property is subject to a contract for sale
    • Broker has no duty to conduct an independent inspection of the property for the benefit of a buyer and has no duty to independently verify the accuracy or completeness of statements made by Seller or independent inspectors. Broker has no duty to conduct an independent investigation of a buyer’s financial condition or to verify the accuracy or completeness of any statement made by a buyer
    • Seller is not liable for Broker’s acts or omissions that have not been approved, directed, or ratified by Seller
    • When asked, Broker (will or will not) disclose to prospective buyers and cooperating brokers the existence of offers on the property and whether the offers were obtained by Broker, a Broker within Brokerage firm or by another broker.

Compensation

In the vast majority of cases the compensation due a real estate agent are not affected by whether they are working as a Transaction Broker or as a Buyers Agent.  When an agent shows a property that is listed through the MLS there is an offer of compensation from the listing broker to agent working with the buyer.  This co-op commission is not a fixed amount and there is a space for compensation amount offered to both a Transaction Broker or a Buyers Agent, however in most cases the offer is the same.  So as long as this amount is acceptable to the agent or is otherwise in agreement with the minimum amount specified in the Buyers Agency agreement the compensation to the agent isn’t an issue for the buyer.

The Strength of the Market Depends Upon Price Range

The Strength of the Market Depends Upon Price Range

In a recent market update I outlined how we are seeing more price reductions, fewer sales and that the market seems to be shifting away from a strong sellers market.  However, there are still pockets in the Boulder County market where most of the houses are under contract.  As I looked further I found that these “pockets” around the county all seemed to be in the lower price range of their community.  The graphic below shows the absorption rate of the inventory throughout Boulder County in different price ranges.  Think of it this way, if we froze the market and accepted no new listings but sales happened at the rate they have been happening over the past three months, how long would it take to sell all of the listings.  According to NAR (National Association of Realtors) a balanced market is 6 months.  Anything less than that is a sellers market and more is a buyers market.  So what we have is a sellers market under $1 million, a balanced market between $1 million and $2 million and a buyer’s market above $2 million.Boulder County Home Inventory

Another interesting graph that helps to tell the story of the market is below and it shows the number of price reductions in the market on a weekly basis over the past three years.  2015 and 2016 were markets characterized by multiple offers and above asking price sales.  2017 started out in much the same way but by the end of spring we were seeing some softening.  One way to see this softening graphically is in the number of price reductions.

Boulder County Real Estate Statistics for August 2017

Boulder County Real Estate Statistics for August 2017

The real estate statistics for Boulder County for the last few months have shown a shift in the market.  August continued this trend.  Sales during the month were 11% lower than last year and lower than any August since 2011.  We are seeing more price reductions, more negotiation room and it’s taking longer for homes to sell.  It seems that we are shifting away from a strong sellers market to a more balanced market.  View the presentation below to see multiple statistics pointing in the same direction.

 

Neil Kearney is Again Recognized as a Five Star Real Estate Agent Award Winner

Neil Kearney is Again Recognized as a Five Star Real Estate Agent Award Winner

Neil Kearney has once again been recognized as one of the top real estate professionals in the Denver Metro Area.  The “Five Star Professional” award in the real estate category is awarded each year based upon independent research and interviews with actual clients from the past year.

The Five Star Professional research team applies a vigorous research and evaluation process to identify service professionals who provide quality services to their clients. Professionals do not pay a fee to be considered or placed on the final list of Five Star award winners.  Along with outstanding survey results the real estate agents who are considered must obtain a high standard of production.

This year the criteria was tightened, and under 750 real estate agents in the Denver Metro Market were recognized as a Five Star Professionals. There are currently over 20,000 licensed real estate agents in the Denver area.  Neil feels honored to be once again be designated award winner.  This is one of the most credible awards a real estate agent can receive because it is based upon direct feedback from recent clients.  Only the highest scoring agents are selected.

Here is a description of the research methodology that is used.  Five Star Professional follows standard survey practices used by other professional research organizations. The research also includes a regulatory review to provide necessary checks and balances.                                                  Five Star Professional conducts research to help consumers with the important decision of selecting a service professional. The Five Star award is presented to wealth managers, real estate agents, mortgage professionals, home/auto insurance professionals and dentists in more than 45 markets in the U.S. and Canada.The Five Star Professional research team applies a vigorous research and evaluation process to identify service professionals who provide quality services to their clients. Professionals do not pay a fee to be considered or placed on the final list of Five Star award winners.

In each market, award winners are listed at no cost in a special advertising section within the city/regional magazine and on fivestarprofessional.com.

Five Star Professional follows standard survey practices used by other professional research organizations. The research also includes a regulatory review to provide necessary checks and balances.

Five Star Professional:

  • Conducts comprehensive research
  • Recognizes service professionals
  • Partners with leading city/regional magazines
  • Helps award winners gain the recognition they deserve
A Summer Wrap-Up and What’s Next in the Boulder Real Estate Market

A Summer Wrap-Up and What’s Next in the Boulder Real Estate Market

Market Update

The next sixty days will tell us much about the direction of the real estate market in Boulder County.  If you are reading this newsletter, you are aware that our market has been on a torrid pace since 2013.  Over the past five years the average home has appreciated in value by over 60%[1] .  A year ago, during the second quarter, our annual appreciation rate was ranked number 1 in the nation.  In short, our market has been sizzling hot.  As I have written about before, net migration to the area, a strong economy, a desirable lifestyle and a shortage of housing and buildable land have been the major drivers of this trend.  However, anyone who pays attention to markets over the long term knows that all markets are cyclical.  In this short update I will highlight some current trends in the market and see what that might mean for the future.

Trend #1 – Slowing Sales

Through the end of July, sales in Boulder County were down 3% from a year ago.  This alone isn’t such a big deal.  What is more interesting is looking at sales on a monthly basis.  Through March, cumulative sales in Boulder County were up by 6% over 2016.  The market was strong, multiple offer situations were common and houses were selling quickly.  Sales tailed off a bit in April and May but that was due more to lack of inventory than anything else.  Then right around Memorial Day the market noticeably slowed down.  Houses that one would expect to sell quickly lingered on the market. We also started to see price reductions at a higher pace than previous years and the total number of sales dropped.  Closings in June were down 12% from the prior year and down 10% in July.

Trend #2 – Increasing Inventory

In 2015, inventory of available homes in the market dropped dramatically.  At the same time demand for homes started to spike.  The result was crazy price appreciation.  Last year, especially in the third and fourth quarters we saw our inventory rise.  This year that trend has increased.  We are not back to 2014 levels but buyers are starting to have more to look at and properties are staying on the market longer.

Trend #3 – Price Range Matters

When we speak about the average listing in Boulder County we are talking about a price range in Boulder County of roughly $500,000.  When one deviates from that range the story can differ from what is reported.  Over the past few years there has been a record number of sales over $1 million.  However, the sales of homes in the luxury range have shown less of a seller’s market than lower price ranges.  Currently there is 2.8 months of inventory on the market in the price range of $500,000 and lower; 3.4 months for those homes in the $500 – $750k range; 4.4 months for homes between $750,000 and $1 million; and 7.7 months for homes priced above 1 million.  The National Association of Realtors has stated that 6 months of inventory is a balanced market.

Trend #4 – Interest Rates

At the end of July the average national 30 year mortgage interest rate was 3.97%.  This is up slightly from a year ago but still below the five-year average. At the end of the day what matters to a potential home purchaser is if they can afford the payment.  As prices rise, buyers slowly adjust to the new normal but if they can afford it and if their friends and colleagues are also buying homes, the price objection as a stand alone issue dissolves as long as they can afford the payment.  So when prices rise, like they have over the past five years affordability needs to come from somewhere.  Buyers must either have their incomes increase in a proportional way, be able to bring a larger down payment, or interest rates must be low enough to allow for a reasonable payment relative to their overall monthly income.  So far, interest rates are staying low and allowing for sustained sales. If we do see a spike in interest rates that compounds the effect of the recent price increases, we can expect to see demand fall and prices flatten.  This flattening of prices has been the normal for the Boulder County market over the past 30 years after a period of rapid price gains.

Trend #5 – Price Appreciation Losing Some Steam

I’m splitting hairs a bit here because we have seen some slowing this summer on price appreciation.  According to FHFA.gov Boulder County homes showed a 10.84% gain in value from June 2016 to June 2017.  This was tied for 19th best in the nation with Portland OR.  But the rise in inventory and the drop in sales this summer tell me that the pace of appreciation has slowed.

Conclusion

There is a normal slow down during the summer months in our area, but when I compare the market conditions of this summer to past summers the slow down seems to have happened earlier and had more price reductions this summer than in the past.  Only time will tell if this was just a temporary pause of if the market has shifted a bit toward the buyer.  That is why the next 60 days is so important.  I will let you know how it turns out.

[1] FHFA.gov Home Price Index 2nd Qtr. 2017

 

Page 1 of 7912345...102030...Last »