Frequently Asked Questions by Buyers

How Are Buyer Brokers Paid?

When a seller lists a property for sale, the listing agreement that the seller signs with the listing broker includes a commission clause that stipulates how much commission the seller has agreed to pay.  It is generally a percentage of the final selling price, anywhere from 5 to 7 percent.  That percentage is split between the listing and selling brokers.

There are some situations in which a buyer would pay their broker’s commission.  An example of this would be a For-Sale-By-Owner listing where the seller was not offering a broker Co-op.  In this case, the broker and the buyer would discuss how the broker commission would be paid.  However, this situation is rare.  In most cases, even in for sale by owner listings, the seller will pay a commission to a broker in order to facilitate the sale of the house.

What is MLS?

Multiple Listing Service, or MLS as it is commonly known, is the organization that all brokers in a particular area belong to that houses all the listings in a computerized database that brokers can access and update.  Metrolist is the MLS organization for the Denver Metro area.  For Boulder and Northern Colorado there is IRES and for Colorado Springs and South there is Pikes Peak.  These databases let brokers that list a property for sale to enter the information about the house in the database along with photos and virtual tours.  This allows brokers that have buyers who are looking for a home to buy, see what is available for sale and forward it on to the buyer.

What To Do If You Searched Yourself and Find A Home?

When you are ready to buy a home, it’s natural to want to do as much research as you can.  This will probably include searching online, driving around neighborhood that you are interested in, and going to open houses.  Great!! Just remember that your broker is there to help guide you through the process and can handle all of the details for you.  If you find a house that you are interested in forward the address or listing number to your broker and they can find out all the details for you.  If you are in an open house and the listing agent asks if you are working with a broker, tell them ‘yes’ and give that person your broker’s information.  Remember, every broker has access to MLS and all of the listings that it holds.

What is the Difference between a Selling Broker, Listing Broker & Transaction Broker?

A selling broker is a broker that represents the buyer solely and has a fiduciary obligation to the buyer.  Their sole responsibility is to represent the buyer and look out for the interests of the buyer.  To protect yourself, you should have an agreement in writing about the duties and responsibilities that your broker has to you.

A listing broker is an agent for the seller, exclusively, representing the seller’s and the seller’s interests.  The listing broker will have a written agreement that allows the broker to put a sign in the yard, specifies the price, commission and marketing techniques that the broker will use to sell the property.

A transaction broker is a facilitator that will assist in a transaction without representing the interests of either the buyer or the seller.  The transaction broker is not an advocate for the buyer or the seller, but is there to insure the success of the transaction.  They are also required to maintain neutrality throughout the transaction by not disclosing the following information:

  • That the seller is willing to take less
  • That the buyer is willing to pay more
  • Motivating factors for either party
  • That either party is willing to accept financing terms other than those offered
  • Any material information about the other party unless:
    • Disclosure is required by law
    • Disclosure pertains to the buyer’s financial ability to perform
    • Disclosure pertains to the buyer’s intention to occupy the property
    • Disclosure pertains to material defects with the property
    • Any disclosure that must be made to avoid fraud or dishonest dealing

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