What Is a Buyer’s Agent?

In Colorado, there are three types of real estate agents—and lots of confusion about what they do. Let’s look at buyer’s agents, seller’s agents, and transaction brokers and see what these three types of real estate agents do.

Colorado’s real estate agent roles are defined by state law and knowing which type of agent you are talking to can make a huge difference in the price you pay for a home. The three types of real estate agents in Colorado are:

1. Seller’s Agents: Sells homes for their clients.
2. Buyer’s Agents: Helps buyers buy homes.
3. Transaction Brokers: Acts as a neutral party, handling paperwork between buyers and sellers.

What Is a Buyer’s Agent?

A buyer’s agent is a type of real estate broker who helps home buyers to find and purchase homes. They do not sell homes to buyers they are working with. Buyer’s agents are required by law to serve the buyer’s best interest. 

The best interests of the buyer include finding homes that meet the buyer’s criteria and that have no major inspection issues or title problems. Buyer’s agents are also obligated by law to help buyers get the best pricing and terms. 

Reasons to Work with a Real Estate Buyer Agent

• Buyer’s agents are legally required to work for the buyer’s best interest.
• After signing a buyer agency agreement, the buyer’s agent is taking on a higher level of responsibility and liability to serve our interests as the home buyer. That’s good for buyers!
• Seller’s agents are required to seek the highest selling price and best terms for their sellers. They sell on commission and so their incentive is to sell you any home at the highest price as quickly as possible. Since most real estate agents are seller’s agents, you are putting yourself at a disadvantage if you do not have a buyer’s agent on your side representing you.
• Experienced buyer’s agents have specific skill sets, proprietary tools, and proven processes to help buyers. Seller’s agents have a very different skill set and although they are allowed by law to work as buyer’s agents, that doesn’t mean they are good at it.
• The listings you see in online real estate databases are, by definition, listed by a seller’s agent or a transaction broker. When you contact those agents, you are helping the seller, not yourself. See how online real estate sites can work against buyers.
• Buyer agents can help craft more competitive offers, helping buyers get the homes they want at fair prices and terms. (It’s not just about the price.)
• Homes are the most costly purchase most people make. There’s a lot to lose and a lot to be saved by working with an experienced buyer’s agent.
• A good buyer agent will help you make sure you don’t buy a problem house through thorough inspections, clean title checks, vetting the HOA, and many more considerations.
• A buyer agent can streamline the extensive paperwork involved in purchasing a home. See more about getting to closing.
• Buyer’s agents can help home buyers avoid these 6 common real estate mistakes.

What Is a Seller’s Agent?

Seller’s agents are the real estate agents that most people think of because most real estate brokers are, in fact, seller’s agents. “Realtors,” “real estate agents,” and “real estate brokers” are all common terms that usually apply to seller’s agents. Seller’s agents are also called “listing agents.”

Pretty much every real estate business you see advertising around town, with yard signs, showcasing properties in a big window—those are all seller’s agents who are listing homes for sale. They have been hired by current home owners to sell their homes at the highest price and best terms possible. 

The Incentives Motivating a Seller’s Agent

Seller’s agents are incentivized to sell homes at the highest price because they are compensated a percentage of the selling price. They are often incentivized to sell homes quickly because, well, more homes sold means more compensation. At bigger real estate firms, seller’s agents try to keep sales “in the family” so that they can maximize their earnings. Seller’s agents usually earn roughly half the overall fee associated with the buying or selling of a home.

4 Reasons Why the Seller’s Agent Is Not the Home Buyer’s Friend

Seller’s agents typically treat home buyers very well to make them feel like they are on your side. If you’ve ever been to an open house, it’s likely that the agent worked hard to make you feel great about how they can help you. But let’s be crystal clear: you, the home buyer, are not their priority. Why not?

1. Seller agents must represent the interests of the seller; it’s the law.

Seller’s agents are literally agents of the seller; they are required by law to promote the best interests of home sellers. That often comes at the expense of the buyer.

2. Seller’s agents have a reputation to maintain.

Traditional real estate companies promote themselves to sellers by promising to sell homes quickly at the best pricing and terms for the seller. The seller’s agent has every reason to take advantage of the home buyer, to the fullest extent allowed by law. After all, it’s not just a bad idea for a seller’s agent to talk a buyer out of buying a bad home or from making an overpriced offer, the seller’s agent can get sued or lose their license for putting the buyer’s interests above the seller’s.

3. Seller’s agents are focused on listings.

Let’s say a seller’s agent sees a “For Sale by Owner” sign on a property that may interest a buyer they know. The agent is strongly incentivized to try to convince the owner to hire the agent to serve as a seller’s agent for that property. If they can sign a seller’s agency agreement with the owner, they can earn a potential double commission by acting as the seller’s agent if they are also able to bring the buyer to the negotiating table. 

4. Sometimes buyers mistakenly think the seller’s agent is representing them.

Home buyers often think they have an agent looking out for their interests. That’s because seller’s agents treat buyers very well and make them feel like they are looking out for them. Seller’s agents are required today to have home buyers sign a disclosure agreement that discloses that the seller’s agent is acting on behalf of the seller. But sometimes home buyers don’t realize what they are signing or what it means. 

This sets up a situation where seller’s agents can earn a double commission on a sale. It works like this:

• “Bringing the buyer” is when a real estate agent brings the buyer to a deal that later closes. If a buyer is using a buyer’s agent, then the buyer’s agent “brings the buyer” to a deal and is generally compensated by sharing the commission fee with the seller’s agent. 
• If the seller’s agent discovers the buyer, say through an open house or a buyer walking into their real estate office, then the seller’s agent “brings the buyer.” Seller’s agents can double their commission if they can “bring the buyer” to a home they are listing for sale because they earn the entire commission. In this scenario, seller’s agents earn both the seller’s agent fee plus the fee for finding the buyer. It’s the best-case scenario for a seller’s agent. 

This arrangement is definitely not in the best interest of the home buyer because the home buyer’s interests are not represented in a deal structured this way. 

What Is a Transaction Broker?

A transaction broker helps with contracts and paperwork to broker deals between sellers and buyers. Transaction brokers are required by law to remain neutral and may not favor the seller nor the buyer. They are often involved in off-market home sales between people who know each other or for sale by owner arrangements. Many times, a seller’s agent has an agreement with the seller to change from an “agent” to a “transaction broker” if they bring a buyer for the home (see “bringing the buyer” above). This means that the seller no longer has someone promoting their best interests and the realtor who previously had a fiduciary duty to the seller is now expected to be neutral and treat the buyer and seller equally as a mediator.  This is a difficult role for most realtors to maintain since they already have an established relationship and history with the seller.  They are typically paid a reduced percentage of the sale value, since they are no longer acting in the role of agent.

There are many things a transaction broker cannot do because of their legally required neutrality: 

• A transaction broker has no obligation to make the buyer aware of all the homes on the market that may meet their needs. 
• When showing homes, a transaction broker should not bring negative features of a home or neighborhood to your attention; they tend to think of all home sales as being in “as is” condition. If a transaction broker were to weigh pros and cons of a home, they would be showing favoritism to either seller or buyer, which they are barred from doing since they must remain neutral.
• If you were to negotiate an offer on a home or raise home inspection problems, a transaction broker should not provide any consultation. Almost any useful advice they could give would violate their legally mandated neutrality. 

Transaction brokers are not the same as “dual agents,” who are supposed to represent both the buyer and the seller. Dual agents are prohibited by law in Colorado. 

How to Find a Good Real Estate Agent

Many home buyers, especially first-time buyers, hesitate to commit to a single broker because they have no idea how to find a good one.

Here’s how:

1. Get trusted recommendations. To begin, set up meetings with two or three brokers who have been recommended by friends or coworkers. Some agents focus on selling listings, so make sure the agents you interview have lots of experience working with buyers.
2. Insist on a buyer’s agent contract. Before revealing info, be sure to tell them clearly that you are looking for a buyer agency relationship. Then tell them what you can about your situation, even if you’re unsure about whether or not you should buy a house in the first place.
3. Observe: Watch and listen to what they say. Look for an agent who tries to help you think through basic issues at your first meeting. If they are organized, knowledgeable and focused, with a concrete plan of action, they can probably help you a lot.
4. Read the fine print! Next, request a copy of their buyer agency agreement and carefully review it, with a real estate attorney’s help if you need it. We recommend insisting on a termination clause that allows you to end the relationship without penalty at any time. When you feel entirely comfortable with the terms and the agent, sign a short-term agreement and get started.

Then take your buyer agent with you! Your agent can take you to any open houses you want to see, or better yet, arrange for a private showing of any home on the market. (See why being careful with open houses is important.) A good agent can show you a property on the day it becomes available, so you can beat the rush.

Why Work with Agents for Home Buyers

We are full-time buyer’s agents.

Real estate is not a hobby or side gig. We are professionals and helping buyers find great homes is our full-time job. 

We focus on buyers and are committed to putting the buyer first.

Our commitment to helping home buyers is reflected in our systematic approach to the home buying process. We’re not comfortable with the casual, hit and miss approach taken by some. Using our systematic, team-based approach, our clients are closely involved and more focused than many others competing in the real estate market. Likewise, we work harder and we’re more focused than typical agents, so the process is efficient and the results are good. See what our clients say.

Our Buyer Agency Commitment

You deserve a real estate agent who is committed to you. When you work with Agents for Home Buyers, we use a buyer agency agreement, a contract that outlines how we will represent your interests and work together. This contract means we accept a higher level of responsibility and liability to make sure you find the home you want. Our buyer agency contract includes a termination clause so that if at any time you aren’t happy with how your home search is going, you can part ways without obligation or penalty. 

Tools & Resources for Home Buyers

We work hard to give our clients the information and knowledge they need to make good decisions. For example, we offer the Agents for Home Buyers Toolbox, a set of mapping and online tools that helps our clients zero in on what they care about most and where they are most likely to find homes that match. We also have been tracking real estate statistics in 10 communities in the Denver-Boulder area since 1997. This data gives us a keen sense of when a house is under-, over-, or fairly priced for its features. 

Our Inspection Process

With over 25 years of experience in Boulder area real estate, we have seen a lot of homes and many unusual situations (like meth contamination). As a result, we use a comprehensive, thorough approach to vetting homes to make sure buyers know what they are considering. Take a look at some of the ways we evaluate homes.

How We Are Compensated

We work for you as a coordinated team, and we are only compensated when you purchase the right home at the right price. 

There are three ways that we get paid upon the successful purchase of your home.

1. We are compensated by the seller’s agent.  The seller’s agent has a pre-established commission rate with the seller and typically agrees to split that commission with the agent who brings a buyer for the home.
2. We are compensated by the seller.  This is essentially the same as option 1, but instead of the seller paying the listing agent a larger percentage and the listing agent then paying us…this more direct method involves the seller agreeing to pay each agent in the transaction.
3. We are compensated by the buyer.  If we are unable to negotiate our compensation to be paid by the listing agent and/or seller, then the buyer becomes responsible for paying us.  We don’t take this lightly as we know that every dollar is likely going towards our client’s down payment and we work hard to avoid it.  Anytime that a buyer is entering into a scenario when this is a possibility, we make sure to have an open, direct conversation about it so that there are no surprises.  And in the handful of situations when a client has paid all or a portion of our compensation, it has never been a point of tension because they know that it was money well spent for the service they received.

Single Agency and Avoiding Conflicts of Interest

We do sell a few properties as seller’s agents, mostly because some of our past home buyer clients have asked to work with us as sellers. These past clients know that we are honest, ethical, and hard-working and they want the same effort and ethics applied to the sale of their home that they saw from us as buyers. We work as “single agents,” which means that we will only ever help buy or sell a property and will never do both as a transaction broker. If we are working with a buyer and they show interest in a home we are listing, we would refer that buyer to another trusted buyer’s agent to make sure they are well represented. By working this way, we eliminate the conflict of interest and can help our thousands of buyer clients with both their home buying and home selling needs now and again.

See more about buyer’s agents and Real Estate FAQs.