Can I work with more than one Broker at a time? If my Broker offers me a discount, am I still entitled to all her usual services? Are there laws regulating what marketing my Broker must do when he puts my house on the Market? Take a minute to read REALTY 101 and get all your questions answered!

REALTY 101
I'm Marie de Espinosa, a licensed Associate Broker in the State of Colorado and I can answer all of your questions about Colorado Real Estate.

Broker - Client Relationships
First of all, please be aware that in Colorado, Real Estate professionals must take 168 hours of coursework and pass a Licensing Exam in order to represent the public in the sale or purchase of Real Estate. Persons who pass this coursework and exam are referred to legally as "Brokers". (It is common to call a Broker an Agent, or a Realtor or even a Salesperson - we understand what you mean when you call your Broker an "Agent" and there is no harm in doing so - but their legal title is Broker)

Brokers are called Brokers because you can have one working for you and not have the benefit of an Agency relationship. In Colorado, when you are ready to hire a Broker, you will sign an employment contract with them that specifies whether the Broker will represent your interests alone in all matters (Agency); or whether the Broker is there merely to conduct the transaction on your behalf (Transaction-Brokerage). You pay the same negotiated fee regardless of the relationship you choose.

Many Brokers feel that their personal integrity requires that they work within an "Agency" relationship with their clients, always pursuing their client's interests first. The advantage to the Transaction-Brokerage relationship is that the Broker can "double-end" the deal and bring buyers who have hired him into homes he has listed. This scenario rarely results in a sale but in the very small percentage of instances where the Broker has listed the one property that happens to be your dream home, Broker earns commission on both ends, but does not pursue your interests or the interests of the buyer. He simply oversees the paperwork and transaction. Usually in this scenario, Brokers under an "Agency" relationship will refer you to another Broker who can represent you, or to an attorney so that both of you have "Agency" representation.

Associate Broker? Managing Broker? Broker Owner? Team? Group?
An Associate Broker is a Broker who has passed all the requirements for licensure in the State of Colorado. Most Brokers are Associate Brokers for their entire careers and are affiliated with a real estate company for Brand Name benefits. An Associate Broker is entitled to start their own real estate company after two years of licensure, and those who choose to can become Broker Owners (or their own real estate company) through the State of Colorado. Most Broker Owners work from home on their own, although some do maintain office space and hire employees. Managing Brokers undergo additional training needed to oversee the business of running a Real Estate office and oversight of it's Associates. Most Managing Brokers do not compete with the Associates in the office, but focus on the business and mentoring aspects of their employment. Teams or Groups of Broker Associates are usually formed within a Name Brand company, joining together to alleviate some of the highs and lows of the real estate market. Usually a group will collectively have several listings and buyers even if one or more of the team individually has none. Teams can become quite large, with a few to several Brokers and many unlicensed (office) assistants. Unlicensed assistants under a licensed Broker Associate can perform most duties that a licensed Broker performs although they have a different level of education and liability.

The Employment Agreements
Brokers have a fine line they must walk until they have been hired by you. When you meet a Broker, you want to ask them questions, get information and learn all you can from them. However, if you have hired someone else, they may not pursue your business and they may have "Agency" obligations to another party.

So how do we find out where we stand? Before soliciting personal information from you about your buying or selling interests, a Broker must let you know about the different types of relationships available with a Broker and where their own obligations lie. The first correct legal form for doing this is a "Definitions of Working Relationships". You will most likely come across these when you make an appointment with a Broker, in an open house setting or when you make an appointment to see a home for sale with the Listing Broker. You may additionally expect the Broker to ask you to sign a "Brokerage Disclosure" which will inform you of the Broker's relationship with relevant parties and which will clarify that Broker's relationship with you. You want to read these documents carefully, but you do not have to sign them. Brokers may choose to not provide services to you without your signature. Get copies of any documents you do sign. You may find that you have established a relationship with this Broker if you sign as anything other than a "customer" OR if you do not sign, but let the Broker provide services to you such as property searches and tours.

Always ask, if you are unsure, "Does signing this mean I am obligated to work only with you and your company?". It is not a good sign if these papers have been presented to you without a careful explanation.

The real employment contracts are the "Exclusive Right to Sell" and "Exclusive Right to Buy" contracts. They are legal documents and are legally enforceable and often indicate that you will owe money to the Broker unless THEY fail to provide contracted services by the negotiated date. There are other employment agreements, but they are less exclusive and can allow you to work with more than one Broker. However, it is the "Exclusive" agreements that are most often signed, because few Brokers are willing to invest their capital and time on your behalf without them. They bind you to that Broker and have definite termination dates and conditions, which you will negotiate and discuss with the Broker before you choose to sign. These agreements are as legally binding and serious as I am making them sound, so read them carefully.

Is the Listing Broker the Selling Broker?
A listing Broker is the Broker you have chosen to help valuate, market and represent your interests in the sale of your property. They will be conducting the analysis necessary to make sure your home is properly priced and will be involved with your overall pricing strategy, they will market your home - what "marketing" means varies tremendously between Brokers - they will keep you informed and negotiate on your behalf regarding the price and terms of sale. The listing Broker puts your goods on the sale shelf, so to speak.

The Selling Broker is the Buyer's Broker, who has been contracted by the Buyer to find a home suitable to their tastes and price. When this Broker shows up with her client's offer for your home, she is the party who sold your home, should you ultimately accept the offer.

As a result, your listing Broker shares his commission with the buyer's Broker. Know what this commission split is and whether the split makes your home more, less or equally inviting to buyer's Brokers. Virtually all homes are ultimately sold by a buyer's Broker, so they are very important people to you.

Help! Part of my Home's Equity is becoming a Broker's Paycheck!
This is how it generally works: you find a professional Broker who has impressed you with her market knowledge and ability to market your property, you like her company and responsiveness and you have decided to enter into contract with her to sell your home. But you wonder why are you paying so much for her services?

First, bear in mind that you are paying two Brokers. Your listing Broker is paying the buyer's Broker for bringing a buyer to the house. Remember that buyers are consumers and they need to have someone representing their interests in this deal. Legally, if your listing Broker handles the transaction for both you and the buyer, your listing Broker automatically becomes a Transaction Broker for both of you. Legally he may not represent either of your interests. Oddly enough, this is the only situation in which a Broker can earn both the listing and selling commissions - thusly "double-ending" the deal. So, (hopefully!) you are paying two salaries with this one commission.

Second, bear in mind that if you have made the appropriate hiring decision, your home is about to be mass-marketed throughout Colorado and the World, at no up-front expense to you. You have given the listing Broker an item to sell (your home) and it's their job to hustle. Your Broker will be paying for print, internet and mass-mail advertising; there will be photography and virtual tour expenses; your agent may be marketing your home with it's own website; there may be special signage purchased; there will be expensive color brochures and cards printed and there will be hours and hours of talking with other Brokers at Realtor meetings telling buyer's Brokers about your home, open houses and at the end, hours of negotiating the offers that come in and oversight of the closure. (Closings are also the responsibility of the listing Broker.) Before the sale, your Broker believes in the product (your home) so much that she will end up spending a significant portion of the commission on marketing. (This is an area to be VERY clear on before signing the "Exclusive Right to Sell". Know exactly what marketing will be done. Do not feel good about any evasiveness.)

Third, most folks may not realize that the vast majority of Brokers are completely independent contractors, working within a larger company and receive no income or leads from that company. In fact, the opposite is true. For the privilege of working for a Brand Name company, brokers pay rent for their office space, pay to use the phones, copy machines and pay through a fund for joint advertising for the Brand Name, for reception services; and all of their contracts are owned by that company. Should the Broker meet with death or accident, your contract is not terminated; someone else within the company will take over the listing (same with buyer's agreements). Your contract is with the Broker and their company, but is ultimately with the company.

So, a Broker is a small business within a business and a significant amount of the Broker's commission goes towards the overhead associated with running a business. She buys computers and programs, hires IT people when computers crash, pays for signs, memberships in professional organizations and ongoing training, maintains websites, markets her services through her personal advertising. Be sure to know what level your Broker is operating at and compare that with the level of service and marketing you expect. Some Brokers run incredibly visible "fast-food-chains" that are so slick you feel awed when your Broker even speaks to you; others have a barely-there advertising and internet presence and will meet you at coffeeshops or at their house. Know your own comfort zone in terms of personal service and professionalism, because you cannot get gourmet service from a fast food chain or a dive.

Last, most Brokers split some of the commission they receive with their company, and some Brokers split significant amounts. It's a personal decision for a Broker to disclose this proprietary figure to you, but 99 times out of a 100 the Broker in front of you does not receive his full commission.

So for the average Denver Metro area transaction, say $250,000 home sale, you, the seller are going to pay an average of 6% in commission, amounting to $15,000. Although the perception is that the Broker has just earned enough for her child to attend private school that year at a premiere academy, the Broker will typically pay 2.8% of that commission to the buyer's Broker (or more); split her commission with her company; pay her overhead; and compensate herself for marketing expenses; pay taxes and walk away with what probably now seems like a much fairer paycheck for her investment in you and for her labor.

Last, sometimes it is helpful to remember that everyone paid to do a job costs someone money. While it may not be necessary to pitch your services to your employer everytime you receive a paycheck, or justify your cost on a regular basis, all employees contribute to the profit and take from the profit of employers. Having said that, make sure you get your money's worth!

More about Commissions: What about For Sale by Owner!
Think about it: you still have to pay a buyer's Broker 2.8% of the sale price, you have to market and advertise your property - much more so in fact because you are not working with the people who sell houses - BROKERS - and you may not be participating in the critical information share: the MLS. You are doing something for the first time, without real guidance, help or full information - and you're doing it with your largest asset. If you are in the 20% of folks who are successful at doing it yourself, you will not save yourself much after you have paid the do-it-yourself company, paid for marketing, cost yourself some bucks at the negotiating table, and have paid the buyer's Broker.

Let me break down and say how much I relate to do-it-yourselfers: there are two things that are really troublesome for me and the first is wasting time, the second, wasting money. I relate to refusing to pay someone to do something that I can theoretically do myself. If you are really going to go that route, break down and get a license. They are time-consuming and it takes work, but it costs less than paying the Do-It-Yourself company?s charge of $2500 and you can list on the MLS. 80-plus percent of the people who do it themselves that end up paying a Broker on top of the D-I-Y expenses, plus paying for any marketing they did. That means 80% of us rogue do-it-yourselfers end up paying more - and take much longer - to sell their property than those who hired a Broker first. In the end, you have an 80% chance of costing yourself more time and money.

Discount Commission?
Aside from the interesting oxymoron this phrase presents, this is not a bad idea. Right now, there is a TV commercial likening discount brokers to do-it-yourself companies. In fact, this is a tough market for Brokers. The average commission has slipped from 7 to 6 percent and it may slip further. Brokers are found discounting their commissions so that they can pick up business. This does not imply you are hiring incompetence. You can see from the initial commission discussion that your Broker is making a profit and depending on your home's price, there can be room to cut. However, there is not a lot: at some point, something has to give in the area of marketing, overhead or commissions paid to Buyer agent. All three hurt the seller.

The point is to price the house right, do a great marketing campaign, get buyer's Brokers in the door, negotiate the offers and go to closing. When talking commissions with your Broker, remember that large discounts will end up costing you, whether it's a cut in house price after three months of lousy marketing or a loss of personal service because your Broker needs to have twice the listings to make up for the discounts he offers.

That is not to say all offers of a discount represent a true interest in being of service to you. Be on guard with Brokers offering too-good-to-be-true specials - your 3.8 percent commission may only cover a sign in the yard, black and white photocopies in the box and a big ad in the newspaper, advertising the Broker's low commission! Also be wary of "guarantees" that your home will sell within a given time frame. Should you not be satisfied, once your house has been marketed, it can be hard to regain the interest of buyer's Brokers. The bottom line is that catchy "fetches" for your business usually have something wrong with them.

The key with discounts is to make sure you receive the same level of service and marketing as you would receive were you not receiving a discount. If you feel subject to your Broker or are not absolutely sure that your home is going to be properly marketed, take an extra week - reconsider. The right Broker is out there for you and it's best to proceed with them than without.

I hope this brief review has been helpful to you. If you have additional questions that I can answer, please feel free to give me a call at (720) 275-3926.

Your Personal Real Estate Information Source,

Marie de Espinosa

Integrity, Insight, Results!