Inside Real Estate: Brokerage Obligations

Real estate brokers have different obligations in different relationships. I as a broker have the fewest obligations to a customer and the most obligations to a client. However, I do have responsibilities to customers.

When I am a Colorado real estate broker, and you are a customer, I owe to you all the obligations owed under state and federal consumer protection laws. I owe you:

(1) Honest and fair dealings—For example, this means that if we are trying to work a deal together, I must tell you if I am an agent for someone else in the same deal, so that you don't tell me information that I can use FOR my client.

(2) Reasonable care and skill in performance—For example, if you give me a "good faith deposit," I must be very careful to deposit it into an appropriate trust or escrow account.

(3) Disclosure of all material facts about the property that I know or that I should have known—For example, if the property has a house built before 1978 and there is a possibility of lead-based paint, I need to tell you about that possibility as well as give you federal information.

When I am a Colorado real estate broker, and we are in a transaction broker relationship, I still owe you the same obligations I owe to a customer. The examples may be different, but I still need to treat you ethically and responsibly. In addition to those obligations, I owe you:

(1) Performance of the terms we set in the written agreement—For example, I will present all offers to you and help you fill out any Colorado Real Estate Commission approved forms.

(2) Neutrality and confidentiality—I may be working with another person as a transaction broker in the same purchase, so I need to advocate for neither and neutrally help both parties. I also need to not disclose to either party confidential information about the other party. What you tell me, stays with me and what the other person tells me, stays with me. However, in following "disclosure of all material facts," including information about the seller’s property, I must disclose a buyer's financial ability to complete the transaction and whether the buyer intends to live in the residential property.

(3) Assistance with closing—For example, I will help organize a list of deadlines so that obligations can get done before the closing.

When I am a Colorado real estate broker, and I am an agent for the seller or the buyer, I still owe the same obligations as to a customer. I also owe you all the obligations in a transaction brokerage, except for neutrality. I go beyond neutrality and I work FOR you. I work hard to fulfill the terms of our contract. I advocate for you, which means I encourage and protect your interests with maximum loyalty and faithfulness. My focus becomes figuring out the best way to solve any issues and presenting that information to you. I spend lots of time and effort trying to accomplish the goal of the contract. I also want to give you any knowledge, experience, and advice that will help you along the way.

The best reason to have an agency relationship - to be my client - is to have an ally during a very complicated process that involves a lot of your money. An advocate is someone who stands beside you and fights for you. I would also want to make sure that you understand everything as things happen. I absolutely hate buying or selling houses when I'm surprised about what's happening. I really want to know BEFORE it happens. By the way, something interesting about Colorado real estate law is that I can be a buyer's agent and get paid by the seller, so it may not cost the buyer any extra to have my help.

In case you want more information about Colorado real estate working relationships, you can also look at Chapter 14 of the 2009 Colorado Real Estate Manual.

Inside Real Estate: Brokerage Relationships

There are three main types of relationship someone (who could be an individual, more than one person, a partnership, and a company) can have with a Colorado real estate broker.

In plain words, these are the three basic ways I as a broker can have a working relationship with you, and the obligations I have to you based on that relationship.

The first type of relationship is when you are a customer. If I meet you and I don't know your name, or I meet you when I am working as an agent for someone else, you are a customer to me. We do not have any written agreement.

The second type of relationship is when I am an agent. I may be a seller's agent or a buyer's agent, but we have a written contract and I have obligated myself to "represent you" or work FOR you. You are my client (or principal, or other similar term), and I may not necessarily get paid by you, but I will work on your behalf.

The third type of relationship is when I am a transaction broker. There may or may not be a written contract and the relationship is in-between a customer and a client. If there is no written contract and I am working with you in some way, Colorado considers the transaction-broker relationship as the default way that we are working together.

You don't get any special designation if you are in a transaction brokerage relationship with me or any Colorado real estate broker, although maybe the law will eventually come up with a name besides "party." However, I have more obligations to you when you are a party than when you are a customer.

Inside Real Estate: Water in Colorado, part 3

There are two more things I want to share with you about water in Colorado. The first is that the Colorado Division of Water Resources has a lot more information. It is also the "Office of the State Engineer" that "administers water rights, issues water well permits, represents Colorado in interstate water compact proceedings, monitors stream flow and water use, approves construction and repair of dams and performs dam safety inspections, issues licenses for well drillers and assures the safe and proper construction of water wells, and maintains numerous databases of Colorado water information."

The second thing is that there are attorneys in Colorado who specialize in water rights and uses. If you are buying land that needs irrigation or has a well, you might want to get help with it. If you go to the Colorado State Bar Association directory and look up "Water Law," attorneys are listed.

Inside Real Estate: Water in Colorado, part 2

In the Colorado Constitution, Sections 7 & 8 cover the "right of way" across land for constructing waterways for those mentioned uses, and establishing rates for water use. Obviously lots of tweaking has occurred with water rights since 1876, but the state still has a tight hold on water. Since the public owns the water, people only get the right to USE the water and only if it's for an ACCEPTABLE USE. Also there is a "pecking order" of who gets to use water, like from a river, before other people get to use it.

This means that in order to do something like build a water fountain in your backyard, unless you want to use your domestic, drinkable water, lots of issues would need to be addressed first. You would definitely need a permit. Whether or not you could get a permit would depend on if you were disturbing a shallow water table beneath your yard, if you even have the right to store water, if you would be "impounding water" (like a dam) above the ground's surface, where you would get the water for filling the fountain, etc.

In another example, let's say you wanted to buy a house with a plot of land or a farm with some acreage. You'd need to make sure you understand where the potable, or drinkable, water comes from. If you are interested in real estate, make sure you notice on the listing contract, the sales contract, and/or the seller's property disclosure information about the water source. The drinkable water could come from a well, a company or municipality, or neither, in which case the water source has to be mentioned. For example, it could be a cistern that you need to refill by hauling water in a tank with a truck. If other water is needed for animals, gardens, or fields, it is important to find out if stocks are needed to purchase the use of that water, whether it comes canals or ditches, and whether using that water involves an additional purchase and real estate deed. Water doesn't automatically go with the land; it's treated as a separate transaction.