Known by many names in different states, and not applicable in several states, the Transaction Broker option or "TB" as it is often called today, works to fill two voids. It is generally utilized where a "neutral" party is required. The default "neutral" position for those that do not have an agency relationship with either the buyer or the seller, or for those individuals or offices that had an agency relationship with both sides and, having sold their listing to a client, need to be "neutral" In most of the states that use it, it is the default position, replacing the much misunderstood automatic "sub-agent" status or the often difficult "dual agent" status.

The Selling Agent

While most of the country has eliminated sub-agency we still remember that little fiction. For rookies, the selling licensee (person working with the buyer without a buy agent agreement) sold a listing from another office. That selling agent worked with "his/her people" to make the deal close. No one was told that the selling agent was a sub-agent (secret agent) of the seller. Yes, that actually happened. Ask your parents.

When sub-agency went away the "selling agent" needed to be something. The obvious option of buyer's agent fit a lot of transactions well. The person working with the buyer was the agent of the buyer, a buyer's agent. However, in some states before you could be a buyer's agent you needed a contract. No, not a disclosure, a real contract, like the seller listing contract. That meant that the buyer would have to read and understand and sign something.

Some buyers would not sign a buyer's agency contract. The reasons are many, not to mention the thought of being liable for their "agent" or having to pay an agent. One solution was to make the selling licensee a buyer's agent by statute (law) that would eliminate the need to have a written contract. True, the terms would not be firmly in place. But then there was no need to address compensation either. Many states did exactly that. Some however, like Colorado, said that to be a buyer's agent required a written listing similar to what is required for seller's agents.

Some licensees did not want to be buyer's agents, they just wanted to be brokers and sell real estate. The need for a new, simple form of neutral ground was there - something that would replace, as a default, the old automatic sub-agency. For those buyers that wanted a licensee to assist (not represent) them, the concept of Transaction Broker (TB) came about. Yes, you could just call them "Real Estate Brokers" since that is exactly what a TB is, a real estate broker who does not represent the buyer nor the seller. Sort of the middle ground between seller sub-agency and buyer agency.

Some people say that a TB working with a buyer is really a buyer's agent in disguise. That may be the case. However in those states where it is the default the individual should be neutral, not working for a "client," the buyer the TB is the new standard. The TB system works well were used. It allows a selling licensee to just sell real estate without a contract, only a disclosure.

The Dual Agent

The other place that we find the TB is the "in-company" sale. On the theory that neutral is neutral no matter what the label, some people thought the neutral "Dual Agent" confused the public, not to mention the licensees. This misunderstanding of what a "dual agent" really is still exists. Courts are working hard to make people aware of the risks but it never the less persists.

No one really understands when an agent, "my agent" sells their listing to someone that they represent, the buyer client. The buyer still thinks that they have "their agent" and the seller still thinks that they have "their agent" and the agent still thinks that s/he can represent both people. True representation is impossible, we all know that. It has to be some form of "limited agency" This fiction is a loser in court. The term itself perpetuates the misunderstanding.

All sellers want the listing agent to sell the property. All listing agents want the next purchase of the seller when s/he goes looking for a replacement property to be through them. What was needed was a better term to define "dual agency," the middle person in the in-house or same salesperson transaction. Something that would help to eliminate some of the misunderstanding that the term "dual agent" carried. Enter the Transaction Broker, the neutral party with the neutral name.

An agent (a true agent) is obligated to one party (only one party), the seller or the buyer, and as such tells their client information that would otherwise be confidential (seller is in a divorce, or has been transferred or buyer can pay all cash or will offer more money) to aid that client in getting the upper hand on the other party. Dual Agents can't do that. But no one knows it or wants to understand it. The name is the problem.

In an effort to have truth in labeling, Transaction Broker is used for the old Dual Agency situation. The job is identical, put the deal together without compromising the confidential information of either party. To act neutral, as a broker, for the transaction. As a result the Transaction Broker label was applied to the "in-company" or "same salesperson" sale.

Split Agency

Some states have greatly reduced the opportunities for in-company conflicts by endorsing a "split agency" or "designated agency" concept. Here the listing salesperson and the selling salesperson are considered to be the agents (at the salesperson level not the broker-whole office level) for their respective clients and the broker is the "neutral" party. In such cases, the Broker of the office is the TB and each salesperson "represents" their buyer or seller for the "in-company" sale.

Part II - What Can Transaction Brokers Do?

Published: June 8, 1999

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