What is a Transaction Broker And When Should You Hire One?

The PropertyClub Team
Sep 30th 2020
With certain real estate deals, you might be able to save money by hiring a transaction broker instead of a traditional agent. So what exactly does a transaction broker do and should you hire one?

While the vast majority of brokers represent either a buyer or seller in a real estate deal, there is a specific type of broker that does not represent either party. This kind of agent is known as a transaction broker and can be useful in certain situations where a traditional agency relationship is not needed. A big benefit of transaction brokers is that they charge a flat fee instead of a commission, and can potentially save the buyer and seller a lot of money.  

Here is everything you need to know about transaction brokers.

What is a Transaction Broker?

A transaction broker is a licensed real estate agent who is a neutral third party in a transaction. He or she provides services to facilitate the closing of a deal but does not act on behalf of any particular client. The transaction broker’s primary job is to assist with tasks that may be difficult for a buyer or seller to perform on their own. However, he or she is expected to refrain from offering either client any advice on the sale or otherwise influencing the transaction. Some common tasks transaction agents perform include:

  • Determining a reasonable listing price for a property
  • Preparing offer letters and sales contracts
  • Handling communications between the buyer and seller
  • Assisting with the closing

Keep in mind that a transaction broker is not the same thing as a dual agent. A dual agent represents both the buyer and seller. This means he or she takes on the responsibilities of a transaction broker and will also act on behalf of both clients to negotiate favorable terms. That being said, in some states, such as Florida, dual agency is illegal and transaction brokers have essentially replaced dual agents. 

Are Transaction Brokers Legal?

Transaction brokers are legal in most states, but not all. While you can find transaction brokers in approximately 30 states, you'll most commonly see them used in states like Florida and Colorado, which were some of the first states to legalize transaction brokers. 

Key Differences between a Transaction Broker and a Buyers/Seller’s Agent

Here are some of the most important differences between a transaction broker and a traditional buyer or seller's agent. 

A Transaction Broker Does Not Negotiate for A Client

One of the benefits of hiring a real estate agent is that they can negotiate on your behalf to secure a better deal. A transaction broker is a neutral party and therefore, will not attempt to influence the sales price in any way beyond suggesting a competitive market value for the property. Therefore, when using a transaction broker, clients must negotiate on their own if they want a better deal.

There is No Implicit Confidentiality

Because the transaction broker does not represent either client, any information shared with the agent may be made public. Say the buyer tells the transaction broker, he is offering a certain amount but is willing to go higher. The transaction broker is not required to keep that from the seller because he or she does not represent either client. It’s up to the broker’s discretion whether or not to share this information. But just know that fiduciary duties are limited because the transaction broker is a neutral party.

Transaction Brokers Often charge a Flat Fee

Many transaction brokers charge a flat fee to facilitate a transaction, rather than charging a commission. This is because the agent is more of a middleman than a broker in the true definition of the word. It all depends on the brokerage you hire. But in general, it will either be a flat fee or a small commission charged to both parties.

When is a Transaction Broker Helpful? 

A transaction broker is helpful when neither client needs a broker’s guidance to handle the transaction, but they need their knowledge and help manage the deal. Perhaps you’re selling a property to a friend or family member, and you don’t need help with marketing or negotiation. But you do need advice on a proper listing price and valid contracts to officiate the sale. Or maybe you and your buyer are both real estate pros and don’t need the advice. But you do need a neutral party to make sure the sale is handled fairly. These are both scenarios where a transaction broker may come in handy.