Here’s an overview of the role and responsibilities of a transaction broker:
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.
Transaction Brokers Key Aspects
1. Act as a Neutral Facilitator
A transaction broker remains neutral and does not advocate for the interests of either the buyer or the seller. Real estate transaction brokers are responsible for providing information and services to both parties to help facilitate a smooth transaction.
2. Limited Representation
Unlike traditional agents who owe fiduciary duties to their clients, transaction brokers do not have fiduciary responsibilities. They offer a limited form of representation, focusing on the administrative and procedural aspects of the transaction.
Who Does a Transaction Broker Represent?
A transaction broker can represent the buyer, the seller, or both parties. They are most commonly used in 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, which can potentially save the buyer and seller a lot of money.
When to Hire a Transaction Broker
A transaction broker is helpful when clients do not need a broker’s guidance to handle the transaction but need their knowledge and help to 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.
Transaction Broker vs. Dual Agent
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.
1. Transaction Brokers Do 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.
2. 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.
3. 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 real estate transaction broker serves as a neutral facilitator, providing essential services to both the buyer and the seller without representing either party. This role can be beneficial for those seeking a streamlined and cost-effective transaction process. However, it’s important for both buyers and sellers to understand the limitations of a transaction broker’s role and to seek additional legal or professional advice if necessary to ensure their interests are fully protected.