2.3 Transaction-Broker Relationships

Transaction-Broker Relationships

The transaction-broker is the relationship Colorado created in 1994 to replace dual agency, and it is the default whenever no written agency agreement exists (C.R.S. 12-10-407). Mastering it is essential — it appears repeatedly on the state portion.

What a Transaction-Broker Is

A transaction-broker:

• Assists both parties in completing the transaction.
• Is not an agent of either party.
• Does not advocate for either side.
• Remains neutral throughout.
• Owes limited statutory duties, not fiduciary duties.

Transaction-Broker vs. Dual Agent

Key Distinction: A transaction-broker has no fiduciary duties — only defined statutory duties. This sidesteps the impossible conflict of dual agency, where one broker tries to owe undivided loyalty to two opposing parties at once.

How a Transaction-Broker Relationship Arises

By Default

The relationship arises automatically when a broker works with a party without signing a listing or buyer agency agreement. No paperwork is required to create it, though the broker must still disclose the relationship in writing at the earliest reasonable opportunity using the Brokerage Disclosure form.

By Written Agreement

Parties may also choose transaction-brokerage in writing, which is common when one firm works with both the buyer and the seller and neither wants single agency.

Statutory Duties of a Transaction-Broker

Under C.R.S. 12-10-407, a transaction-broker owes both parties:

Note how these mirror the duties a single agent owes to everyone — honesty, presenting offers, disclosing adverse facts — but without loyalty, obedience, or advocacy for either party.

What a Transaction-Broker Cannot Do

No Advocacy

A transaction-broker may not:

• Advise either party on negotiation strategy.
• Tell the seller what price to accept.
• Tell the buyer what price to offer.
• Suggest terms favoring one side over the other.
• Help one party gain an advantage over the other.

Confidential Information

What a Transaction-Broker CAN Provide

The broker is neutral but not useless. A transaction-broker can:

• Provide factual market data (comparable sales, days on market).
• Explain the process and the standard forms.
• Provide property access and help complete Commission-approved forms.
• Coordinate inspections, appraisals, and closing logistics.

Exam Tip: The classic trap — a transaction-broker learns the buyer can afford far more than the offer. The broker must keep that confidential. Telling the seller, or coaching the buyer to offer more, would be unlawful advocacy.

In-House Transactions and Liability

When one brokerage works with both the buyer and the seller, Colorado provides three lawful paths:

Transaction-brokerage is usually the simplest in-house solution because it avoids the information walls that designated brokerage requires.

Liability

Neutrality is not immunity. A transaction-broker still faces discipline and liability for:

• Failing to disclose adverse material facts.
• Misrepresentation or fraud.
• Failing to present an offer.
• Trust-account (Rule F) violations.
• The unauthorized practice of law (e.g., drafting custom legal clauses beyond filling in approved forms).

Exam Tip: "No fiduciary duty" never means "no duty." Disclosure of adverse material facts, presenting all offers, and proper accounting are owed even by a neutral transaction-broker.

Changing or Combining Relationships

A broker can move from transaction-broker to single agent only by signing the appropriate written agency agreement — and must then give that client full fiduciary duties going forward. A broker generally cannot switch a single client into transaction-brokerage mid-deal without informed written consent. When a transaction-broker who started with the seller later begins assisting the buyer in the same deal, the neutral transaction-broker posture toward both must be clearly documented.

Why Colorado Chose This Model

Colorado adopted the transaction-broker default to give consumers competent help without forcing brokers into the conflicted, often-litigated posture of dual agency. The neutral facilitator can shepherd a deal to closing while protecting each side's confidential information — a balance the legislature preferred over trying to make one broker loyal to two opponents.

Exam Tip: A transaction-broker may serve both parties at once precisely because it owes loyalty to neither. That is the structural reason Colorado treats it as the safe default.