What exactly is a transactional real estate agent?

Unlike a realtor, a transactional real estate agent is a more affordable alternative in helping you buy a home.

When purchasing a new home, there are many professionals who can help you go through a smooth transaction. But hiring them can be costly. Unless you can negotiate for the seller to pay for your agent’s commission, you will have to keep a close eye on your budget.

Lately, transactional agents are becoming more popular as they offer similar services to a buyer’s or seller’s agent at a lower cost. Because their roles vary from state to state, many home buyers still have them confused. What exactly do they do? And do you need to hire one when you buy a home?

In this article, you will have answers to the following questions:

What is a transaction broker?
What do they do?
What is the difference between them and buyer’s or seller’s agents?
How do they earn commission?
Is it legal to hire them?
Should you hire one?

If you are planning to buy a new home and want to see if a transaction broker can meet your needs, then read on to learn more.

What Is a Transactional Real Estate Agent?

What is a transaction broker in real estate? Also known as a transactional real estate agent, a transaction broker is a third-party resource in a property transaction. Their main goal is to complete real estate transactions. They do this by helping the buyer and seller come to a mutual agreement on the terms written in the Contract of Sale during closing.

Unlike a real estate agent, which represents either the buyer or the seller, a transaction broker is legally neutral. They are not considered dual agents either. But like real estate agents, they must have obtained their license from the state. They are also still bound by the same standards as a real estate agent that represents buyers and sellers. And they are required to complete a formal training program and pass the licensing exam.

Transaction brokers either work for a brokerage firm or run their own real estate business. Because they do not represent either the buyer or the seller, they can provide both parties with information and advice. They generally act as mediators between the buyer and seller.

Instead of negotiating for either party, transaction brokers assist both of them in closing the deal. They are in charge of coordinating the details of the sale instead of negotiating between the two. This means providing the same information and advice to both parties.

Transactional brokerage can vary depending on the state. In Alabama, Colorado, and Florida, for example, if a buyer does not sign an agency agreement with an agent, then that agent is a transaction broker. As of this writing, some US states like Texas do not allow transactional agents yet. You can check with your state’s or local legislature about the legality of this service in your state.

What Does a Transaction Broker Do?

A real estate transaction broker provides advice and assistance to both you and the seller. Using their skills, care, and due diligence, their goal is to help you and the seller come to an agreement on the terms of your contract during closing.

Here are some of the specific transaction broker duties that help buyers like you:

Assists the buyer in preparing an offer on a house
Relays communication with the seller
Verifies ownership of the property by producing a title
Writes the Contract of Sale
Accounts for all of the funds involved
Coordinates the transaction from accepting the offer until closing
Reveals any repairs or problems that you might not have observed and that may affect the material value of the property

Of course, as a neutral agent, it is their responsibility to help the seller as well:

Assists the seller in setting a competitive asking price
Relays communication with the buyer
Writes the Contract of Sale
Accounts for all of the funds involved
Coordinates the transaction from accepting the offer until closing
Discloses if you can afford to follow the terms of the sale

When you hire a transaction broker, you and the seller you are negotiating with will waive your rights to the broker’s undivided loyalty. Because they are not representing either party, they are not allowed to favor you over the seller and vice versa. It is their responsibility to manage the deal in an honest and fair manner. They are also not allowed to negotiate on your or the seller’s behalf.

What Is the Difference Between a Transactional Real Estate Agent and a Buyer’s or Seller’s Agent?

Both transaction brokers and real estate agents went through the same formal training and passed the same licensing exam. This is why they both follow the same standards. But transaction brokers are not required to have loyalty, confidentiality, and obedience to the client in doing their jobs.

To become a transaction broker, real estate agents must go back to school after having one to three years of work experience in the industry. A transaction broker is also licensed to run their own business and work by themselves, while a real estate agent must work with a real estate broker.

A transaction broker usually manages their own firm and has real estate agents as employees. Thus, there are cases when a client of theirs would like to purchase the home of a seller who also happens to be another client. In such scenarios, the transaction broker offers to assist both parties in managing the details of their transaction. Both buyer and seller can have their own real estate agent and also hire a transaction broker in facilitating the deal.

A transaction broker mainly does not negotiate on behalf of their client, while a real estate agent represents you or the seller in securing a better deal.

They also have no implicit confidentiality since they are not representing either party. So any information that you tell them could be disclosed to the seller. For example, if you tell the broker that you are willing to go higher than your budget, they can share that with the seller you are negotiating with.

A transaction broker charges a flat fee, while real estate agents charge a commission. This is why transactional brokers are considered lower-cost alternatives to real estate agents.

Lastly, a transactional real estate agent can help you prepare an offer on the house that you wish to purchase. However, they are not allowed to give you advice on what to negotiate in case there are other interested parties who put in their own offers.

How Does Commission Work for a Transactional Real Estate Agent?

Learn about transactional real estate agent commission

Instead of commission, a transaction broker fee is a fixed amount that is charged out of closing the deal from both parties. You will know what the exact amount is ahead of time, so feel free to shop around and compare fees before signing with a broker that you like.

Because of this, people think transaction brokers are more affordable than real estate agents. As a buyer, you can use this as a bargaining chip during negotiations, since you and the seller do not have to lose out on more money paying for commission. Of course, this will only apply if you each did not hire an agent to represent you in the transaction as well.

The reason transaction brokers are paid a flat fee is because of the nature of their job. As a neutral resource between buyer and seller, they do not have fiduciary duties toward either party. This reduces their liability.

They also have more flexibility in offering the exact service that you need and are charging accordingly. Whereas real estate agents often provide a complete package of services at a fixed cost.

Is It Legal to Hire a Transactional Real Estate Agent?

Many confuse a transaction broker with a dual agent. The latter represents both the buyer and the seller. Meanwhile, the former is neutral and is only interested in making sure that the details of the sale are complete, accurate, and agreed upon by both parties.

However, several states have declared dual agency illegal and replaced this function with transaction brokerage. As of this writing, transaction brokers are legal in about 30 states like Alabama, Colorado, and Florida, but they are not yet legal in several other states like Texas.

If you are not sure if transaction brokerage is legal in your area or not, contact your state’s legislature.

Should You Hire a Transactional Real Estate Agent?

Transaction brokers follow legal and ethical codes so they can work in an honest and fair manner. So you do not have to worry about them not being on your side when they are not on the seller’s side either. All that matters to them are that the legal requirements are complete and that you and the seller have come to an agreement.

You should consider hiring a transaction broker if:

You do not need someone to negotiate on your behalf. One example is if you are going to purchase a family member’s home at a price that you both agreed beforehand. In this scenario, you will only need someone to draw up the paperwork.
You already know how to handle real estate transactions, but you need to delegate the deal management to someone else. If you are an experienced real estate investor, a transaction broker can help you oversee your deals while keeping your expenses low.
You want to save time and money. Negotiations take a lot of time and may take even longer since communication is done through agents. Having one person facilitating the deal can speed up the process.
Your agent is working in the same firm as the seller’s agent. In this case, either the managing broker will step in as the transactional broker, or either of your agents will change their role to transaction broker.

If you already hired a real estate agent, you can still change their role to transaction broker anytime. You must simply provide written consent stating the change in your working relationship.

Make sure that the transaction broker you hire specializes in both buying and selling so that you will not be at a disadvantage. Also, they will need to provide a written disclosure that spells out their duties to you and to the seller you are dealing with. Note that this only applies to residential property transactions and may vary depending on the state that you are purchasing a home in.

Conclusion

A transactional real estate agent can help you close the deal on your home purchase at a lower cost compared to a buyer’s agent. As a neutral entity that represents neither you nor the seller, they work to make sure that the transaction closes with terms that both parties agree with.

Unlike a buyer’s agent, a transaction broker is not allowed to negotiate or give you advice on how to negotiate. They have to abide by an ethical code that should help them administer a fair deal.

The reason why many are opting for a transaction broker is because of the lower cost. Instead of charging a commission, they charge a flat fee that you can know about ahead of time.

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What Exactly Is a Transactional Real Estate Agent?