A real estate brokerage agreement is a contract formed between a broker and their client. Here, the contract is usually between only one broker and their client, although other parties may be involved. The brokerage agreement is not the same as a home sales contract, which deals with the actual property transaction.
Instead, the brokerage agreement or broker agreement describes the duties that the broker has towards the client. It also lists the client’s duties, such as the duty to pay the broker. Thus, broker agreements are often formed well before the client is even close to purchasing a home.
Brokers handle many different tasks for their clients. These can vary depending on the broker’s background and specific focus. Their duties will also differ depending on whether the broker is representing a client who is a seller versus a client who is a buyer.
Generally speaking, the brokerage agreement may contain important terms such as:
- Terms regarding property listings
- Obtaining loans or financing for the client
- Viewing and presentation of property
- Whether the broker has exclusive rights over the client’s interests
- A clause describing methods for resolving potential disputes
- Payment methods and interest rates
Various other terms may be included as well. Some brokerage firms may use standardized contract forms. However, some situations may require an individualized contract.
Violations of broker agreements can happen many different ways. For the client, the main source of a breach of contract occurs due to a failure to pay the broker on time or according to the amount listed in the contract. Another form of breach is where the client begins working with another broker when the contract has provided exclusive dealing rights for the broker.
For the broker, a common breach of agreement is where they don’t exercise enough diligence in their efforts. For instance, if the broker is lax in placing listings for the property, or if they do not keep up with buyer offers, they could be held liable for a breach. Real estate fraud can also negatively affect the broker’s contract rights.
In such cases, the non-breaching party may be awarded damages to pay for financial losses. The amount awarded will depend on several factors including market values and the terms of the contract.
Brokerage agreements are very important for the process of selling or buying property. However, they can often be complicated and may require the assistance of a lawyer. You may wish to hire a real estate lawyer if you need help with a brokerage agreement. Your attorney can assist you with steps such as negotiating, drafting, reviewing, and finalizing a contract. In the event of a legal dispute over contract terms, your lawyer can represent you in a court of law.