Revocable or irrevocable brokerage contract: which should you choose?

At the heart of any real estate transaction is the brokerage contract, a critical document for all parties involved in the process, whether they are appraisers or individuals. Did you know that this contract can take a variety of forms, including revocable and irrevocable?

When it comes to choosing the terms and conditions of your brokerage contract, you need to pay special attention to the revocability clause. It has a direct impact on the signatory and it's important to know about it so you can make an informed decision.

Let's take a closer look at revocable and irrevocable real estate contracts and determine which one is best suited for your situation.

What is a real estate brokerage contract?

First of all, a real estate brokerage contract is a written agreement between the owner of a property (house, condo, plex, commercial building, land, etc.) and the real estate broker who represents him or her. Its purpose is to define the terms and conditions under which the broker will act as an intermediary for the sale, purchase or rental of the property.

The brokerage contract therefore defines the rights and obligations of the broker towards his client, as well as those of the client towards the agent. It includes terms and conditions relating to:

• The duration of the contract;
• The broker's remuneration;
• The type of mandate (exclusive or non-exclusive).

In short, it's an essential document to establish the partnership between the broker and the client on a clear and precise basis.

Is it mandatory for a sale or purchase?

The Real Estate Brokerage Act is clear on the subject of real estate sales and purchases: it is mandatory to sign a written brokerage contract with the real estate broker who represents you. If you fail to do so, the professional is not authorized to work with you on your transaction.

This obligation applies to any type of transaction involving a real estate agent, whether it is the sale, purchase or rental of a property.

Sample of a brokerage form

If you wish, you can access examples of brokerage forms directly on the OACIQ website. The Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ) is the authority of real estate brokerage in the province.

Revocable brokerage contract: a more flexible option

The revocable brokerage contract is characterized by its flexibility. With this type of contract, the client retains the right to revoke the agreement at any time without having to give any reason. This flexibility can be seen as an attractive advantage, especially for sellers who want to retain control over the process of selling their property.

However, the ability to revoke your contract is still subject to certain clauses that may require advance notice or incur fees.

How do I cancel a brokerage agreement?

Even if it is revocable, a brokerage contract isn’t supposed to be terminated before its scheduled expiration date.

However, article 2125 of the Quebec Civil Code allows a client to unilaterally terminate a service contract. This means that you can cancel the contract at any time and for any reason, unless it explicitly states otherwise, such as "This contract is not terminable".

But beware: you may have to pay certain fees, expenses, or services already provided by the broker. You may also have to pay compensation for damages caused by the cancellation.

Be sure to agree with your broker or real estate agent in advance on the terms of compensation and any fees you may be charged.

Irrevocable brokerage contract for commitment and stability

By mutual agreement, real estate agents and their clients may choose an irrevocable brokerage contract. This type of contract establishes a more binding level of commitment between the two parties, as the client cannot unilaterally terminate the contract at any time.

To be irrevocable, the contract must contain a statement to that effect before signature in clause 11.1 Other declarations and conditions of the sales brokerage contract or in clause 10.1 of the purchase and rental brokerage contracts.

Although more restrictive, an irrevocable contract offers interesting benefits, not the least of which is stability for the agent. Knowing that his efforts and investment of time are protected against unforeseen revocation, the professional will be more committed and motivated to see your project through to completion.

The right of withdrawal to cancel a contract with your broker

There is, however, one exception to the irrevocability of the contract: the right of withdrawal. According to the Real Estate Brokerage Act, a client may cancel a brokerage contract, whether revocable or not, within 3 days of receiving a copy of the signed contract.

This right makes it possible to terminate the agreement with the real estate broker, generally without penalty, if the termination is made in good faith.

However, there are exceptions to this rule. For example, if the property is sold within 180 days of the end of the brokerage contract and a causal link between the transaction and the actions taken by the professional during the validity of the contract is proven.

Photo : Freepik.com (benzoix)

Which type of brokerage contract is best?

Now that you know a little more about these two types of brokerage agreements, should you choose a revocable or irrevocable brokerage contract? The answer depends on several factors.

1. Client goals and preferences

If flexibility is a top priority for your real estate project, a revocable contract may be the best option. This is especially true for sellers who prefer to try different agents or have concerns about the performance of their current broker. 

However, you'll need to discuss this with your real estate agent and find one who is willing to work with this type of contract, which admittedly may be less motivating for the professional than a non-revocable contract.

On the other hand, if stability and long-term commitment are key elements you're looking for, an irrevocable contract can offer you a more solid relationship with your chosen real estate broker. This can be particularly advantageous in competitive real estate markets where the purchase or sale of a property may require ongoing time and effort.

2. State of the local real estate market

The dynamics of the local real estate market may also influence the choice between a revocable and irrevocable contract.

For example, in a fast-moving market where properties sell quickly, a revocable brokerage agreement may be better suited to take advantage of new opportunities quickly. On the opposite, in a slower-moving market, an irrevocable agreement may provide some security, especially if the real estate transaction may take some time.

3. Relationship of trust with the real estate agent

Clients who are already familiar with the process and who have already established a relationship of trust with a real estate agent, for example through a previous purchase, may be more inclined to opt for an irrevocable contract.

On the other hand, someone entering the market for the first time may prefer to have a greater degree of flexibility in working with a real estate broker.

In any case, the choice between a revocable and an irrevocable contract depends on your situation and your goals. It's important to weigh the pros and cons of each option, consider the length of the contract, and make sure the terms match everyone's expectations and goals.

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