When you decide to work alongside a real estate broker to sell your home, signing a brokerage contract is an essential step that establishes your professional relationship.
This contract, developed by the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ), is designed to provide maximum consumer protection. It covers essential details such as the property specifics, the sale terms, the broker’s compensations, and it outlines the broker’s responsibilities to the client.
Prior to finalizing the brokerage contract with a real estate broker, it’s important to make sure you are fully informed. Here are 5 things you should know about your mortgage contract.
1. You brokerage contract can be exclusive or non-exclusive
When you sign a brokerage agreement with your real estate broker, you’ll need to decide between an exclusive or non-exclusive contract for selling your property. The distinction between the two is significant.
Opting for an exclusive brokerage contract gives your broker the sole authority to act as your intermediary during the sale process. This means they are the only agent authorized to sell your property, and other brokers cannot approach you directly.
However, you have the freedom to contact another real estate agent for the purchase of a property, as the scope of each contract is distinct.
Choosing an exclusive brokerage contract motivates your broker to put forth maximum effort, as they are assured a commission upon successfully finding a buyer.
In contrast, opting for a non-exclusive brokerage contract provides you with flexibility. You can either find a buyer on your own or work with a second broker.
In this scenario, your real estate broker doesn’t have a guaranteed commission upon completing the sale. As a result, they may invest less effort compared to when they are bound by an exclusive brokerage contract, where their focus is on securing deals that ensure their income.
2. Your brokerage contract can be revocable or irrevocable
This distinction between a revocable and irrevocable contract is essential to understand, as it determined whether you have the flexibility to cancel the contract before its expiration date. However, terminating a revocable contract may still involve reimbursing the broker for any advertising costs incurred.
Opting for a revocable contract allows you the advantage of terminating the agreement if you decide to keep your property or if you're unsatisfied with your broker's commitment. Although rare, the broker can also opt to terminate the agreement.
On the other hand, an irrevocable brokerage contract is one where the agreement cannot be terminated by either party before its expiration date, except under specific conditions outlined in the contract.
This type of contract typically requires a high level of commitment from both the seller and the broker throughout the entire duration of the agreement.
3. You can negotiate your broker's commission
A broker's commission in real estate transactions is always open to negotiation! However, it should ideally be negotiated before signing the brokerage contract to establish clear terms upfront. Typically ranging from 4% to 7%, the commission of a real estate agent can be influenced by various factors:
- The condition of the house; whether it’s new or recently renovated.
- The type of property being sold.
- The current market demand and conditions
- The listing price set for the property.
- The desirability of the property’s location.
The more compelling your arguments are for achieving a quick sale, the better your chances of negotiating a lower commission. Real estate agents are motivated by efficiency, so a swift sale benefits them by allowing them to focus promptly on other transactions.
On the other hand, reducing your real estate agent's commission may come with trade-offs in the level of service provided. A significantly lower commission could mean less visibility in advertising or less time devoted to your sale project by your broker.
While negotiating commission fees is common among clients aiming to save money, there are alternative strategies to save money. For instance, some brokers may offer additional services, such as providing a free professional advisor to enhance your property’s appeal to potential buyers.
It’s essential to maintain open communication with your broker to discuss these options and identify ways to maximize the value in your real estate transaction.
4. You have 3 days to cancel your brokerage contract
According to the Real Estate Brokerage Act, sellers are granted a 3-day window after receiving a signed copy of the brokerage contract to cancel it. This period, known as the right of withdrawal, allows clients to terminate the agreement with their broker without needing to provide a reason or offer compensation.
The cancellation must be communicated to the broker in writing to formalize the withdrawal from the contract. Indeed, the OACIQ recommends sending the notice of termination via registered mail to ensure proof of delivery within the specified timeframe. It’s important to note that this right applies regardless of whether the brokerage contract is revocable or not.
It's important to be aware that if the house is sold within 180 days after the cancellation of the brokerage contract to a buyer who initially showed interest during the contracts' effective period (within the initial three-day period), the broker may still be entitled to a commission. This is contingent upon the broker being able to substantiate the buyer's interest, often through records such as visit logs or communications.
However, there is an exception to this rule if the client subsequently signs an exclusive brokerage contract with a different real estate broker. In such cases, the original broker may not be entitled to a commission, unless it can be proven that the client acted in bad faith.
5. You can choose the duration of your brokerage contract
You have the flexibility to determine the duration of your brokerage contract. While standard contracts often span six months, you can negotiate for a shorter period, such as three months.
This flexibility is advantageous, especially if you prefer a more proactive broker who has a reputation for swiftly selling properties.
Cover photo: Deposit Photo
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