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Buying And Selling a House: Creating the Real Estate Agency Relationship

September 15, 2015

For the real estate agent to be considered your agent, you should have a contract with that agent, which both sides should want to be in writing. It is possible for oral contracts to be enforceable, but with a written contract there should be little or no dispute about the terms. The terms of that contract, or agency agreement, are very important, and should not be something you sign without reading and negotiating.

Most people focus first on the fee to be charged by the agent. This may or may not be negotiable. Many agencies have a set fee and will not enter into a contract unless the seller or buyer agrees to pay that percentage fee. Other agencies may be willing to negotiate. One factor that can affect the fee an agent will be willing to accept is the price of the home to be sold or purchased. If you are selling a house worth a million dollars or willing to pay a million dollars for the house you want to buy, an agent may be willing to accept a smaller percentage fee than if the price under consideration were $75,000. If the agent is going to represent you in both selling your house and buying another, that could result in a lower percentage since there will be two commissions paid rather than one.

The amount of work you will expect from the agent can also affect that fee. You need to know exactly what you are getting for that basic fee, and what might result in additional charges. For example, how often will your house be advertised in the newspaper, and will it be advertised on television and/or on the internet? Will the agent hold any open houses? Will the house be placed on a shared listing with multiple real estate agencies? If you’ve hired a buyer’s agent, how much time will he or she devote to the search? Will he or she go to open houses with you, or in your place if you are not available? Does he or she check shared lists and internet ads? Many people don’t know the answer to these questions when they sign their agency agreement and then are disappointed if something they thought would be included costs them an extra fee.

Another factor of major importance in the agency agreement is the duration of that contract. You need to decide how long you are willing to list your property for sale, or how long you are willing to look for a new house. If you only want to sell or buy during the April ­ November season, then you should not sign a contract for one year. If the contract is for six months, but provides that it will automatically renew unless you send notice 30 days before the end, make sure you know the date by when you must give notice.

The ability to terminate the relationship if you are dissatisfied is also important. If you are unhappy with the work the agent is doing, or believe the agent is not working as hard as you think he or she should, you may want to terminate the agency agreement. If there is no termination clause in the agency agreement, however, then you may be tied to that contract for the full term. Other times, after a property has been for sale for awhile without an offer, or after the buyer has viewed a number of homes without finding one that meets their needs, they wish to terminate the agency relationship. Again, there may not be a way to do that before the end of the term, unless you specifically negotiate a termination clause.

If you are able to terminate the agency relationship, the agent may still be entitled to a commission if you do sell a home or buy a home thereafter, if the sale or purchase resulted from work the agent did. For example, if the buyer came to an open house sponsored by the terminated agent three months earlier, the seller might nonetheless owe the terminated agent a commission because it was that agent’s work which produced the buyer. Similarly if you as a buyer finally decide to purchase a home the agent showed you three months earlier but which you initially rejected, you might owe that agent a commission since you might not have known about the house without the agent’s work.


Author: Bernadette L. Puzzuole

Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm’s attorneys.

© 2004 RGPC

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