Brokerage Agreement

What is a brokerage agreement?

A brokerage agreement is a contract under private law between a client and a real estate agent. In the real estate sector, clients can be both owners who want to sell or rent a property as well as interested parties who are looking for a property to buy or rent. The legislator does not prescribe what has to be regulated in the contract. Rather, the Civil Code only regulates the question of remuneration (§ 652 BGB, paragraph 1).

When and how is a brokerage agreement concluded?

If you want to sell or rent out a property, first contact one or more estate agents in the region. They will prepare an initial exposé of the property for you, which will also include the commission. By co-signing this exposé or the proof of ownership of the property, the brokerage contract is concluded. In addition, however, the broker has some information obligations, such as the amount of the commission, a possible revocation of the contract, his identity as an entrepreneur and the exact contents of the brokerage contract.

A notarial recording is not necessary here. In most cases, the broker concludes a contract with both parties, i.e. with the buyer or tenant as well as with the seller or landlord.

What forms of brokerage are there and what should one pay attention to?

There are three different types of brokerage contracts for the sale of real estate: Qualified exclusive contract The client does not use other brokers and does not become active in the search himself. This gives the broker the guarantee to receive the commission as soon as he finds a buyer.

Simple brokerage contract

The broker does not have to act, but receives his commission only in case of success

Exclusive contract

The client waives the right to use other brokers and in return the commissioned broker becomes active. If he finds a buyer, he receives the commission, but the client may also search privately.

Qualified exclusive commission

The client renounces other brokers and does not become active in the search himself. Thus the broker has the guarantee to receive the commission as soon as he finds a buyer.
In the brokerage contract itself, one should pay particular attention to the following contents:

• Term of the contract
• Necessary activities of the real estate agent
• Amount of the brokerage commission
• Date of payment of the brokerage commission
• Term of the commission claim and possible commitment

How is the brokerage commission regulated in the brokerage agreement?

In most cases, it is the notarized sales contract or the successfully signed lease agreement that is decisive for the payment of the brokerage fee. This contract also determines the final amount of the purchase or rental price, which in turn determines the percentage brokerage commission. The due date of the broker's commission is also usually specified in the brokerage agreement.

Is a verbal brokerage contract also valid and how does it come about?

In case of sale, the verbal brokerage contract is not excluded. According to the German Civil Code (BGB) you are obliged to pay the commission if the real estate agent fulfills the service assigned to him to your satisfaction (§653).

Even if you have not agreed on an exact amount of the commission, the broker may expect a remuneration. In this case, the usual salary that is prescribed for the sale in every federal state applies. In addition, the regional professional associations of brokers provide benchmarks which you can consult.

It is not always easy to know when a verbal brokerage contract is concluded.

As long as the real estate agent can prove that his activity was decisive for the brokerage of the property, he is entitled to the commission. If you only have a verbal contract or an agreement by e-mail, you should document all relevant correspondence and agreements accordingly.

Special case letting
Only a written brokerage agreement is valid here. A broker's commission of two net cold rents plus value added tax usually applies to the rental of real estate.

Can a brokerage agreement be terminated prematurely?

During the agreed time limit of the brokerage contract, the property owner has no ordinary right of termination. However, if there is an extraordinary reason for termination, the client may terminate the contract even before the expiry of the term.

How can a brokerage agreement be revoked?

A revocation can only be made in the cases specified by law. The most important condition is first of all that the client is a consumer. This is anyone who does not conclude the brokerage agreement for commercial or self-employed professional purposes. Especially relevant is the revocation due to a distance selling contract (§ 312c BGB). This is a contract that is concluded between a consumer and an entrepreneur (the broker) by means of email, telephone, letter, internet or other means of distance communication. In these cases a contract is concluded quickly. One click is often enough, but a well thought out contract is sometimes not. For this reason, the consumer should be able to cancel the distance contract within 14 days. The broker must instruct the consumer about his right of withdrawal. Only then does the period begin to run. Without instruction or in the case of incorrect instruction, the period only starts to run when the consumer is instructed, but after one year at the latest. The consumer therefore has a maximum of 1 year and 14 days to revoke the contract. The revocation does not require a special form. It can therefore also be made verbally or by telephone. In order to be able to prove the revocation in court in the most extreme case, an e-mail is the most suitable way. To meet the deadline, it is sufficient to send the revocation in time. The consumer is also entitled to a right of revocation if the brokerage agreement was concluded outside the broker's business premises (§ 312b BGB). This also applies if the consumer was addressed outside the business premises and a contract was subsequently concluded within the business premises of the broker. The consumer is to be protected from being "taken by surprise" here. The above applies to the cancellation period.

Broker Checklist

The selection of a broker is a matter of trust. Therefore it is important to choose a good, competent and serious broker. The following checklist picks out important aspects of the brokerage business and offers an orientation for the selection of a broker. Brokers receive a brokerage fee for their brokerage activities, which for real estate sales is usually between 5 and 7% of the purchase price. For the brokerage of rental apartments, the brokerage fee is limited to 2 net cold rents plus VAT.

A good, competent and serious real estate agent offers

Market knowledge

He knows the current real estate prices and the situation of supply and demand in the local real estate market as well as the expected market developments. In addition, he should have the necessary expertise to evaluate the property.

Individual, problem-conscious and realistic advice without time pressure

• He talks to the seller in detail about his personal needs and wishes as well as his economic situation in order to be able to advise him competently and to warn him of possible risks on his own initiative.
• He advises the real estate salesman in a qualified manner and does not pretend to him that the sale can be completed quickly and easily if this is not the case.
• He carefully and conscientiously examines existing or potential problems in the sale of the property and finds suitable solutions.
• He does not tell the seller an unrealistically high price for his property in order to get the contract.
• He knows the market-driven offer price of the property and can justify it.
• He takes the necessary time to advise the real estate seller comprehensively and search for the best possible solutions.
• He also consults other specialists such as architects or lawyers if he considers it useful or necessary.

Liability

He protects himself and his customers against possible financial losses by means of liability insurance. Even the most competent broker is not immune to accidental or accidental mistakes.

A planned approach

It describes to the salesman exactly, how he will proceed in view of the market situation with the sales of the real estate. He will specify the planned sales activities and provide a realistic time and effort estimate for the entire sales process until successful completion.

Customer care

He is still there for the seller even after the successful conclusion of the sales contract and does not immediately disappear from the scene after receiving their commission. He also helps with any problems that may arise later.

Membership in the professional association

It is member in a broker federation like the real estate federation Germany (IVD), which is a further quality characteristic for a real estate agent, since it must prove its real estate knowledge already with the admission into the federation.

Sample brokerage agreement

In the case of a qualified exclusive contract, the client of the broker undertakes neither to engage another broker nor to seek out a broker himself and to prohibit brokers who take the initiative to act from doing so. In return, the broker is obliged to become actively active and has the guarantee to receive the commission as soon as he finds a buyer. The simple sole mandate can be agreed upon in principle likewise form-contractually.