Have you decided to purchase a property and would like to be represented by a broker to enjoy all the benefits that this professional has to offer? Great decision!
The first step is to sign a brokerage contract with your real estate broker.
What’s a Brokerage Contract?
It’s a written agreement between a client and a real estate broker. It outlines the services that the broker will provide and their obligations, as well as the contract’s term and its conditions.
The Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) is responsible for regulating brokerage contracts.
The Different Types of Brokerage Contracts
There are basically two main types of real estate brokerage contracts:
- The brokerage contract – Sale: Signed between an owner who wishes to sell their property and a broker. This contract authorizes the broker to put the property on the market and sell it on the best possible terms.
- The brokerage contract – Purchase: Signed between a buyer and a broker. This document formalizes the search for a property that meets the buyer’s criteria and regulates the broker’s activities throughout the purchase process.
But why is it so important that a buyer sign a contract?
It guarantees that the broker is working exclusively for you!
A buyer must sign a brokerage contract to benefit fully from a broker’s expertise. Without this document, the broker is bound by certain restrictions and can’t serve the buyer as effectively.
In fact, a broker can neither represent the buyer, nor defend their interests, or give them advice based on their needs. They simply offer the buyer what is termed fair treatment. Despite its name, this concept is far from advantageous for the buyer.
In practice, this means that the buyer’s broker works indirectly for the listing broker. It’s therefore in the buyer’s best interest to sign a brokerage contract to ensure the broker acts with their interests in mind.
Licenced real estate broker with RE/MAX
For example, without a signed brokerage contract, a broker is limited in what actions they can undertake for the buyer. Namely, the broker is prevented from
- advising the buyer on what price to offer;
- negotiating the promise to purchase’s conditions on the buyer’s behalf;
- presenting comparable properties to the buyer (properties similar to those the buyer has already visited to help them decide).
It Protects the Buyer
The brokerage contract also allows the buyer to see, in black and white, what services their broker will provide. If the broker violates their professional code of conduct, the buyer will be able to file a claim with the Fonds d’indemnisation du courtage immobilier du Québec (FARCIQ).
At RE/MAX, brokers work as teams within agencies managed by highly efficient and committed executive officers committed to delivering quality services. This gives clients greater peace of mind.
Licenced real estate broker with RE/MAX
The Essentials of a Brokerage Contract
Your brokerage contract will contain several key pieces of information:
- The parties involved: the names and addresses of the broker and seller or buyer.
- The type of contract: a property sale or purchase.
- The contract’s term: a fixed period, typically 3 to 6 months (but this is at the parties’ discretion).
- The broker’s legal obligations: services offered, advice, administrative support, etc.
Compensation: how the broker will be paid, usually a percentage of the sale or purchase price.
Can You Terminate a Brokerage Contract?
The seller and the buyer have a right of withdrawal: the right to terminate the brokerage contract within three days of receiving a duplicate of the contract. The seller or buyer may exercise this right by sending a simple written notice to this effect to the broker.
After this period, it depends on the conditions of the contract that has been signed. The client can generally terminate the brokerage contract (for sale or purchase) at any time, provided they reimburse the broker for the fees, expenses, and value of services rendered upon termination.
However, if the brokerage contract contains an irrevocability clause, neither the seller nor the buyer may unilaterally terminate it. The client must then obtain the broker’s consent to terminate the contract before the end of its term.
In short, a brokerage contract is just as important for the broker as it is for the buyer. Make certain you fully understand all this document entails before signing. And don’t hesitate to ask questions!
