Your contract with your estate agent: everything you need to know

Your contract with your estate agent: what actually is it?

An estate agent contract is a contract between a real estate agent and their client and governs their collaboration. The estate agent undertakes to perform certain services, such as searching for suitable properties or buyers, and receives a commission in return. The amount of the commission usually depends on the sale price or the rent.

Legal requirements

The contract must be issued in writing and contain certain pieces of information, such as the identities of the contracting parties, the services to be provided by the agent and the commission. The person commissioning the estate agent must also be informed of their right of withdrawal.

Estate agents’ duties

An estate agent has a lot of tasks to do under an estate agent contract. They include searching for suitable properties and buyers, conducting viewings, negotiating prices and preparing the purchase contract. The estate agent also provides advice on market prices and helps with financing-related matters.

The client’s obligations

Under an estate agent agreement, the person commissioning the agent is obliged to support them and provide all the relevant information. This includes sharing documentation for the brochure and informing the agent about any possible changes that could affect their work.

Duration

An estate agent contract normally runs for between six months and two years. However, it is also possible to conclude a contract with an indefinite term. In this case, the contract can be terminated by either party with a notice period of three months.

Types of estate agent contracts

There are different kinds of estate agent contracts, which vary depending on the type of collaboration between the agent and the client. The most common versions are:

• Sole mandate: the estate agent is solely authorised to sell or rent the property. This agreement offers the agent greater security and motivation when looking for buyers or tenants.

• Simple estate agent contract: the person commissioning the agent has the right to look for buyers or tenants themselves, while the estate agent also gets down to work at the same time. If the client concludes a contract through their own efforts, they must still pay the agent the agreed commission.

• General estate agent contract: this kind of contract gives the agent the right to broker real estate in general. However, the client may decide for themselves whether or not to use the agent’s services.

What does an estate agent contract need to include?

An estate agent contract serves as a set of guidelines for the collaboration between you and your estate agent and should clarify all the necessary terms and information. It is important that all the relevant points in this contract are dealt with thoroughly in order to avoid misunderstandings later on. The following information should be included in an estate agent contract:

• Names of both parties: the contract should clearly state the names and contact details of both parties.

• Property: a precise description of the property, including its location and characteristics, should be included.

• Commission amount: the contract should specify the exact commission that the estate agent will receive upon successful conclusion of a sale or lease agreement.

• The estate agent’s duties: this section of the contract defines the estate agent’s obligations and duties, such as brokering buyers or tenants and organising viewings.

• Expenses allowance: if applicable, the contract should specify whether the estate agent will have their expenses covered in the event of the non-performance of the contract.

• Information on exclusivity and dual brokerage: the contract should state whether the estate agent has exclusive rights to arrange the sale or rental of the property and what the consequences of dual brokerage are.

• Contract term: the duration of the contract should be clearly stated, along with the start and end dates.

• Termination: finally, the contract should clarify the conditions under which and how the contract can be terminated by both parties.

Right of withdrawal from the estate agent contract

As the client, you have a statutory right of withdrawal when it comes to estate agent contracts. This means that you can step back from the contract within 14 days of its conclusion, without giving reasons for doing so. The notice of withdrawal must be issued in writing and can be sent to the estate agent by post or email. Bear in mind, though, that your right of withdrawal won’t be valid if you’ve already instructed the estate agent to actually broker a property and the service has been provided in full.

Financial details about estate agent contracts

Estate agent’s commission 

The estate agent’s commission, also known as brokerage fees, is set out in an estate agent’s contract and represents the fee that an estate agent receives for their services. It is calculated as a percentage of the sale or rental price of the property. The commission may vary from region to region and can also be negotiable. It is important to record the exact commission in writing in the estate agent contract to avoid misunderstandings down the line.

Reimbursement of expenses or expenses allowance

In addition to the estate agent’s commission, an estate agent contract may also provide for reimbursement of expenses or expense allowances. The reimbursement of expenses is not regulated by law and must be stipulated in the contract. It is important to find out about the conditions and level of reimbursement before concluding a contract. In addition to the commission itself, other costs such as advertising and expert opinions may arise; these costs should be reasonable.

What to bear in mind with estate agent contracts

• Right of withdrawal: remember that you have a 14-day statutory right of withdrawal, during which you can step back from the contract without giving reasons for doing so.

• Estate agent commission: the commission should be clearly defined in the contract. It is important that you know the exact percentage of the sale or rental price that is calculated as commission.

• Reimbursement of expenses: find out about any provisions on the reimbursement of expenses. These are additional costs for advertising, expert opinions, etc. and should be reasonable.

• Contract term and termination conditions: the duration of the contract and the arrangements for termination should be clearly indicated.

• Exclusivity and dual brokerage: the contract should state whether the estate agent has exclusive rights to arrange the sale or rental of the property and what the consequences of dual brokerage are.

• The estate agent’s obligations: the estate agent should have clearly defined tasks and duties, which are set out in the contract.

• Property description: the contract should contain a precise description of the property, including its location and characteristics.

Do note that this information is general in scope and professional legal advice should be obtained in each individual case.

Legal provisions in an estate agent contract

There are a few legal aspects to consider when signing an estate agent contract. In Switzerland, the Code of Obligations (Obligationenrecht, OR) and the Real Estate Agents and Brokers Ordinance (Verordnung über die Makler und Vermittler von Grundstücken, MV) govern the most important legal provisions for broker contracts.

• Written form of the contract: according to Art. 12 of the OR, an estate agent contract does not necessarily have to be concluded in writing. Nevertheless, it is advisable to have a written contract in order to avoid ambiguities or disputes down the line.

• Right of withdrawal: under Art. 40 of the OR, you have the right to cancel an estate agent contract within seven days, without stating a reason for doing so. Do note that this period starts from the day on which you or a third party nominated by you received the contract.

• Estate agent’s commission: an estate agent’s commission is not set by law and can therefore be negotiated as desired. However, it must be clearly defined in the contract. According to Art. 412 of the OR, the estate agent is only entitled to their commission if their evidence or brokerage has led to the conclusion of the main contract (e.g. purchase or rental contract).

• Estate agent’s duties to provide information: the estate agent is obliged to provide you with all the important information about the property and the selling/rental process. This also includes disclosing all known defects in the property.

Please note that this is generic information and each case should be assessed individually. You should always seek legal advice if you have any questions or are uncertain about anything. Homegate can assist you with its selection of skilled lawyers.

Frequently asked questions (FAQ) about estate agent contracts

What are the differences between an estate agent contract for a sale and an estate agent contract for a rental?

Estate agent contracts for sales and rentals differ mainly in terms of their objective. Whereas an estate agent sales contract aims to sell a property, an estate agent rental contract is about renting out a property. Therefore, the agent’s obligations, the commission and other contractual conditions may differ between these two types of estate agent contracts.

Can you sell your house privately under an estate agent contract?

Whether you can sell your house privately depends on the terms of your estate agent contract. Some contracts contain what is known as a “ sole agency clause”, which states that only the agent is entitled to sell the property. If you have a contract of this nature, a private sale would therefore not be possible.

What happens if the estate agent doesn’t sell the house?

If the estate agent doesn’t sell the house, the terms of your contract determine whether you owe them a commission anyway. As a rule, the agent is only entitled to their commission if their evidence or brokerage has led to the conclusion of the main contract (e.g. purchase or rental contract).

Do I have to pay for an estate agent contract?

As a general rule, an estate agent contract is subject to a fee. However, the amount of the estate agent’s commission is not set by law and can therefore be negotiated as desired. However, it must be clearly defined in the contract. In addition to the commission itself, other costs such as advertising and expert opinions may arise; these costs should be reasonable.