Brokerage agreement: Points to consider

What is a brokerage instruction and what types are there?

The brokerage agreement is the core of the brokerage contract. In it, you specify the tasks of the estate agent. The aim of every brokerage agreement is to market the property in accordance with your wishes and specifications so that a tenant or buyer for the property can be found quickly. If a successful brokerage is achieved, an agreed brokerage commission is payable as remuneration.

In this context, it is also important to distinguish between different brokerage services – so-called referral brokerage and so-called agency brokerage.

Referral brokerage

In referral brokerage, also known as a simple brokerage agreement, the estate agent only takes on the task of proposing verified prospective buyers to you. You take care of all further steps yourself, such as negotiations and concluding the contract. You can commission several estate agents or estate agent offices; the commission is payable when suitable prospective buyers are proposed.

Mediation brokerage

With this type of contract, the estate agent takes care of everything for you, from marketing to sale. All you have to do is decide who to sell to. With mediation brokerage, the commission is only payable upon sale.

Brokerage can be structured in more detail. On the one hand, as a sole agency agreement: this option excludes you from appointing other estate agents. On the other hand, it can also be a so-called exclusive mandate, which additionally excludes you from searching for suitable buyers yourself.

Good to know: In Switzerland, Art. 412 ff. of the Swiss Code of Obligations (CO) regulates brokerage mandates. Brokerage law, the regulations governing the brokerage of contracts and much more are described in detail here.

The brokerage contract – what it includes

The brokerage agreement sets out the terms of the contract in detail. This prevents misunderstandings and ensures that the contract is executed in accordance with your wishes. In addition to a detailed description of the property to be sold, you should always pay attention to the following points when drawing up a brokerage agreement:

1. Draw up the contract in writing

There are no formal requirements for a brokerage agreement. In theory, therefore, a verbal agreement is also possible and legally valid. However, a written contract is always recommended. This provides clarity, especially in the event of a dispute.

2. Formulate the assignment clearly

For successful brokerage, it is important to specify the tasks of the estate agent in the brokerage agreement. This prevents any misunderstandings regarding responsibilities, work performance and remuneration. This includes at least:

• The type of brokerage agreement

• The term of the contract: fixed-term/permanent, any option to extend

• The obligations of the estate agent: marketing, creating exposés, advertisements, viewings, feedback, etc.

• The obligations of the client: providing documents, refraining from parallel sales in the case of exclusive mandates, etc.

• Dealing with interested parties: what to do if the seller finds a buyer themselves?

3. Specify the term and termination conditions

Specify the agreed termination rules and notice periods in the contract. In the case of fixed-term brokerage contracts, it is advisable to specify the exact duration of the contract.

4. Specify commission and amount of expense allowances

Define the amount and due date of the brokerage fee or commission as well as the conditions for payment precisely. As a rule, the commission is a percentage of the sale price or rent achieved.

5. Clarify liability and insurance issues

What responsibility does the estate agent bear in the event of errors?

6. Regulation on dual agency

State explicitly whether the estate agent is also permitted to agree on a commission payment with the buyer.

7. Exclusivity of the contract

Specify whether the estate agent has an exclusive mandate for your property or whether you can also approach other estate agents.

How much is the estate agent's commission?

The estate agent's commission is payable when the contractual provisions have been fulfilled and is usually paid by the seller. However, when the commission is payable can be defined in different ways – from simply referring interested parties to the final conclusion of the contract.

The amount of the estate agent's commission is clearly stated in an estate agent contract in Switzerland. When selling real estate, it is 2 to 3% of the purchase price achieved. Of course, you can negotiate the exact amount of the estate agent's commission individually in your case. You can also agree with the buyer to split the commission if necessary.

In addition, there are expenses and other costs, such as for advertising the property or home staging, which are not covered by the commission. In these cases, it is advisable to work with fixed sums or a cap. This gives you control over the costs.

Tip: It is often worthwhile to obtain quotes from different estate agents in order to find the best mix of costs, services and expertise.

The obligations of estate agents and clients when concluding an estate agency agreement

Although estate agency agreements can be tailored to individual needs, estate agents always have the following obligations:

• They must act on the basis of an exclusive mandate.

• Depending on the type of mandate, they must refer or introduce persons interested in purchasing to the seller.

• They must maintain their duties of care and loyalty, i.e. always act in the interests of the client.

• They must maintain confidentiality with regard to all information marked as confidential.

• They must report problematic prospective buyers as such to the client within the scope of their so-called duty to notify. For example, a credit check of all parties interested in the purchase can be contractually agreed.

However, clients also have certain obligations:

• As part of their duty of loyalty, they must inform the estate agent of all relevant details and any changes relating to the property and the sale.

• If the sale is successful, they must pay the agreed remuneration and, in the case of a sole or exclusive mandate, comply with the respective contractual restrictions.

Can I terminate a brokerage agreement early?

A brokerage agreement normally ends automatically upon the sale or rental of the property or upon expiry of the agreed term. However, you can also terminate the agreement early. Important: Notice of termination must be given in writing.

In the case of an open-ended brokerage agreement, you can withdraw from the agreement at any time without giving reasons, provided you observe the notice period. The same applies to the estate agent.

In the case of a fixed-term contract, you need valid reasons for early termination without notice. This is only permitted if the estate agent has demonstrably failed to fulfil their contractual obligations or has grossly violated their duties of care. For example, if, despite clear agreements, no advertisements or other marketing measures have been implemented for the sale of the property.

In any case, costs for services already rendered or a contractually agreed expense allowance may be incurred in the event of termination of the contract – but the burden of proof lies with the estate agent. Without proof that the costs have been incurred, you do not have to pay anything.