The majority of apartments and other real estate are sold with the help of real estate agents. The commissions constitute large amounts of money and one must be able to rely on the agent's professionalism when engaging in real estate transactions. Because of this, choosing the real estate agent carefully is important. Using a real estate agent does not, however, free the seller from liability regarding possible defects in the property. These generally always fall within the seller's liability. In real estate transactions the agent's services include at least the following:
- assessing the price of the apartment
- preparing the brokerage contract in a professional manner
- giving the seller advice and guidance on matters related to real estate transactions
- newspaper advertising and other marketing activities
- taking prospective buyers to inspect the apartment
- supplying information to prospective buyers regarding the apartment and the sale of the apartment
- receiving offers and, possibly, a down payment
- preparing the deed of sale
The most common method of brokering and selling apartments is that the seller gives the agent a traditional brokerage assignment, or in other words, enters into a brokerage contract with the real estate agent. In recent times the market has, however, seen the arrival of new real estate agents with less traditional approaches
New ways to sell and broker apartments
Consumers should be careful in buying new types of brokerage services. Bringing sellers and buyers together still requires that a brokerage contract is drafted and the commission specified therein. Prior to signing the contract, care should be taken to clarify what the service includes compared to traditional real estate brokerage and what constitutes the costs.
One new way of marketing apartments is, for instance, not listing a traditional ”asking price” for an apartment, but instead a minimum price which is then used as the basis for making higher offers. Offers may be made to the real estate agent in writing or on the Internet. On the Internet, everyone can see which offers have been made in excess of the minimum price. An offer on a website is not binding on the prospective buyer in the same way as a written offer.
An apartment may also be sold through a "silent sale" and a buyer can earmark apartments. Earmarking is a way for buyers on the market to express their interest in an apartment, building or area. Silent sale, on the other hand, gives the owner of the apartment an opportunity to feel out the demand for his or her home.
Choosing a real estate agent
Before meeting with an agent, do some background work to estimate the realistic selling price of your apartment. This is important as some agents may suggest an unrealistically high sales price. It is a good idea to have representatives from at least two or three agencies visit and assess your home - preferably from both large and small agencies. This also helps in setting the selling price.
- the operating models of estate agents vary, so it is worth finding out, for example, whether the same agent will show people around the property, receive the offers, and seal the deal
- the cheapest agency is not necessarily the best
- the agency who ”promises” the highest selling price for your apartment is not always the best either
When an agent comes to assess your home, consider the following criteria
- how realistic is the price estimated by the agent. The selling price of an apartment ultimately depends on the market, not the agent's promises
- the agent's familiarity with the area. Agents should be familiar with, for instance, the area's zoning
- in marketing the apartment, which media will be used, how, and with what frequency
- the commission
Watch out agents who
- call you to secure a brokerage assignment even when your sales ad says ”Not for agents”
- promises an unrealistic selling price
- tells you on the very first phone call that he has a certain buyer for the apartment
In addition to traditional real estate brokerage services, the market offers services designed to help homeowners sell their apartments themselves. There are various service packages on offer, or one may opt to only use an agent to prepare the deed of sale.
Carefully familiarise yourself with the contents, contract terms and prices of the service. New supplementary services, even when quite extensive in scope, may not necessarily follow the rules and legislation governing traditional real estate brokerage services.
Door-to-door selling must involve information of the withdrawal
If a real estate agent advertises free-of-charge assessment and price estimation services and eventually a brokerage contract is signed at home, this is considered door-to-door selling. This gives the customer 14 days to withdraw from the contract.
Study agents' commissions in advance on their websites. The commission must be stated inclusive of value added tax. If no information is provided on the commission, the agent is in breach of the Price Indication Decree.
There is often room for negotiation in the list prices provided.
Most real estate agents charge their commission as a percentage of the sales price or debt-free sales price of the apartment. Many also set a minimum level for their commission.
Some agents may indicate a percentage that is lower than most others', but will then charge extra for the costs of advertising and preparing documents. If you choose an agent with this type of pricing structure, make sure that the assignment documents include an exact breakdown of costs and the estimated total fee amount.
The commission is usually paid at the time of purchase
The fee may only be charged from the party which has entered into a brokerage agreement - in most cases the seller.
A real estate agent may also be commissioned by a buyer to find a suitable apartment in a particular area. If both the seller and the buyer have a contract with the agent, the agency may only charge commission from one of them.
If the apartment is bought by a member of the real estate agency's staff, commission may not be charged.
The commission is paid when the sale is concluded. The real estate agent is deemed to have performed the work entitling him to his fee - despite the fact that the transaction is later cancelled.
Compensation after expiration of assignment prevents sellers from circumventing the need to pay commission
Brokerage contracts usually include a standard provision on compensation after expiration of assignment. This is meant to prevent sellers from circumventing the need to pay commission by postponing the conclusion of the sale to a date after the brokerage contract has expired.
Compensation after expiration of assignment may be collected by the agent when he has played a material role in the conclusion of the sale. Merely having brought the buyer to inspect the apartment does not constitute having played a material role.
If an offer has been made and negotiations over the sale have taken place, the agent is entitled to compensation after expiration of assignment. Compensation after expiration of assignment must be collected within a period of six months.
Brokerage contracts are made in writing
Brokerage contracts, also known as assignments, are always made in writing or electronically. The agent may not appeal to oral agreements or discussions. The contract is important - not only for a successful relationship with the agent - but also for the success of the sales transaction itself.
According to law, the seller must supply the buyer with all information that could influence the purchase decision. When the apartment is sold by an agent, he or she must acquire the relevant information from the seller and pass this information on to prospective buyers.
This information includes, for example, information pertaining to the age of the apartment or house, construction, past repairs and renovation work, condition and any known defects. The agent must also inform the buyer of matters dealt with at the general meeting of shareholders of the housing company.
Make sure that this information, particularly information concerning material defects in the apartment or building as well as upcoming repair and renovation projects known to the housing company are noted on the brokerage contract. This will later serve as evidence, if necessary, that the agent was duly informed of said matters. If the agent has not clearly conveyed such information to the buyer, the statutory liability for supplying information is transferred from the seller to the agent.
Exclusive brokerage contracts give exclusive rights to the agent
Contracts with real estate agents are generally always of the exclusive type: only the agent in question can offer the apartment to prospective buyers. The seller must pay the agreed commission even if he ends up selling the apartment himself during the validity of the assignment.
Sometimes a neighbour or relative might be interested in the apartment. If you are aware of this possibility, add a special provision to the brokerage contract which states that a particular prospective buyer - specified by name - is excluded from the contract. By doing this, you will avoid having to pay commission if the person in question buys the apartment directly from you.
Duration of brokerage contracts
Brokerage contracts have no minimum length - they can even be valid for a single day. If an agent tells you that he or she has ”a certain buyer” for your apartment, consider making a brokerage agreement valid for only a couple of days. This will enable the agent in question to take the prospective buyer to inspect the apartment and receive an offer.
The maximum validity of a brokerage contract is four months. The contract can be renewed after it has expired.
However, if you are uncertain about the agent's expected performance in selling the apartment, it is a good idea to make a contract for a shorter time, for instance two months. This is prudent, as brokerage contracts may only be terminated for certain weighty reasons.
Make sure to ask the agent about anything in the contract that you do not fully understand. Only sign the contract when you have read and fully understood it.
Brokerage contracts may only be terminated for weighty reasons
Brokerage contracts may not be terminated during their validity without a weighty reason. A weighty reason may be constituted by a significant mistake made by the agency, the customer falling ill or the illness or death of a family member of the customer. Changes in circumstances may also constitute grounds for termination if the continued brokerage of the apartment could become excessively disadvantageous to the customer.
However, if you are uncertain about the agent's expected performance in selling the apartment, it is a good idea to make a contract for a shorter time, for instance one month. This is prudent, as brokerage contracts may only be terminated for certain weighty reasons.
In many cases, it is possible to come to a mutual agreement over the termination of the brokerage contract while it is still valid. Sensible agents do not try to hold on to customers against their will.
If the agency has made a material mistake in their work, there may be grounds for termination of the contract. Ask your local consumer advisor for more information.
Obligations of the real estate agent
The real estate agent is responsible for acquiring the documents pertaining to the apartment or house, e.g. the house manager's certificate and articles of association, and for single family houses, documents such as the extract from the land register and encumbrance documents.
Documents provided by authorities, such as the extract from the land register, are reliable. Other documents, such as the house manager's certificate, should be checked by the seller to confirm that information such as the square area and repair history of the building are accurate. This is because the seller has liability for all information provided to the buyer, including those on the house manager's certificate.
The agent does not routinely need to check the information on the house manager's certificate unless he has reason to doubt their accuracy.
The agent does, however, have a general responsibility for whether the information supplied by the seller or listed in the documents pertaining to the object of sale are correct. This responsibility could apply to, for example, information on the square area of the apartment if the agent's professional ability and assessment of the property indicate that the square area listed on the documents is inaccurate. If this can't be achieved with reasonable effort, the agency must notify the buyer that the information in question could not be confirmed.
Information pertaining to square area may be difficult to confirm, particularly with old apartments and single family houses. A frequently used standard statement is that the square area of the apartment may be different to that stated in the articles of association or that the square area of the single family house has not been re-checked by measuring it.
Information must also be provided regarding zoning The agent must provide both parties with all information relevant to the real estate transaction in question.
The agent must, amongst other things, be aware of and give information on significant changes to the zoning of the area. The agent must disclose to the buyer if, for instance, an apartment building is planned for development in a park or green area across from the apartment. The same information is significant to the seller in setting the sales price of the apartment. The agent does not need to find out answers to questions related to the specific personal wishes of a prospective buyer, such as whether the soil around a single family house is suitable for tomato farming.
One of the most important tasks of the real estate agent is to receive and process purchase offers and to advise both parties in compliance with legislation and good brokerage practices.
The seller naturally has the final say in which offer to accept. One can never be forced to sell an apartment, despite having entered into a brokerage contract. Similarly, the buyer may not demand that the seller sells the apartment, even if the buyer has made a cash offer that meets the asking price.
The commission must, however, be paid if a so-called full price offer has been made and the offer meets the conditions regarding price and other aspects as specified in the brokerage contract. The standard contracts used by agents usually include a clause on this. If the contract does not include such a clause, the commission only needs to be paid if the sale is concluded.
The agent must ensure that the purchase offer, its acceptance or counter-offers are made in writing. This facilitates their use as evidence in case of disputes.
The parties to the offer should ensure that they both receive signed copies of offer documents and acceptance documents. This is particularly important if concluding the sale appears time-consuming.
A down payment may be made in conjunction with the offer, which will be part of the sales price when the sale is concluded. These days, however, it is more common that a contract penalty binding on both parties is agreed upon when the offer is made.
If down payment is used, the agent may not accept other offers until the seller has decided whether or not to accept the offer in question.
- The agent must inform both the seller and the prospective buyer of the significance of a down payment or contract penalty in conjunction with a purchase offer for real estate as well as the binding nature of offers in real estate transactions.
- The agent should also advise the prospective buyer to include conditions with dissolving effect in the offer, if the buyer is uncertain of e.g. being able to secure financing.
Closing the sale and preparing the deed of sale
Many agents use the terms preliminary sale and final sale when the sales price is paid in instalments. These terms are misleading. The parties to the transaction may mistakenly think that there is still the possibility of withdrawing from the transaction after the preliminary sale.
- The ”preliminary sale” is the actual conclusion of sale, involving the signing of a binding deed of sale.
- The ”final sale” is just the time when the remainder of the sales price is paid
Preparing the deed of sale is the agent's responsibility. The agent is responsible for preparing the deed of sale in a professional manner, with consideration of both parties' interest. The deed of sale must include, for instance, any material defects in the apartment which the seller has informed the agent of at the time of drafting the brokerage contract.