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The different brokerage contracts
The brokerage contract may be concluded validly in oral form, but a written and signed contract avoids any misunderstanding.
The following are the various types of contract used in Geneva.
Exlcusive brokerage contract
The broker receives an exclusive commission, and throughout the duration of the contract the principal is committed to referring to the agent any person who contacts him directly. The agent has complete control of the procedure.
Main brokerage contract
The main broker is the only one responsible, with regard to the principal, for the administrative and commercial actions necessary to execute the commission. He may engage other brokers to work under him. The sale commission will be paid in its entirely to the main broker who is solely responsible for dividing it among the brokers.
Joint and exclusive brokerage contract
The vendor signs an exclusive brokerage order with two brokers who agree among themselves on the division of the commission.
Basic brokerage contract
The vendor can commission one or more brokers for the sale one and the same property. This form of commission can lead to disputes between brokers when several brokers offer one and the same object to one and the same client. If one and the same property is offered by too many people, the sale price will drop.
Research principal brokerage contract
The principal, i. e. the person seeking to purchase a property, instructs the broker to indicate the opportunity to acquire the desired property and to act as an intermediary for the negotiation of this acquisition.The broker compiles the file and may hire other brokers under his responsibility. The maximum purchase price and the amount of equity capital are to be noted in the contract.
The brokerage contract with provision guarantee
The simple or exclusive brokerage contract with provision guarantee contains a clause that, if the broker has found a person who has made a firm and unreserved offer on the terms requested, the principal undertakes to pay the agent a remuneration. The amount of this guarantee is to be agreed and is only due if the sale has not been concluded.
Elements of the brokerage contract
The standard contracts stipulate that the principal instructs the broker either to indicate or arrange for a buyer for the property or to act as an intermediary for the broker in negotiating the sale.
The brokerage contract should contain at least the following elements:
- The appointment of the principal and the agent
- Negotiation or indication brokerage contract
- The designation of the property for sale
- The selling price asked, this price has however only an indicative value
- The duration of the contract and its renewal
- The brokerage commission calculated on the accepted price
- Coverage of costs
- Jurisdiction and applicable law
- Possibly special clauses
- The date and signature
Compensation in the event of an unfulfilled promise to purchase
It is agreed that in the event of an unfulfilled promise to purchase, the broker will be entitled to compensation of 30% of the withdrawal or indemnity that will be received by the principal.
The brokerage commission
The commission is calculated on the actual selling price and can be set freely. In Geneva, the usual commission amounts to 5% on the first CHF 500,000 and 3% above that up to CHF 4,000,000 and 2% above that, excluding tax. The commission rate is increased by 1% if the seller hires two brokers and 2% if the seller hires three or more brokers.
Coverage of costs
Cost coverage can be negotiated. In the event of termination, expiration or termination of the contract by the principal before the sale has taken place, the principal undertakes to pay a fixed amount to be agreed in the contract. This amount covers the broker's expenses
Conclusion
In our opinion, the main brokerage contract is the most advantageous for the seller. The principal broker is solely responsible for the composition of the file and the information to be provided to potential buyers and may collaborate with other brokers and will be solely responsible for sharing the commission. The owner signs a single brokerage contract and the broker retains complete control over the process. The offer will not be presented on the sites with different descriptions by several brokers and there will be no uncontrolled dissemination of information. By signing a main or exclusive mandate, you will get the best selling price.
© Esther Lauber, Real Estate Trustee with Advanced Federal Diploma of Professional Education and Training, real estate broker