Exclusive Dealing Agreement

An Exclusive Dealing Agreement within the real estate mediation, is supported by a Mediation Contract that provides for the promotion and sale of a property, during a given period, forcing the owner not to enter into similar contracts with other mediators, during the contractual period.

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Open dealing versus Exclusive Dealing Agreement

This is a sensitive topic for real estate consultants and homeowners as many people think that selling the property on an exclusive basis is not the best option. So, what are the options for selling a property if you decide to ask a real estate agent for help? Well, there are two: open regime and exclusivity regime . Know the differences:

What is the Exclusive Dealing Agreement?

An Exclusive Dealing Agreement is supported by Real Estate Contract (CMI) drafted with clauses that provide for the obligation of the mediation company to promote its property, against the obligation of the owner not to enter into real estate mediation contracts with other mediators, nor to promote the sale by own means, during the contractual period.

This contract, signed between the owner of the property and the mediator (duly licensed for the purpose), provides for the payment of a remuneration to the real estate, in case the sale of the house takes place. The contract will be valid for the term agreed between both parties, the most usual duration being 6 months (periods of 3 or 12 months are also common) and automatically renewed for a similar period (if not canceled by one of the parties with due anticipation).

In short, the owner grants a vote of confidence to the consultant and the real estate company with which he signed the contract, so that they have some time to do their best, investing in its promotion, with the guarantee that another real estate agent will not appear. closing the deal on your back, putting the work and investment done at risk. It is also a way of transmitting security to interested customers, as they know that when negotiating your proposal this is done in a more transparent way, taking care of their interests.On the other hand, communication between the consultant and the owner is facilitated and the owner feels more secure because this way it is easier to have a global idea about the visits and those interested in your home. This is the most used modality in the world and the one I use successfully at Keller Williams (except for large developments, or properties with a very high sale price)!

What is the Open Scheme?

On the other hand, there are real estate agents that work in an open regime, that is: the property, although there is a Real Estate Mediation Contract between the owner with each agency, can be sold by more than one real estate agent, and the owner has the right to accept the proposal that is more favorable to it, without the remaining real estate agents being able to claim the loss.

As I mention below, in terms of advantages and disadvantages, selling your home without exclusivity runs some risks, such as: lack of investment in promotion and advertising , overexposure and consequent devaluation of the property , etc. Many of the real estate agents that work in this regime practice lower commissions, which at the beginning seems to be advantageous for the owner but has the reverse side of the coin, which is: the investment in the promotion of the property is also less . A consultant who knows that there are more consultants visiting the house behind his back, and who practices a low commission, and who will sometimes have to share it with other real estate agents (if the sale is made with sharing) will spend a lot of money on advertising that property . This is usually one of the classic situations in which " cheap is expensive "! Not to mention the climate of lack of control, confusion and misinformation that the owner normally suffers from the open sale regime!

Advantages of the Exclusive Dealing Agreement

The exclusivity contract proposed by some real estate companies, including Keller Williams , the company I work for, is usually one of the requirements that most makes the owner sway when deciding on the strategy to sell his home. However, what appears to be a disadvantage at first glance, is not, and the proof of this comes to the fore over time.

First of all, it is important to note that the fact that you sign an exclusive contract with a broker, this does not mean that the broker is not allowed to share the sale of your home with other competitors ! Keller Williams defends the sharing tool as one of its main assets and I, personally, must be one of the consultants that most shares in Portugal , inside and outside the KW Portugal network. That is, for KW the exclusive only concerns the promotion of the property and not its sale!

These are some of the reasons why you should not be afraid to sign an exclusive contract to sell your home:

The mediator's commitment to selling your homeThe Commitment - The owner gains greater dedication on the part of the consultant who works on an exclusive basis, contradicting the wrong idea that: if there are "n" competing consultants working in parallel with the same property, the probability of success is multiplied by " n ". What the experience ends up showing is that, after an initial peak of activity, right after the conclusion of the "open regime contract", it decreases over time and the property tends to lose interest on the part of the consultants , which prefer to focus on properties that sell on an exclusive basis, to the detriment of those that are sold under an " open contract ".

Risks in selling your home without exclusivityThe Risks - The sale of a house, contrary to what may appear at first sight, is not a mere transaction identical to that of so many other commercial products. There are too many legal, fiscal and financial "pitfalls" that can lead the owner to very complicated situations, even due to the high values that are at stake. Now, the role of an experienced real estate consultant and duly advised by a professional team, is to advise your client at all times to avoid unforeseen damages.

The time to sell your home without an exclusive contractTime - This is a variable that should contribute to the quality of the sale and not to a sale at any price. Would you trust a brain surgeon just because he promises to perform the operation more quickly? Or a workshop mechanic? Or a builder of a house? Not? Of course! You’re afraid of what might happen in the end, right? Selling a house is no different. Risking your home in an unrestrained competition between consultants, devaluing your property not to mention the frustration that awaits you, doesn't seem like such a good idea, does it? All of this to avoid an exclusive agreement, whose period of time is usually only 6 months !!

The focus on selling your homeThe Focus - For the consultant, the exclusivity regime means that he has time to develop a professional job. Its focus is no longer centered on competition with the other sellers and starts to focus on the promotion and search for the best buyer for your home, that is, the one who is willing to buy your property at the highest price and achieve the purchase in the shortest period of time . The consultant, instead of fighting against time, starts to fight for the valorization of his property, because both parties have to gain more from it.

Marketing in selling your homeThe Marketing - When the mediator offers you "non-exclusivity" as an advantage and at the same time promises you to use powerful marketing in the service of marketing your property, it is not being entirely true. Marketing these days has high costs, whether it is traditional marketing or digital marketing. Invest in social networks, in teams of professionals (photographers, audiovisual producers, marketers and designers, translators, etc.), in the best national and international advertising sites, etc. etc. it has costs, many costs. Exclusivity is the price to pay for increasing the visibility of your property, without losing value and getting the best buyer for your home .

Confidentiality in selling your homeConfidentiality - This argument is not always sufficiently considered by homeowners who want to preserve their confidentiality during the sale process. It is easy to see that, if this is an important factor for you, when choosing non-exclusivity you are following the opposite path to the one intended. An experienced consultant, who has enough time may be able to sell your home, will have the time and additional incentive to explore your network of contacts and find a buyer, even without resorting to the unruly advertising that competition between various mediators would bring you. right.

Sharing between real estate consultants in the sale without exclusivitySharing - One of the ways to increase the visibility of a property and to reach qualified customers is through sharing between the real estate consultant and the other colleagues in your network, or other competitors. When there is an Exclusivity Contract, the consultant is more comfortable to disclose the same, because he has the guarantee that he will not lose the business to the competition during the contractual period. But when the promotion is made under an Open Contract regime, this does not happen, for fear of the consultant, which makes it difficult to promote the property and the subsequent sale.

The devaluation of a house sold without exclusivityThe Devaluation - A property for sale, still "virgin" in the market, provokes interest and curiosity, this is because still few know it, managing to keep its "aura of valuation" intact. A property promoted by several mediators, each using descriptive and photographic reports of sometimes dubious quality, sometimes with an outdated price, competes quickly for an image of a property " that nobody takes and that will probably have a problem ".

In short: do not fear an Exclusive Dealing Agreement! Six months is not an eternity, but an opportunity for a proven professional to improve the chances of selling your home well .

These are just some of the arguments that confirm the old saying: "quickly and well, there is no one!" .

Open regime vs. exclusivity regime, reasons for resistance in Portugal

Exclusivity is the most popular model of real estate in the world, but in Portugal there is a lot of resistance! It is not easy to explain to many owners the advantages of working exclusively with me, which seems obvious to me is not so for many. So why so much resistance in Portugal in relation to the exclusivity regime ? There are several reasons:

1 - Distrust, always distrust! It is natural, as I usually say: " there are 50,000 real estate consultants in Portugal, but at the top there are few ". If an owner doesn't know the consultant or the real estate agent, why put all the eggs in one basket?Of course, this is a reducing thought and the answer is not easy to explain, as you can see by the size of this page :) That is why I invest so much in professional relationships, partnerships and marketing, for me it is essential that people understand who can trust me, because I show my face for successes and failures. Here, the key word to unlock this resistance is to establish a relationship of trust with the owner (s) .

2 - Lack of professionals with big P! Sometimes distrust has a raison d'être. At the risk of appearing petulant, there is a great lack of professionalism in this medium. This is partly due to the arrival of many real estate consultants and new agencies to the real estate activity, without any specific preparation or training, and in which for many the strategy is: " learn while they evolve ". Of course, this strategy has risks and leaves havoc along the way. On the other hand, there are many professionals who confuse effort and work with commercial aggressiveness, without a culture of good repute and strong pillars of ethics. Run over, dishonesty, lack of professionalism, I have found a little bit of everything and in doses that are not usual. There is an urgent need to create a certification model for real estate consultants, similar to what exists in more mature markets, abroad.

Often, to convince an owner to sign a Real Estate Contract, anything goes: "promising to sell your home in X months", "ensuring that you already have customers for your home or even forging visits using friends", "affirming that already sold N houses in the vicinity "," advise unrealistic selling prices just to get the fundraising and later go down the price "," work with illegal rules during the transaction ", etc. etc.

3 - Quantity versus Quality. On the other hand, the argument that the owners who want to work in the open convey more to me is that in this way they will multiply the number of people working on their property and the number of real estate agents promoting it. It is not easy to deconstruct this argument, but unfortunately, reality is in charge of doing so. The only thing I usually say is that: if in the first week or the first month it seems that the strategy is working, then the visits are rare and the consultants disappear . Why?Because the investment in the promotion of a property is very expensive and in the open sale regime, it is usually null or almost!

What if the owner sells the house outside the scope of the Exclusive Dealing Agreement?

1 - Although the owner is prevented from promoting the sale of his house during the term of the contract, advertising it in his personal name, of third parties or through other mediators, this does not prevent him from accepting an offer to buy from an interested party , as long as this has been addressed to you spontaneously, or is part of your personal contact circle, and has not been presented to you by the contracted mediation company .

At least that is the understanding of the courts, which can be consulted in this judgment of the Court of Appeal of Évora - 5/11/2015 that was foreshadowed in this sense, thus contributing to consolidate the jurisprudence on this topic. Also in a Judgment of the Court of Appeal of Guimarães - 04/20/2010 we can read:

" An absolute exclusivity regime (impeding the acceptance of proposals not sought by the principal (owner) does not follow from the letter of article 18, 2, a), of Decree-Law nº 211/2004 ... "

In both cases, the courts found that no commission or compensation was due from the owner to the company with which he had signed an exclusive mediation contract.

2 - If the owner, in breach of the mediation contract with an exclusivity clause, concludes a mediation contract with another mediator and sells the property to a buyer client presented by this other mediator - during the term of the contract - he will have to pay the agreed commission to the first company with which he had signed an exclusive mediation contract, as referred to in the Lisbon Court of Appeal - 10/17/2017 :

In the mediation contract with exclusivity clause, the fact that unilateral and discretionary termination is not possible “means that the client has to pay the remuneration in the following cases:

a) ... if the client (owner) enters into the contract envisaged thanks to the activity developed by the mediation company during the contractual term (namely by concluding it with the interested party that the mediator presented to him during the term of the contract), even if the conclusion of the targeted contract takes place outside the contract period;

b) If the client (owner), in breach of the mediation contract with an exclusivity clause, concludes a mediation contract with another mediator and comes to conclude the targeted contract with a third party presented by this other mediator during the term of the defaulted contract ...;

c) ... if, during the term of the mediation contract, the mediating company presents to the client an interested person, willing and ready to conclude the contract in question, and the client does not conclude it for any reason attributable to him ... ”.

It happens that the effects do not derive automatically from the law, but must be specified in the contract, under penalty of nullity.

Please note that, according to paragraph 5 of article 16 of Law no. 15/2013, all this is only valid if the Real Estate Contract makes explicit reference to the exclusivity regime and the agreed remuneration (commission) if the the deal does not take place for reasons attributable to the client, under penalty of the contract being considered null.

Can the owner refuse a purchase proposal?

No , as long as the client's proposal is formalized in writing, through the real estate company and during the term of the contract, it respects the conditions imposed in it, that is: the price and the terms of deed agreed between the owner and the mediation company.

As explained in the Judgment of the Court of Appeal of Évora - 11/05/2015 : " ...if, during the term of the measurement contract, on an exclusive basis, the mediator presents a principal interested in the business to the principal (owner), he cannot pass it on without being obliged to pay the agreed remuneration, even in the face of another that offer you better conditions ".

More: "The company also owes the remuneration agreed in cases where the business referred to in the mediation contract was entered into on an exclusive basis and does not take place due to a cause attributable to the owner client ... "

How to cancel the automatic renewal of an Exclusive Dealing Agreement?

If the contract does not mention an automatic renewal clause, it is considered to be automatically terminated after the end of the period provided for in the contract.

If the owner is not satisfied, he can request the cancellation of the automatic renewal by informing the real estate agent of his intention, by registered letter and with acknowledgment of receipt, "n" days before the end of the contract, as provided for in the terms of the contract.

How to terminate an Exclusive Dealing Agreement with the real estate company?

A real estate mediation contract presupposes a serious commitment by both parties and should only be revoked unilaterally if there are strong reasons, namely the objective non-compliance with the terms of the contract by one of the parties, or because the owner has given up selling.

If the owner gives up the intention to sell the property, during the term of the contract, he must also substantiate and inform in writing, describing the reasons that lead him to withdraw from the sale. You should do so by registered letter with acknowledgment of receipt. " This does not mean that the client cannot freely give up the conclusion of the contract in question, which he cannot, without paying the mediator's remuneration, is to put an end to the mediation contract before its agreed term, by unilateral and unmotivated declaration . " - Judgment of the Lisbon Court of Appeal - 5/10/2016

How and where to complain about an Exclusive Dealing Agreement?

Since the contracts in which the exclusivity clause is mentioned, must be previously submitted by the mediation company and approved by IMPIC - Institute of Public Markets for Real Estate and Construction , if the owner so wishes, he can file a complaint with the same, this if faced with any irregularity on the part of the mediating company responsible for concluding the contract.

However, the owner should first exhaust the informal channels before making a formal complaint:

  • Try to resolve the matter through direct negotiation, with the person in charge of the real estate agency or with the Master Franchising, in the case of a real estate franchising brand;
  • Use the Complaints Book to report the situation;
  • Consult the DECO consumer association;
  • Submit a complaint on the Complaint Portal . Although this portal is not institutional, it has a lot of visibility and as a general rule, renowned companies in the real estate business are concerned with responding to the complainant more quickly.
Updated on: 
9. September 2019
 
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