Real Estate Exclusive Contract: Everything You Need to Know

Index

• What is an Exclusivity Agreement?
• Exclusivity Regime versus Open Regime
  • What is the Exclusive Real Estate Mediation regime?
  • What is the Open System?
• Advantages of the real estate exclusivity regime
• Real estate exclusivity, reasons for reluctance in Portugal
• What if the owner sells the house outside the scope of the exclusive contract?
• Can the owner refuse a purchase proposal?
• How to cancel the automatic renewal of an exclusivity contract?
• How to terminate an exclusive contract with the real estate agency?
• How and where to complain about an exclusivity contract?
• FAQs about the exclusivity agreement

What is an Exclusivity Agreement?

An exclusivity contract is a Real Estate Mediation Contract (CMI) written with clauses that authorize a mediation company to promote your property, against the condition that the owner does not enter into mediation contracts with other real estate agents, nor promote the sale by its own means., during the contractual period.

This contract, concluded between the owner and the mediator (duly licensed for this purpose), provides for the payment of a fee to the real estate, in case the sale takes place. The contract is valid for the duration agreed between both parties, with 6 months being the most common duration (periods of 3 or 12 months are also common). It is automatically renewed for a similar period, if not canceled by one of the parties, in writing and with the due anticipation provided for in the contract.

This contract has legal force and must be authorized and registered with INPIC, in the name of the company that holds the AMI License. Attention, because this contract is only valid if it is drawn up in writing and signed by the real estate company and the legitimate owners of the property . Otherwise, the nullity of the contract may be invoked, with retroactive effect.

Open Regime versus Exclusivity Regime

This is a sensitive topic for real estate consultants, as there are many owners who 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 exclusive regime . Know the differences:

What is the Exclusive Real Estate Mediation regime?

The exclusive real estate brokerage regime is supported by a service provision contract in which the owner grants exclusivity to a real estate agency for the sale or lease of the property in question . In this regime, this real estate agency is the only company authorized to carry out the intermediation of the business, not allowing other companies or consultants to sell or rent your property. In this way, the real estate company that holds the exclusivity is better able to offer a personalized and quality service to the property owner and potential buyers or tenants, which can result in a faster and more efficient transaction.

Briefly, on an exclusive basis:

1. The owner gives a vote of confidence to the consultant / real estate company, so that they have time to do their best and invest in promoting their property, with the guarantee that no other real estate company will close the deal behind their backs, losing thus all the work and investment made.
2. It is a way of conveying security to buyers, as they know that when negotiating their purchase proposal, this is done without surprises, in a more transparent way, safeguarding their interests.
3. On the other hand, the management of the whole process, between the consultant and the owner, is facilitated and the latter feels more confident and secure, as this way it is easier to have a global idea about the visits and people interested in their home.
4. Exclusivity only refers to the promotion of the property, it does not prevent the real estate consultant / agency from sharing the sale with other colleagues, their agency or other competitors.

This is the modality most used all over the world, at least where the real estate sector works more professionally, and the one I use with success at Keller Williams !

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What is the Open System?

There are real estate agents that work in an open regime, that is: the property can be promoted by more than one real estate agency simultaneously and the owner has the right to accept the purchase proposal that is most favorable to him, from any real estate agent, without the others being able to complain. There still has to be a Simple Real Estate Mediation Contract, between the owner(s) and each contracted agency.

As I mention below, in terms of advantages and disadvantages, selling your home openly carries some risks, such as: lack of investment in promotion and advertising, overexposure and consequent devaluation of the property, visits from poorly qualified customers, etc. Many of the real estate agents that work under this regime practice lower commissions, which at the outset seems to be advantageous for the owner, but has a disadvantage: the investment in promoting the property is lower!

A real estate consultant, aware that other consultants make visits behind his back, eventually trying to negotiate discounts on the price of the property, or accepting lower commissions, out of desperation, will spend less money on advertising and promoting the property . This is usually one of the classic situations in which " cheap is expensive "!Not to mention the difficulty in managing visits, when several consultants work in competition, trying to schedule for the same time and the inconvenience that "mark / unmark" causes to buyers.

Advantages of the real estate exclusivity regime

The exclusivity contract proposed by some real estate agents, including the company I work for, Keller Williams, is one of the requirements that most makes homeowners sway when deciding on the best strategy for selling their home. However, what appears to be a disadvantage at first sight is not, and the proof eventually comes to light over time.

Firstly, it should be noted that the fact that the owner accepts the exclusivity regime does not mean that the realtor is prevented from sharing the sale of his 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 who share the most in Portugal, inside and outside the KW Portugal network. That is, exclusivity only concerns the promotion of the property and not its sale!

Below, I highlight some of the reasons why you shouldn't be afraid to sign an exclusivity contract to sell your home:

Commitment - The owner gains greater dedication from a consultant working on an exclusive basis, contradicting the misconception that: if there are "n" competing consultants working on your property simultaneously , the probability of success is multiplied by "n". What experience ends up demonstrating is precisely the opposite. After an initial peak of activity, the request for visits decreases over time and the property tends to lose interest on the part of the consultants, as they prefer to focus on the properties that they raised on an exclusive basis, to the detriment of those that they raised in " open regime ".

Risks - The sale of a house, contrary to what it may seem at first sight, is not a mere transaction identical to that of other commercial products. There are too many legal, fiscal and financial "traps" that can lead the owner to very complicated situations, even due to the high values at stake. Now, the role of an experienced real estate consultant, duly assisted by a professional team, is to advise and protect his client to avoid unforeseen damage and losses.

Time - This variable has to contribute positively to "selling with quality" and not to hurry, closing the sale at any price. Would you trust a brain surgeon just because he promises to perform the operation faster? Or a workshop mechanic? Or a home builder? No? Of course! You're afraid of what might happen in the end, right? Selling a home is no different. Risking your home in an unbridled 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 this to avoid an exclusivity contract, whose duration is only 6 months!!

Focus - For the consultant, the exclusivity regime means that he has time to develop a professional work. Its focus is no longer centered on competition with other sellers and starts to be centered on promoting and finding the best buyer for your home. That is, finding the customer who is willing to buy the property at the highest price and complete the purchase in the shortest period of time . In this way, the consultant , instead of fighting against time, will start to fight for the appreciation of his property, because both parties stand to gain more from it.

Marketing - When the realtor presents you with "non-exclusivity" as an advantage and promises you to use powerful marketing to sell your property, he is not being completely truthful. Currently, marketing has very high costs, whether it is traditional marketing or digital marketing. Investing in social networks, in teams of professionals (photographers, audiovisual producers, marketers, designers, translators, etc.), in the best national and international advertising platforms, etc. It has costs, lots of costs. Exclusivity is the "price to pay" for increasing your property's visibility, without losing value, to get the best buyer for your home .

Privacy - This issue is not always considered by owners who want to preserve the confidentiality of the process of selling their home. It is easy to see that, if this is an important factor for you, by opting for non-exclusivity you are taking the opposite path to that intended. An experienced consultant, who has enough time to manage to sell his house, will have the time and the additional stimulus to explore his network of contacts and find a buyer, even without resorting to the unruly publicity that the competition between several realtors would bring him for right.

Sharing - One of the ways to increase the visibility of a property and get qualified clients is through sharing between the real estate consultant and other colleagues in their work network, or other competitors. When there is an Exclusivity Contract, the consultant is more comfortable disclosing it, because he is guaranteed 50% of the commission, at least during the contractual period. But when the promotion is carried out under an Open regime, this does not happen, for fear of the consultant, which makes it difficult to promote the property and the subsequent sale.

Devaluation - A property for sale, still "virgin" on the market, provokes interest and curiosity, this because few people know about it, keeping its "aura of appreciation" intact. A property promoted by several mediators, each using descriptions and photographic reports of sometimes dubious quality, sometimes with outdated prices, contributes to devaluing the property, giving the image " that no one will take it, because there will probably be a problem ".

In short: don't be afraid of an exclusive contract! 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 versus Exclusivity regime, the reason for reluctance in Portugal

Exclusivity is the most popular property acquisition model in the most competitive markets, but in Portugal there is great reluctance! It is not easy to explain to many owners the advantages of working exclusively with me and what seems obvious to me is not obvious to everyone. So why so much distrust in Portugal regarding the exclusivity regime? There are several reasons:

1 - Distrust, always distrust! It's natural, as I usually say: " there are 50,000 real estate consultants in Portugal, but there are few Top Producers ". If a homeowner doesn't know the consultant or real estate agent, then why put all their eggs in one basket?Of course, this is a simplifying thought that is not easy to demystify, as you can see by the size of this page :) That's why I invest so much in professional relationships, partnerships and marketing, for me it's fundamental that people realize they can trust in me, because I face the successes and failures. In this theme, the "key word" to unlock this resistance is to establish a relationship of trust with the owner(s) . Talking face-to-face or inviting owners to follow my work on social media makes everything easier.

2 - Lack of professionals with big P! Sometimes mistrust has a reason for being. At the risk of sounding immodest, there is a serious lack of professionalism in this industry. In part, this is due to the arrival of new professionals and real estate agents to the real estate activity, many without specific preparation or training, and in which the strategy is: " learn as they evolve ". Of course, this strategy has risks and leaves damage along the way. On the other hand, there are consultants who confuse commitment and work with commercial aggressiveness, without a culture based on ethics and professionalism. Mistakes, dishonesty, lack of professionalism, I have found a bit of everything and in unusual doses. It is urgent to create a regulatory framework cementing the deontology of real estate consultants similar to what already exists in more mature markets outside Portugal.

Often, to convince an owner to sign a Real Estate Mediation Contract, anything goes: "promise to sell your house in X days", "ensure that you already have customers for your house or even fake visits using friends", "state that already sold N houses in the vicinity", "advise unrealistic sales prices just to get the referral and later lower the price", "working with illegal rules in mediation", etc. etc.

3 - Quantity versus Quality. On the other hand, the argument that owners who want to "work in the open" most convey to me is that, " in this way they will multiply the number of people working to sell the property", as well as the number of real estate agents promoting it. It is not easy to deconstruct this argument, but unfortunately reality takes care of doing so. The only thing I usually say is that: if in the first week or in the first month the strategy seems to be working, then the visits decrease and the consultants disappear . Why? Because the investment in promoting a property is very expensive and in the open sale regime , after some time no one spends money on its promotion!

What if the owner sells the house outside the scope of the exclusive contract?

1 - Although the owner is prevented from promoting the sale of his house during the term of the contract, advertising it on his own behalf, on behalf of third parties or through other mediators, this does not prevent him from accepting a purchase proposal from an interested party, provided that this has been addressed to you spontaneously, or is part of your circle of personal contacts and that it has not been presented to you by another real estate agency .

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, which foreshadowed in this sense, thus contributing to consolidate the jurisprudence on this subject. Alsoin a Judgment of the Court of Appeal of Guimarães - 20/04/2010 we can read:

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

In both cases, the courts understood that no commission or compensation was owed by the owner to the company with which the owner signed a mediation contract, on an exclusive basis.

2 - If the owner, failing to comply with the mediation contract signed with company A, with an exclusivity clause, enters into a mediation contract with another mediator B and succeeds in selling the property to a customer who has been presented to him by this company - during the duration of the contract - you will have to pay the agreed commission to company A, with which you had signed a contract on an exclusive basis, as referred to in the Judgment of the Court of Appeal of Lisbon - 10/17/2017 :

In the mediation contract with an 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) concludes the intended contract thanks to the activity carried out by the mediation company during the contractual term (namely by signing it with an interested party that the mediator presented to him during the term of the contract), even if the conclusion of the intended contract takes place outside the period of the contract;

b) If the client (owner), failing to comply with the mediation contract with an exclusivity clause, enters into a mediation contract with another mediator and concludes the intended contract with a third party presented by this other mediator during the term of the breached contract...;

c) ... if, during the period of validity of the mediation contract, the mediating company presents the client with an interested person, willing and ready to sign the intended contract, and the client does not sign it for reasons attributable to him... ”.

It turns out that the consequences do not automatically follow 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 of this is only valid if the Real Estate Mediation Contract makes explicit reference to the exclusivity regime and the agreed remuneration (commission), if the deal does not materialize for reasons attributable to the customer, under penalty of the contract being considered void.

Can the owner refuse a purchase proposal?

No, as long as the client's proposal is formalized in writing, through the real estate agency and during the term of the contract, and complies with the conditions stated therein, that is: respecting the price and terms of the deed, agreed between the owner and the mediation.

As elucidated 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 to the principal (owner) an interested party in the business, he he cannot deny it, without being obliged to pay the agreed remuneration, even in the face of another one that offers him better conditions ".

More: " The agreed remuneration is also owed to the company in cases where the business envisaged in the mediation contract has been concluded on an exclusive basis and does not materialize for reasons attributable to the client owner ...."

How to cancel the automatic renewal of an exclusivity contract?

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

If the owner is not satisfied, he may 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 its clauses.If you need to, you can consult this link for a Draft Termination of a Real Estate Mediation Contract - (editable version).

How to terminate an exclusive contract with the real estate agency?

A real estate agency contract presupposes a serious commitment from both parties and should only be unilaterally revoked if there are strong reasons, namely the objective breach of contract clauses by one of the parties, or because the owner has lost interest in selling.

If the owner withdraws from 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. It is advisable to do so by registered letter with acknowledgment of receipt. " This does not mean that the client cannot freely withdraw from the intended contract, what he cannot, without paying the mediator's remuneration, is to end the mediation contract before its due term, by unilateral and unmotivated declaration. " - Judgment of the Lisbon Court of Appeal - 5/10/2016

How and where to complain about an exclusivity contract?

Since the contracts in which the exclusivity clause is mentioned, must be previously submitted by the mediation company and approved by IMPIC - Instituto dos Mercados Públicos do Imobiliário e da Construção, if the owner wishes, he can file a complaint with the same, this if you are confronted with any irregularity on the part of the intermediary company responsible for signing the contract.

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

• Tente resolver o assunto pela via negocial direta, contactando o Broker responsável pela agência imobiliária ou o Master Franchising, caso se trate de uma marca de franchising imobiliário;
• Utilizar o Livro de Reclamações para denunciar a situação;
• Consultar a associação de consumidores DECO;
• Apresentar queixa no Portal da Queixa. Embora este portal não seja institucional, tem muita visibilidade e regra geral as empresas de renome no ramo imobiliário preocupam-se em responder ao queixoso de forma mais rápida.

Perguntas frequentes sobre o contrato de exclusividade imobiliária

1. What is a real estate exclusivity contract? The real estate exclusivity contract is an agreement signed between the owner of a property and a real estate company, with an AMI license. Through this contract, the owner grants the mediator exclusivity to sell or lease the property in question, preventing other real estate agents or consultants from doing the same.
2. What are the benefits of signing a real estate exclusivity contract? The benefits of signing a real estate exclusivity contract include: security and guarantee that the sale or lease process is carried out in a professional and efficient manner, the elaboration of a personalized marketing plan for the property, the personalized and exclusive service of a consultant specialized in the type of property, the guarantee that all visits will be scheduled in advance and accompanied by a real estate professional, among other reasons.
3. What is the duration of the real estate exclusivity contract?The duration of the real estate exclusivity contract is negotiated between the parties involved, and may vary between 3 and 6 months. After this period, the owner and the real estate agent can choose to renew or cancel the contract.
4. What is the commission due to the real estate agent in an exclusivity contract? The commission due to the real estate agent when signing an exclusivity contract may vary according to the value of the property and the services provided by it. Usually, the commission varies between 3% and 5% of the total transaction amount. However, this percentage may vary according to the region, the type of property or the real estate agency in question.
5. Can the owner sell or lease the property on his own during the exclusivity period? Yes, the owner can sell or rent the property on their own during the exclusivity period.However, if a buyer or tenant is introduced to the landlord by another agency, the estate holding the exclusivity is entitled to receive the commission due for the work performed.
6. Can a real estate company refuse to sell a property without being exclusive? Yes, the real estate agency may refuse to list a property under the open regime, if it considers that the property does not comply with the rules of its business model. eg. in Portugal, it is usual for some of the biggest real estate agents to only admit to working openly above a certain amount (eg above 750 000 €).
7. Is it possible to terminate a real estate exclusivity contract before the agreed deadline? Yes, the exclusivity contract can be canceled before the end date foreseen in it, provided that both parties agree, or if the owner has given up selling his property.However, the contract usually contains a fine clause, in case the owner decides to cancel the exclusivity contract before the deadline and sell the property through another mediation agency. Usually, the fine is equal to the amount of the agreed commission.