Real Estate Broker Agreement

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Real Estate Broker Agreement

Brief Introduction About Real Estate Broker Agreement

Selling a property can be a stressful process, especially when done alone. However, there are brokers in the real estate market who are well-versed with the market conditions and demands. The brokers may be individuals or companies. Often, owners engage their services to help them in the process of selling their property. It can include a home or a commercial space.

The services of real estate brokers are engaged with the help of a real estate broker agreement. It lists the terms under which the broker will work. These terms include details of the property, its selling price, and the broker’s commission and responsibilities. The broker here acts as the owner’s agent and facilitates the sale of the property.

What Is a Buyer Broker?

Just as owners of real estate have their brokers working as agents to sell their property, buyers also have real estate brokers. They act as the buyer’s agent and help them find a property according to their needs. They may agree with the buyer for this purpose. Sometimes, the owner and buyer may agree to have a single agent working on their behalf. This is called the dual agency. It may not be legal in every state.

Purpose of a Real Estate Broker Agreement

It is important to have a real estate broker agreement with the agent. It is a legally binding contract. This means that if any party does not follow the terms of the contract, it will be penalized. The legal nature of the agreement secures the rights and interests of both parties. It clarifies all the conditions of the arrangement. The parties are aware of each others’ duties. This way, they know what to expect of each other. The agreement also guides them in case of an unfavorable situation. For example, if there is a dispute between them, they will proceed according to the terms of the agreement. It will prevent uncertainty and prolonging the dispute.

Contents of a Real Estate Broker Agreement

It will generally contain the following key terms:

  • Names and contact details of the parties
  • Date of the agreement
  • Term of the agreement
  • Appointment of the broker and scope of authority
  • Details of the property, including its sale price
  • Broker’s commission
  • Representations by the owner
  • Representations and warranties by the broker
  • Obligations of the broker
  • Grounds for termination
  • Dispute settlement
  • Applicable law
  • Signature of the parties

If there are any specific terms related to the transaction, they can also be included in the contract. But all these terms have to comply with applicable federal and state laws.

How to Draft a Real Estate Broker Agreement?

One of the most important points to keep in mind when drafting the agreement is to make every term clear. It should be written in such a way that it can only mean one thing. This will avoid confusion between the parties. Some specific points are listed below:

Appointment of the broker: This clause should state the services for which the broker has been hired. It should include whether the engagement of the broker is exclusive or non-exclusive and how much authority he possesses. This means that he can either act on behalf of the client as his agent or only take part in certain negotiations.

Commission: The percentage of commission that the broker will receive should be clearly stated. It should also mention when it becomes payable and how it is to be paid. If the broker is a company, it may have a separate real estate broker agent commission split agreement with its individual agents. Under this agreement, the agents will get a portion from the broker’s commission.

Negotiation Strategy

The negotiation stage should be used to discuss and clarify all the issues. Both parties can adopt different strategies.

Owner: When negotiating with a real estate broker, the owner must discuss the scope of services that he wants the broker to perform. He should ask all relevant questions, such as how the broker intends to market his home and how many clients he has at that given time. He should negotiate the commission percentage if he feels that the broker is quoting more. To get an idea, it is wise to look refer to a real estate broker commission agreement template.

Broker: The broker should know the prevalent market value of the property in the owner’s locality. This will help him guide the negotiations in a better way. Whatever points the owner brings up, the broker should discuss them with a collaborative mindset and not be aggressive.

Benefits and Drawbacks of Real Estate Broker Agreement


  • It allows the owner to utilize the skills and market expertise of real estate brokers.
  • The owner can save time by asking the broker, who is a professional, to find buyers for the property.
  • The contract protects both parties from legal risks.


A real estate broker may have multiple clients. The contract is not a guarantee that the owner’s purpose will be solved at the earliest.

What Happens If It Is Violated?

A violation of the agreement will constitute a breach of contract. For example, an owner may breach the contract by not paying the broker as per the agreed terms. A broker may violate it by not conducting due diligence of the buyer. If any party violates the contract, the dispute settlement clause(1) will be attracted. The method mentioned in the clause will be followed. If it fails, the suffering party can sue the other in court. The state whose law applies to the agreement will have jurisdiction.

A real estate broker agreement is important to ensure that the broker understands his role and performs it efficiently. Rules may vary from state to state, so it is best to get the agreement reviewed by an attorney before finalizing anything.