Two of the most Frequently Asked Questions FAQs that real estate agencies receive from potential clients that are looking to sell or buy properties in Cyprus are of course the commission that the agencies charge and what are their responsibilities both towards the seller and also towards the buyer.
For this reason, we will explain the main duties of a real estate agency but also briefly analyze some of the key legal and ethical responsibilities of a real estate agent towards potential clients within the limited space of a small article.
First and most importantly, a real estate agent must be registered with the Registrar of the Estate Agents in Cyprus and must have a professional indemnity insurance of at least £100.000, and also should have a registered office.
A licensed real estate agent is defined by the law as a “registered” real estate agent, who in due time holds a valid license issued and includes a person legally exercising the profession of a real estate agent in another Member State and providing services in the Republic, in accordance with the provisions of the current Law;
Be very careful of the social media people advertising themselves as realtors whereas, in reality, they lack the knowledge to protect you and also do not have the legal right to represent a client or proceed to money or property transactions. A real estate agent’s license is not just a matter of paperwork, it is a legal document written in a way to protect the client from any possible fraudulent or unlawful activities.
Key agency responsibilities:
Find customers to sell or rent the property
All communication between seller and buyer
Negotiate prices or any other selling terms
Property advertising (website, other property portals, signs, social media, exhibitions) is all free of charge to the client unless otherwise agreed upon.
Advice clients on market trends, conditions, and future expectations.
*Contract between seller and buyer: This is not up to the agency and it is strongly advised that it is performed by a lawyer and the agency should not engage in legal procedures or agreements.
Key legal responsibilities:
- A real estate agent has a legal and ethical responsibility to act in the client’s best interest. For example, he/she should be honest regarding a property’s market value and not mislead a potential buyer to buy above their budget and criteria to benefit from a higher commission.
- Any conflicts of interest must be disclosed and he/she should negotiate in good faith.
A realtor has to be honest and straightforward about all the details of the property and the relationship he/she has with any potential buyer.
*For example, if a client is selling, he/she should be informed adequately and truthfully if the potential clients are willing to pay more than the asking price, the buyer’s intentions towards the property, all the offers that have been received and also any other information that the real estate agent has that could potentially discourage the seller into selling the property to that person or entity.
*If your client is buying, you must inform them how long this property is listed in the marketplace, if the asking price is fair and what the market value is, if any other offers have been made for this property, what the offer put in the table should be having in mind always the best interest of your client.
You may have heard of the acronym “OLD CAR” which translates as:
- Obedience – You (the realtor) must obey your client’s lawful instructions and requests as agreed.
- Loyalty – You should try and obtain the best possible deal for your clients even if it means you will gain less commission from the deal.
- Disclosure – All facts and knowledge in regard to the deal and property information must be disclosed to all parties including any contradicting interests and relationships between yourself and the third party
- Confidentiality – Unless otherwise agreed, all personal information must be kept for yourself up to the extent allowed by the law.
- Accounting – All money and property transactions must be kept in accurate records.
This is stated in the AML law and the agency must be informed and up to date regarding the necessary procedures. They should strongly advise potential clients to consult a lawyer to perform due diligence before any transactions take place. This protects all the involved parties.
Reasonable care – The agent’s duty strictly requires that they exercise their duties with competency and that they display the professional skills expected of someone holding a real estate license in the best interest of the client.
A real estate agent has to carry out an investigation before bringing any property to a potential client which includes: A physical visit to the property to inspect and check for any obvious damages that could potentially lower significantly the value of the property but also all the legal parts that could affect the price of a property such as zoning (ex. residential, agricultural, animal rearing, industrial, green belt, and tourist zones), any other limitations or repairs required, if there are mortgages and impediments, ownership and title availability, bank memos, etc.
What are the commissions that real estate agents usually charge?
A real estate agent usually charges a 5% commission for a sale of the property, but if there is an exclusive agreement of exclusivity, the commission could drop up to 4%.
Should we signed a contract?
A written agreement must be signed by both parties explaining in detail the obligations and expectations of both parties which must include but are not limited to the following:
– A deadline for the exclusivity given to the agency to sell the property
– The commission and when it is paid
– What penalties or charges will occur if another agency is involved
– The desired selling price and the price range the real estate agent is allowed to ask (Higher or lower depending on the demand working always in the client’s best interest)
– If the seller is also the buyer or has any direct relationship with the buyer, he/she is not allowed commission.
– If the sale is agreed upon but there is a cancellation of the contract, depending on whose behalf the cancellation occurred, the commission is still payable as follows: If the fault is on the buyer, the agency is entitled to a commission provided the seller received a minimum of 25% of the asking price. The commission amount should be analogous and proportionate to the amount received by the seller.
– If the seller is at the fault for the contract cancellation, then the whole commission is payable.
– The commission is always paid by the seller unless otherwise agreed.
– Exclusivity – If there is an agreement that the agency has the sole and exclusive right to sell the property, even if the owner of the house sells the property himself, the agency is still entitled to the whole commission as stated in the written agreement.
– If the agent acts in a misleading, doubtful, or improper manner, he/she is, or may not be entitled to a commission.
Given the above, it is fair to say that not all these rules can be easily proven in court and we have seen contradictory decisions over the years, in favor of both parties so in case of the bridge of contract or not keeping your part of the agreement, each case is examined differently taken into consideration all the evidence submitted by all the parties involved.
Real estate agents in Cyprus are aware of all documents that parties need when they buy/sell real estate. This includes titles, apostilles, and other important papers that must be issued. They can protect clients from fraudulent activity, throwing away their money on a property that has limitations, or other legal issues as explained more thoroughly above, and also handle all procedures of the deal or advise the client to consult a lawyer when needed.
A sale or a purchase of a property is not an easy task and there are a lot of risks involved, therefore, it is strongly advised to let the professionals handle it.
We hope this article has given you a better idea and knowledge about what to request and expect from a realtor before signing any contract agreements.