By Boris Goldshmit
Here is the fourth and final part of Boris’s article, with advice on how to hire a suitable real estate agent in Brazil. To read the previous parts click the link at the bottom of the article.
A listing contract can be exclusive or non-exclusive. Since there is no MLS in Brazil, most of the listing contracts by default grant exclusive rights to sell to the listing broker or agency (commission is due even if the seller finds a buyer directly) for the duration of the contract. Usually such contracts are signed for a period of 90 business days. If the seller desires to grant only an EXCLUSIVE AGENCY contract (commission is only due if the listing agent finds buyer), the clause has to be explicitly stated and carefully worded.
If the transaction takes place after the expiration date of the contract, but as a result of the broker’s contribution, the fee is still due.
An exclusive contract gives the rights of public advertising to the broker (posting signs, running classifieds ads, posting listings on web sites). A non-exclusive contract would limit marketing options to the internal catalogs, existing client lists and such.
Commission or fees
Legislation and regulations guiding the profession of real estate brokers in Brazil shies away from calling compensation for real estate brokerage services commission. Instead, consistent effort is being made to equate such compensation with fees payable to other liberal professionals in Brazil, such as lawyers and doctors. The word used for the legal and practical purposes is Honorrios. Such effort is being made in order to further disassociate the real estate broker profession from the ranks of common sales clerks, and to elevate the professional status of the category.
The Honorrios ought to be fixed at the service contract and should be clearly identified as for the type of services that would generate such compensation.
Note: Commission and fee are going to be used in this article interchangeably since commission is the most frequently used term designating such compensation in the English language.
There are five basic types of professional compensation:
This commission is paid by either the seller or buyer and is based on the type of property and sales commission table provided by the corresponding state’s CRECI. Usually, the rate ranges from 5% to 10% of the amount of the transaction.
Property Barter commission
Barter commission generally follows the same guidelines as the sale commission. It is important to note that in case of a direct exchange of a property for another one of equal value, the broker can claim commission for both. When a property of a lesser value is provided as part of payment for a property of a greater value only the commission on the property of the greater value is due.
Property Lease commission
Rent commission is always charged to the landlord. It usually is defined as an amount equivalent to a month worth of rent.
Property Administration fee
Can be fixed at up to 12% of the amount of the monthly rent. If the amount of rent is fixed for the entire duration of the lease agreement, then a greater amount can be charged.
Property Appraisal (Property valuation) fee
Real Estate brokers in Brazil can conduct market analysis and determine the market value of the property in question.
Note: If the property appraisal is required for legal, fiscal, or mortgage purposes, only civil engineers could provide reports that can be admitted.
When the fee is due
It is a common misconception that the broker fee ought to be paid at closing. In reality, payment of the broker fee is due at the moment when the transaction has become imminent, i.e. when the intent to purchase or a similar document has been signed.
Even if the deposit/earnest money has been paid and the buyer later pulls back for one reason or another, the seller is liable for the full broker commission. This is one of the reasons that the down payment should be set at least 10% of the agreed sale price in order to cover possible expanses that include broker commission.
It doesn’t mean that if the broker has merely introduced the two parties that the commission is due. There has to be a clear indication that the transaction is to take place. What is usually not considered in this situation is whether or not the transaction is eventually carried through by either of the parties or not.
If the transaction falls through due to the unprofessional, unethical, or illegal conduct by the broker, there is a fair chance that the fee would be denied and the broker could be held responsible legally and financially for his or her actions.
Previous articles by Boris: