Buying Property Through a Real Estate Agency
You have decided to buy your first property and are wondering how to start your search, and whether to buy on your own or have a real estate agency handle everything for you. If you hire an agency, you may also want to know how much you need to pay in brokerage commission.
In this article you will find answers to questions about how to hire a real estate agency. Real estate agencies have specialist knowledge. For most people, buying or selling a property is a complicated, risky and very delicate process, especially if they undertake it on their own without professional help.
Since the smallest oversight in the buying process can complicate the entire procedure and end up costing you far more, in practice there is a need to hire a real estate agency specialised in property sales and purchases. Real estate agencies offer buyers security during a transaction, provided they are well versed in legal regulations, construction, architecture, energy efficiency, finance, contractual relations and administrative procedures.
Register of Intermediaries kept by the Croatian Chamber of Economy
However, before deciding to buy a property through a real estate agency, you should check in the Register of Intermediaries kept by the Croatian Chamber of Economy whether the agency you have contacted operates legally. Under the Real Estate Brokerage Act (Official Gazette 32/19), a real estate intermediary (agency) is a company, sole trader or craftsman registered to carry out real estate brokerage activities, with its registered office in the Republic of Croatia or in a state party to the Agreement on the European Economic Area.
What knowledge does a real estate agency have?
For an agency to have the knowledge and experience you need to buy a property, it must first hold a licence, which means it must have at least one qualified agent who has passed the state professional exam for real estate business. An agent who has passed the exam has broad knowledge of real estate and is well versed in spatial plans, the cadastre, the land registry, taxes, finance, loans, construction, contractual relations and legal procedures. Very often they must also be a good psychologist, courteous, confident and professional in every respect. In addition, the agency must have an office where it works and receives clients, and it should certainly have a real estate lawyer who continuously monitors changes in property legislation. Bear in mind that if you hire an unlicensed agency and any complications arise during the completion of the sale and purchase, you are completely vulnerable and unprotected in every respect. For this reason, it is advisable to always research the agency you contact, look at recommendations to see how visible they are in advertising, and on that basis decide which agency inspires enough confidence for you to entrust it with the sale of your property.
Obligations of a Real Estate Agency When Engaged by the Seller
If you are a property owner, the safest way to sell your property is to hire a real estate agency to find you a buyer. In that case, you should first check whether the agency charges a commission only to the seller or also to the buyer, because charging commission to both sides could cause your property to be passed over on the market. It is also important to find out how the agency works and what services it offers.
If you have decided to engage a professional from a licensed real estate agency, you first need to arrange a meeting at your property so that they can inspect its condition, and you are obliged to hand over the proper documentation relating to the property (ownership certificate, building permit and occupancy permit, and a personal ID document). If the documentation is in order, the seller and the agent sign a Brokerage Agreement, by which the seller authorises the agency to advertise the property and bring in buyers, and agrees to pay a certain fee for this. After the agent visits your property, photographs it and writes a description, they give their opinion on the optimal market price of the property being sold. The seller may set the price they consider acceptable, but must keep in mind that properties only sell at realistic prices. The agent then advertises the property online, on domestic and international portals, through paid ads, on social media and so on.
Tasks of a Real Estate Agency When Selling a Property
The agency's task is to bring potential buyers to view the property, sometimes several times, but only if they are seriously interested in buying, and to negotiate the price of the property. Once the agency has found a buyer and reached an agreement on the price, it must engage a lawyer to draw up the Sales Contract, which must be notarised by a public notary. After the purchase price has been paid and the keys handed over to the buyers, the agency carries out the second part of the job: registration in the land registry (zemljišna knjiga) and the cadastre, filing the tax return and transferring all utilities into the buyers' names. Obligations of a real estate agency when engaged by the buyer: It is common in practice for buyers to be looking for an apartment but not have the time to devote to the search. In that situation, it is best for you as a buyer to engage a real estate agency to take care of finding the apartment and handle the entire purchase process. Before choosing the right agency, contact several prospective agencies and discuss your needs, wishes and expectations regarding the price you are prepared to pay and how quickly a suitable property needs to be found. With the chosen agency you sign a brokerage agreement, which makes you the principal, and you are obliged to pay a commission if the transaction is completed. All properties available on the market are advertised on portals accessible to everyone, to agents and potential buyers alike. An authorised agent first searches among the properties in their agency's portfolio for those that match the buyer's wishes and needs. However, if the agency does not have the kind of property the buyer wants, the buyer can engage it to look for a suitable property among the offerings of other agencies or on the open market.
Once the agent has found a property whose description and price meet the buyer's needs, the buyer is entitled to view the property accompanied by the agent, who negotiates the price with the seller. If, after the negotiations are completed, the buyer decides to purchase the property, the agency must engage a lawyer to draw up the sales contract. In addition, the real estate agent prepares, on the buyer's behalf, the application for registration in the land registry, carries out the transfer of ownership and obtains the proof of ownership (land registry extract).
When is an agent entitled to a commission?
In order to acquire the right to a brokerage fee, a real estate agent must conclude a brokerage agreement with the seller or the buyer, depending on who engaged them. This agreement is made in writing for a fixed term. However, if no term has been agreed, the agreement is deemed to have been concluded for a period of 12 months, which the parties may extend several times by mutual consent through an annex to the agreement. The Real Estate Brokerage Act and the amount of the brokerage fee: Under the Real Estate Brokerage Act, the agent and the principal are free to determine the amount of the brokerage fee in the real estate brokerage agreement. It is important to note that when the brokerage agreement is concluded, the agent's right to a fee arises conditionally, meaning the agent becomes entitled to the fee only once the contract they brokered has been concluded, or a preliminary contract if the agent and the principal have agreed so. The fee includes all of the agency's services, from the lawyer's fees for drafting the sales contract, through submitting the documents for registration in the land registry and submitting the documents to the tax authority for tax assessment, to transferring all utilities into the buyer's name.
Charging a double commission
In light of all of the above, it can be concluded that an agency may charge its brokerage commission to the seller if the seller engaged it under a brokerage agreement to help find a buyer, or to the buyer if the buyer engaged it to help find a property with certain characteristics and concluded a brokerage agreement for that work. In practice, however, there are situations in which an agency engaged by the seller to help find a buyer also charges a commission to potential buyers who are interested in visiting and viewing the property. In such cases, an interested buyer who has read the agency's property advertisement in a newspaper or has seen the property listed on the agency's website is not a principal obliged to pay the agency a brokerage commission, but is considered a so-called "third party", for whom no such obligation exists.