Lesson 2: Brokerage Agreements in Maryland

The Brokerage Agreement 

The Brokerage Agreement is a written agreement between a broker and a buyer/seller (client) which stipulates the duties and responsibilities of the agents and buyers and sets out exactly what services the brokerage will provide to their client. The most important parts of the agreement between buyer and broker are (1) duration of the contract, (2) compensation, a (3) description of the property sought by the buyer, and (4) the level of broker exclusivity.

The Brokerage Relationship 

A ‘broker’ is a licensed organization (LLC, corporation, partnership, or sole proprietorship) that provides brokerage services to buyers and sellers. A ‘brokerage relationship’ describes an agency relationship under an official brokerage agreement in which a client engages a broker and the broker provides real estate services. 

Elements of a Brokerage Agreement

Brokerage agreements must contain the following elements: 

Have an automatically-effective date of termination.

Specify whether the broker may cooperate with other brokers and share compensation.

State the conditions that must be met or the events that must transpire for the broker to be entitled to compensation.

Provide the terms of a brokerage relationship cancellation. 

Define the broker compensation amount.

Compensation for Representation

Compensation is defined as the payment or promise of payment to a broker/licensee by their client (who is selling, buying, or leasing a property).  Agents earn a commission from the sale of their properties (typically 5-6% of the home’s final sale price, split between the seller’s agent and the buyer’s agent). The brokerage with which each agent works may require a percentage of their agent’s commissions, or charge a flat fee. 

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Check for understanding!

What are the essential elements of a brokerage agreement?