How to Write a Real Estate Agency Agreement
This is the agreement between a property owner and the agent selling for them. Written down, the commission argument never happens.
What a real estate agent agreement is
A real estate agency agreement appoints somebody to find a buyer or tenant for a property, and sets out what they are paid for doing it.
It is a contract of agency. The agent acts for the owner, owes them duties of loyalty and disclosure, and must not take a secret profit from the position.
In Nigeria most agency arrangements are verbal, which is exactly why commission disputes are so common. The owner says the agent did not conclude the sale. The agent says they introduced the buyer. Both are describing the same facts and reaching different conclusions, because nobody agreed in advance what earned the fee.
One written sentence about when commission falls due removes that entire category of argument.
Who needs one
Owners instructing an agent to sell or let a property.
Agents who want their fee protected against an owner who deals directly with an introduced buyer.
Anybody appointing an agent on an exclusive basis, where the stakes on both sides are higher.
It is worth having even between people who know each other well. Commission disputes usually arise between parties who trusted each other enough not to write anything down.
Before you start
Settle the commercial points first.
The lowest price you will accept, since that is the agent's mandate.
Whether the agent is paid a fixed fee or a percentage, and what triggers payment.
Whether the appointment is exclusive, and if so for how long.
Whether the agent may receive money from buyers on your behalf, which is the arrangement most Nigerian property losses run through.
And when the appointment ends, because an open ended exclusive mandate with an inactive agent is a trap.
The walkthrough
Filling in the form, step by step
Every question you will be asked, what it means, and an example of a good answer.
Step 1 of 4
Real Estate Agent Agreement
The agent, the owner and the property
The agreement starts by naming who is acting for whom, and over what.
Be specific about the property. An agency agreement describing a house in Lekki covers rather more than the owner probably intends, and where an owner holds several properties it invites a claim for commission on a sale the agent had nothing to do with.
The client here is the owner. If the person instructing the agent is not the registered owner, that is worth resolving before anybody markets anything, because an agent selling on the instruction of somebody with no authority is the beginning of a much larger problem.
- The Real Estate Agent's Name
- The full name of the agent or agency being appointed. Where it is a firm, use the registered business name rather than the individual who turned up, since the firm is who you are contracting with.
- The Real Estate Agent's Address
- The agent's business address. An agent unwilling to give a verifiable address is telling you something useful before you have signed anything.
- The Client's Full Name
- The property owner instructing the agent. This should be the person or company named on the title documents. Where somebody instructs on an owner's behalf, sort out their authority before marketing begins.
- Client's Address
- The owner's address for correspondence. Offers, updates and the eventual account of the agent's fee come here.
- Description of the property
- The specific property the agent is instructed on, described precisely: type, number of rooms and full address. Keeping it narrow prevents a later claim for commission on a different property the owner sold themselves.
Step 2 of 4
Real Estate Agent Agreement
Price, start date and how the agent is paid
This step sets the agent's mandate and their fee, and the fee question is where the money is.
The minimum price is the instruction. An agent who brings an offer below it has not fulfilled the mandate, and stating the figure protects both sides from a misunderstanding about what the owner will accept.
On payment, a fixed fee is predictable and a commission aligns the agent with the price achieved. Nigerian practice leans heavily towards commission, commonly a percentage of the sale price, but the percentage is negotiable and should be written rather than assumed.
Whichever you pick, the crucial words are the trigger. Commission on introduction of a party who subsequently completes, payable on completion, is the formulation that prevents the classic dispute where the parties met through the agent and then dealt directly.
- The minimum price for which the property will be sold
- The lowest price the owner will accept. This is the agent's mandate, and an offer below it is not one they are authorised to accept. State the figure in full to avoid any ambiguity about the currency or scale.
- Date when the agent will begin to render his/ her services?
- When the appointment starts. It matters for exclusivity, since the exclusive period runs from here, and it marks the point from which introductions count towards the agent's fee.
- The additional services the agent will be providing to the client
- Anything beyond finding a buyer: marketing and photography, conducting viewings, obtaining valuations, assisting with documentation. Listing them clarifies what the fee actually buys and what remains the owner's job.
- The agent will be paid
- Choose a fixed fee for predictable cost, or a commission to tie the agent's reward to the price achieved. Commission is the Nigerian norm for sales, while fixed fees suit lettings and defined pieces of work.
- fixed fee
- If you chose a fixed fee, state the amount and, critically, what triggers it. A fee payable on completion is very different from one payable on introduction of a buyer, and the difference is the whole dispute.
- A commission
- If you chose commission, state the percentage, what it is calculated on, and when it is earned. The formulation that prevents arguments is commission on introduction of a party who subsequently completes, payable on completion.
Step 3 of 4
Real Estate Agent Agreement
Payment mechanics and the end date
These answers cover how and when the agent actually gets paid, and when the appointment stops.
The form of payment question is worth treating carefully, because it touches the single largest source of loss in Nigerian property transactions. If the agent will receive money from buyers on the owner's behalf, say so explicitly and say what they may do with it. If they will not, say that too, so buyers can be told to pay the owner directly.
The termination date matters more than owners expect. An exclusive appointment with no end date, given to an agent who then does nothing, removes the owner's ability to sell through anybody else. Set a period, review it, and renew if the agent is performing.
- The agent shall be paid in what form?
- How the fee is paid, for example bank transfer to the agent's business account. Use this to state whether the agent may receive purchase money on the owner's behalf, since that is where most Nigerian property losses originate.
- Within how many days when the agent's payment is due will he/ she be paid?
- The window between the fee falling due and being paid. Agents want it short, owners want it after completion funds clear. Agree a realistic number rather than leaving it to goodwill.
- In case of default by the client, how much shall be charged as late fee penalty?
- What the owner pays for paying the agent late. Keep it a genuine reflection of the delay rather than a penalty, since an excessive figure is open to challenge.
- The agreement is to be terminated at what date?
- When the appointment ends. Always set a date, particularly for an exclusive mandate. An open ended exclusive appointment with an inactive agent leaves the owner unable to sell through anybody else.
Step 4 of 4
Real Estate Agent Agreement
Exclusivity, confidentiality and governing state
The final step covers the two conditions that most affect what each side can do.
Exclusivity is a real commitment. An exclusive agent is generally entitled to their fee on a sale during the period even where the owner found the buyer themselves, which is the point of the arrangement from the agent's side. Owners should understand that before agreeing to it, and should insist on a defined period in return.
Confidentiality goes the other way. An agent learns why you are selling, what you will accept and what your circumstances are. A buyer who discovers the owner is under pressure negotiates accordingly, so an obligation not to disclose the owner's position has genuine commercial value.
- Is this contract exclusive to the agent only?
- Answer Yes to appoint this agent alone, No to instruct several. Exclusivity buys the agent's commitment and usually entitles them to a fee on any sale during the period, including one the owner arranges themselves.
- Yes
- If exclusive, set out the terms: how long exclusivity lasts and whether the agent earns a fee on a sale the owner arranges during it. This is the clause owners most often regret leaving vague.
- Will the agent be restrained from disclosing confidential information of the client?l
- Answer Yes to bind the agent to confidentiality. Agents learn why you are selling and what you will take, and a buyer who learns you are under pressure will price accordingly.
- Yes
- If you required confidentiality, describe what it covers: the owner's reasons for selling, the lowest price acceptable, personal and financial circumstances, and how long the obligation lasts after the appointment ends.
- State where the property is located?
- The state the property sits in, which governs this agreement. Property matters follow the location of the land rather than where either party happens to live.
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Give the agent written authority
Buyers and tenants should be able to verify the agent is actually instructed. A short letter of authority alongside this agreement lets the agent prove it.
Have buyers pay the owner
Wherever possible, purchase money should go to the owner directly. Money paid to an agent who was never authorised to collect it is the most common property loss in Nigeria.
Diary the end date
Exclusive appointments should be reviewed rather than rolled over by inertia. If the agent is performing, renew deliberately.
Account for the fee in writing
When the transaction completes, record what was paid and on what basis. It closes the arrangement cleanly and leaves nothing to be revisited later.
Questions people ask
What is a real estate agency agreement?
The contract appointing an agent to sell or let a property, setting out the mandate, the fee, and when that fee is earned. It is a contract of agency, so the agent owes the owner duties of loyalty and disclosure.
When is an estate agent entitled to commission?
Whenever the agreement says. The formulation that prevents disputes is commission on introduction of a party who subsequently completes, payable on completion. Without a written trigger the argument is about what was understood.
Should I appoint an agent exclusively?
Exclusivity buys commitment but usually entitles the agent to a fee on any sale during the period, including one you arrange yourself. If you agree to it, insist on a defined and reviewable period.
Can an agent collect money from buyers?
Only if you authorise it, and it is safer not to. Money paid to an agent who had no authority to receive it is the single most common property loss in Nigeria.
What commission do estate agents charge in Nigeria?
It is negotiable and commonly expressed as a percentage of the sale price. Whatever you agree, write down the percentage, what it is calculated on, and when it is earned.
Can I end an agency agreement early?
Depending on its terms. This is why a termination date matters, particularly for exclusive appointments, since an open ended exclusive mandate with an inactive agent leaves you unable to sell elsewhere.
Documents that go with this
Terms used on this page
Estate Agent
An estate agent introduces buyers and sellers or landlords and tenants for a commission. General estate agency in Nigeria is largely unregulated, which is the whole problem.
Agency
Agency is the relationship where one person acts on behalf of another and can bind them legally. The principal carries the consequences of what the agent does within their authority.
Commission
Commission is payment calculated as a share of a transaction rather than as a fixed fee. The argument is almost never about the percentage. It is about when it was earned.
Agency Fee
Agency fee is what a property agent charges for finding you a place to rent or buy. In most Nigerian cities it lands somewhere around ten percent of the annual rent, and it is separate from the rent itself.
Exclusivity
Exclusivity gives one party sole rights: to distribute in a territory, to supply a customer, or to negotiate a deal without the other side talking to anybody else. It is valuable, and it should be earned.
Property Management
Property management is running a property on the owner's behalf: collecting rent, maintaining it and dealing with tenants. The money handling is where it goes wrong.
Valuation
A valuation is a professional opinion of what something is worth. It is needed for probate, lending, tax, disputes and investment, and the method used changes the number considerably.
Title Search
A title search is the check you run at the lands registry before buying land, to find out who actually owns it and what is registered against it. It is the cheapest part of any Nigerian property purchase.
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