Why do I have to Sign a Contract with a Real Estate Agent?

Why do I have to Sign a Contract with a Real Estate Agent?

The law in Israel requires every real estate agent to present clients with contract called:  הזמנה בכתב לביצוע פעולת תיווך – a A written request to perform a brokerage operation. This ensures that in the case of a purchase, sale or rental, the client agrees to pay the commission. It removes any doubt that might arise later about who introduced the client to the property. It also ensures that the person viewing the property does not tell a friend or someone else in order to bypass the agent and avoid having to pay commission.

Today, most real estate agents charge 2 percent of the total purchase price plus VAT. Both sides of the transaction pay their respective real estate agents even if the agent is representing the buyer and the seller.

In the case of a seller, the agent may suggest exclusivity. Exclusivity means that over a specific period of time that is mention in a separate exclusivity contract, the agent will be considered the moving factor  (הגורם היעיל) of the sale (even if he did not make the introduction), as long as he performed the required marketing actions in the first third of the exclusivity period. The advantage to an owner is that an agent may be more likely to offer you a discount on the commission, since the agent will be taking from the buyer's side. 

The first time you see a real estate agent's request for services, it might look scary and your first instinct might be to talk with your Israeli lawyer. If you know that you will be required to sign a request for brokerage operation, you can request a copy for your lawyer to review, but keep in mind that in that time the sale might be lost to another buyer.