Feb 14, 2024

Exclusive Contracts with Czech Real Estate Agencies: What You Need To Know

When dealing with a Czech real estate agency, you’ll likely come across the term ‘exclusive contract‘ (exkluzivní smlouva).

It‘s important to understand the implications of these kinds of contracts and what you need to take into consideration before entering into one. In this guide, we’ll delve into the details of these contracts and give you insights into how to set them up correctly. Let’s get started.

What is an exclusive contract?

Essentially, an exclusive contract means that you, the seller, must cooperate only with the real estate agency with which you have entered into the exclusive contract, and for the entire period of the contract.

Disadvantages of an exclusive contract

Limited cooperation

For the seller, this type of contract is a ‘bet on one card‘. If the real estate agency turns out to be incompetent, you cannot simply terminate your cooperation with them, because you are tied in until the end of the contract. This can be especially annoying if you are in a hurry to sell your property.

Penalties and sanctions

Any exclusive contract with a real estate agency will include various restrictions, sanctions, and penalties. These are intended to force the seller to maintain their cooperation with the agency should he or she want to terminate the cooperation for any reason.

Remuneration in any case or scenario

Based on an exclusive contract, the real estate agency is entitled to remuneration even if the buyer is found, for example, from among your acquaintances or friends, even though the real estate agency did not contribute to finding the buyer.

The benefits of an exclusive contract

A quality real estate agency will only carry out exclusive work for you

A quality real estate agency will have enough clients and experience to know whether and to which tasks it should devote its time and resources. Therefore, non-exclusive commissions are clearly not appealing to them. Under a non-exclusive agreement, the status of the commission is not fully under their control, so the real estate agency cannot reliably pass on information to those who may be interested in buying. Additionally, there is no guarantee that the real estate agency will ultimately be rewarded for its time and effort.

A real estate agency invests in marketing

In order to get more money from the sale of the property, the real estate agency needs to invest in marketing. And, if they do this honestly, the marketing costs for each property can reach at least 10 to 30 thousand Czech crowns. Therefore, we can see why they would not be willing to invest this amount of money under a non-exclusive agreement.

My recommendation

It’s all about choice

So as we can see so far from this guide, exclusivity has its advantages and disadvantages. It’s therefore essential to find a quality real estate agency and take advantage of the benefits of the contract, and avoid choosing the wrong one and under a contract that will only hold you back. I wish at this point I could give you a simple formula that will help you easily decide which real estate agency is of a high quality, but unfortunately, I do not know of one.

Contract duration

When starting your cooperation with an agency, consider setting a shorter contract duration, such as 2-3 months. This initial period allows you to assess the real estate agency’s performance, and if the cooperation is successful, you can easily extend the contract. It’s worth noting that under the Act on Real Estate Brokerage in the Czech Republic, an exclusive contract between a real estate agency and a client can be established for a specific period, with a maximum duration of 6 months.

How we view exclusive contracts at the KOTULA real estate agency

In our view, the collaboration between a real estate agency and a seller hinges on mutual trust. If this trust isn’t established, the type of contract between the parties becomes less significant. If the seller wishes to terminate the partnership, they might wait until the contract concludes or seek early termination through various means.

On the other hand, if the seller is satisfied with the real estate agency’s performance, a formal contract might not even be necessary. A natural inclination to cooperate then arises, driven by a desire to reward the agency for its effort. At KOTULA Real Estate Agency, our contracts are founded on mutual trust. They have been intentionally simplified to take up just one page at most, while also eliminating any constraints or penalties directed towards clients.

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