Each country has its own rules regarding real estate agencies. Cyprus has a Law on Real Estate Agents. Foreigners coming from abroad rely on their own country’s system, which sometimes creates confusion.
Abroad, a real estate agent is usually paid a fee for finding the right property for an investor.
The fee can be 1-2% of the purchase price as a discovery reward. However, if the parties agree, the agreement must clearly state that the agent will not require additional commission from the seller. In Cyprus, this fee is rarely applied. If someone wants a certain type of property, they must hire several agents to find it. As a result, the successful agent receives a commission from the seller (unless otherwise agreed).
The commission is a percentage agreed between the parties (or a fixed amount) and has no limits. The agreement must be in writing, otherwise the law provides for a commission of 3% of the agreed price. The commission can be paid even for a failed transaction if there is no clause in the contract that allows it.
The commission in some European countries is divided 50/50 between the buyer and the seller, in other countries the ratio varies. In Cyprus, the commission is fully paid by the seller in accordance with the law (unless otherwise agreed). The job of an agent in Cyprus is to find the right buyer.If a buyer is found and the seller backs out of the deal, the real estate agent may demand a full commission or “expenses”. There have been several cases heard by both the Supreme Court of Great Britain and Cyprus, with court decisions for the full payment of the commission.
Abroad, it is considered normal when a real estate agent expresses his opinion on the value of real estate. This is also done in Cyprus, but the agent cannot issue an official written valuation report as such.
It is noteworthy that in order for an agent to obtain a listing, he may indicate a high sale price in order to ensure that the contract is signed with the client. Subsequently, such a property will be difficult to sell and this will cause damage to the seller.
In Cyprus, appraisals are carried out by appraisers registered with the Technical Chamber of Commerce. You should contact only registered appraisers. A qualitative assessment is more reliable than the opinion of a real estate agent.
In Cyprus, especially among local sellers, it is not customary to conclude an exclusive contract with an agent. Exclusivity means that if the property is sold by the owner or another agent, the seller still pays a commission to the exclusive agent. Thus, the owner may end up paying double fees.
There are many arguments for and against exclusive appointments. This is a popular practice in many European countries, but if you choose to do so, set a time limit of, say, six months.Keep in mind that if a buyer is found by an exclusive agent, but the buyer buys the property after the expiration of the contract with the agent, then the latter can sue the seller in accordance with the agreement.
It is not uncommon for the buyer and seller to agree to “cheat” the agent in order to save on commissions, with the seller reducing their price accordingly. Such cases may end up in court when an order is issued to prohibit the transfer of property. So the buyer and seller remain in limbo.
Use a registered agent otherwise the seller won’t be able to deduct a commission from the sale price and an unlicensed “agent” may end up paying a fine or even going to jail.
If you’re going to trust one agent, make sure you know how they’ll market your property and check their work periodically.
We also recommend that agents refer the sale and purchase agreement to a lawyer who will check the various points (building permit, mortgage waiver, and so on).
Be aware that some lawyers also ask for a commission on a sale or purchase transaction, or blackmail the agent to get a “share”. Also, unscrupulous lawyers advise both parties to refuse the transaction and offer other properties from which they can receive a commission.
Another scam is to introduce a third party (not an agent) to the seller in order to receive a commission under the guise of a promotion.
If the seller is asked to pay a commission abroad, especially at an unknown bank, this is suspicious. The seller may be involved in money laundering.
In Cyprus, local real estate agents still have a long way to go. The fact is that numerous illegal real estate agents work with full-page ads in the press. And this despite the fact that many of them were officially published, and some were even condemned.