Double down on documentation

July/August 2017 edition

Robert Anderson and Ann Banister
REINSW Helpline

Showing a property to a potential buyer may seem innocent enough, but if you do it without having the right documentation in place beforehand you could find yourself on the wrong side of the law.

By Robert Anderson and Ann Banister

When it comes to listings, it’s important to quickly seize upon opportunities when they arise. And in a competitive market, where so many agents are vying to secure listings, it can be tempting to jump the gun.

Maybe it’s the property across the road from the home you successfully auctioned last Saturday. The owners watched the bidding with interest and you know the under-bidder is still keen to buy on the same street.

There’s nothing wrong with having a casual conversation with the owner, is there? “I have some buyers who would be very interested in this property,” you might tell them. “Let me just bring them around for a look.”

You don’t have an agency agreement in place with the owner and a valid contract for sale hasn’t been prepared, but that’s OK isn’t it? If the buyer is really interested, you can always sort the documentation out later. What harm is there in giving a potential buyer a quick sneak peak? After all, it will show the owner how proactive you are. Right?


Agency agreement

Before you can show a property to a potential buyer, you must have an agency agreement in place. No ifs, no buts – it’s a must.

If you show a property without an agency agreement in place, it can hit your hip pocket. Section 55(1) of the Property, Stock and Business Agents Act 2002 states that a licensee is not entitled to commission unless there is a written agency agreement in place.But it’s not just about commission.

Having a valid agency agreement doesn’t just secure your entitlement to commission, it also provides you with a range of protections should something happen during an inspection. What if the potential buyer trips down the front stairs and breaks their leg? What if they slip on the decking and hit their head on the edge of the pool as they fall in? The number of ‘what ifs’ is potentially unlimited.

The REINSW agency agreement provides you with comprehensive protection should a ‘what if’ arise. You are indemnified against any actions and claims made against you in the proper performance of your duties. Detailed privacy terms, work health and safety provisions and material fact disclosure requirements also ensure you are protected.

Contract for sale

A valid contract for sale is also a must before any inspection can take place.

Section 63(2) requires a valid contract for sale to be available for inspection at all times when an offer to purchase the property may be made. Under section 63(3), an agent is considered to offer a property for sale when, expressly or by implication, they indicate that the property is for sale or is to be auctioned at any future time, they offer to sell the property or they invite offers to purchase. If you fail to comply with section 63, you could be subject to a substantial penalty

Don’t risk it

While it may be tempting to show a property to a potential buyer before you have all the necessary documentation in place, you should never do it. It’s not worth risking your commission, opening yourself up to potential claims or facing the possibility of a penalty. Having processes in place at your agency to ensure both an agency agreement and contract for sale are in place before you start offering a property for sale will ensure you stay on the right side of the law.

Property, Stock and Business Agents Act 2002
Section 55 – No entitlement to commission or expenses without agency agreement
(1) A licensee is not entitled to any commission or expenses from a person for or in connection with services performed by the licensee in the capacity of licensee for or on behalf of the person unless:

        (a) the services were performed pursuant to an agreement in writing (an “agency agreement”) signed by or on behalf of:
                 (i) the person; and
                 (ii) the licensee, and
        (b) the agency agreement complies with any applicable requirements of the regulations, and
        (c) a copy of the agency agreement signed by or on behalf of the licensee was served by the licensee on that person within 48 hours after the agreement was signed by or on behalf of the person.

Section 63 – Proposed contract for sale of residential property

(2) A real estate agent must not offer residential property for sale unless the required documents* are all available for inspection at the real estate agent’s registered office by a prospective purchaser or agency for a prospective purchaser at all times at which an offer to purchase the property may be made (or at such other place or at such other times as may be prescribed by the regulations).

[* emphasis added – “required documents” include “a copy of the proposed contract for the sale of property” in accordance with section 63(4)(a)]

(3) A real estate agent is considered to offer residential property for sale when the agent, expressly or by implication:

        (a) indicates that residential property is for sale or is to be auctioned at any future time, or
        (b) offers to sell residential property, or
        (c) invites an offer to purchase residential property, or
        (d) indicates that a person may be willing to grant an option to purchase residential property.
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