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How to complete a sales agency agreement

24 November 2016

Failing to complete a sales agency agreement correctly can cost an agent their commission.

This was the warning from Kristie Lorenz, who has more than 12 years’ experience in real estate and is a qualified workplace trainer and assessor. Kristie recently led an REINSW webinar on this topic: you can watch the recorded webinar by clicking here.

She explains that for sales agency agreements to be enforceable, they must contain the five p’s, which are:
 

1. Parties to the agreement and information to identify them

The names of the relevant parties are crucial to the validity of the agreement and you need to include the first name and surname of all owners of the property.

You also need the agent’s corporation name, not their personal name, or the personal name of the licensee in charge: this is a common mistake we come across. It also must be their legal names with no abbreviations.

2. Property identification

The agreement must include a clear identification of the address of the property, and it is best practice to include the state and post code to avoid any uncertainly which could cause issues. It should also be checked against the title documents of the property.

3. Price

It must include the price the property is to be offered and which the owner says they will accept. It cannot be less than the agent’s lowest estimated selling price (ESP) and must comply with the underquoting laws.

This means the ESP must be backed up by evidence and cannot be greater than a 10% price range. It must also be reasonable throughout the sales process and be changed accordingly. For more on the underquoting laws click here.

4. Period of exclusivity to the agreement and termination

The agreement must include a start and end date of the exclusive period of the agreement. An agent is still entitled to sell the property after the period expires and get a fee, but once the exclusive period has ended then others can also sell it - and if they do then you’re not entitled to a commission.

5. Payment to the licensee and remuneration

The amount of commission you will get paid has to be included, along with a sample calculation to make the owner aware of how much it is likely to be, so they are fully aware of the amount to avoid any surprise. 

Expenses also have to be listed that an agent is likely to incur throughout the course of the sale, such as advertising, a 149 certificate, plus any other related costs. It must also include when it is due and payable.

Disclosures of any rebate, discounts, commissions and benefits must be given along with the name of the third party, nature of that relationship and the financial amount.

Kristie added: “Quite often people will write next to the date to be paid, ‘on settlement’, and this is a mistake because if you don’t sell the property, you are not entitled to reimbursement. I prefer to write ‘on invoice’.

“It is important for us to ensure our agreements are enforceable and there are no legal loopholes so we get paid at the end of the day.”

The REINSW Sales Agreements include a clause that allows for the payment of commission even if the sale of the property is not completed. To purchase these Agreements please visit our Store webpage.

Signatures, sales inspection report and exclusive agency agreement

The agency agreement must be signed before putting the property on the market.

Under section 55 of the Property, Stock and Business Agents Act (PSBA) there is no legal entitlement to commission or expenses without the agency agreement.

Kristie added: “Often we will get vendors who will say they don’t feel comfortable signing an agency agreement straight away and ask if they can sign it once they have a prospective buyer. The answer to that is categorically no.

“The agency agreement gives the agent legal authority to act on behalf of the vendor, to market it and step foot onto their property to show it to third parties.”

It is also critical to have every owner sign the agreement. If the owner is a company, the nominated person may sign on behalf of the directors. 

General tips

  • Don’t use abbreviations because not everyone will understand, it may not be considered legal, and could hold up an agreement
  • Don’t leave blank lines because anything can be inserted at a later date that wasn’t there to begin with. Use nil, none or not known
  • Always use full legal names on documents
  • Check the principal’s name with the certificate of title
  • All parties to the agreement must sign the agreement
  • The agreement must be served to the owner within 48 hours of signing the document. If it takes longer it’s not valid.

To find out what else must be included in the agency agreement, please watch the webinar with Kristie here.

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