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23 July 2019

No contract? No show!


You are a sales agent with a new listing. Your vendor hasn’t yet signed the agency agreement and the contract for sale has not been prepared, but you’ve been approached by a buyers’ agent who is very keen to inspect the property for a client.

What do you do?

If you answered, show the buyers’ agent through the property as soon as possible (it is a competitive market, after all), you could find yourself on the wrong side of the law.

Showing a property to a buyers’ agent, potential buyer or anyone else without the requisite documents is in contradiction to Section 63 of the Property, Stock and Business Agents Act 2002 (NSW) (PSBA Act). 

The PSBA Act clearly states that 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 agent for a prospective purchaser at all times at which an offer to purchase the property may be made.

So, what are the relevant documents that you need to have in place prior to showing a property?

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 PSBA Act states that a licensee is not entitled to commission or expenses unless there is a written agency agreement in place.

However, it’s not just about commission or expenses. Having a valid agency agreement in place doesn’t just secure your entitlement to commission and expenses, it also provides you with a range of protections should something happen during an inspection. 

What if the buyers’ agent from the scenario 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 literally unlimited. And without the agency agreement, you are not covered for any of them.

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 inspections take place.

Section 63(2) of the PSBA Act requires a contract for sale to be available for inspection at all times when an offer to purchase residential property may be made.

Under section 63(3), an agent is considered to offer a residential 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, they invite offers to purchase or they indicate that a person may be willing to grant an option to purchase the property. If you fail to comply with section 63, you could be subject to a substantial penalty up to $11,000.

Don’t risk it 

While it may be tempting to show a property to a potential buyer or buyer's agent before you have all the necessary documents in place, you should never do it.

It’s not worth risking your commission or being reimbursed expenses, opening yourself up to potential claims or facing the possibility of a penalty. 

Braden Walters, REINSW Board Member and REINSW Residential Sales Chapter Committee Chairperson, says while it may seem like a quick and easy way to earn the business from the vendor or to have an opportunity of obtaining your selling fee, the risk is just too great.

"When you consider that you could lose your licence or be fined, I would rather wait a week for a contract to be prepared or explain to the vendors that they too would be at risk if something were to go wrong," he says.

So, as you can see, it is not only best practice – but in line with the legislation – to ensure both an agency agreement and contract for sale are in place before you offer a property for sale.

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