In a market where stock is low, is it possible to be too quick off the mark? Absolutely.
While it may be tempting to start showing a property to potential buyers as soon as you’ve inspected a potential listing, there are legal requirements that need to be satisfied before you can offer a property for sale.
Consider these scenarios.
Perhaps you have a handshake deal with a seller to list their property. You know you have a few potential buyers on your database who’ll jump at the chance to see the property. What’s the harm in giving them a sneak peek?
Or maybe you’ve recently sold a property and there are under-bidders still looking to buy. You know some owners across the street are considering whether to sell. Is there anything wrong with approaching them and asking if they’re happy for you to bring a few people through for a look?
And what about buyers’ agents? You know you have a potential seller with a property that ticks all the boxes for one of their clients, but you’re waiting on final confirmation that the property is going to market.
In each of these cases, it’s tempting to start showing the property to potential buyers as soon as possible. But you do so at your peril.
Has the agency agreement been signed? Is there a contract for sale in place?
While it may seem like formality for formality’s sake, having the right documentation is a must. If you don’t, you’re putting your commission at risk and may find yourself being hit with substantial monetary penalties.
Agency agreement
Having an agency agreement in place before you show a property to a potential buyer is essential. Without it, you could find yourself out of pocket.
Section 55(1) of the Property, Stock and Business Agents Act 2002 (NSW) sets out that a licensee is not entitled to commission unless there is a written agency agreement in place.
But it’s not just about commission. A valid agency agreement also provides you with a range of other protections should something untoward come to pass during an inspection. What if a potential buyer trips down the front stairs and hurts themselves? 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 unlimited.
The REINSW agency agreement provides you with comprehensive protection should a ‘what if’ arise. You’re 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 of a property can take place.
Section 63(2) of the Property, Stock and Business Agents Act 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.
Get your documents in order
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.
The key message: Make sure you have 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.
“While it may seem like formality for formality’s sake, having the right documentation is a must.”
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