Nick explained: “If you don't have a correctly completed agreement, you're not entitled to your commission. It must comply with the regulations and be served to the buyer within 48 hours.
"You can also serve an agency agreement by email which means geography doesn’t have to be an issue anymore. You could have a client in Hong Kong and still complete signing the agreement."
There are also nine terms which apply to all agency agreements. These are:
- Identification of property
- Names of parties to agreement
- Information identifying parties
- Authority of the person on behalf of whom the agent will act to enter into agreement
- Authorisation for licensee to act on behalf of person
- Period of agreement
- Termination of agreement
- Reimbursement of licensee
- Remuneration.
The five P’s
1. Parties to the agreement
The first section of the REINSW Exclusive Buyers' Agency Agreement form relates to parties which requires information about the principal and agent.
Nick added: “You must write the principal’s full names, and it's important you get their middle names as well.
“You must fill in all the boxes accurately in the agreement, otherwise there could be an argument down the track that it hasn't been filled in correctly.”
Jacque added that if the principals were a married couple, you should write down both of their names in full separately.
For any sections not relevant, such as the ABN for personal buyers, it is fine to write "nil" or "not known to the agent at this time".
2. Property details
This is the section where you fill in the description about the property.
Jacque added: “The boxes aren't large enough to put a specific buyer brief so it’s a good idea to put an annexure to the agreement.
“Then in the first section, where it says "type of property to be purchased," you could put "refer to the buyer brief in the annexure".”
Nick added that if you choose to fill in the sections, under the type of property, specify if it's a house, apartment, or townhouse. Under the location of the property, you can put a region or radius within a suburb.
Special instructions can include the deadline, or if it’s a property investment and the general description of the property could be as simple as "personal property" or "principal place of residence".
A client who doesn’t have a solicitor or conveyancer when they sign up is a common issue. Nick recommends leaving both boxes blank and putting the words "to be advised" if not known.
Jacque added: “I always advise clients to let us know within a week of the search starting because you could potentially need a contract to be reviewed early on.”
3. Period of the agreement
The period of the agreement is the start and end date of the exclusive period of the agreement.
Nick explains: “The exclusive agency period is the amount of time your agreement runs, it’s best to insert the actual dates.
“The REINSW agreement allows for the continuing exclusive agency period so that once the agreement has expired it automatically rolls over and continues.”
4. Price
Jacque said: “The maximum price or price range of property is a vitally important part of the agreement. It's important to talk to your client, because some buyers hold back on their maximum budget and you need to know this.
“We are put in a position of privilege and trust, but unless we know the ultimate budget we might be excluding properties that are suitable.”
Remuneration
The agent’s remuneration section includes the retainer fee which is up to each individual agent to set.
Jacque added: “It's healthy, in this environment, to make sure that the retainer fee is enough to remunerate us for the time spent on the search and wise not to make it too low.”
The fee can be GST inclusive and you should include it in the final price on the form.
Price range
It is important to always add the GST onto the purchase price in the price range.
5. Payment
Entitlement to the buying fee
There are clauses that protect buyers’ agents, outlining when their fee is payable, and what it isn't affected by.
Jacque said: “The buying fee clause is really important and we need to explain it to clients, because even if they terminate an agreement, and go and buy a property, we may still be entitled to a buying fee.”
An exclusive buyers’ agency agreement means the client may have to pay the agent’s buying fee even if the client, another agent, or any other person finds a property they purchase.
Jacque added: “The last thing you want to do is complete all the work for the client in good faith, and them not pay you because it's not an exclusive agreement.”
Early termination fee
Jacque explained: “It's up to every buyers' agent to decide if they include an early termination fee. In some circumstances, it can be good if you've signed up a client for long period of time.
“If you work for 12 months for a retainer and the client wants to get out of the contract because they buy a property after you've done all the work, it isn't worthwhile.”
General advice
- Unless instructed in writing by the principal or a solicitor acting for the principal, buyers' agents are not authorised to sign a contract on behalf of the client
- Buyers’ agents must disclose if they receive a commission or a referral payment from a third party
- Always use full legal names on documents. Don’t use abbreviations
- Don’t leave blank lines and use “nil” where necessary
- All parties to the agreement must sign the agreement
- Always avoid using acronyms and write the words in full.
Jacque added: “We need to disclose to the client that any advice that we are providing is general in nature.
“We're not financial advisors. We're not experts in legal issues, building, engineering, or town planning. It is important to point this out so they are aware of our role.”
Nick added: "When you finish the agreement, and you go through it with the client, always double-check everything thoroughly.”
To find out more information, watch the webinar in full here.