Contracts are par for the course when it comes to selling and buying property. In the case of selling a house, the legalities of agency agreements can vary, especially if you want to change agents or agencies. Here’s what you need to know before you sign the dotted line.
Important note: The information provided in this blog should not be a substitute for legal advice. You should always consult with lawyer before making any decisions concerning your agency agreement.
What is an agency agreement?
Agency agreements are a legally binding contract that authorises a real estate agent or agency to market and sell your property on your behalf.
What many sellers don’t realise is that these agreements are negotiable. Clauses, commission rates, timeframe and expenses for example, can all be discussed and amended where appropriate, before you sign the contract. However, just like any other legal document, once your name is penned on the bottom line, you’re locked in.
Recommended reading: Selling a House 101 (online guide)
Sole agency versus general agency agreements
As its name suggests, a sole agency agreement is an exclusive contract between the seller and one agent/agency. Under this agreement one agent/agency takes responsibility to look after the property and see it sold.
A general agency agreement allows multiple agencies to work together to market and sell a property. In most general agency agreements, only the agency that successfully sells your property gets the commission.
Important! While it might seem like a good idea to use a general agency agreement and have more than one agency working to sell your property, properties with these agreements tend to become a low priority to agents. This can result in properties staying on the market far longer than normal, which can lead to buyers believing something is wrong with it.
Read more: Sole agency vs general listing
Can you cancel an agency agreement?
Yes, under certain conditions. After you sign an agency agreement, you have until 5pm on the next working day as a grace period in which you can cancel if you change your mind. Note: this must be done in writing.
If you sign a sole agency agreement with a timeframe longer than 90 days, you or the agency can cancel the agreement after 90 days. Again, this must be in writing. Be aware that in some circumstances, if you cancel a sole agreement it may revert to a general agency agreement—which you will also need to cancel.
Important! If you sign a new agreement without cancelling your previous agreement, you will have to pay both agents/agencies a commission when your home sells.
Unethical practices and breaches of contract
Unethical practices (such as selling a property at a reduced rate to friends or family) and breaches of contract (failing to provide a fair representation of a property for example) are uncommon, but they do happen. In these situations, the first step is to make a complaint to your agency. If the issue cannot be resolved, you can escalate it to the Real Estate Authority (REA) where it may be assessed by an independent Complaints Assessment Committee (CAC). In cases where less serious complaints are upheld, such as neglect and incompetence, CACs may impose fines and award limited compensation.
Serious cases, such as misconduct and non-disclosure, may be forwarded to the REA’s Disciplinary Tribunal, which can: “impose fines, award compensation, suspend an agent’s licence or impose a lifetime ban”. However, the tribunal is limited in its ability to award damages for lesser cases of unsatisfactory conduct. In these situations, complainants should pursue civil action.
Read more about the process here.
Note: The Real Estate Authority can only discipline licensed agents. For unlicensed agents, you may need to seek other legal means.
10 essential checks to make before you sign your agency agreement
Before you sign your agency agreement, check that it:
- Includes a written estimate of your sale price.
- States what selling method your property will go through (auction, fixed-price, tender).
- Includes the listing price of your property if it is being sold at an advertised price.
- Covers what marketing the agency will provide, including what they will do for free and what you are expected to pay for.
- States what commission rates, fees and expenses you’ll pay.
- Has a timeframe of when the agreement starts and ends.
- Includes the conditions under which you’ll pay a commission when the agreement finishes.
- Your agent is licensed. If they’re not, the Real Estate Authority (REA) cannot help if things go wrong.
- Your agent has given you a copy of REA’s agency agreement guide—this is a legal requirement.
- The agreement includes the REA-approved clauses that are designed to protect vendors from:
- Being charged commissions from more than one agency.
- Unknowingly signing up with a new agency before a previous agreement has ended.
- Paying commissions at the wrong time (i.e. before the house has sold).
See a list of agencies that use these clauses as part of their standard agreement here.
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