Disciplined approach eases every property deal

Lucy Corry

Buying a property is rarely straightforward, which is no surprise given that it is the biggest financial commitment most people ever make.

When you combine big sums of money and a considerable level of emotional investment, even the simplest transaction can be stressful.

We hear a lot about the need for buyers to do their homework, but there are plenty of reasons for sellers to be careful too.

Getting legal advice

If you are selling a property with a real estate agent, you must sign an agency agreement that sets out all the terms and conditions of your contract with them, including how much commission they will earn from the sale and how the property will be marketed.

That is why it is so important to get legal advice before you sign an agency agreement.

If it is a standard agreement, you usually retain the right to sell the property privately but it’s a good idea to check this.

If you have signed an agreement with an agency but decide for whatever reason to opt for a DIY private sale, you should double and triple-check whether the agency agreement requires you to pay commission to the real estate agent or agency.

REA Standards

Most agencies use the Real Estate Authority (REA) standard clauses in agency agreements, which set out certain terms and conditions for the contract and the payment of commission.

According to the standard clauses, commission is payable if the property is sold within the active term of the agreement (normally 90 days) or if it is sold privately within six months after the end of the term to a buyer that the agent had earlier introduced to the property.

In other words, if the buyer visits an open home run by the real estate agent, and then enters into a private sale with the seller within six months after the end of the agreement, the seller is still obliged to pay commission to the agent.

This can vary depending on whether it is a sole or general agreement – talk to your lawyer before you sign up.

Commission Payments

Both sole agency agreements and general agency agreements provide for commission payments after the agreed period ends.

If a seller enters into a sale within six months of the agency agreement ending with a buyer who was introduced by the real estate agent (or the agent facilitated the sale), then the seller must pay the agent commission just as they would have done when the agreement was still current.

So, if the agent brings a potential buyer to a property in March, the agency agreement expires in April, and the seller and purchaser enter into a private sale agreement in May, the seller will have to pay the agent commission.

Unconditional Sale

The sale must become unconditional (which is when all the conditions of the sale and purchase agreement have been met), but it does not matter whether it goes unconditional during or after the agency period, or during or after the six months following expiry, so long as the sale and purchase agreement is entered into within those timeframes.

So, before you sign an agency agreement, ask the agency if it uses standard REA clauses. If it does not you may be exposed to more complicated commission risks and you should seek legal advice.

Generally, any issues arising from the agency agreement/arrangements between the seller and the real estate agent will not have a direct effect on the separate sale and purchase agreement between the seller and the buyer.

However, the wrangling involved may create headaches or delays that you as a buyer would not want to be troubled.

If you do decide that you are really keen on a property in this situation, seek legal advice before getting involved (and especially before signing anything).

Remember too that the REA can help you with questions and complaints about sales involving licensed real estate agents, but it’s unable to step in if you have a problem with a private and unlicensed seller.

For independent advice on buying or selling property, check out settled.govt.nz

Lucy Corry is Media Communications Manager at the Real Estate Agents Authority based in Wellington. For independent advice, please visit www.settled.govt.nz.


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