Selling your home is no walk in the park, and most people choose to sell through an agent which normally makes the process much simpler and ensures you get the best market price for your home. Using an agent will require you to sign an agency agreement. In this article, we will cover what an agency agreement is, why you must have one, what's inside the agreement and a choice you must make before signing.
Let us get started.
The agent will give you a copy of the New Zealand Residential Property Agency Agreement Guide, and you will need to offer your signature to show you have a received it. Do read it and consider seeking legal advice before signing. It is written in simple language and covers the same things like this article.
What is an agency agreement?
An agency agreement is a legally binding contract between a real estate agent (must hold a current licence issued by the REAA) and a client who wants to sell their home.
A real estate agent requires an agency agreement to be able to market your property with signage, online and offline advertising. The agreement includes the terms and conditions and sets out what the agent will do to sell your property, and also covers what you will pay the agent based on the agent's appraisal of the properties value. The agreement allows any agent within that company to sell your property.
What you need to know before signing an agency agreement.
Before signing the agent should have given you the following information:
- An appraisal in writing. After analysing the market in your area, the agent should have a fairly good idea how much buyers are likely to pay for your home.
- Recommend the best method to sell your property and why. This may be with or without a price, how they intend to market your property to achieve the best possible price.
- How the agent will be paid. This is the commission that the listing agent, the agent who actually sells your home, and the real estate company get paid. The agent must explain how they formulate the commission, and provide you with an estimate based on their appraisal value of your property
- Expenses. This is the actual cost of marketing your property to potential purchasers.
What information will I see in an agency agreement?
- The address of the property.
- The chattels. These are things that are not part of the property like the dwelling but are included in the sale. Example include – dishwashers, tv aerials, drapes and the like.
- Basic information about the land and dwelling. This would be the number of bedrooms, bathrooms, land area, and floor area.
- Your lawyer's name and contact details.
- Your name and contact information.
- The name of the agent marketing your property.
- The agent's company name and contact details.
What does the agreement authorise the agent to do?
The standard agency agreement appoints the agent (agency) and details what the agent is authorised to do to bring about the sale of your home.
This might cover things like:
- Signage on the verge of your home for traffic and neighbours to see.
- Advertise the property with or without a price, and subject to the conditions you authorised.
- Arrange for photographs, inspection from a potential buyer.
- Receive a deposit on your behalf.
- Deduct the commission from the deposit should an offer on your home become unconditional.
There are two types of agency agreements.
The agreement will state if it is a 'Sole Agency' or 'General Agency' agreement. You will have to decide which one suits you best and give you the best possible sale price.
What is a Sole Agency?
A sole agency which is also known as an exclusive means that only one agency will be allowed to market your property, effect a sale and is for a fixed length of time. The duration of the agreement will be stated in the agreement.
What is a general agency?
A general agency is where you choose to appoint several companies to sell your property. Only the company that sells the property will be entitled to receive the commission. Marketing under this agreement is normally restricted to open homes and maybe some signage.
Never sign more than one agency agreement as this may require you to pay more than one commission. (not good for you)
An agency agreement allows you to have second thoughts even after you have signed it. To cancel the agreement requires you to notify the agency in writing by 5 pm the next working day after signing.