Moving at pace? Make sure you've got a signed Agency Agreement

In a pressured residential property market, it is not surprising that we’re seeing vendors wanting to move at pace to make the most of the hot sales environment. As the licensed real estate professional supporting these eager clients, it’s important to take the time to make sure you’re meeting your regulatory obligations, even in a fast-moving transaction.

Don’t bypass your obligations for a quick sale

At the Real Estate Authority, we’ve received reports of licensees undertaking real estate agency work before an Agency Agreement has been signed.

Licensees need to ensure they are acting under the authority of an Agency Agreement before offering or marketing a property. REA understands that, in a hot market, vendors may not wish to sign an Agency Agreement until a licensee has a prospective purchaser. However, it is important licensees take the requisite steps before finding a purchaser for a vendor client.

Similar issues may arise if a licensee is acting as a buyer’s agent. Licensees should be aware that an Agency Agreement is required regardless of whether they are working as a vendor’s or buyer’s agent.

When you enter into an Agency Agreement with someone who is selling a property, you need to meet a number of requirements that are set out in the Real Estate Agents Act 2008 and the Code of Conduct.

Protecting the interests of consumers in relation to real estate transactions is an important purpose of the legislative framework underpinning real estate agency work. Licensees must take the time to explain to prospective vendor clients important elements of the Agency Agreement they are entering into. This would include matters such as marketing costs and the basis for commission, and licensees should recommend that the client seek legal advice before signing any agreement.

The legislation requires that the Agency Agreement must be signed by or on behalf of the vendor and the agent. You must supply a copy to the vendor within 48 hours of it being signed. You can’t show prospective buyers through a property until the agreement has been signed.

Clearly identify who your client is

It should be clear to everyone involved who the licensee is representing in a transaction. Under rule 9.1 of the Code of Conduct, a licensee must act in the best interest of their client. The client is the person the licensee is acting for. The client is usually the vendor, but it could be the buyer if the licensee is acting as a buyer’s agent. In a transaction, an individual agent can represent either the vendor or the buyer – never both. A licensee cannot claim two commissions on a sale.

Produce a current market appraisal

With any Agency Agreement with a vendor, a current market appraisal (CMA) is required. It must reflect current market conditions realistically and be supported by comparable information about sales of similar properties. If it is not possible to provide comparable information, you should say so in the appraisal. The CMA must be provided before the Agency Agreement is signed. It is important that licensees do not describe appraisals as valuations. Valuations are provided by independent registered valuers. Buyers should be encouraged to obtain an independent valuation as part of their due diligence prior to making an offer.

Approaching a vendor when you already have a buyer in mind

We also receive complaints from vendors who have been approached out of the blue by a licensee with an offer from a buyer. The licensee asks the vendor to sign an Agency Agreement with them so they can present an offer. In this scenario, the licensee often won’t discuss other sale options with the vendor but will simply facilitate the sale between the buyer and the vendor.

This may cause serious issues because the licensee won’t have acted in the best interests of the vendor if they haven’t discussed other options for selling the property and what might be possible if the property is taken to the open market. The licensee won’t have been acting for the vendor when they facilitated the offer from the potential purchaser, so it’s unlikely it was drawn up with the vendor’s interests in mind.

Provide the Agency Agreement guide

Remember, before a vendor signs an Agency Agreement, you must give them a copy of the Real Estate Authority Agency Agreement Guide (if it’s a residential property sale). You must also obtain written confirmation that they have received it.

You can order printed copies of this at rea.govt.nz/guides, or download a free PDF version. While you’re there, order some free printed copies of our Buyer Journey Guides – these include content from our website settled.govt.nz, designed to help consumers navigate the property transaction with confidence.

Have a question? We’re here to help These are just some of your statutory obligations when it comes to Agency Agreements. On the REA website, you’ll find guidance about discussing different options for selling the property, explaining marketing and advertising costs, disclosing rebates and discounts, informing the vendor if you have a conflict of interest, confirming vendor identity under the Anti-Money Laundering and Countering Financing of Terrorism Act and more – visit rea.govt.nz/ agencyagreements. If in doubt, you can always call us at the Real Estate Authority on 0800 367 732.

Nadine Thomas

Industry Insights and Engagement Manager, REA