For the sale of residential property
If you decide to sell your property with an agent, you enter into a legally binding contract. NSW Fair Trading has put together some tips on choosing an agent and what you need to know before making a commitment.
Choosing a real estate agent
To find the right agent for your needs, you should shop around. We suggest you talk to at least three agents, and:
- make sure they have a valid licence
- get a list of all their fees
- find out if they have a good knowledge of your area
- ask if they adhere to a code of ethics.
To sell a home in NSW, an agent must have a real estate agent's licence issued by NSW Fair Trading. You can do a licence check online through the Fair Trading website or call 13 32 20.
Signing up with an agent
Before the agent can market your property, they must sign a contract with you, called an agency agreement. An agency agreement is a legally binding contract and it is important that you read and understand it. If you are not sure about the agreement terms you should get legal advice.
What is in the agency agreement
The agency agreement must state:
- the services the agent will provide for you
- the amounts of any fees or commission you agree to pay for those services
- the circumstances in which the agent is entitled to payment – for example, commission is usually payable only when the property is sold
- how and when payment is to be made – for example, whether the agent can deduct their commission from the deposit money paid by the buyer
- warnings about circumstances in which you might have to pay commission to more than one agent
- from 1 March 2015 inclusive, a warning about the commission if the agreement includes a term that a commission is payable even if the sale of the property is not completed
- the extent of the agent's authority to act for you – for example, whether the agent is permitted to exchange a sale contract on your behalf or make changes to the sale contract
- the agent's estimated selling price for the property. The price may be a single price or a price range. Note: If a price range is used the highest price cannot exceed the lowest price by more than 10%. An agent is required to amend their estimated selling price if it is no longer reasonable, notify you in writing and amend the agency agreement. Your consent is not required to amend the agreement with the revised estimated selling price. The agent must provide you with evidence of the reasonableness of their estimated selling prices.
You have the right to negotiate the terms and conditions of the agreement and to ask for any legally permitted changes to be made. Alterations made to the agreement need to be signed by all parties, except if the agent revises their estimated selling price for your property.
Commission, fees and expenses
You can negotiate with the agent about the amounts of any commissions, fees or other expenses that you may be required to pay. Before signing an agreement, it is a good idea to talk to a few agents to compare prices. Ask each agent for a printed list of their fees and commission rates and the expenses they charge.
Disclosure of rebates and discounts
The agent can ask you to pay for advertising, auctioneer's fee, cleaning, decorating or landscaping, if it’s set out in the agreement.
The agency agreement must state the amounts or estimated amounts of any such commissions or discounts on these services. You can negotiate with the agent about whether you should pay the full amount.
Ending the agreement
The agency agreement can either be open ended or for a specified period (a ‘fixed term’).
The length of any fixed term is negotiated between you and the agent, there is no minimum or maximum set term. The fixed term will depend on how long you and the agent think it will take to sell the property.
If you wish to end the agreement, you must give written notice. Check your agreement to see how much notice you need to give.
If you are not happy with an agent's services, it is important to properly end your agreement with them before signing up with another agent. Otherwise both agents may charge you commission when the property is sold.
Types of agency agreements
Exclusive agency agreements
Exclusive agency agreements are commonly used for the sale of residential property. In this kind of agreement, you give exclusive rights to one agent to sell your property. This may entitle the agent to be paid commission if the property is sold during the fixed term of the agreement, even if the property is sold by you or by another agent. The agent may also be entitled to commission if the property later sells to a person who started negotiating for the property with the original agent.
Sole agency agreements
A sole agency agreement is similar to an exclusive agency agreement. You give rights to one agent to sell the property but you may find a buyer yourself. If you find a buyer who has not been introduced by the agent, then no commission is payable to the agent.
General listing / open agency agreement
This lets you list your property with a number of agents. You pay a commission to the agent who finds the buyer.
Multiple listing
This occurs when you deal with an agent who is part of a network of agents working together to sell your home. It covers both auction and private treaty. You pay a commission to the agent you signed up with.
Auction agency agreement
This is effectively an exclusive agency agreement where the property is listed for auction.
Cooling–off period
What is it?
The agency agreement becomes binding when the principal (that is, you as the owner/s [vendor/s] of the property, or someone who is legally acting for you) and the agent have signed it. There is then a cooling–off period of one business day during which you can cancel (or ‘rescind’) the agreement. Saturday is included for the purposes of the cooling–off period, but public holidays are not.
The cooling–off period starts when you sign the agreement and ends at 5pm on the next business day or Saturday. For example, if you sign the agreement on a Friday, the cooling-off period ends at 5pm on Saturday. If you sign up on Saturday, the cooling–off period would usually end at 5pm on Monday, unless that is a public holiday, in which case it will end at 5pm on Tuesday.
The cooling–off period gives you time to read the agreement, consider the terms you have agreed to, including the agent's fees, and get independent advice if you have any concerns.
Cancelling the agreement during the cooling–off period
If you decide to cancel (or ‘rescind’) the agreement during the cooling–off period, you need to deliver a ‘notice of rescission’ to the agent.
This simply means giving the agent a written notice or letter which:
- is addressed to the agent (use their name as given in the agency agreement),
- states that you are rescinding the agreement, and
- is signed by you (and any other person named on the agreement as a principal [vendor]) or by your solicitor/s.
You can hand the notice to the agent in person, deliver it or leave it at the agent's office or the address that’s in the agency agreement, email or fax it. Be sure to keep a copy for your records.
The agent cannot charge you any fees or costs in relation to an agreement that has been rescinded correctly. Any money you have already paid to the agent must be refunded to you.
Waiving your cooling–off rights
You can waive, or forego, your right to a cooling–off period by signing a separate waiver form when you sign the agreement.
The cooling–off period can be waived only if the agent gave you the following documents at least one business day before you signed the agency agreement:
- a copy of the proposed (unsigned) agency agreement, and
- a copy of this fact sheet.
For example, on Thursday morning the agent gives you a copy of the unsigned agreement and this fact sheet, which you read and consider carefully. On Friday afternoon you sign the agency agreement and the waiver form. The agency agreement immediately becomes binding and the agent can get to work on selling your home.
The Contract of Sale
A residential property cannot be advertised for sale until a contract of sale has been prepared. The contract must contain a copy of the title documents, drainage diagram and the Planning Certificate (s 10.7) issued by the local council. Property exclusions must also be included and a statement of the buyer's cooling off rights must be attached.
If you are selling a residential property that has a swimming pool or spa, ensure it is compliant with the Swimming Pools Act 1992. For more information and to check your responsibilities, or to check if a property with a swimming/spa pool has a current certificate of compliance, visit the NSW Swimming Pool Register website.
The draft contract must be available for inspection at the agent's office. It is important that you hire a solicitor or conveyancer to help prepare the contract.
Exchange of contracts
The contract exchange is a critical point in the sale process. Be aware of the following important conditions in the exchange of contracts:
- The buyer or seller is not legally bound until signed copies of the contract are exchanged.
- Buyers of residential property usually have a cooling–off period of 5 working days following the exchange of contracts during which they can withdraw from the sale.
- If the agent arranges exchange of contracts, the agent must give copies of the signed contract to each party or their solicitor or conveyancer within 2 business days.
- The cooling–off period can be waived, reduced or extended by negotiation.
- There is no cooling–off period for sellers. Once contracts have been exchanged, sellers are generally bound to complete the agreement.
- There is no cooling–off period when purchasing at auction.
If you encounter problems
If an issue arises during the sale process that you are unhappy with:
- Check your copy of the selling agency agreement to clarify your rights and obligations.
- Try to sort out the problem by talking to the agent.
- Make certain that any instructions you give the agent are in writing, and keep a copy.
- If you think the agent has charged a fee to which they are not entitled, or believe the fee charged is excessive, you can apply to the NSW Civil and Administrative Tribunal (NCAT) to settle the matter.
Other tips
If you need further assistance to resolve a problem, consider the following:
- If your agent is a member of a professional association, contact that association. They can be helpful in resolving disputes.
- You can also seek legal advice from a solicitor or the Chamber Magistrate at your nearest Local Court.
- If your complaint concerns your solicitor, you can lodge a complaint with the Office of the Legal Services Commissioner.
- If your complaint concerns your conveyancer, you can lodge a complaint with NSW Fair Trading.