An agency agreement is a legally binding contract between you and your real estate agent.
An Agency agreement
An agency agreement (also known as a listing agreement) is a legally binding contract between the seller of the property and the agent. It sets out what the agent is required to do and the commission the agent will receive. Before the agreement is signed, the agent must recommend to the seller that they seek legal advice.
An agency agreement is a legally binding contract between you and the real estate agency that helps to sell your property. An agency agreement gives the agency the right to market your property for sale.
The agreement sets out all the terms and conditions of your contract such as what your agent will do for you and what you’ll pay them. If you use an agency to sell your property, you must sign an agreement with them first.
While an individual agent may sign you up, your contract is between you and the agent or agency they work for. Depending on the conditions of the agency agreement, once you’ve listed your property, any agent in the agency can try to sell it.
This is the agent’s best estimate of the price they expect your property could sell for, based on sales of similar properties in your area. This is referred to as an appraisal or a current market appraisal (CMA).
They should recommend the best way of selling your property, for example, by advertised price, tender, auction or deadline sale. The agreement will set out how you’ve agreed to sell and what marketing you’ve agreed the agency will do.
The agency agreement will include a listing price if your property is being marketed with an advertised price but not if it’s being sold by another method.
They should tell you what commission you’ll have to pay them, when you’ll have to pay and how this payment is calculated. Commissions can vary between agencies, so you may want to compare different agencies or negotiate with your preferred agency. The agent must explain the formula used and give you an estimate in dollars of the commission you’ll pay if your property sells at their estimated price. Usually, the agency will take their commission out of the deposit when the agreement for sale and purchase becomes unconditional.
Usually you pay extra for marketing the property, but you don’t have to pay extra if you don’t want to.
Ask what marketing is provided for free by the agency, for example, they may put details of your property in the agency’s office or on its website.
You need to consider the cost of extra marketing against the possible benefit. The agency should prepare a detailed marketing plan explaining what you’re paying for and when. Remember, you’ll have to pay for the extra marketing even if your property doesn’t sell.
There must be a set date or timeframe from the time the agency agreement is signed that tells you when the agreement ends. The agreement must also say under what circumstances you might have to pay commission after the agreement ends.
While the layout and content of agency agreements can vary between agencies, all agency agreements should include the following things.
You must make sure that any details you give the agent are accurate. If you don’t, you may leave yourself open to legal action from a buyer.
It is important to tell the agent everything you know about the property. An agent is required to disclose known defects of a property to a potential buyer. You may not instruct an agent to withhold this information. An agent may cancel an agency agreement if you instruct them not to disclose known defects.
If you’re not the sole owner of the property, either all owners must sign the agency agreement or you must show you have the authority to sign for all the other owners. (You will need to provide the agent with written confirmation, such as a power of attorney, a resolution of trustees, company minutes or a court document.)
Your agent is legally obliged to give you a copy of REA’s agency agreement guide before you sign an agency agreement. They also have to get your written confirmation that you’ve received it.
Details of what you authorise the agency to do
The agency agreement appoints your chosen agency and sets out what you authorise them to do, for example:
The agency agreement will state whether it’s a sole agency or general agency agreement when it starts, when it ends and how to end it. It is up to you and the agency to agree on how long the agreement will last.
To help protect New Zealand’s reputation and economy from money laundering and the financing of terrorism, before conducting certain activities, real estate agents, lawyers, conveyancers and banks must confirm your identity under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act) (external link) .
The agent will also need to confirm your identity if you are selling a property on someone else’s behalf.
The agent may verify your identity by using:
In certain circumstances, an agent (with whom you do not have an agency agreement) may need to obtain and verify identity information about you if you deposit $10,000 or more in cash or by cheque into that agent’s trust account.
Even if you have been a client for a long time, the agency will need to confirm that you are who you say you are. You can read more at the Department of Internal Affairs (DIA) (external link)
When an agency agreement ends, there may be a stand-down period. During this time, if you sell your property to someone the agent has introduced to your property, you may be charged commission by the agency.
The stand-down period is typically six months, but the length of the stand-down period can differ from agency to agency. It is important to read your agency agreement and seek legal advice if you are unsure what this means for you.
The length of the stand-down period in the REA standard residential agency agreement clauses is six months, and in the REA standard rural agency agreement clauses, the stand-down period is 12 months.
At any time, up until an agreement has gone unconditional, you can decide you don’t want to sell your property and remove it from the market.
If you want to end the marketing for your property, you need to tell the agency in writing. Ask the agency to confirm in writing that all marketing has been stopped and removed. Let the agency know if you want to hear from them if a buyer contacts them after the marketing has been stopped.
Your agency agreement will remain in place until the date it ends unless you terminate it.
If you decide that you want to cancel the agency agreement, get advice from your lawyer first. You will need to give the agency notice, and the notice period should be specified in the general agency agreement. The notice period exists to give the agency the chance to conclude any introductions before the contract is terminated.
If you have a sole agency agreement, you might not be able to cancel the agreement early unless the agency agrees, but you can withdraw your property from the market until the agency agreement expires. If the sole agency agreement is for a term longer than 90 days, you or the agency can cancel the agreement any time after 90 days.
Some sole agency agreements become general agency agreements when cancelled – this means that you will also have to cancel the general agency agreement if you no longer want to work with the agency.
You may decide to list your property with a new agency at a later date. If the first agency has already done work that helps to sell the property (such as introducing a prospective buyer who then goes on to purchase it), you may still have to pay them a commission. Make sure you check with your new agency about the risk of paying two commissions.
