People selling a property via a real estate agent will sign an agency agreement that sets out all the terms and conditions of the contract, including how much commission agents will earn from the sale and how the property will be marketed.
If it’s a standard agreement, vendors usually retain the right to sell the property privately, but it’s a good idea to check. If you have signed an agreement with an agency but decide to opt for a DIY private sale, you should check whether the contract requires you to pay commission to the agent or agency.
Kevin Lampen-Smith, chief executive of the Real Estate Authority says most agencies use its standard clauses in agency contracts.
According to those standard clauses, commission is payable if the property is sold within the term of the agreement (normally 90 days) or if it is sold privately within six months after the contract expires to a buyer the agent had introduced to the property.
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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 from the end of the agency agreement, the seller is still obliged to pay commission to the agent.
These agreements mean that, if an agent brings a potential buyer to your property in March, and the agency agreement expires in April, and the seller and purchaser enter into a private sale agreement within six months, the seller will have to pay the agent commission.
It doesn’t matter whether the sale 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.
Before signing an agency agreement, ask the agency if it uses standard REA clauses. If it doesn’t, you may be exposed to a more complicated agreement.
Generally, any issues arising from the agency agreement/arrangements between the seller and the real estate agent won’t 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 wouldn’t want to be troubled with.
If you decide you’re really keen on a property in this situation, seek legal advice before getting involved (and especially before signing anything).
The REA can help regarding 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, see settled.govt.nz
