We often have clients ask us about the role of the Real Estate Agent (“the Agent”) in a property transaction. Whether you are a Vendor or a Purchaser, it is important to understand what an Agent can and cannot do during the course of the transaction so that you can anticipate the next steps in the process and ensure the transfer of property is as stress free as possible.
A contract for the sale of land must be drafted and provided to the Agent before they can invite potential purchasers to view the property or market the property in any way.
The Agent can continue to advertise the property even after contracts have exchanged. Once a contract is exchanged it is binding on the Vendor, but Purchasers of residential property are entitled to a cooling off period of five business days and may still back out of the contract for a fee of 0.25% of the purchase price. Once this period lapses, the contract is binding on both parties, although it may still be validly terminated or rescinded by either party and therefore not finalised until settlement. The duration that the property is advertised for will normally depend on the Agency Agreement agreed between the Agent and the Vendor and the Vendor’s budget. So do not panic if you drive by your soon-to-be new home and still see a for sale sign out the front.
It is a common misconception that paying a ‘holding deposit’ (normally 0.25% of the purchase price) to the Agent will take the property off the market and secure your intention to purchase. While paying a holding deposit is a sign of good faith that you are a genuine interested party, it does not force the Agent to take the property off the market nor bind the Vendor to sell the property to you.
Normally, you will be required to pay the full 10% deposit to the Agent’s trust account for contracts to exchange, unless a lesser amount is agreed.
Offer and Acceptance
If an Agent has told you that a Vendor has accepted your offer, the Agent is still under an obligation to notify the Vendor of any higher offers, which the Vendor is free to accept. This practice, known as ‘guzumping’ is perfectly legal, as an offer is only formally accepted once contracts have been signed by both parties and exchanged.
You may also hear an Agent say, “the Vendor is only accepting offers on a signed contract with a section 66W certificate”. An offer in this manner, if accepted, will form a binding contract as a section 66W certificate (once signed by the purchaser’s solicitor) waives the purchasers right to a cooling off period. Although the Agent is obliged to notify the Vendor of any acceptable offers, the form of the offer can be subject to agreement between the Agent and the Vendor. Unfortunately, Purchasers faced with this situation will have to play ball, however it is paramount that you have completed all due diligence before proceeding in this manner.
It is not uncommon for an Agent to make representations about the property, i.e. ‘this is such an upcoming area’, ‘everything was built with council approval’, ‘the Vendor will happily throw that in for free’. These representations may be true, however as a Purchaser you can only enforce what is in the contract and you can only reasonably rely on the enquiries you have made yourself. Trying to bind the Vendor to something the Agent has stated will not hold any water should there be a dispute. Therefore, receiving proper advise on the contract and as to which enquiries should be made is essential.
It is not unusual for a Purchaser or a Vendor to have questions about the contract or the conveyancing process. The best person to answer these questions however is your lawyer, not the Agent.
Please do not hesitate to contact us if you have any questions about the role of your Agent or the conveyancing process.