In any property transaction, such as the purchase and sale of property, the real estate agent plays a prominent and central role. They represent the seller and are responsible for the facilitation of the sale process.
As such a fiduciary relationship exists between the real estate agent and seller. This is a special relationship that has strict legal obligations requiring the real estate agent to act solely in the best interests of the seller. As a buyer when purchasing property it is important to remember that the real estate agent is acting in the best interests of the seller only.
Notwithstanding this, the real estate agent will be labile to a purchaser in the event of any misleading or negligent conduct.
The role of the estate agent normally includes advertising the property, locating a buyer, negotiating acceptable terms of purchase with that buyer and completing all the paperwork, ie the contract of sale to record the terms of the purchase.
As payment for undertaking these services the real estate agent will charge the seller a commission. Generally the commission will be a percentage of the sale price.
Given the importance and responsibility of this role, real estate agents are subject to strict rules and regulations governing their conduct which are contained the Estate Agents Act and are further subject to supervision by Consumer Affairs Victoria.
In order to act on behalf of a seller, a real estate agent must hold a current license, possess written authority which is signed by the seller that contains details about commission which is payable to the agent in the event of a sale.
In order to be enforceable the authority must also contain details as to the agent’s estimate of a sale price. Rather than specifying a figure, the agent is permitted to specify a sales range within 10%.
The standard form agreement, known when auctioning, is an Auction Authority or in the event of a private sale, a Sale Authority. The authority is the contractual document that obligates a real estate agent to find a buyer, negotiate with that buyer who must then sign a contract of sale.
In return for these services the authority provides that commission is then payable by the seller. Should the buyer not proceed and the sale falls through, given the wording of the standard form authority, the estate agent may still be entitled to the payment of commission.
In most instances the standard from of authority will contain an exclusive authority period. During this period should another agent sell the property, the seller will still be required to pay commission to the original listing real estate agent.
The authority will also specify any additional responsibilities or powers provided to the real estate agent, such as the authority to sign a contract of sale on behalf of the seller.
From time to time the situation arises whereby the real estate agent may wish to purchase the seller’s property and the seller is happy to sell to the real estate agent. Given the unique position of the real estate agent in the transaction, a real estate agent is permitted to purchase a client’s property subject to complying with the procedure contained in the Estate Agents Act.
Given the increasing popularity of a buyer appointing a buyers advocate to act solely on its behalf in the buying process, it should be noted that a buyer’s advocate must also be licensed as a license is required for the ‘negotiation of the sale or purchase’ of a property.
As always this article contains general information only and should not be relied on for detailed advice related to your particular circumstances. Should you require such advice, please contact your lawyer.
For more information please contact Sutton Laurence King Lawyers: https://www.slklawyers.com.au/contact