The first step many people take when deciding to sell a property is to appoint an estate agent to handle the sale.

The agent is responsible for marketing the property with the intention of achieving a sale.

Before you appoint your agent, you should always make sure the person you are dealing with is a licensed estate agent or an authorised agent’s representative. You can check this by searching Consumer Victoria’s Public register of licensed estate agents.

Agents are obliged to act responsibly and ethically when dealing with buyers and sellers. Strict laws govern their licensing, authorisation and conduct. They must always act in your best interests, follow your lawful instructions and engage in good practice. 

According to Consumer Victoria, estate agents must:

  • advise you that all commissions and other outgoings are negotiable
  • at an auction, disclose any vendor bids
  • let you know of all verbal and written offers from prospective buyers, unless you instruct otherwise in writing
  • state an estimated selling price in the sales authority that is reasonable, and takes into account the three most comparable properties. For more information, view Comparable properties - Understanding underquoting.

You can expect the agent to:

  • advise on a method of sale
  • provide a marketing plan, advertise and market the property
  • advertise an up-to-date price for the property reflecting rejected offers. It is not compulsory for a price to be advertised
  • organise and attend open house and other inspections
  • attract prospective buyers
  • organise and conduct an auction (if you choose this method of sale)
  • arrange the signing of the contract
  • collect and hold the full deposit.

Estate agents must not:

  • mislead or deceive any party
  • make or accept dummy bids
  • at an auction, accept any late bids after the fall of the hammer
  • keep any rebates or discounts they receive for advertising or other services they buy on your behalf. They must immediately pass these on to you
  • charge you more for advertising or other outgoings than you authorised in writing or than they paid for the service.

Sales Authority

When you chose an agent, they will ask you to sign a ‘sales authority’. This is a legally binding contract which documents what you have agreed with the agent.

The authority governs the relationship between you and the agent and as such it is an important document. Make sure you understand and agree with all the terms and conditions before signing.

Many of the conditions in the sales authority are negotiable including:

  • the method of sale (auction or private sale)
  • the authority period (how long they are authorised to act for you)
  • the commission or agents fee
  • the amount spent on advertising.

Any changes (deletions, amendments or additions) you negotiate with the agent must be made on the sales authority and initialled by both you and the agent, not just verbally agreed.

If you have specific instructions for the agency, attach them to the authority.

Types of Sales Authority

There are two main types of sales authority:

1.Exclusive authority

This is the most common type of sales authority. Giving an agent exclusive authority means that you appoint one agency to market and sell your property for an agreed period of time – usually 90 days.

Once you have signed the authority, you cannot cancel it during this time, unless the agent agrees. If no period is stated on the authority, the default period for sale by auction is 30 days after the date of the actuation. For a private sale, the default period is 60 days after the sales authority was signed.

The agency is entitled to commission when the property is sold and can claim commission even if you sell your property without their help (for example by selling to a family member or friend).

We recommend that you do not sign more than one exclusive authority, as you may have to pay more than one commission in certain circumstances.

2. General authority

This is where you list with more than one agency but only pay commission to the agency that sells your property. This is much less common.

There are two basic things you need to be aware of in relation to the sales authority:

  1. By signing the authority you give the agent the exclusive right to market and sell the property for a specified period You must be mindful of your potential liability to pay commission to the agent in the event that you seek to sell the property with another agent, as the authority may say the original agent is entitled to a commission in certain circumstances.
  2. The agent’s obligation pursuant to the authority only extends to finding a purchaser who purchases the property pursuant to an unconditional contract.

The agent is entitled to a commission if this is achieved, even if settlement does not take place. This is something to bear in mind in the unlikely event that the purchaser is unable to fulfil its obligations under the contract of sale.

Get expert advice

If you are not sure what type of sales authority is best for you or need assistance in negotiating or reviewing the terms of your sales authority before you sign, the friendly property and conveyancing team at Tonkin Legal are here to help! Book an appointment today.