There are pros and cons to working with more than one agency.
Belinda Moffat is the Chief Executive of the REA, the independent government agency that regulates the conduct of property professionals in New Zealand.
Q: Hello Belinda. We have to put our house on the market, but we fear that the prices will drop and the days needed to sell will increase. Is it a good idea in a market like this to refer to a few agencies rather than just one, to increase the chances of finding a buyer?
A: Working with one or more agencies is a matter of personal choice – there is no definitive “right answer” for all circumstances.
In theory, a multi-agency approach means that the property could be seen by a greater number of potential buyers, and therefore could have a better chance of selling sooner or, depending on the level of competition, at a higher price. . However, this type of arrangement carries risks, as no licensed (“licensee”) real estate professional is solely responsible for marketing the property.
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In a slowing market, you need to weigh how your choice of listing arrangement incentivizes licensees to operate.
Will you benefit from licensees competing for the sale, or will an exclusive deal encourage the licensee to find the best deal rather than getting a sale as soon as possible to avoid missing out altogether?
The important thing to remember is that both options require you and your chosen agency(ies) to sign a legal contract.
These contracts, known as agency or “listing” agreements, are legally binding, so it’s a good idea to seek advice from your lawyer before signing (and, under the code of conduct we oversee at REA, licensees are required to inform you of this recommendation).
If you opt for a “general agency contract”, this allows you to give several agencies the right to market and sell your property. You will be required to sign a General Agency Agreement with each agency you decide to sign up with. Each agency will work with you to arrange open viewings, and they may all market the property differently. With multiple relationships to manage, this tends to be a more complex arrangement for you as a supplier, so be sure to factor this into your decision making. It is important to take the time to understand what commission may be due to each licensee.
As the name suggests, a sole or “exclusive” agency agreement gives a licensee or agency the exclusive right to market and sell your property. If you sign a sole agency contract, you must not sign another agency contract (sole or general) with another licensee until you have canceled the first contract in writing, otherwise you may have to pay a commission to all licensees, regardless of who made the sale.
Be sure to check what happens when the exclusive agency contract ends. Some sole agency contracts become general agency contracts after a certain period of time – this means that you will also have to cancel the general agency contract if you no longer wish to work with this agency. If the exclusive agency contract is for a residential property and for a duration of more than 90 days, the seller or the concessionaire may terminate the contract at any time after these 90 days.
When a general or exclusive agency agreement is terminated, the licensee must provide you with a list of the people they have introduced to the property. If you eventually sell to one of these people, the licensee may be entitled to a commission.
Whether you choose an agency or take the general agency approach, the Real Estate Authority recommends using agencies that use the standard REA clauses in their agency contracts. These clauses help protect you by clearly indicating when the agreement ends and when you must pay a commission.
For more information on what to expect when working with a property professional, visit REA’s consumer advice site Settled.govt.nz. Have a question for Belinda? Email [email protected]