06.Signing an agreement
There are three main types of agency agreement:
Open listing or general authority — Sellers can list with more than one agency, only paying commission to the agent that sells the property. While you may get more market coverage than with a sole agency, the sale of your property may not be as high a priority for the agents, compared to the other types of agreements. There’s also a risk that you won’t achieve the best price if various agents are competing for a quick sale.
Exclusive authority/agency — The agent gets paid upon sale, even if the sale ends up being by a different agent or by the vendor themselves. One trap is to sign up for a lengthy contract. For example, one CHOICE reader told us how he signed up for six months with an agent and regretted it later. Why not try one month first, and extend the agreement if you’re satisfied?
Sole agency — Similar to exclusive agency, except the agent may not be entitled to commission if you sell the property yourself. Don’t feel pressured to sign up after your first meeting. One shadow shopper told CHOICE about an agent she met. “He wanted us to sign a contract there and then, without my husband and I having discussed it. I told him he could talk as much as he liked but we wouldn’t sign anything until we’d discussed it privately.”
Some states have a cooling-off period for agency agreements. Some also have a limitation on the time for which an exclusive or sole agency can run.
You don’t have to accept the contract agreement an agent presents — you’re strongly advised to have it checked by a lawyer and changed if necessary.
One of our shadow shoppers even drafted a set of ‘special conditions’, modelled on Neil Jenman’s Home Seller’s Protection Guarantee (available at Jenman.com.au).
These conditions aim to prevent the agent from quoting an inflated price to get the contract, and provide some level of protection for the seller. “We retained control of the process rather than handing it over to the agent,” our shopper says. “We asked our solicitor to check the exclusive sale authority and the special conditions for ‘gotchas’ and to ensure that they expressed our intentions.”