What are standard terms and what is fair?
Home sellers are well advised to scrutinise their agency agreement prior to signing it. The selling fee, advertising costs and expected selling price are all key elements of an agency agreement. However, the devil is often in the detail. One commonly overlooked component of an agency agreement is the Exclusive Agency Period.
As market conditions normalise, agents that over promise on their service levels and/or the expected selling price will be caught out.
In a market that punishes agents who over price listings, there will be increased instances where home owners want and/or need to change firms. An instance rarely seen during the boom.
In many agency agreements, there is a clause stating that the Exclusive Agency Period will be ‘90 days after the auction’. This works out at around 120 days of exclusivity, even if the auction fails and the client is unhappy. Some agency agreements are a set time frame of 90 days.
Given the purpose of an auction is to sell on the day – it begs a very good question. Why does an agent need 90 days exclusivity post auction? In fairness, not all auctions conclude on the day and it is common for negotiations to spill over into the next week or two before the property sells, but 90 days?
When a home seller who really needs or wants to sell signs a 120 day ‘Exclusive Agency Agreement’, they unwittingly hand complete control to the agent.
If the price and service don’t meet the agent’s promises, the home seller is stuck until the completion of the Exclusive Agency Period.
At the point of signing the agency agreement, it’s crucial a home seller understands the legal and practical ramifications of the agreement. A phrase often used by sales people when it comes to paperwork is ‘it’s all standard’.
When signing a contract (which an exclusive agency agreement is) it is important to remember everything is negotiable.
Controlling the agent
The best way to control an agent is by controlling the time frame in which you are exclusively committed. An exclusive period in which the agent has time to deliver on the promises they have made is fair and commercial. If the agent believes in the auction process, engage the agent until the day of the auction. If the agent’s claim is to ‘have interested buyers’ offer them a few weeks exclusivity to show the buyers through your property.
In addition, ask for all agents to put their promises in writing. If the property sells below the agent’s suggested price, will the agent reduce their commission? If not, why not!
Home sellers also need protection against being conditioned. Conditioning is when the agent praises the property before gaining the listing and once listed, systematically channels negative feedback about the property to the vendor, with the express purpose of driving down the vendor’s price expectations.
If your property remains unsold at the end of the Exclusive Agency Period, that is not necessarily the catalyst to change your agent. Rather, it’s that you maintain control as the vendor.
As a seller, it pays to be due diligent. Our 12 Real Estate Myths Busted may answer some of your questions!
