Agency agreements for the sale of property in NSW
Before a property agent can market your property, they must sign a contract with you. This is called an agency agreement.
An agency agreement is a legally binding contract, and it is important that you read and understand it. If you are not sure about the agreement terms you should get legal advice.
What is in the agency agreement
The agency agreement must state:
- the services the agent will provide for you
- the amounts of any fees or commission you agree to pay for those services
- the circumstances in which the agent is entitled to payment. For example, commission is usually payable only when the property is sold
- how and when payment is to be made. For example, whether the agent can deduct their commission from the deposit money paid by the buyer
- warnings about circumstances in which you might have to pay commission to more than one agent
- a warning about the commission if the agreement includes a term that a commission is payable even if the sale of the property is not completed
- the extent of the agent's authority to act for you. For example, whether the agent is permitted to exchange a sale contract on your behalf or make changes to the sale contract.
- the agent's estimated selling price for the property. The price may be a single price or a price range. Note: If a price range is used the highest price cannot exceed the lowest price by more than 10%.
Negotiating the agreement
You have the right to negotiate the terms and conditions of the agreement and to ask for any legally permitted changes to be made. Alterations made to the agreement need to be signed by all parties, except if the agent revises their estimated selling price for your property.
About estimated selling prices
An agent is required to amend their estimated selling price if it is no longer reasonable. They must notify you in writing and amend the agency agreement. Your consent is not required to amend the agreement with the revised estimated selling price. The agent must provide you with evidence of the reasonableness of their estimated selling prices. See important information about selling prices and underquoting.
Commission, fees and expenses
You can negotiate with the agent about the amounts of any commissions, fees or other expenses that you may be required to pay. In some cases, commissions change based on price. You need to be careful when considering this option, as you may end up paying significantly more in commissions than you otherwise would have if you had agreed on a flat fee based on final sale price. Make sure you have researched other properties for sale and sold in your area, so you have a reasonable estimate of what your property is likely to sell for. Don’t be pressured by the agent, do your calculations and know what you are liable to pay at conclusion of the sale. Re-negotiate or find another agent if you are not satisfied.
Before signing an agreement, it is a good idea to talk to a few agents to compare prices. Ask each agent for a printed list of their fees and commission rates and the expenses (for example, advertising) they charge.
Disclosure of rebates and discounts
If set out in the agreement, the agent can ask you to pay for:
- advertising
- auctioneer's fee
- cleaning
- decorating, or
- landscaping.
The agency agreement must state the amounts or estimated amounts of any such commissions or discounts on these services. You can negotiate with the agent about whether you should pay the full amount.
Ending the agency agreement
The agency agreement can either be open ended or for a specified period (a ‘fixed term’).
The length of any fixed term is negotiated between you and the agent. There is no minimum or maximum set term. The fixed term will depend on how long you and the agent think it will take to sell the property.
If you wish to end the agreement, you must give written notice. Check your agreement to see how much notice you need to give.
If you are not happy with an agent's services, it is important to end your agreement with them before signing up with another agent. Otherwise, both agents may charge you commission when the property is sold.
Types of agency agreements
Exclusive agency agreements are commonly used for the sale of residential property. In this kind of agreement, you give exclusive rights to one agent to sell your property. This may entitle the agent to be paid commission if the property is sold during the fixed term of the agreement, even if the property is sold by you or by another agent. The agent may also be entitled to commission if the property later sells to a person who started negotiating for the property with the original agent.
A sole agency agreement is similar to an exclusive agency agreement. You give rights to one agent to sell the property, but you may find a buyer yourself. If you find a buyer who has not been introduced by the agent, then no commission is payable to the agent.
This lets you list your property with a number of agents. You pay a commission to the agent who finds the buyer.
This occurs when you deal with an agent who is part of a network of agents working together to sell your home. It covers both auction and private treaty. You pay a commission to the agent you signed up with.
This is an exclusive agency agreement where the property is listed for auction.
The cooling off period for an agency agreement
The agency agreement becomes binding when the principal – that is, you, the owner or vendor of the property, or someone who is legally acting for you – and the agent have signed it.
There is then a cooling off period of one business day during which you can cancel (or ‘rescind’) the agreement.
The cooling off period starts when you sign the agreement and ends at 5pm on the next business day or Saturday. It does not include public holidays.
The cooling off period gives you time to:
- read the agreement
- consider the terms you have agreed to, including the agent's fees
- get independent advice if you have any concerns.
Cancelling the agreement during the cooling off period
If you decide to cancel (or ‘rescind’) the agreement during the cooling off period, you need to deliver a ‘notice of rescission’ to the agent.
This simply means giving the agent a written notice or letter which:
- is addressed to the agent (use their name as given in the agency agreement),
- states that you are rescinding the agreement, and
- is signed by you (and any other person named on the agreement as a principal [vendor]) or by your solicitor/s.
Delivering the notice of rescission
You can:
- hand the notice to the agent in person
- deliver it or leave it at the agent's office or the address that’s in the agency agreement
- email it.
Be sure to keep a copy for your records.
The agent cannot charge you any fees or costs in relation to an agreement that has been rescinded correctly. Any money you have already paid to the agent must be refunded to you.
Waiving your cooling off rights
You can waive, or forego, your right to a cooling off period by signing a separate waiver form when you sign the agreement. it is recommended that you seek legal advice.
You can waive the cooling off period only if the agent gave you the following documents at least one business day before you signed the agency agreement:
- a copy of the proposed (unsigned) agency agreement, and
- a copy of this waiver form.