At some point during your investment journey, you're going to find yourself in a position where you want/need to sell one of your properties. This begs the question, who can I get to sell my property?
In general, you can choose just about any licensed real estate agent to sell your property, but the key to a smooth transaction is in the type of agency agreement you choose.
An agency is a legally binding agreement between the seller of the property (vendor) and the real estate agency. This agreement gives the real estate agency the ability to market a property for sale.
Agency agreements lay out the rules for the transaction including marketing budgets, commissions, and so on.
There are two main types of agency agreements:
General agency
Sole agency
Let's consider the two different agencies.
General Agency
With a general agency, the client may engage more than one real estate agent (including the licensees they employ) to work on a deal at the same time. This, however, does not open up the listing to any agent... the vendor has to sign an agreement with each different real estate agency they are engaging with, and therefore not every agent has access to a listing during a general agency.
Despite signing agencies with many different agents, the vendor should only pay a commission to the agency which brought in the buyer and confirmed the sale. The agencies should advise the client if there is any potential risk for the vendor to pay two commissions.
Paying two commissions is a potential pitfall in signing a general agency. The most common way this occurs is if the previous agency agreement hasn't expired yet and the property sells. The Real Estate Authority (REA) has introduced standard clauses to mitigate this risk but it is important to check these and other clauses before potentially becoming liable.
Sole Agency
A sole agency is as it sounds, one agency has the sole ability to sell the listing that is given to them by the vendor. In other words, a sole agency gives the exclusive right for one real estate agency to market and sell your property.
This is perhaps the much more streamlined approach to selling because you are working directly with the selling party rather than with multiple real estate agencies. This gives you the chance to have better communication across the transaction and a better relationship moving forward.
What if another agent finds a buyer for someone else's listing?
In this case, we have what is known as a conjunctional sale. A conjunctional sale occurs when one agency has the agency on the property, and a different real estate agency finds a willing buyer for the property.
The agencies will mutually agree to share the commission payable once the sale is confirmed.
As a result, some agencies might show reluctance to go ahead with this because they are potentially reducing the amount of commission they have owing to them. But, the decision on whether or not the conjunctional sale proceeds must be based on the best interests of the client, not the salesperson's financial gain. I.e. if a conjunctional sale is going to result in a quicker sale for the vendor, this is in their best interest and the deal should proceed.
It's worth noting that during a conjunctional sale, the vendor will still pay the same commission that was originally agreed upon so the vendor is generally not at any risk of having to pay more than one commission.
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