[Author – Tim ODwyer]
How to make a sale and collect a commission…when a property’s NOT for sale!
The basic real estate rule across Australia is that a licensed agent is entitled to be paid commission on a property sale provided the owner has engaged the agent in writing for that purpose. It is not unknown for agents to make sales first, then later secure their sellers’ signatures to ensure entitlements to commission.
In Queensland, for instance, a real estate agent must not commence any selling activities for a client, nor collect a subsequent sales commission, unless both agent and client have first signed a government-prescribed form of appointment. The maximum fine for a breach of this three-year old law is $15,000, not to mention the more severe practical penalty of missing out on commission if the agent goes ahead and sells without being properly appointed. Not that this prevents some Sunshine State agents still trying to get paid for selling properties they are not lawfully authorised to sell – as the following true story shows.
Clients of mine, Nigel and Laurienne, lived in Logan City, south of Brisbane They owned a quarter acre block of land on Tamborine Mountain, just inland from the Gold Coast. There is a little rainforest on the block and superb views to the coast.
One day they received a phone call about their block from a Tamborine real estate agency. The saleslady (let’s call her “Melissa”) asked if Nigel and Laurienne wanted to sell because she had someone interested in buying. Melissa happily explained that the interested buyer, who had approached her agency, once lived in the street where the block was. Melissa had promptly found out Nigel and Laurienne’s details from the local Council. The buyer was offering $110,000.
Melissa was firmly told the land was not for sale, but Nigel conceded they might consider selling for $160,000.
Melissa kept calling back with better offers from the same keen buyer. The best offer was $135,000, at which point Melissa volunteered, “I’m obliged to put any offer in writing to you.” She had no such obligation, of course, to these non-clients. And in any case, real estate agents are always at liberty to pass on non-written offers or expressions of interest to their actual, legal clients. The common law, in fact, obliges agents to communicate all offers and expressions of interest – whether in writing or not – to their seller clients.
Melissa reported in her final phone call that the buyer, whose name she let slip was “Russell”, had somehow got annoyed with her and would probably use another agency to continue his purchase and price negotiations.
Before long Nigel and Laurienne got a not-unexpected call from “Harry”. Were they interested in selling, he asked, because his estate agency had an interested buyer. Nigel by now knew how to play the game. The block was not for sale, he said, then cheekily added, “But we might accept $165,000.”
More calls followed from Harry who, along the way, offered to post out from his agency – wait for it – an appointment-to-sell form for Nigel and Laurienne to sign. No thanks, he was told.
But the calls kept coming. Each time Harry was reminded that the land was not for sale. Soon he called to say he had a signed contract offer from the buyer for $155,000. This was shortly upped to $160,000, then to $162,500, until ace-negotiator Harry finally got the buyer to make a written offer of $165,000 – the price Nigel had said might be accepted.
When Harry immediately suggested he’d take the contracts to Nigel and Laurienne’s home for them to sign, they told him they wanted to see their solicitor first. So they contacted my office for an appointment. Harry said he would meet them there.
Harry came early, and when Nigel and Laurienne arrived, I asked him to wait while we considered the documents he had brought along. These included a contract in duplicate signed by Melissa’s “Russell”, and – wait for it – the government-prescribed form for Nigel and Laurienne to sign and appoint Harry’s agency exclusively for a month from that day to sell their land. (Never mind the buyer had already found the land himself, Melissa had first located the owners for the buyer and all Harry had really done was to wear these novice sellers down with his calls.)
This document did not state, as required by Queensland law, how the agency would perform the selling service (which, needless to say, had already occurred), but clearly showed the listing price at $165,000 with commission of more than $5,000 (calculated, naturally, on the maximum regulated percentage). Strange how only a couple of phone calls earlier Harry had seemed comfortable enough for an offer of $155,000 to have been accepted. After some discussion with me, Nigel and Laurienne decided they really didn’t want to sell– nor pay five grand to pushy Harry for the privilege.
When I went to the waiting room to diplomatically tell him my clients were not yet ready to sell, Harry complained how he had driven all the way to Slacks Creek from Mount Tamborine because he was told the contract would be signed. All I knew, I said, was that an appointment had been made for legal advice which my clients had now received.
I then returned his documents to him, but Harry promptly shoved them back and said “You might as well keep these until they are signed.” He then stormed out.
Some months later Harry came back to Nigel and Laurienne with another appointment agreement and a fresh contract from the same buyer. The price had risen, but Nigel had got smarter. Maybe, Nigel tod Harry, but you are really acting for the buyer, so there is no deal unless the buyer pays your commission on top of the price. The matter went into limbo. Harry and Russell apparently began negotiating on how much commission Harry was worth for his efforts as Russell’s agent.
All over the country there are more than a few scouting agents – like Melissa and Harry – daily being approached by buyers, offering to find sellers for what these buyers want to buy, seeking out inexperienced owners who don’t necessarily want to sell, pressuring them into selling, then negotiating between the parties and finally collecting generous retrospectively-authorised commissions on comparatively easy sales.
Some consumer advocates are raising conflicts of interest questions with regulators about this practice. Will such buyers be misled into believing these agents are acting in their best interests? Are buyers told that the agents will always represent the sellers for whom they must obtain the highest possible prices? How many sellers will be told that their prospective agents already have actual buyers for their properties? Will agents offer to reduce their commissions for sellers where the agents’ marketing and selling services were minimal? How much information obtained from buyers will agents disclose to their seller clients?
I did not lodge a complaint with Queensland’s Office of Fair Trading on behalf of Nigel and Laurienne about the whole unsavory exercise, but I was not confident of the investigative result. I’ve seen too many sales where agents illegally sold properties – as both Melissa and Harry attempted to do here – but where Fair Trading’s investigations of subsequent written complaints were far from adequate. Despite blatant breaches of a law designed to protect consumers by requiring agents to be properly appointed, the agents who were the subject of those complaints were treated lightly by the “Consumer Cops”. In one case a family home had been grossly undersold to an agent’s developer mate. In another bargain sale of an inner-city unit to a buddy, the agent unlawfully kept his commission but no-one from the Office of Fair Trading even bothered telling this licensed scoundrel to refund it. The seller later had to sue the agent to recover the illegal commission.