Signing an agency agreement
An agency agreement is a legally binding contract between you and your real estate agent.
Summary of important things to know
An agency agreement is a legally binding contract between you, the seller of the property, and a real estate agency.
Sole agency agreements and general agency agreements allow different things.
You can negotiate what’s in an agency agreement, including the timeframe it covers, how much commission you’ll pay and any expenses you’ll pay.
You need to read and understand the agency agreement, and you should also get legal advice before you sign it.
Your real estate agent must tell you about any rebate, commission or discount they receive in connection with any work they do for you.
It’s important to check that your agent is licensed. Use REA's public register to check their details and see if they’ve had any complaints upheld against them in the last 3 years.
If you deal with an unlicensed person, the Real Estate Authority won’t be able to help you if things go wrong.
Remember, the real estate agent works for you, the seller, and you pay them for their services. Make sure you’re happy with their approach before you decide to sign an agreement with them. If you are unsure about any terms in the agency agreement, seek independent legal advice.
It is important to tell the agent everything you know about the property because an agent is required to disclose known defects of a property to a potential buyer. An agent may cancel an agency agreement if you instruct them not to disclose known defects.
Agents must give you a copy of REA’s agency agreement guide before you sign an agency agreement.
What an agency agreement is
An agency agreement is a legally binding contract between you and the real estate agency that helps to sell your property. An agency agreement gives the agency the right to market your property for sale.
The agreement sets out all the terms and conditions of your contract such as what your agent will do for you and what you’ll pay them. If you use an agency to sell your property, you must sign an agreement with them first.
While an individual agent may sign you up, your contract is between you and the agent or agency they work for. Depending on the conditions of the agency agreement, once you’ve listed your property, any agent in the agency can try to sell it.
What the agent should tell you before you sign
A written estimate of your sale price
This is the agent’s best estimate of the price they expect your property could sell for, based on sales of similar properties in your area. This is referred to as an appraisal or a current market appraisal (CMA).
How they recommend selling your property
They should recommend the best way of selling your property, for example, by advertised price, tender, auction or deadline sale. The agreement will set out how you’ve agreed to sell and what marketing you’ve agreed the agency will do.
The agency agreement will include a listing price if your property is being marketed with an advertised price but not if it’s being sold by another method.
What commission you’ll pay
They should tell you what commission you’ll have to pay them, when you’ll have to pay and how this payment is calculated. Commissions can vary between agencies, so you may want to compare different agencies or negotiate with your preferred agency. The agent must explain the formula used and give you an estimate in dollars of the commission you’ll pay if your property sells at their estimated price. Usually, the agency will take their commission out of the deposit when the agreement for sale and purchase becomes unconditional.
What expenses you’ll pay for
Usually you pay extra for marketing the property, but you don’t have to pay extra if you don’t want to.
Ask what marketing is provided for free by the agency, for example, they may put details of your property in the agency’s office or on its website.
You need to consider the cost of extra marketing against the possible benefit. The agency should prepare a detailed marketing plan explaining what you’re paying for and when. Remember, you’ll have to pay for the extra marketing even if your property doesn’t sell.
When the agency agreement ends
There must be a set date or timeframe from the time the agency agreement is signed that tells you when the agreement ends. The agreement must also say under what circumstances you might have to pay commission after the agreement ends.
What’s in an agency agreement
While the layout and content of agency agreements can vary between agencies, all agency agreements should include the following things.
Details about the property for sale
- The address of your property.
- The chattels to be sold with your property (for example, whiteware or curtains).
- Details about your property.
You must make sure that any details you give the agent are accurate. If you don’t, you may leave yourself open to legal action from a buyer.
It is important to tell the agent everything you know about the property. An agent is required to disclose known defects of a property to a potential buyer. You may not instruct an agent to withhold this information. An agent may cancel an agency agreement if you instruct them not to disclose known defects.
Details about the parties to the agreement
- Your name, address and other contact details.
- Your lawyer's or conveyancer’s name and contact details.
- The name of the agent mainly responsible for marketing and selling your property.
- The agency’s name and address.
Who has the authority to sell the property
If you’re not the sole owner of the property, either all owners must sign the agency agreement or you must show you have the authority to sign for all the other owners. (You will need to provide the agent with written confirmation, such as a power of attorney, a resolution of trustees, company minutes or a court document.)
Confirmation that you’ve been given a copy of the guide
Your agent is legally obliged to give you a copy of REA’s agency agreement guide before you sign an agency agreement. They also have to get your written confirmation that you’ve received it.
Download a copy of the residential property agency agreement guide here.
Download the Chinese version of the residential property agency agreement guide here.
Details of what you authorise the agency to do
The agency agreement appoints your chosen agency and sets out what you authorise them to do, for example:
- advertising your property for sale at the price, in the way and on the conditions you’ve agreed to
- arranging inspection of your property by prospective buyers
- receiving a deposit on your behalf
- taking their commission from the deposit.
The type of agency agreement and how long it lasts
The agency agreement will state whether it’s a sole agency or general agency agreement, when it starts, when it ends and how to end it. It is up to you and the agency to agree how long the agreement will last.
Verifying your identity
To help protect New Zealand’s reputation and economy from money laundering and the financing of terrorism, before conducting certain activities, real estate agents, lawyers, conveyancers and banks must confirm your identity under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act).
The agent will also need to confirm your identity if you are selling a property on someone else’s behalf.
The agent may verify your identity by using:
- Primary photo identification, for example, a passport, a certificate of identity or refugee travel document or a firearms licence.
- Non-photo identification such as a birth certificate or a citizenship certificate, accompanied by a supporting form of photo identification such as a driver's licence, an 18+ card, or an international driver’s licence.
- A New Zealand drivers licence supported by evidence such as a bank card, a gold card, or an IRD letter.
In certain circumstances, an agent (with whom you do not have an agency agreement) may need to obtain and verify identity information about you if you deposit $10,000 or more in cash or by cheque into that agent’s trust account.
Even if you have been a client for a long time, the agency will need to confirm that you are who you say you are. You can read more about this on the Department of Internal Affairs (DIA) website.
When an agency agreement ends
When an agency agreement ends, there may be a stand-down period. During this time, if you sell your property to someone the agent has introduced to your property, you may be charged commission by the agency.
The stand-down period is typically six months, but the length of the stand-down period can differ from agency to agency. It is important to read your agency agreement and seek legal advice if you are unsure what this means for you.
The length of the stand-down period in the REA standard residential agency agreement clauses is six months, and in the REA standard rural agency agreement clauses, the stand-down period is 12 months.
You can check if your agency agreed to use the REA standard agency agreement clauses here.
Taking your property off the market
At any time, up until an agreement has gone unconditional, you can decide you don’t want to sell your property and remove it from the market.
If you want to end the marketing for your property, you need to tell the agency in writing. Ask the agency to confirm in writing that all marketing has been stopped and removed. Let the agency know if you want to hear from them if a buyer contacts them after the marketing has been stopped.
Your agency agreement will remain in place until the date it ends unless you terminate it.
Terminating an agency agreement
If you decide that you want to cancel the agency agreement, get advice from your lawyer first. You will need to give the agency notice, and the notice period should be specified in the general agency agreement. The notice period exists to give the agency the chance to conclude any introductions before the contract is terminated.
If you have a sole agency agreement, you might not be able to cancel the agreement early unless the agency agrees, but you can withdraw your property from the market until the agency agreement expires. If the sole agency agreement is for a term longer than 90 days, you or the agency can cancel the agreement any time after 90 days.
Some sole agency agreements become general agency agreements when cancelled – this means that you will also have to cancel the general agency agreement if you no longer want to work with the agency.
You may decide to list your property with a new agency at a later date. If the first agency has already done work that helps to sell the property (such as introducing a prospective buyer who then goes on to purchase it), you may still have to pay them a commission. Make sure you check with your new agency about the risk of paying two commissions.
Sole agency and general agency agreements
A general agency agreement gives more than one agency the right to market your property. You’ll sign a separate agreement with each agency, but you should only pay a commission to one agency. The agencies should talk to you if there is a risk of you paying two commissions.
A sole agency agreement gives one agency the exclusive right to market and sell your property.
If you sign a sole agency agreement, there are some things you should be aware of:
- You shouldn’t sign another agency agreement with anyone else. If you do, you may have to pay both agencies a commission when your property sells.
- If you sell the property privately with a sole agency agreement in place, you will still need to pay the agency a commission when you sell.
- If you change your mind immediately after signing, you can cancel the agreement by 5pm on the first working day after the agent has given you a copy. The agent should give you a copy of your agreement within 48 hours of you signing it. You must cancel in writing, for example, by letter or email.
- If you sign a sole agency agreement for a term of more than 90 days, either you or the agency can end the agreement after 90 days. This must be done in writing.
In some agreements, cancelling a sole agency agreement means it becomes a general agency agreement. You’ll need to cancel this too if you don’t want to continue with the agency.
Details of any rebates, discounts or commissions the agent may receive
If an agent gets a discount, rebate or commission on any services they arrange for you and you’re paying for, they have to tell you. For example, an agent may receive a discount on the cost of advertising your property in a newspaper.
This disclosure is done in a form that must be included in the agency agreement.
The form must state either the estimated amount of rebate, discount or commission and its source or that the agent won’t be receiving any rebates, commissions or discounts.
Recommended standard clauses
- reducing the likelihood of you being charged commission by two agencies
- clarifying when the agreement ends and when you need to pay a commission.
We recommend you only use agencies that use these standard clauses. Ask your agent about the clauses before you sign.
You can ask questions, get independent advice, talk to more than one agent and negotiate what’s in the agency agreement. You can negotiate timeframe, commission, expenses or services. Make sure you and your lawyer or conveyancer are happy with the agreement before you sign it.
See the Real Estate Authority's list of agencies who use standard clauses in their agency agreements here.
Test your knowledge of the agency agreement