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Real Estate Fees - Negotiating with An Real Estate Agent

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					                                  Government of
                                  Western Australia




    Real estate fees
    negotiating with an agent




  REBA
Real Estate & Business Agents Supervisory Board
This booklet contains general information that was current at the time of publication. If you
have specific inquiries about matters relating to your situation then you are strongly urged to
seek independent professional advice. The producers of this publication expressly disclaim
any liability arising out of a reader’s reliance on this publication.

This publication was produced by the Real Estate and Business Agents Supervisory Board.

This publication is available in other formats on request to assist people with special needs.
Contents

Ensure your agent is licensed / sales representative is registered ............................. 3

Compare fees and the quality of services                                                 ............................................................................................   3

Selecting an agent to sell your home                                         ........................................................................................................   3

Selecting an agent to sell your business                                              ...............................................................................................   5

Selecting an agent to manage your property                                                       ....................................................................................   5

Selecting an agent to assist you in purchasing property                                                                       .......................................................   7

Read and amend the Written Authority                                              ...................................................................................................   7

Consumer protection mechanisms in Written Authorities                                                                           .....................................................   7

Written Authorities and sales transactions                                                  .........................................................................................   9

Types of Written Authorities for sales transactions                                                             ..................................................................    10

Conjunctional arrangements                            .............................................................................................................................   11

Written Authorities for property management                                                       .................................................................................   11

Dispute resolution assistance                             ........................................................................................................................    12

We can assist     .................................................................................................................................................................   13




                                                                                             Real estate fees: negotiating with an agent                                                1
If you plan to employ a real estate               The government no longer fixes a
and business agent to do any of the               maximum fee for agents’ services.
following then the information                    Agreement on all fees and services
contained in this publication is                  can now be determined through
relevant to you:                                  negotiations between you and your
•   market and sell your home or                  agent.
    business;
                                                  Public protection and dispute
•   manage the renting/leasing of                 resolution safeguards were also
    your home or business premises;               introduced at the same time as the
    or                                            removal of maximum fees. The
•   act as a 'buyers agent' to assist             safeguards, which are detailed
    you in buying a property or                   below, protect consumers if an
    business.                                     agent acts illegally or unjustly when
2   Real estate fees: negotiating with an agent
negotiating, setting or charging a       member. For further information
fee.                                     concerning the Fidelity Guarantee
                                         Account visit the REBA website.
As with any other service, it is also
wise for you to protect yourself by      Compare fees and the quality of
ensuring your agent is licensed,         services
comparing agents’ fees and
                                         Before an agent can perform any
services, and checking contracts
                                         services for you, the agent is
carefully.
                                         required by law to have a written
Ensure your agent is licensed /          agreement signed by you that
sales representative is registered       authorises them to act on your
                                         behalf. This agreement is called a
To check if your agent is licensed, or
                                         'Written Authority', an 'Appointment
if the sales representative employed
                                         to Act' or an 'Authority to Act'.
by the agent is registered, visit the
REBA website (www.reba.gov.au)           Before you sign a Written Authority
for an online search service.            you should safeguard your interests
Alternatively you can call the           by comparing the fees and services
licensing staff of the Real Estate       of several agents, much the same
and Business Agents Supervisory          way as you would get several
Board (REBA) on 9282 0843, or            quotes before hiring a tradesperson.
country callers can dial                 You should also carefully read the
1300 30 40 64 for the cost of a local    conditions of the Written Authority.
call from anywhere in the State.         Also note that real estate agents
REBA is the statutory authority          can no longer include a letting fee
responsible for the licensing of real    as part of a residential tenancy
estate agents and registration of        agreement.
sales representatives, in addition to
                                         If you feel uncomfortable dealing
regulating their conduct.
                                         with an agent by yourself, you might
By dealing with a licensed agent or      want to have a friend or relative with
a registered sales representative        you to help ask questions and
who is employed by a licensed            negotiate the best fee for service.
agent, you are assured that they
                                         Selecting an agent to sell your
have passed certain relevant
                                         home
educational standards. You may
also be protected by an insurance        Generally, agents employ sales
scheme known as the Fidelity             representatives who will be the
Guarantee Account if you suffer          people liaising with sellers and
financial loss due to the actions of a   buyers of property. Although all
licensed agent or an agency staff        sales representatives must be
                                          Real estate fees: negotiating with an agent   3
registered with REBA, it is the agent             •   How will you determine the
who supervises them and is                            market value of my property?
ultimately responsible for the sale of
                                                  •   Will a 'For Sale' sign be erected
your property and any other
                                                      on the property?
dealings you have with the agency.
                                                  •   Will home-opens be conducted,
You can usually gain a fair indication                and how many will there be?
of an agent’s knowledge of your
local area by:                                    •   Which agency staff member will
                                                      conduct the home-open
•   their office location;                            inspections and negotiations with
•   the extent of their advertising in                interested purchasers?
    local papers; and                             •   Which newspapers or specialist
•   the presence of their 'For Sale'                  real estate publications will the
    signs in the neighbourhood.                       property be advertised in?

You can also assess an agent’s                    •   How often will the ads be placed
suitability by attending other                        and what information will be
home-opens to see them in action,                     included in them?
or asking for a free market appraisal             •   Will the selling fee (the agent’s
of your property.                                     commission) include advertising
Be aware that a market appraisal is                   and marketing costs? Note that
what the agent considers to be the                    this and all other fees/charges
current market price of the property.                 can be negotiated (see the
It is not a valuation, which is a                     section Written Authorities and
formal and detailed assessment of                     sales transactions).
the property’s value carried out by a             •   If advertising and marketing
licensed valuer for a fee.                            costs are to be separate from the
Some marketing and service                            selling fee, what is the maximum
questions you may need to ask the                     amount that will be charged? Ask
agent include:                                        where these costs are specified
                                                      in the Written Authority and
•   Are you a member of a relevant                    request an itemised list of the
    industry body, for example, the                   types of advertising to be carried
    Real Estate Institute of WA                       out.
    (REIWA)?
                                                  •   Does the agreement allow for a
•   What are your skills and                          conjunctional sale to take place?
    experience?
                                                      (See page 11 for more
•   What is your knowledge of my                      information about conjunctional
    local area?                                       arrangements).
4   Real estate fees: negotiating with an agent
Request the agent to confirm in          •     Can you arrange specialist
writing the answers to the questions           information as required such as
above, in particular those relating to         valuations, government and
home-opens and advertising.                    municipal inspections?

Compare the services, prices and         •     What are your strategies for
professional manner of the agent.              introducing prospective buyers to
                                               me?
Negotiate a better fee for service by
stating what other agencies are          •     How often will you provide me
prepared to do for you and be                  with reports on the level of buyer
prepared to substantiate this.                 interest?

Selecting an agent to sell your          •     Are the marketing and
business                                       advertising fees included in the
                                               selling fee? If not, what is the
The sale of a business is a                    maximum amount that will be
specialised area. It is advisable to           charged? Remember, fees/
check the business sales                       charges can be negotiated – see
experience of the agent carefully.             the section Written Authorities
                                               and sales transactions.
Some questions to ask business
agents as you compare services           •     Will there be any other costs?
include:
                                         Compare the services, prices and
•   Are you a member of a relevant       professional manner of the agent.
    industry body chapter like, for      You are again advised to negotiate
    example, REIWA’s business            a better fee for service by stating
    broking chapter or the Business      what other agencies are prepared to
    Brokers Association of Western       do for you. It is advisable to request
    Australia?                           the agent to outline in writing what
                                         services are offered and at what
•   How will you assess the value of     cost.
    my business?
                                         Selecting an agent to manage
•   Do you have any experience in        your property
    selling my type of business?
                                         Property managers are employees
•   For how many years have you
                                         of an agent. Property managers are
    been selling businesses?
                                         not usually involved in sales
•   What information about my            transactions but are still required to
    business will you provide to         be registered under the Act to
    prospective buyers?                  conduct most property management
                                         functions.
                                             Real estate fees: negotiating with an agent   5
You can appoint an agent to                       •   How thoroughly will you check
advertise for and select a tenant,                    my property after the tenant
and to manage the property (that is                   leaves?
to collect rent and other costs, lodge
                                                  •   Could you show me a copy of
bonds, arrange repairs, conduct                       your standard property condition
inspections), or to perform either of                 report?
these tasks.
                                                  •   How often will property condition
Although you may negotiate with an                    reports be provided to me?
agent, ask to meet the specific
property manager who will be                      •   How often will financial
                                                      statements be provided to me?
personally looking after your
property, including dealing with your             •   Have you had experience in the
tenants and signing them on.                          Small Disputes Division of the
                                                      Local Court acting on behalf of a
Some questions to ask about
                                                      property owner?
property management services
include:                                          •   How much will the bond be?

•   What evidence and/or                          •   What arrangement will be made
    assurances can you provide me                     for the apportionment of water
    regarding the quality of property                 rates?
    management service your clients               •   Please show me your standard
    receive?                                          Written Authority and explain to
•   What are the skills and                           me the different fees and total
    experience of the person in                       fee you propose to charge me.
    charge of the agency? For                     Once again, compare the services,
    example, what involvement does                prices and professional manner of
    the person in charge have with                the agent. Negotiate a better fee for
    tenant selection and property                 the property management service
    management?                                   by stating what other agencies are
                                                  prepared to do for you. See the
•   How will your agency advertise
                                                  REBA booklet You and your
    for tenants?
                                                  property manager for more
•   How will your agency assess                   information.
    tenants?
                                                  For more detailed information about
•   Could you show me your                        a landlords rights and obligations
    standard lease agreement with a               toward a tenant, contact the
    tenant?                                       Consumer Protection Contact
                                                  Centre on 1300 30 40 54. The
6   Real estate fees: negotiating with an agent
Department of Commerce,                  Read and amend the Written
Consumer Protection Division, can        Authority
offer advice to landlords and tenants
                                         Before you sign a Written Authority
on residential tenancy matters.
                                         with an agent for any type of
Selecting an agent to assist you         service, you should read the
in purchasing property                   document very carefully. Once you
                                         sign the Written Authority it becomes
Be aware that the selling or listing
                                         legally binding so it is important that
agent is engaged by and paid by the
                                         you don’t agree to anything that is
seller and, therefore, acts for the
                                         unreasonable, and you include any
seller not for the purchaser. This
                                         requirements you specifically want
being the case, you may wish to
                                         from the agent.
consider appointing a 'buyers agent'
to act for you if you are seeking to     Do not necessarily sign immediately.
purchase property or a business.         Ask the agent to clarify anything you
                                         may not understand.
As is the case with appointing an
agent to sell your property or a         You can give yourself time to think
business, or to manage your              about the terms and conditions of
property, if you want to engage an       the Written Authority. You may want
agent to act as a buyers agent then      to discuss the Written Authority and
you should enter into a contract (the    its conditions with your legal
Written Authority) with them.            practitioner, a trusted family member
                                         or a friend.
Also, remember to check with REBA
that the agent or sales                  You can cross out existing
representative is licensed or            conditions in the contract if you are
registered respectively. Ask pertinent   not satisfied with them and if the
questions of the agent like what sort    agency agrees. You can add your
of experience they have acting as a      own conditions but make sure you
buyers agent, and whether they can       word them carefully to avoid
put you in contact with purchasers       misunderstandings.
they have acted for in the past.
                                         Consumer protection
Speak to different agents, compare       mechanisms in Written
the costs of their service then          Authorities
negotiate a contract you fully           Agents' fees are deregulated and
understand and are happy with.           are therefore open for negotiation.
                                         Current legislation protects the
                                         consumer from unknowingly
                                         agreeing to pay high fees. Agents
                                          Real estate fees: negotiating with an agent   7
are now required to define fees and                   services on which the fees are
services more clearly in their Written                based. Make sure you know the
Authorities. The written agreement                    difference between management
you have with the agent will                          fees and a letting fee.
therefore be clearer for you to                       Management fees are charged
understand.                                           for the on-going management of
                                                      the property, whereas a letting
In order to be valid, Written
                                                      fee is charged only for finding
Authorities must include the
                                                      and selecting a new tenant.
following:
                                                      Effective since 5 April 2007, real
•   A statement explaining that the                   estate agents cannot include a
    agent’s fees are not fixed by a                   letting fee (for finding a tenant)
    regulated scale of fees, and are                  as part of a residential tenancy
    to be agreed upon between the                     agreement. However agents can
    parties. This statement must be                   still charge these fees to owners
    placed immediately before the                     if agreed upon in the Written
    agent’s commission or selling                     Authority. Further information on
    fee.                                              this can be received by calling
                                                      the Real Estate and Settlement
•   A statement stating that in the
                                                      Advice Line on
    event of a dispute, REBA can be
                                                      1300 30 40 64.
    approached for assistance.
                                                  •   If an agent seeks expenses from
•   The agent’s commission or
                                                      you (such as advertising costs or
    selling fee must be expressed in
                                                      repairs) for the sale of a property
    dollar terms and not just as a
                                                      or property management, the
    percentage.
                                                      agent must specify the expense,
•   If the selling fee for a sales                    set out the way the expense is
    transaction is expressed in an                    calculated, and provide you with
    hourly or weekly rate the                         relevant written information to
    maximum amount to be received                     verify the costs.
    by the agent must also be                     •   A Written Authority must include
    included.                                         your initials next to the agreed
•   In property management, and                       commission rate, advertising
    other areas where the calculation                 expenses, general expenses and
    of fees is based on the use of                    any other costs. This will give
    certain services, the Written                     you the opportunity to consider
    Authority should provide a full                   the commission or expense
                                                      carefully. Do not initial or sign
    explanation of the nature of the
                                                      until you understand and agree
                                                      with the cost.
8   Real estate fees: negotiating with an agent
•   A copy of the Written Authority      whatever period of time you prefer.
    you signed must be given to you
                                         A Written Authority to sell exclusively
    immediately after signing.
                                         will usually also contain several
In addition, an agent must not act       important options from which you
unjustly in all circumstances when       must explicitly choose, and then
negotiating, setting or charging a       initial.
fee. Disputes over any unjust
conduct can be referred to REBA          Essentially, for an exclusive selling
(see Dispute resolution assistance       agreement you have the option to
page 12).                                agree or not agree to pay:
Written Authorities and sales            •     The selling fee to the agent if the
transactions                                   property is sold after the
There are certain common                       'exclusive rights period'.
conditions in most sales-related         •     Marketing/advertising costs and/
Written Authorities. The information           or expenses. If you agree to pay
below highlights some of these                 the marketing costs then you can
conditions. Be aware that there is             specify the maximum amount
no standard set of conditions for              that you are willing to pay.
Written Authorities that are                   Alternatively, the agent may
prescribed by the government, so               agree to waive reimbursement of
agents may create their own. You               marketing costs and/or expenses
should, therefore, read very carefully
                                               if the property is sold during the
the Written Authority presented to
                                               period of agency. If you decide to
you by the agent because it could
                                               draw up a schedule of marketing
have important conditions and
                                               costs then ensure you are
special wording other than what is
                                               specific about cost items and
described here.
                                               maximum amounts. After
Bearing in mind that the terms and             advertising has been carried out,
conditions of a Written Authority are          and on your request, an agency
usually in the agent’s favour, you             must be able to provide evidence
should be prepared to negotiate                of the marketing they have
before you sign it.                            charged you for and how the
The 'period of agency' on the                  costs were calculated.
Written Authority is the time period     •     A selling fee to the agent if you
for which you agree to employ the              and not the agent introduce the
agent and to follow the conditions of          ultimate purchaser to the
the authority. You can write in                property.

                                             Real estate fees: negotiating with an agent   9
•    A selling fee and other charges                •   As with all other types of Written
     as outlined in the Written                         Authority, the agent may allow
     Authority to the agent if, during                  another agent to present buyers
     the 'exclusive rights period', you                 in a conjunctional arrangement
     appoint another agent, who                         (see page 11 for the section on
     ultimately finds a successful                      Conjunctional arrangements for
     purchaser.                                         more information).
You will need to be clear about what                •   Agents prefer this type of listing
options you choose and what                             because a selling fee is
clauses you may decide to strike out                    guaranteed to the agent in the
before initialling and signing the                      event of sale.
Written Authority.                                  2. Multi-listing
Types of Written Authorities for                    (not for business sales)
sales transactions                                  •   The exclusive period is for 90
There are a number of broad                             days, plus a non-exclusive period
categories of Written Authority that                    of one year.
you can sign when employing an                      •   Applies only to member agents
agent to sell your home or business.                    of the industry association, the
You can specifically request a                          Real Estate Institute of WA
certain type of Written Authority if                    (REIWA), and the Multi Listing
you think it will suit you best.                        Service (MLS).
There are five main types of                        •   Other MLS members may
Authority to Sell. These are:                           introduce prospective buyers to
1. Exclusive Listing                                    the property.

•    One agent is given exclusive                   •   You deal only with the listing
     authority to sell for a specified                  agent, who is responsible for all
     period, usually 60–120 days, or                    negotiations with other agents
     for any period to which you                        and interested buyers.
     agree. There is usually provision              •   Commission is split between the
     in an exclusive listing contract to                agents if another MLS member
     also designate a non-exclusive                     sells the property.
     period for which you will have the
                                                    3. Sole Listing
     choice to agree or refuse to pay
     the agent a selling fee if the                 •   Only one agent has the right to
     property is sold after the                         sell but the seller can still attract
     exclusive period but before the                    a buyer without having to pay a
     non-exclusive period ends.                         commission.
10    Real estate fees: negotiating with an agent
•   The agent is entitled to a             written offers from potential buyers.
    commission only if he or she is        Remember that a listing agent and
    the one who sells the property.        the conjuncting agent both act for
4. Open Listing                            you as the seller and, therefore,
                                           have certain obligations to you in
•   The seller can give authority to       selling your property.
    sell to several agents at the
                                           Written Authorities for property
    same time.
                                           management
•   Only the agent who makes the
                                           There are certain common
    sale gets the commission.
                                           conditions in most Written
•   The seller can still sell privately.   Authorities for property management
5. Auction (not for business sales)        services. The information below
                                           highlights some of these conditions.
•   One agent has the authority for a      You should, however, read your own
    specific period, including the day     Written Authority very carefully since
    of auction.                            it may also have other important
•   The agent may be given an              conditions and wording.
    exclusive listing period if the
                                           In both residential and business
    property is passed in.
                                           tenancy situations, the Written
Conjunctional arrangements                 Authority will specify what types of
                                           services you will be paying for. You
Most Written Authorities allow the
                                           can strike out some of these or add
listing agent to enter into a sales
                                           others.
agreement with a sub-agent, known
as a conjunctional agent. In a             REIWA's Exclusive Management
conjunctional arrangement, another         Authority for Residential Premises
agent approaches your listing agent        (2008) provides for you to specify
with an offer from a potential buyer.      the rental details for the premises,
If the offer is accepted then the          the period of agency, the payments
commission you have agreed to pay          the agent can make on your behalf
to your listing agent is divided           using the rental monies collected,
between the two agents as they             and your bank account details for
                                           depositing rental monies collected.
have agreed.
                                           You may also specify other
Conjunctional deals increase the           conditions relating to the authority of
prospects of sale but are not as           the agent to act on your behalf like,
attractive to agents because of the        for instance, having the agent pay
splitting of the agent’s commission.       the electricity and water rates but
Nevertheless, agents are required          not Council rates out of the rental
by law to inform the seller of all         monies collected.
                                           Real estate fees: negotiating with an agent   11
The agreement also requires you to                 If you want an agent to select a
specify whether or not you agree to                tenant and manage your rental
pay separate marketing and                         property, you should be aware that
advertising costs. An agreed letting               fees will probably be stated
fee and management fee schedule                    separately in the Written Authority.
must also be specified.                            Ask the agent for the total cost of all
                                                   the fees.
An agent may claim expenses from
you that are actually incurred and                 It is important to be aware of the
related to their duties, such as                   fact that most property management
photocopying costs, fax costs, or                  Written Authorities allow for the
reimbursement for repairs paid on                  agreement to be terminated prior to
your behalf. These may be called                   the period of agency concluding. If
'disbursements'. You should discuss                you decide to terminate a property
these expenses with the agent                      management Written Authority you
before signing the Written Authority.              will generally need to inform the
It is important to specify in the                  agent in writing 28 days before you
Written Authority the nature of these
                                                   wish to end the management
expenses, and clearly set out the
                                                   contract.
method by which they will be
calculated.                                        The Written Authority usually allows
                                                   for 'damages' to be paid to the
If a strata company is responsible
                                                   agent at the current rate of 50 per
for the property, there is also
provision for you to specify the                   cent of the management fee that the
strata company’s details, including                agent would be expected to receive
to where the company’s invoices                    for the unexpired period of agency.
and correspondence should be                       If you do not agree with this clause
forwarded.                                         you may negotiate another rate with
                                                   the agent or strikeout this clause
It may be prudent to require the                   completely before you sign the
agent to seek your permission                      Written Authority.
before undertaking any repairs on
the property. To do so, explicitly                 Dispute resolution assistance
state this in the Written Authority.
                                                   Real estate and business agents
Alternatively, you may authorise the
                                                   are regulated under the Real Estate
agent to approve certain urgent
                                                   and Business Agents Act 1978.
repairs without contacting you first.
For property maintenance, you can                  There is also a Code of Conduct
also specify that the agent must use               covering the responsibilities of
a certain company to perform                       agents and sales representatives
repairs. All amendments need to be                 including those limited to property
initialled by you.                                 management.

12   Real estate fees: negotiating with an agent
REBA is responsible for maintaining     We can assist
industry standards by licensing
                                        If you are experiencing a dispute
agents and registering the sales
                                        about fees with a real estate and
representatives employed by
                                        business agent, or you have a
agents. REBA also provides
                                        general concern about the conduct
education and advisory services to
                                        of an agent, sales representative or
the industry and public, and
                                        property manager, then you can
conducts investigations into
                                        phone the Real Estate and
allegations of misconduct by agents
                                        Settlement Advice Line on
or their employees.
                                        1300 30 40 64 for the cost of a local
Where appropriate, REBA can bring       call from anywhere in the State.
proceedings before the State            Complaints may be lodged in writing
Administrative Tribunal or              with:
Magistrates Court for disciplinary
                                        The Real Estate and Business
action to be taken against agents
                                        Agents Supervisory Board
and sales representatives.
                                        Locked Bag 14
In addition, REBA has the power to      Cloisters Square WA 6850
provide advice and a conciliation
service to resolve most types of
sales or property management
disputes between consumers and
agents. The conciliation service
specifically deals with breaches of a
minor or technical nature where a
complainant is seeking some
remedial action or even financial
compensation.




                                        Real estate fees: negotiating with an agent   13
Real Estate and Business Agents Supervisory Board
The Forrest Centre, Level 6, 219 St Georges Terrace
Perth, Western Australia 6000 (weekdays 8.30am - 5.00pm)

Real Estate and Settlement Advice Line: 1300 30 40 64
(for the cost of a local call statewide)

Post: Locked Bag 14, Cloisters Square WA 6850
Admin: 08 9282 0843 Facsimile: 08 9282 0869
                                                           DP1114/ Sept 09/ 2000




Email: contactus@reba.wa.gov.au
Website: www.reba.wa.gov.au

National Relay Service 13 36 77
Quality of service feedback line: 1800 30 40 59
Translating and Interpreting Service: 13 14 50
(ask for a connection to 1300 30 40 64)

				
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Description: If you plan to employ a real estate and business agent to do any of the following then the information contained in this publication is relevant to you: • market and sell your home or business; • manage the renting/leasing of your home or business premises; or • act as a 'buyers agent' to assist you in buying a property or business. The government no longer fixes a maximum fee for agents’ services. Agreement on all fees and services can now be determined through negotiations between you and your agent.