Multiple representation vs sole agency

23/06/2017

Q: We’re planning to put our house on the market in spring. Is it best to use one agency to sell the property, or will we get a better result with multiple agency representation?

A: ‘Many hands make light work’. ‘The more the merrier’. ‘Two heads are better than one’. There are many old adages that support the idea of using more than one real estate agent or agency to market and sell a property. It has become less common to see properties festooned with a variety of ‘for sale’ signs, but whether you choose to work with one agency or several is all a matter of personal choice. Either way, there are a few important things to bear in mind.

Both options require the signing of a legal contract between you and the agency involved. These contracts, known as agency or ‘listing’ agreements, are legally binding so it’s a good idea to get advice from your lawyer before you sign.

As the name suggests, a general agency agreement gives more than one agency the right to market your property. You will be asked to sign a general agency agreement with each one. Each separate agency will work with you to arrange open homes, and they will all market the property differently.  

If you opt for a sole or ‘exclusive’ agency agreement, you are giving one agent or agency the exclusive right to market and sell your property. If you sign a sole agency agreement you should not sign another agency agreement with any other agent until you have cancelled the first agreement. If you don’t, you may have to pay all agents a commission, regardless of which one arranged the sale.

Make sure you check what happens when the sole agency agreement is cancelled. 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.

If you change your mind after signing a sole agency agreement you can cancel it by 5pm on the first working day after you have been given a copy. This must be done in writing (such as letter, email or fax). 

Whether you choose one agency or take the general agency approach, the Real Estate Agents Authority recommends using agencies (in the residential or rural sectors) that choose to use specific clauses that we have designed to reduce the risk to you of paying two commissions. These clauses help protect you by making it clear when the agreement ends and when you need to pay a commission. They can be found on www.reaa.govt.nz along with the list of agencies that use these clauses.

If you don’t use these agencies then your sole agency agreement for a residential property may be for a term longer than 90 days, but note that you or the agent can cancel the agreement at any time after those 90 days.

However, if an agent carries out any work before the agreement is cancelled and that work results in the sale of the property after the agreement is cancelled, the agency agreement will be legally binding and you may have to pay the agent commission.
When a general or sole agency agreement is cancelled your agent must give you a list of people they have introduced to the property. If you subsequently sell to one of these people through a new agent, the first agent may still be entitled to a commission .

In theory, multiple representation means the property will be seen by a larger number of potential buyers, so it has a greater chance of selling at a higher price. However, the risk in this arrangement is that because no one agent is solely responsible for marketing the property, they may be less committed to selling it. By contrast, a sole agency listing means the agent is obligated to do their best to sell the property.

Kevin ​Lampen-Smith is the chief executive of the Real Estate Agents Authority (REAA), the independent government agency that regulates the New Zealand real estate industry. If you have a question about buying or selling property, send it to info@reaa.govt.nz

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