An ‘authority to sell’ or sales authority is a legally binding contract that outlines the terms of the agreement a vendor makes with a real estate agency.
The process usually goes something like this: you decide to sell; you speak with a bunch of local real estate agents; you choose one; they prepare a sales authority; you sign it; the sales campaign begins.
The sales authority covers all the details about your sale, including:
- Sale method: auction (and auction date) or private sale
- Reserve price or asking price
- Commission and marketing expenses (don’t forget you can—and should—negotiate these) with GST set out separately
- Circumstances under which commission is payable—this will depend upon the type of authority signed, whether it’s ‘exclusive’ or ‘general’
- Advertising costs
- Level of service promised
- Agent’s estimation of likely selling price
- Authority period or amount of time given to the agency to sell the property.
The sales authority allows the agency to legally draw their agreed fees and costs from your deposit. It also permits the agency to sign a contract of sale on your behalf as long as all terms are met.
BEFORE YOU SIGN A SALES AUTHORITY
As you can see, the sales authority is an important document and there are a few things you should know before you sign on the dotted line:
Most agents will want exclusive authority. Make sure you set a reasonable time period (more on that below). If the authority has a non-exclusive period, you can cancel anytime during that period by giving notice in writing. If on the other hand you opted for a general sale authority, you can cancel it anytime by providing a written notice to the agent.
Exclusive really does mean exclusive. If you engage another agent while you’re still on an exclusive authority with someone else, you may end up having to pay each agent a commission.
How could that possibly happen? Well, if the agent receives an offer that matches the terms laid out in the sales authority, then he or she is deemed to have done their job and is due the full commission—regardless of whether they have actually sold the property or not. Ouch.
The authority period is the period of time you give the agent to sell your property. Once you’ve signed, there’s no cooling-off period and you can’t cancel during this time unless the agent agrees.
If you’ve opted for a private sale, keep your authority period to 60 days. If you’re selling by auction, don’t let the authority period go beyond 14 days after the auction date. Tenders, commercial property and expression of interest campaigns all need to be evaluated on a case by case basis.
If you don’t specify a time period, the authority will default to 30 days after the date of an auction and 60 days after the sales authority was signed for a private sale.
Waiting a month after an unsuccessful auction is a long time—especially if you’re unhappy with the agency.
Don’t put yourself in this situation. If your property hasn’t sold by the time the authority period is up and you’re keen to switch agents, notify them in writing.
The sales agreement is made with the agency, not the individual sales agent.
Any changes to the authority (eg change of auction date or expected price) need to be signed off by both the vendor and the agent.
As always, know what you are signing, and if you aren't sure - ask!
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