agent’s representative training

IDENTIFY LEGAL AND ETHICAL REQUIREMENTS OF PROPERTY SALES TO COMPLETE AGENCY WORK

LEARNER GUIDE Agent’s Representative Training

CPPDSM4008A

Real Estate Institute of Victoria 355 Camberwell Road, Camberwell

Phone: 9205 6666

reiv.com.au

This learning Guide has been produced with the assistance of and information provided by:

Consumer Affairs Victoria website

Real Estate View website

State Revenue Office website

Department of Sustainability and Environment website

These materials were prepared by The Real Estate Institute of Victoria.

© Updated December 2019 The Real Estate Institute of Victoria

This work is copyright. Apart from any use permitted under the Copyright legislation, no part may be reproduced without prior written permission from REIV.

Disclaimer

No part of this material may be regarded or relied upon as legal advice. Although reasonable care has been taken in the preparation of this material, recipients:

• must not alter their position or refrain from doing so in reliance upon this material; and

• should seek independent legal advice with respect to the matters traversed in this material.

The Real Estate Institute of Victoria (REIV) does not accept or undertake any duty of care relating to this material. Further, REIV shall not be liable in any respect to any recipient of this material for:

(a) any loss of profit, loss of goodwill, loss of production, loss of opportunity, business interruption, loss of revenue, loss of Contract, loss of anticipated savings or revenue, loss or corruption of data or loss of privacy of communications; or

(b) any consequential, special, indirect, exemplary or punitive damages, of any nature, arising out of or in connection with this material, even if such loss or damage was reasonably foreseeable or the recipient had informed the REIV of the possibility of the recipient incurring that loss or damage.

This material has been prepared based on information available at the time of its publication. REIV does not represent or warrant that the material is error free, complete or accurate.

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Contents

About this training 7 Overview of training program 7 About this unit 7 Tips for studying by Distance Education 7 Assessment 7 We are here to help 7

CHAPTER 1 - ABOUT PROPERTY SALES

About sales 8 1.1 About sales 8 1.2 Employment 9

CHAPTER 2 - ROLES AND RESPONSIBILITIES OF GOVERNMENT AGENCIES 11 2.1 Victorian Government agencies 11 2.2 Commonwealth Government agencies 13 2.3 Learning activity 13

CHAPTER 3 - LAWS THAT APPLY TO PROPERTY SALES 15 3.1 Legislation 15 3.2 Penalties for not complying with legislation 18 3.3 Where to find copies of legislation 18 3.4 Learning activity 19

CHAPTER 4 - PROFESSIONAL CONDUCT AND ETHICS 20 4.1 Professional conduct laws, codes and rules 20 4.2 Equal Opportunity 22 4.3 Privacy 22 4.4 Learning activity 23

CHAPTER 5 - STRUCTURE AND ROLES OF A SALES TEAM 25 5.1 Principal Agent or Officer in Effective Control 25 5.2 General/Office Manager 25 5.3 Sales Manager 26 5.4 Property Manager /Asset Manager 26 5.5 Assistant Salesperson 27 5.6 Reception/support staff 27 5.7 Some examples of agency structures 27 5.8 Learning activity 28

CHAPTER 6 - SOURCING CLIENTS AND THEIR PROPERTY 29 6.1 Marketing and advertising 29 6.2 Repeat business 30 6.3 Word of mouth referrals 30 6.4 Walk-ins 30 6.5 Identifying Market Activity 30 6.6 Seminars 30

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6.7 ‘Farming’ 31 6.8 Open for inspections 31 6.9 Networking 31 6.10 Telemarketing 32 6.11 Learning activity 32

CHAPTER 7 - APPRAISING PROPERTY 34 7.1 Research 35 7.2 Conduct an inspection and complete a listing sheet 49 7.3 Determine the estimated sale price 51 7.3.1 Methods of calculating the estimated sale price 51 7.3.2 Stating the estimated sale price 51 7.4 Determine the method of sale 52 7.4.1 Types of method of sale 52 7.4.2 Private sale 52 7.4.3 Auction 53 7.4.4 Sale by tender 53 7.4.5 Choosing a sale method 54 7.5 Determine property ownership 54 7.5.1 Multi-unit ownership 55 7.5.2 Ownership documents – certificates of titles 55 7.5.3 Information shown on the Title 59 7.5.4 Conduct a Title search 60 7.5.5 Personal Property Securities 60 7.6 Develop a marketing strategy and plan 60 7.7 Determine Commission 65 7.8 Ask the question 7.9 Prepare a presentation kit for the vendor 65 7.10 Learning activity

CHAPTER 8 - SIGNING CLIENTS TO THE AGENCY 67 8.1 The Sale Authority 67 8.2 Vendor Check List form 80 8.3 Learning activity 84 8.4 Learning activity – completing forms 85

CHAPTER 9 PREPARE STATEMENT OF INFORMATION

9.1 Statements of information

9.2 Indicative selling price

9.3 Three most comparable properties

9.4 Median house or unit price for the suburb

9.5 How to provide the median price for vacant land

9.6 How to complete a Statement of Information it there is no median price

9.7 Caution regarding median prices

9.8 Learning activity

CHAPTER 10 – SELLING PROPERTY

10.1 Record the listing

10.2 Obtain Section 32 – Vendor’s Statement

10.3 Begin the sales process – market/advertise the property

10.4 Introduce prospective purchasers to the property

10.4.1 Access to residential properties

10.4.2 Access to commercial properties

10.4.3 Considerations when accessing properties

10.4.4 Documents to be on display at inspections

10.4.5 Behaviour at inspections

10.4.6 Answering questions

10.4.7 Your safety when accessing properties

10.5 Negotiation

10.5.1 Formal negotiation

10.5.2 Informal negotiation

10.5.3 More than one purchaser

10.6 Contract of Sale

10.7 Sale deposit

10.7.1 Receiving the deposit

10.7.2 Holding and transferring the deposit

10.7.3 Vendors not using an agent

10.7.4 Termination of contract

10.8 Purchaser’s right to withdraw or to cool off

10.9 Secret commissions

10.10 Restrictions on agents buying property listed with their agency

10.11 Estate agents promising finance to purchasers

10.12 Stamp Duty

10.13 After the Contract is signed – finalising the sale

10.14 Sales Checklist


CHAPTER 11 – CONDUCTING AN AUCTION

11.1 On auction day – preparing the property for the auction

11.2 Crowd and vendor management

11.3 The auction

11.3.1 Preamble

11.3.2 Bidding

11.3.3 Forbidden activities at auctions


CHAPTER 12 Buyers Advocates

CHAPTER 13 SELLING BUSINESSESS

13.1 About business sales

13.2 The sale authority

13.3 Small business Vendor’s Statement (section 52)

13.4 Contract of sale of business


CHAPTER 14 - COMMUNICATION 146

14.1 Communicating with potential clients 146 14.2Communicating with vendors 147 14.3Communicating with purchasers 147 14.4Communicating with colleagues 147 14.5Recording communication 148 14.6Dealing with conflict and disputes 148 14.7Managing complaints from clients 150 14.8Learning activity 151

LEARNING ANSWERS 152

APPENDIX 1 – OFFICIAL ELEMENTS AND PERFORMANCE CRITERIA 164

GLOSSARY OF REAL ESTATE TERMS 166

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About this training Overview of training program To work as an Agent’s representative in Victoria you must complete three units of competency from the CPPD40307 Certificate IV in Property Services (Real Estate) as prescribed by the Victorian Regulations and Qualifications Authority (VRQA).

This unit is one of the three. The other two units are: • CPPDSM4080A Work in the Real Estate Industry; and • CPPDSM4007A Identify legal and ethical requirements of property management to complete agency work.

As you continue to work in the industry, you may choose to complete other training units to increase your knowledge and help advance your career. If you plan to become a licensed real estate agent, you must complete all units of the Certificate IV in Property Services (Real Estate).

About this unit It will provide you with an overview and basic understanding of estate agency sales operations, the laws that govern the industry and professional conduct.

There are a lot of names and terms used in the real industry. Most of these will be explained as you work through the unit. If at any time you are unsure of a term, you can ask your trainer or refer to the glossary for a definition or explanation.

At the end of most chapters, you will find a learning activity that asks you to answer questions on what you have learned so far. It is good practice to complete these learning activities because they will help prepare you for the assessment you need to complete to gain competency in each unit.

Tips for studying by Distance Education If you are completing the training by Distance Education and not attending a class, you can use these tips to help you study.

• Schedule uninterrupted time to dedicate to your study. • Read the material from cover to cover to give yourself a good overview of the course content. • Go back to the start and read again to absorb more detailed information, completing the learning activities as

you go. • Refer to the assessment and identify the key areas of questioning and refer back to your Guide to clarify your

understanding.

Assessment At the end of the training for each unit, you will be asked to complete a written assessment to demonstrate your knowledge and competency. An assessor will review the answers you have provided. If you pass the assessment you will be deemed ‘competent’ and notified by post. If you are unsuccessful, the assessor will mark your assessment as ‘not yet competent’ and the assessment will be returned to you with some guidance to gain competency for the unit.

We are here to help If you have questions about any components of the training or assessment, please ask your trainer or contact the REIV training department on 9205 6666.

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Chapter 1 About property sales 1.1 About sales When an owner of a property (known as the vendor) decides to sell their property, they will usually engage a real estate agency to sell it. The agent’s role is to market the property to attract purchasers, negotiate and sell the property at a price and settlement date acceptable to the vendor.

As a real estate salesperson, you could sell:

• existing residential property;

• commercial property such as offices and retail shops;

• Industrial property;

• vacant land for both residential or commercial uses;

• house and land packages where the purchaser buys a block of land and signs a separate contract for construction of a dwelling;

• rural land

• off-the-plan sales where a purchaser buys a proposed dwelling in a block of apartments or flats that will be built.

Selling property is complex and requires specialised skills and knowledge. To succeed as a property salesperson, you will need many attributes that include:

• planning; • proactive approach;

• time management; • research and analyze;

• motivation; • data basing;

• communication; • follow up;

• attention to detail; • legal knowledge;

• negotiation; • networking.

Your working week should be planned and structured. It may be filled with administrative tasks, completing paperwork, preparing marketing and advertising material, meeting with clients, reviewing and researching properties, conducting an auction, negotiating with vendors and purchasers as well as dealing with other professionals such as valuers, solicitors and finance brokers. When you begin a career in real estate sales, the first 12 months are often the most challenging, as you will spend a lot of time learning about the industry, building relationships and establishing yourself in your area of the market.

While the role of a real estate salesperson may give you some flexibility with your time during the day, there is an acceptance in the industry particularly for residential sales, that due to sellers and purchasers availability, you may need to commence work early and finish late both during the week and on weekends. In commercial sales, it is different because most vendors and purchasers make time during the working day to negotiate and finalise the sale. Like any sales environment, you will need to be proactive and set your personal goals to align with the expectations

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of your agency. This may include simple but important targets such as the number of new contacts you make in any given week or the number of sales you achieve per month or for the year.

The key element to achieving your goals or targets is your self-motivation. Enthusiasm and energy will create opportunities that bring results.

Whilst this unit will provide you a good understanding of legislative requirements required for sales transactions, you will find that you improve your selling skills from on-the-job training and experience. There are other sales specific units of study in the Certificate IV qualification which we would advise that you undertake to further enhance and improve your knowledge and skill. These are:

• Sell and finalise the sale of property by private treaty (CPPDSM4022A);

• Appraise property (CPPDSM4003A);

• List property for sale (CPPDSM4012A);

• Market property for sale (CPPDSM4014A),

• Prepare and Present Property Reports (CPPDSM4018A),

• Prepare for auction and complete sale (CPPDSM4019A*),

• Conduct auction (CPPDSM4004A*)

*These units, whilst not mandatory to conduct an auction in Victoria are strongly recommended.

As well completing the units listed above, you can also complete a further 14 units under the Certificate IV in Property Services (Real Estate) – CPP40307 to satisfy the educational requirement to apply for a real estate agent’s licence. The Certificate IV qualification can be studied through the REIV via contact classes, distance education, or a mixture of both. Many sales agents choose to become fully licensed as a point of difference.

The most powerful tool you have as a salesperson is your ability to communicate with people. This has become easier with modern technology including email and social networking mediums (such as Facebook or Twitter). Keeping in touch with and being connected to your client base is critical to your success.

Your knowledge is just as important as the skills you bring to selling real estate. You will need to understand the legislation and documentation required for selling a property. The importance of getting your paperwork right should not be underestimated. Regardless of your ability to connect with people, your attention to detail with documentation is critical. Otherwise, it could be financially costly for both you and the agency you work for.

In this Guide, we give an overview of the entire sales process including the legislative and document requirements. It will give you the information necessary to understand what is required for both a private sale and a sale by auction and prepare you for becoming a real estate salesperson.

1.2 Employment

It is important to know the employment conditions and pay structures in the real estate industry. Employment terms and conditions are covered in detail in the Learner Guide CPPDSM4080A Work in the real estate industry.

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Salary and commissions In this section we will briefly outline how sales agents could be paid.

Real estate agencies will use various payment methods to attract and reward property sales professionals. Your employment agreement must include provisions to ensure payment of a minimum salary and paid leave.

Depending on the terms and conditions stated in your employment agreement, you may be paid:

• A salary plus commission – the amount of commission you are entitled to may be dependent upon you achieving specific targets or alternatively it may be adjusted to take account of the salary you have already been paid.

• Commission only - this is where you only get paid when you are entitled to receive commission from a sale. You may get paid a commission for listing a property, selling a property or assisting with a sale of a property (for example, assisting with advertising, open for inspections and auctions).

• A Salary – this is where you get paid a regular fixed amount and do not earn commission on any of your sales.

When you first start in Sales in the real estate industry you are to be paid a guaranteed minimum salary with or without commission. Before commission only employment is possible a number or requirements must be satisfied including having demonstrated significant success over a 12 month period.

If commission is included, the amount of agency commission varies depending on the agency, location and market influences. As the agency commission varies, so will your percentage of that commission.

The award covering real estate employees in Victoria is MA000106. For further information, go to the Fair Work Commission website www.fwc.gov.au. The award sets out minimum conditions and cannot be overridden by and employment agreement.

Tips on preparing for your new career Before you begin interviewing for various sales positions, you should:

• spend some time becoming familiar with real estate web sites on the internet, especially www.realestat.com.au, www.domain.com.au or www.realestateview.com.au an industry owned and run online portal. Learn how to use the sites. Start to get a feel for the language, layout and prices for various properties and locations. Become aware of the different layouts and navigation tools. Read about the agencies and individual agents to see what they offer.

• use the internet including www.reiv.com.au to get a grasp of activity in the market; how many properties are being sold, what is the turnover, who has the largest market share?

• use real estate and bank website tools to create property reports and profiles and become familiar with reporting concepts.

• do desktop research for your area - get a sense of the size of the real estate market as well as zoning. Where are the industrial and retail properties, what public transport is available, what about schools and day care? What other points of interest exist in your chosen area. Why would people want to live there? Census data is a good place to start for this type of information.

• think about how you would go about establishing yourself as a new agent in the area. What is your plan?

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http://www.realestat.com.au/

http://www.domain.com.au/

http://www.realestateview.com.au/

http://www.reiv.com.au/

Chapter 2 Roles and responsibilities of Government agencies Government agencies are responsible for setting policy and rules to regulate the real estate industry. Along with regulation they also provide services that assist the public and the industry in matters such as:

• general advice;

• conciliation and mediation;

• decisions on disputes (resolution);

• listing and maintaining registers for the public to view and acquire information.

2.1 Victorian Government agencies The five main Victorian State Government agencies that administer laws and regulate property sales in Victoria are:

• Consumer Affairs Victoria;

• Land Victoria (Department of Environment, Land, Water and Planning);

• State Revenue Office Victoria;

• Victorian Civil and Administrative Tribunal;

• Victorian Equal Opportunity and Human Rights Commission.

Consumer Affairs Victoria www.consumer.vic.gov.au

Consumer Affairs Victoria (CAV) administers and enforces the: • Residential Tenancies Act and Regulations; • Estate Agents Act and Regulations;

• Sale of Land Act and Regulations;

• Owners Corporations Act and Regulations;

• Australian Consumer Law (ACL) of the Competition and Consumer Act (which is a shared responsibility with the Australian Competition and Consumer Commission (ACCC)).

CAV also:

• manages the Victorian Property Fund which enables reimbursement claims for misuse of trust money. The fund

also allows application for funding in key areas of the real estate industry including education;

• provides advice to consumers and agents regarding agency practices and legislative requirements;

• receives complaints and offers a dispute resolution service for matters relating to commission, outgoings and the conduct of estate agents in breach of various legislation;

• conducts enquiries and investigation into the conduct of estate agents and agents representatives;

• takes enforcement action against estate agents for breaches of the Estate Agents Act and other related legislation.

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http://www.consumer.vic.gov.au/

Land Victoria

Land Victoria (previously known as the Titles Office) is managed by the Department of Environment, Land, Water and Planning is responsible for managing all land titles in Victoria. A land title is an official record of who owns a piece of land. It can also include information about mortgages, covenants, caveats and easements. Victoria’s land titles are held in the State’s online land titles register, managed by the Registrar of Titles. Estate agents use Land Victoria to conduct searches of Certificate of Titles to confirm ownership of land before selling a property or land.

For more information about land titles, go to: services.land.vic.gov.au

State Revenue Office Victoria

The State Revenue Office (SRO) is the Victorian Government’s major tax collection agency.

The SRO is an independent service agency which acts under a framework agreement between the Victorian Treasurer, the Secretary of the Department of Treasury and Finance and the Commissioner of State Revenue.

The SRO administers Victoria’s taxation legislation and collects a range of taxes, duties and levies, including tax (Stamp Duty) on the purchase of property. The SRO also administers the First Home Owner Grant and the Unclaimed Moneys Fund.

Victorian Civil and Administrative Tribunal www.vcat.vic.gov.au

VCAT can make legal orders to resolve disputes between vendors, agents and purchasers. Depending on the circumstances, agents can apply to VCAT to claim disputed marketing costs or commissions.

VCAT also conducts hearings relating to the conduct of estate agents and agents representatives and if misconduct is proven can:

• cancel a licence or the right to act as an Agent’s representative;

• suspend a licence or the right to act as an Agent’s representative;

• impose conditions or limitations on a licence;

• declare a person ineligible to work as an agent either temporarily or permanently;

• impose other penalties and monetary fines.

Victorian Equal Opportunity and Human Rights Commission www.humanrightscommission.vic.gov.au

The role of the Victorian Equal Opportunity and Human Rights Commission is to assist in resolving complaints about discrimination, sexual harassment and racial and religious vilification, through a confidential and impartial conciliation process.

A person can complain about the conduct of a real estate agent if they believe certain treatment was unfavourable because of discrimination on any basis covered by anti-discrimination laws such as race, religion or marital status.

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http://www.vcat.vic.gov.au/

http://www.humanrightscommission.vic.gov.au/

2.2 Commonwealth Government agencies As well as State Government, some Commonwealth Government agencies also play a role in real estate sales. These include:

• Australian Competition and Consumer Commission; • Office of the Australian Information Commissioner; • Australian Taxation Office; • Foreign Investment Review Board.

Australian Competition and Consumer Commission www.accc.gov.au

The Australian Competition and Consumer Commission (ACCC) is the independent Statutory Authority that administers and regulates the Competition and Consumer Act. The ACCC promotes competition and fair trading in the marketplace to benefit both consumers and businesses by ensuring compliance with Commonwealth consumer protection legislation.

Office of the Australian Information Commissioner www.oaic.gov.au

The Office of the Australian Information Commissioner (formerly known as the Office of the Privacy Commissioner) is the Government agency that has responsibilities to administer privacy laws across Australia. This includes the collection, use and disclosure of personal information. They provide advice and education about privacy, investigate privacy complaints from individuals and conduct privacy audits across the private and Government sectors.

• Australian Taxation Office

www.ato.gov.au

The Australian Taxation Office (ATO) is the Commonwealth Government’s main revenue collection agency, collecting among other things Goods and Services Tax (GST) and Capital Gains Tax (CGT). Some sales of real estate are subject to GST and in some circumstances portion of the sale proceeds must be withheld from the vendor and paid to the ATO.

• Foreign Investment Review Board www.firb.gov.au

The Foreign Investment Review Board (FIRB) provides advice to ministers regarding proposed purchases of Australian Real Estate by foreigners.

2.3 Learning activity Multiple Choice (choose one only – circle your answer)

1. Land Victoria is the Government body responsible for:

a) distributing first home buyer grants to applicants;

b) administering the Estate Agents Act;

c) managing the Victorian Property Fund;

d) land titles in Victoria.

2. The role of the State Revenue Office in real estate transactions is:

a) collecting tax on the purchase of property and administering the first home-owner grant;

b) prosecuting real estate agents for not declaring all income streams;

http://www.accc.gov.au/

http://www.oaic.gov.au/

http://www.ato.gov.au/

http://www.firb.gov.au/

c) collecting and managing interest from estate agents trust accounts;

d) administering the Sale of Land Act.

True or False (circle the correct answer)

3. The Victorian Property Fund enables claims of reimbursement for misuse of trust money.

True or False

4. Today, copies of Certificates of Title can only be obtained in a computer generated format.

True or False

Short Answer Questions

5. What do estate agents use Land Victoria for?

6. Which Acts relating to property sales is CAV responsible for administering and enforcing?

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Chapter 3 Laws that apply to property sales For you to succeed and continue to work as a property salesperson, it is vital to read, understand and have a working knowledge of the legislation (laws) that govern the industry. The Acts and Regulations that are the basis of such laws are written in simple plain language and the name of the Act and Regulation is an indication of its content.

3.1 Legislation

Estate Agents Act 1980 and Regulations

Consumer Affairs Victoria

This Act and Regulations govern estate agency practice and procedures in Victoria. Key points you need to be familiar with include:

• licensing and identifying who is eligible to operate or be employed in an estate

agency, S14, S15 and S16;

• prohibition of licence lending, S29B;

• advertising and marketing requirements, S47C;

• restriction on agent purchasing property, S55;

• commissions S49A & S50, commission sharing S48, rebates S48B and expenses;

• false and misleading information, S47B, S47C;

• seller of residential property must be given reasonable estimated selling price, S47A, 47AB;

• determination of estimated selling price, 47AC;

• Statements of Information, 47AF;

• handling money including trust accounts, S59;

• keeping records, S63, S98.

You must also familiarise yourself with all Estate Agent Regulations but specifically the General, Accounts and Audit Regulations that specify accounting and trust money processes (S59) and the Professional Conduct Regulations that specify the minimum professional standards for estate agents.

Sale of Land Act 1962 and Regulations


This legislation governs the sale of land in Victoria. It includes laws on disclosing information, Contracts, and handling money.

If you are selling land or property, key points you need to be familiar with include:

• Sections 37 to 48 which regulate the conduct of an estate agent when selling land or property by public auction.

• The Sale of Land (Public Auctions) Regulations which specify the rules and processes that must be followed if you are conducting a public auction. This includes:

» the bidding process; the only circumstances when a vendor can bid; prohibition of dummy bidding;

» information to be provided before the auction starts.

• Release of deposit money, S27.

Parts of this legislation are explained in greater detail later in this Guide.

Property Law Act 1958

The purpose of this legislation is to deal with various legal matters relating to property transactions known as General Law. It covers transactions of land other than those dealt with by the Transfer of Land Act (Torrens Title).

It relates to conveyancing of land, easements, mortgages and covenants on land titles.

Owners Corporations Act 2006 and Regulations


The main purpose of this Act is to specify laws for managing Owners Corporations, outline a set of model rules and provide a process to handle Owners Corporation disputes.

If you are selling a property that is part of an Owners Corporation the vendor must provide a certificate pursuant the Owners Corporation which forms part of the section 32 Vendor’s Statement to potential purchasers.

Subdivision Act 1988 and Regulations

Department of Sustainability and Environment (Land Victoria)

The purposes of this Act are to set out the procedure for the subdivision and consolidation of land, including buildings and airspace, and for the creation, variation or removal of easements or restrictions. For an estate agent it is important to understand the process of subdividing land.

Transfer of Land Act 1958

Land Victoria

The Transfer of Land Act provides a registered system for recording and transferring land titles in Victoria under the Torrens Title system.

The titles system enables an estate agent to search for details of property and land- owners through either a webpage or in person at Land Victoria.

Instruments Act 1958 S126(1)

Attorney-General

This Act consolidates the law relating to instruments (legal documents) and securities of insurance, bonds, public contract, liens on crops, wool and mortgages of stock, and powers of attorney.

For a Contract of Sale for Real Estate to be enforceable it must be in writing signed by the party to be charged.

Competition and Consumer Act 2010 (formerly Trade Practices Act 1974)

Australian Competition and Consumer Commission

The purpose of this legislation is to provide a consistent approach towards national consumer laws.

Key points relating to property sales practices include:

• misleading or deceptive conduct;

• unconscionable conduct;

• false and misleading representations;

• consumer guarantees;

• false testimonials;

• bait advertising;

• unfair Contract terms.

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Fair Trading Act 1999


The Fair Trading Act is a Victorian statute that was created to address consumer protection in Victoria.

Most of the relevant provisions of this Act, such as misleading or deceptive conduct, have been replaced with the Competition and Consumer Act 2010; however the Fair Trading Act still deals with implied conditions of warranty in the supply of goods and services, frustrated Contracts and the powers of the Director of Consumer Affairs Victoria.

Crimes Act 1958 Victoria Police

(Department of Justice)

This Act specifies the crimes in Victoria and what the penalties are for those crimes.

The key point to be familiar with in this legislation is section 176 which specifically prohibits secret commissions.

Privacy Act 1988

Office of Privacy Commissioner

The purpose of this Act is to regulate the privacy of information including personal information.

It outlines obligations on gathering, using, disclosing, accessing, storing and destroying personal information.

Occupational Health and Safety Act 2004

This legislation places obligations on both employers and employees to work together to ensure a safe and healthy workplace.

Key points to be familiar with include identifying, discussing and implementing procedures on:

• psychological and fatigue-related hazards; • workplace violence; • regular review and consultation on OHS issues; • ensuring properties are safe and without risk for open inspections and public

auctions; • managing properties with common areas such as foyers, entrances, stairways and

hallways. Ensuring the common areas are maintained for safety.

Equal Opportunity Act 1995

Victorian Equal Opportunity and Human Rights Commission

The objectives of this Act are to promote recognition and acceptance of everyone’s right to equality, eliminate discrimination and sexual harassment and to provide redress for people who have been discriminated against.

Sections 47-58 and 93 are particularly relevant and should be read by all real estate professionals.

You should also be familiar with the principles set out in Commonwealth legislation including the Sex Discrimination Act, Racial Discrimination Act and Disability Discrimination Act.

Native Titles Act 1993

National Native Title Tribunal

This Act provides a process through which Indigenous Australians can lodge applications seeking a determination of native title.

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Financial Services Reform Act 2001

Australian Securities and Investment Commission (ASIC)

Some of the main objectives of this legislation are to promote:

• confident and informed decision making by consumers of financial products and services;

• fairness, honesty and professionalism by those who provide financial services;

• fair, orderly and transparent markets for financial products.

It is important to note that estate agents and their representatives, unless qualified to do so, are excluded from providing advice on financial matters including mortgage or insurance advice.

GST (Goods and Services Tax) Act 1999

Australian Taxation office (ATO)

The GST system specifies when and how GST is applied and who pays it.

As an estate agent or agent’s representative, you need to know when GST is applicable to the sale or rental of a property as well as understand your obligations to explain the GST component of your commission and the outgoings or expenses in a transaction.

Electronic Transactions (Victoria) Act 2000 Attorney General

Purposes include:

• recognizing validity of electronic transactions;

• signatures;

• production and retention of electronic documents.

Foreign Acquisitions and Takeovers Act 1975

Foreign Acquisitions and Takeovers Fees Imposition Act 2015

Register of Foreign Ownership of Water or Agricultural Land Rules 2017

With the related regulations these acts regulate the acquisition of Australian land and water by foreigners.

3.2 Penalties for not complying with legislation Legislation mostly specifies penalties for not complying with the law.

The penalty depends on the type of offence or behaviour you have committed but the penalties can be significant including:

• Monetary fines and compensation payouts;

• Disciplinary action from the regulatory body administering the legislation;

• Suspension or cancellation of licence;

• Disqualification from working anywhere in the real estate industry;

• Court appearances and orders;

• Imprisonment.

3.3 Where to find copies of legislation You can access and source legislation at no cost at:

• www.legislation.vic.gov.au (Victorian Legislation);

• www.comlaw.gov.au (Commonwealth Law);

http://www.legislation.vic.gov.au/

http://www.comlaw.gov.au/

• the websites of the relevant Government or industry agencies.

Hard copies of Victorian legislation can be purchased at: Anstat (saiglobal.com/information/legislation)


1. The Act that specifically prohibits secret commissions is the:

a) Crimes Act;

b) Competition and Consumer Act;

c) Financial Services Reform Act;

d) Domestic Buildings Contract Act.

2. One of the main purposes of the Transfer of Land Act is to:

a) prohibit selling properties overseas;

b) transfer the responsibility of selling land and property from the owner to the estate agent;

c) identify unused land for new building developments;

d) provide a registered system for recording, transferring and searching land titles in Victoria.


3. Estate agents and their representatives should provide advice on financial matters including mortgage

advice and insurance.

True or False

4. The Sale of Land Regulations specify the rules and processes that must be followed if you are conducting a

public auction.

True or False


5. Name 4 key points relating to property sales practices under the Competition and Consumer Act.

6. Why is the Australian Tax Office A New Tax System (Goods and Services Tax) Act relevant to the real estate industry?

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Chapter 4 Professional conduct and ethics As discussed in CPPDSM4080A (Work in the Real Estate Industry) you must adhere to professional conduct requirements. The Estate Agents (Professional Conduct) Regulations 2008 form part of the Estate Agents Act.

Along with the Regulations, members of the Real Estate Institute of Victoria should adhere to additional ethical behaviour standards and professional conduct obligations. These are stated under:

• the Real Estate Institute of Australia (REIA) National Principles of Conduct, • the Real Estate Institute of Victoria Rules of Practice.

4.1 Professional conduct laws, codes and rules

The Estate Agents (Professional Conduct) Regulations 2018

These Regulations specify mandatory professional conduct behaviours for all estate agents and Agent’s representatives in Victoria.

As they form part of the Estate Agents Act, the penalties for not complying with the Regulations can be the same as not complying with the Act, including fines, disciplinary action or court actions.

A summary of the professional conduct behaviours is provided below.

Regulation 6 - Knowledge of the law. You must have a working knowledge of all Acts and any other laws relevant to the functions you perform.

Regulation 7 - Confidential information. You must not at any time use or disclose any confidential information obtained while acting on behalf of a client, unless authorised by the client or required by law to do so.

Regulation 20 - Dispute resolution. There must be procedures for resolving complaints and disputes about the agent’s estate agency practice. You must advise a person that the agency has a complaint handling procedure:

• before they sign an agreement to use your services or a soon as possible after they have

signed the agreement; or

• as soon as possible after obtaining the person’s signature on the agreement.

• If a complaint is made against you or the agency, you must, as soon as possible, inform the person of the agency’s procedures for resolving complaints.

You must also make every effort to minimise and resolve disputes with a principal client that relate to your performance.

Regulation 8 - Commissions. In any transaction you must only accept commission from the person you are acting for. So, if you are acting for the vendor you cannot also accept commission from the purchaser and if acting for the purchaser you cannot accept from the vendor. You must not induce or attempt to induce a person to pay commission to more than one estate agent in respect of the same transaction without giving clear written advice to the person of the potential liability to pay more than one commission.

Regulation 9 - Estate agent’s instructions. You must follow the lawful instructions of a client, unless it would be unlawful, unreasonable, improper or contrary to good conduct.

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The Estate Agents (Professional Conduct) Regulations (continued)

Regulation 10 - Fairness and honesty of estate agent. You must at all times act fairly and honestly and to the best of your knowledge and ability.

Regulation 12 - Potential conflict of interest. You must not accept to work for or act for a person where your interests conflict with that person. If you recommend a supplier of goods and services to a principal client you must disclose to them any personal or commercial relationship between you and the supplier of the goods and services.

Regulation 13 - Good practice. You must exercise all due skill, care and diligence in performing your functions as an estate agent or Agent’s representative. You must not engage in conduct that is unprofessional or detrimental to the reputation or interests of the real estate industry. You must complete all work on behalf of a client as soon as is reasonably possible.

Regulation 14 - Do not induce breach of contract. You must not knowingly try to persuade a person to breach a contract of any kind relating to the estate agency practice.

Regulation 15 - Ascertain information. You must make all reasonable enquiries to get all information relevant to your real estate service or transaction.

Regulation 16 - Communication of offers. Unless instructed in writing by a client not to do so, you must communicate all offers, whether those offers were made verbally or in writing. This must be done as soon as possible after the offer has been made.

Regulation 17 – Bids and offers at public auctions of land. Despite regulation 16, an estate agent must not communicate to any person any bid or offer for a property that is made after the property has been knocked down to the successful bidder at a public auction for sale of land, unless the vendor or successful bidders at the auction refuses to sign the Contract of Sale following the auction.

Real Estate Institute of Australia (REIA) National Principles of Conduct

The REIV and its members are bound by the Real Estate Institute of Australia National Principles of Conduct. The Principles constitute a public statement of the ethics expected to be upheld by all REI members, as well as employees of those members, in their dealings with other REI members, other estate agents, their employees and members of the public. No instructions or inducements from any client or customer will relieve a member from the responsibility of strictly observing these Principles. However, where there is a conflict between these Principles and he law, the law prevails.

Real Estate Institute of Victoria (REIV) Rules of Practice

The objective of these Rules is to:

• promote and facilitate professional standards in real estate practice;

• foster good relations between members of the Institute, other agents and members of the public;

• improve the standing of members of the Institute within the community.

These Rules provide best practice standards for agency work as well as some of the requirements of the Estate Agents Act and the Estate Agents (Professional Conduct) Regulations. The REIV may also conduct disciplinary hearings if a member is in breach of the Rules of Practice. There are various monetary fines that can be imposed if a member breaches a Rule.

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4.2 Equal Opportunity You must apply equal opportunity principles to all aspects of your role. It is against the law to discriminate against or harass people based on their actual or assumed:

• Age

• Breastfeeding status

• Carer status

• Disability/impairment

• Gender identity

• Industrial activity

• Lawful sexual activity

• Marital status

• Parental status

• Physical features

• Political belief or activity

• Pregnancy

• Race

• Religious belief or activity

• Sexual orientation

• Personal association with someone who has, or is assumed to have, one of these personal characteristics

If a person believes you have discriminated against them, they can make a complaint to the Equal Opportunity and Human Rights Commission or VCAT.

If VCAT determines that discrimination has occurred you may be ordered to do something to remedy the situation and pay monetary damages, costs and fines.

4.3 Privacy Personal information is any information that can identify an individual. This includes a person’s name, address, telephone numbers, email addresses, marital status or income.

As a real estate professional, you will regularly obtain and store personal information. You must understand what your obligations are on gathering, using, disclosing, accessing, storing and destroying personal information.

In real estate, personal information can be obtained in many forms including letters, forms, telephone calls, emails, faxes, telemarketing, surveys, face-to-face conversations, marketing lists, databases, title searches, competitions, coupons, referees, loyalty programs, other agents, rent rolls, electoral rolls and open inspections. It is important that this information is not used for marketing unless you have express authority to do so.

Your agency should have documented privacy procedures that include:

• a privacy policy;

• the purpose of collecting personal information and what they intend to do with it;

• only collecting, using and disclosing personal information that is relevant to real estate transactions;

• any consents required;

• allowing people to access their personal information held by the agency;

• systems to keep personal information secure, accurate and up-to-date;

• training in privacy;

• privacy complaint handling;

• reviewing and auditing privacy procedures and practices;

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• a privacy statement on all documents/systems that collect personal information from clients;

• displaying a privacy notice at public auctions and open inspections;

• giving people the option of no further contact;

• respecting people’s privacy rights if their letter box is marked ‘no advertising or non-addressed material’;

• making sure no contact is made if a private advertisement specifies ‘no agents’.

Forms should include a privacy statement that states why the information is being collected including any legal requirements, who it will be disclosed to, what happens if the information is not provided and how the person completing the form can access their information.

Privacy consents are often included on forms to get the client’s approval to release certain information. Consents for disclosing information that is required by law or asked for by an authorised Government agency are not always needed.

Information should not be collected about a client’s religious or philosophical beliefs, racial or ethnic origin, political preferences, union memberships, sex life or health.

Client information should be securely stored, only accessible to authorised staff and, when the time comes, disposed of in a way that protects the client’s confidentiality.

Generally, clients should be given access to the personal information they have provided and should be able to update their information quickly and easily. In some cases they may be denied access to their own information if providing the information would unreasonably impact on the privacy of other individuals, is related to a legal investigation or, if it would breach a law or legal order to release the information.

Along with the laws governing privacy, you also have an obligation to act ethically when dealing with personal information.


Multiple Choice (choose one only – circle your answer)

1. The penalties for not complying with the Estate Agents (Professional Conduct) Regulations:

a) are not as severe for not complying with the law because they are Regulations and not an Act;

b) do not apply to agent’s representatives;

c) can be the same as not complying with the Estate Agents Act, including fines, disciplinary action or Court action;

d) are only applicable to the Officer in Effective Control or the Principal Agent.

...continued over the page.

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2. Three professional conduct laws and codes that apply to members of the REIV and representatives are:

a) The Estate Agents (Professional Conduct) Regulations, the Estate Agents Mandatory Code for

Professionalism and the REIV Code of Conduct;

b) The Estate Agents (Professional Conduct) Regulations, the REIA National Principles of Conduct and the

REIV Rules of Practice;

c) The REIV Rules of Practice, the Estate Agents (Professional Conduct) Regulations and the REIV

Professionalism Standards;

d) REIV Code of Conduct, the Estate Agents (Professionalism) Regulations and the REIV Rules of Practice.


3. You cannot accept a payment for commission from a vendor if you have already been retained by the purchaser to negotiate the purchase of the property on their behalf.

True or False

4. Personal information is any information that can identify an individual.

True or False


5. Under the Estate Agents (Professional Conduct) Regulations, what are the obligations of an agent or agent’s representative regarding the communication of offers to vendors?

6. Under the Estate Agents (Professional Conduct) Regulations, what is an agent’s duty of care to the vendor if they have signed an agreement with another agent?

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Chapter 5 Structure and roles of a real estate sales team The property sales team of an estate agency should be creative and dynamic. As a sales department does not have a ready-made client base, each salesperson must create opportunities in order to gain property to sell and then locate or match suitable purchasers.

Most agencies have a structure consisting of a sales team, a property management team and reception/administrative and support staff.

5.1 Principal Agent or Officer in Effective Control Every real estate business must have an individual licensed real estate agent who is ultimately responsible for operating, managing and supervising the whole business.

If the business is owned by an individual or partnership, this person is known as the Principal Agent. If a company owns the business, this person is known as the Officer in Effective Control (OEIC).

The Principal Agent or the Officer in Effective Control is responsible for:

• regularly attending, supervising and managing the principal office;

• overseeing the estate agency business as a whole, including all branch offices and licensed Branch Managers;

• making sure employee licensed estate agents and agents representatives are eligible to be employed and notifying the Business Licensing Authority of all new and ceasing licensed estate agents and agents representatives;

• specifying and authorising the real estate functions to be performed by employees (the Authority to Act section 47 of the Estate Agents Act 1980);

• establishing and monitoring procedures to ensure the business is conducted in accordance with the law and good agency practice;

• making sure all employees of the business comply with the laws relating to the business.

5.2 General/Office Manager In larger agencies, a person is often employed to act as second in charge to the OIEC or Principal Agent. They may be a licensed estate agent or an authorised agent’s representative, but it is not necessary for them to be so if they are not performing the functions of an estate agent.

They manage the broader aspects of the business including:

• reviewing targets and statistics;

• monitoring and improving the quality of services;

• conducting staff meetings;

• hiring new staff and managing the performance of existing staff;

• dealing with disputes and enhancing client satisfaction.

In small agencies this person may be the person responsible for the entire sales portfolio along with an assistant to take enquires and provide administrative support.

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5.3 Sales Manager The sales manager is responsible for ensuring the sales team are working at their optimum. They are usually a licensed estate agent or an authorised agent’s representative. They will often conduct sales meetings to discuss:

• current properties listed for sale;

• sales results from the previous week;

• status of negotiations with vendors;

• current offers from purchasers;

• opportunities for new business coming on to the market.

The sales manager will usually conduct or organise in-house training for sales staff. They will also mentor new salespeople to pass on their experience and knowledge of the industry.

An important part of the sales manager’s role is to organise visits to properties or have round table discussions to make sure the current listings in a particular area are being priced and advertised consistently in accordance with legislation.

Along with managing the sales team, the sales manager may also have their own sales listings

5.4 Real Estate Sales Person A salesperson may subject to their ‘Authority to Act’ perform any of the following tasks:

• Appraising and Listing. Source properties for sale, presenting sales services, negotiating commissions and terms and conditions when signing clients to the agency, recommending the most suitable method of sale.

• Prepare advertising and marketing materials. Develop a marketing plan on how best to promote the property to potential purchasers which may include preparing copy for advertising.

• Advertise the property for sale. Use the advertising and marketing products and tools. Promote the vendor’s property to maximise its sale potential and attract as many potential purchasers as possible.

• Arrange open-house inspections and attend auctions. Set dates and times for viewing the property. Promote open- house inspections to get as many people to the property during a sales campaign. Prepare the property and surrounding area to attract potential purchasers using flags, signage, marketing leaflets and letter box drops. Attend and assist with the auction.

• Conduct Auction. Most agencies have sales staff specifically dedicated to conduct auctions on behalf of the agency. In some agencies, the OIEC or Directors are solely responsible for this task. Agencies may also engage contract/freelance specialist Auctioneers to undertake their auctions.

• Arrange private inspections of the property.Target suitable purchasers for the property and arrange a private inspection.

• Receive offers from potential purchasers. Collate and forward all offers to the vendor for consideration in accordance with the Estate Agents (Professional Conduct) Regulations 2008.

• Negotiate with parties. Negotiate the terms and conditions of the sale including the sale price and settlement date.

• Complete a Contract of Sale. Formalise an offer. Obtain signatures and deposit monies from the potential purchaser to commit to the purchase of the property.

• Follow-up communication. Keep in contact with the vendor and purchaser to assist with finalising the sale.

• Attend final inspection. Conduct an inspection with the purchaser within 7 days of the settlement date to ensure the property is in the condition it was at the date of sale.

• Hand over keys. Once settlement has been confirmed hand over any keys still held by the agency.

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Officer in Effective Control or Principal

Reception/administrative and support

Salesperson Salesperson

5.5 Assistant Salesperson To get a basic understanding of the sales process and the agency’s procedures, some agents’ representatives commencing work in a sales team will start out as an assistant salesperson (can also be known in real estate as a personal assistant) under the guidance and mentoring of an experienced licensed estate agent or agents representative.

Whilst preparing for the role of a salesperson, an assistant salesperson will usually perform basic sales functions and administrative tasks. This may include:

• preparing advertising and marketing materials for the property; • arranging and conducting open-house or private inspections of the property; • communicating with interested purchasers; • handling administrative sales paperwork.

5.6 Reception/support staff The number of agency support staff will vary depending on the agencies’ size and operations. Tasks include reception, clerical, accounting, secretarial, research and marketing. Support staff play an important role in assisting and communicating with the sales team and ensuring that advertising deadlines are met, and the sales and supportive administrative procedures are performed.

5.7 Some examples of agency structures The flow chart below shows an example of a sales department within a large agency.

Officer in Effective Control or Principal Agent

General Manager

Sales Manager



Assistant Salesperson

Assistant Salesperson

Reception/administrative and support staff

Example 2 This flow chart shows an example of a flatter structure in a small agency with not as many managers and staff.

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1. What typical tasks may a real estate salesperson perform? a) Serve Notices to Vacate; b) Give advice about building plans and construction; c) Listing, prepare advertising, conduct marketing, arrange inspections, receive offers, negotiate the sale; d) Negotiate the lease terms for a commercial tenancy.

2. For completion of a Contract, what is the role of the selling agent?

a) Write legal terms and conditions for Contracts; b) Act as a legal advisor to the vendor; c) Receive offers, sign up purchasers, take deposits and obtain the vendor’s acceptance (signature); d) Nothing.


3. An assistant salesperson is usually learning the role and performs basic sales functions and administrative

tasks. True or False

4. Salespeople that work in a larger agency may specialise in one area of sales.

True or False


5. In what time frame must a final inspection for the purchaser be conducted from the date of settlement?

6. What role should a sales manager play in managing sales staff?

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Chapter 6 Sourcing clients and their property Sourcing (also known as prospecting) clients and their properties for a sale listing can be achieved by marketing your personal and agency profile.

The aim is to publicise and create awareness of your agency’s presence in the local area or target market to draw interest from potential vendors.

Sourcing clients and property for sale is not necessarily an expensive process. Today’s marketing tools mean you can promote your business and services with little cost.

Some common ways of attracting new clients include:

6.1 Marketing and advertising Marketing and advertising is a great way to raise the profile of the agency and attract new business. Advertising includes:

• website promotion, particularly your own agency website that will have information on services, staff profiles and

testimonials;

• social media tools including the agency’s facebook page;

• sponsorship to promote the agency through local businesses and community activities;

• brochures and printed material;

• billboards and wall signage;

• advertisements in newspapers, magazines and on TV, radio and websites;

• fridge magnets, calendars, key rings and other items;

• direct marketing mail-outs (letters, brochures etc) to targeted individual clients or mass mail-outs to groups of people or businesses;

• newsletters.

Remember, laws apply to statements in advertising. The information must not be false or misleading. For example, can your agency back up such statements as:

“We promise to sell your home in 30 days”?

“If your current agent has not achieved your asking price – we will”?

If not, such advertising is false and misleading which could have consequences for you and your agency including poor reputation, complaints, prosecution, legal action and loss of income.

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6.2 Repeat business This is the term for when existing and previous clients engage the agency to conduct further real estate transactions. For example, a current landlord may choose to sell their investment property through your agency.

Alternatively, a client may choose to use your agency again for other sales of their property (based on past performance), or buyers become vendors through constant nurturing of relationships over time.

6.3 Word of mouth referrals One of the best ways to attract business is to provide friendly and efficient customer service. If you do, current clients and business professionals may recommend your agency to family, friends or their clients.

Recommendations and referrals are influenced by your reputation which also impacts on the agency’s profile. Establishing a good reputation is one of the best ways to build trust and reliability and bring in new business.

6.4 Walk-ins One of the best ways to promote the agency is through window signage to attract clients to walk in the door. Traditionally this is displaying properties for sale on hard copy cards with photos, description and price. Today, agencies are using a combination of traditional displays but also technology such as Touchscreens or TV screens with changing images. The displays maybe high quality, interactive and visually stimulating.

6.5 Identifying Market Activity Reports obtained from an online database such as Property Data Online or through the various online real estate portals can provide information on sales activity within a specified area.

You may also choose to access records of local planning and building decisions, identify land and building developments, and build relationships with developers to increase opportunities to act as their agent. These relationships often have a flow-on effect of potential sales in the future.

6.6 Seminars Estate agencies may run real estate seminars and invite current vendors, landlords, tenants, potential home purchasers and clients. Qualified guest speakers at a seminar could include:

• solicitors to talk about the legal process, including documentation;

• financial planners to talk about using equity to further invest in property;

• accountants to talk about property income return and taxation;

• agency staff to discuss market trends and the state of the market.

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6.7 ‘Farming’ Farming is the term used to find new clients in a designated geographical area. Most agencies will appoint a certain territory to their individual agents. Territories are often broken down into suburbs and divided by main roads or streets.

Farming a territory known as a ‘farm’ involves you becoming familiar with housing styles, demographics (who lives in the area), property sales turnovers, market worth of property, community services, schools, sporting clubs and other areas where people gather socially. Over time you will become established and known in your area and gain new business and listings.

Methods of farming include:

• door knocking;

• leaflet drops;

• telephone telemarketing;

• participating in and sponsoring local events such as fetes, sporting activities and festivals.

6.8 Open for inspections Open for inspections give you opportunities to not only attract interested purchasers, but interested future vendors who may sell their property. You should meet and greet each person, obtain their details, discuss their property plans and make follow up contact if they provide you permission to do so. Please note that if you obtain personal data for the sole purposes of “security”, then you would not have this permission.

When holding open for inspections you should always be mindful that the public is judging your customer service skills and commitment to their interest. Be consistent and after each inspection, contact all interested parties unless they advise you not to do so.

6.9 Networking Networking provides an opportunity for new sales business by building relationships.

You can network by:

• introducing yourself to all the businesses in your area. Ask them to refer clients to you and your agency and ask them to keep your business cards in a location where people will see them;

• speaking to bank managers, solicitors, conveyancers and financial advisors and giving them a copy of your professional profile.

Networking is often successful if you provide incentives to local businesses to make referrals. Incentives could include return promotion of their businesses and free products or services for their clients.

A growing trend in real estate is to use social networking sites to get connected to clients and customers. Facebook, Twitter, LinkedIn, Myspace, Youtube, Foursquare are all examples of social mediums to engage clients and build profile. You can use these to inform people of property market trends, new listings and agency events.

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6.10 Telemarketing Telemarketing in real estate involves ‘cold calling’ potential clients to consider your services. Using a prepared script or dialogue you can contact people from a database or a local directory. Most agents use telemarketing as an opportunity to make an appointment with a potential client to appraise their property. When telemarketing, you need to comply with the laws administered by the Australian Communications Media Authority:

• the Do Not Call Register Act 2006, and

• the Telecommunications Industry Standard 2007.

Key areas in these laws you need to be familiar with are:

• requirements for identifying yourself when calling;

• when telemarketers and researchers must terminate calls;

• the hours in which telemarketing and research calls may be made. A caller must not make or attempt to make a call on:

Research calls Telemarketing calls

Weekdays Before 9.00 am or after 8.30 pm Before 9.00 am or after 8.00 pm

Saturday Before 9.00 am or after 5.00 pm Before 9.00 am or after 5.00 pm

Sunday Before 9.00 am or after 5.00 pm Calls prohibited

National public holidays Calls prohibited Calls prohibited

If a person has consented to being contacted outside of these hours, it is not a breach of these laws.


1. You want to conduct some telemarketing on a Sunday. Between what hours can you call?

a) Between 9am to 5pm;

b) After 12 noon;

c) You cannot make telemarketing calls on a Sunday;

d) Between 9am and 12 noon.

2. Why is it most important not to make false or misleading statements when advertising yourself or your

agency’s services? a) Other agencies might copy what you say;

b) False and misleading advertising could have consequences for you and your agency including poor reputation, complaints, legal action and loss of income;

c) It costs too much money to change the marketing material;

d) It will be bad for the agency’s reputation.

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3. The term ‘farming’ in real estate refers to marketing to potential clients in a designated geographical area. True or False

4. When conducting an open-house inspection you should let everyone see the property first before greeting

or talking with them. True or False


5. What are some of the social marketing tools you can use in networking to inform people of property market trends, new listings and agency events?

6. What are two ways you can source new clients by knowing what’s happening in your local area?

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Chapter 7 Appraising property Often in real estate, the word ‘appraisal’ specifically refers to providing an estimate of the property market worth. In fact, there is a lot more involved. When appraising a property, you should approach it with the belief that you will sign the client to an ‘Authority’ and have the opportunity to sell their property.

When a potential client (vendor) is interested in using your services to sell their property, they may ask for a meeting or have a telephone conversation with you about what skills and experience you can provide.

Usually vendors will get more than one agent to appraise their property before making a decision on which agency to appoint as their selling agent. To build the client’s confidence and trust in your ability to sell their property, you will need to demonstrate your skills and knowledge of the market and what sets you apart from other agents.

Ask questions and listen

Before dealing with the specifics of the services you offer, and the detail of the property ask questions and above all listen. This is an important step in developing rapport with the owner/s of the property and will assist you in fine tuning what you might subsequently say when detailing how you will be able to assist them to achieve their goals.

You should discuss:

• the list of services you can provide (sometimes with a guarantee of service levels);

• the reputation of the agency and your sales experience;

• your knowledge of the market in general and the area where the property is situated;

• testimonials from existing clients;

• Association membership (such as the REIV) identifying compliance with codes of conduct;

• any personal and agency success in real estate industry awards.

• the qualifications that you hold and what you do to maintain currency of knowledge – e.g. REIV CPD and regular professional development.

As well as promoting your reputation and services you need to prepare yourself for the presentation to the vendor. You should:

• conduct research on the property and current market conditions;

• conduct a pre-listing inspection of the property;

• gather information about the property owner and the land title;

• determine the estimated selling price and turn-around time to sell the property;

• evaluate the best method to sell the property;

• determine commission payable and advertising budgets;

• develop a marketing strategy for the property including how best to present the property to attract purchasers.

CPPDSM4008A 34 V2015.3

7.1 Research You must be prepared to answer questions about the property and the current market conditions. Research is essential to confidently provide this knowledge to the client. In Victoria it is now legalisation that you must produce valid evidence to a client to determine estimated sales prices based on historic evidence.

You should study key elements of market intelligence such as:

• Sale prices of similar properties that have recently sold in the area

• Listed properties for sale in the area and how long they have been on the market at that price

• Clearance rates

• State of the market

• Purchaser demographics

• Proximity to local amenities

• New developments in the area

The best way to source this data:

• Using Victoria’s best property data source propertydata.com.au

!Ask your trainer for a FREE trial login!

• The REIV website and REIV owned realestateVIEW.com.au listing portal

Example of the REIV’s propertydata.com.au, the best possible source for Victorian agents, compatible across multiple platforms

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Why are more Victorian agents using propertyDATA.com.au

» Sales data sourced from agents, updated throughout the day, seven days a week

» Photos, floor plans, descriptions and time-on-market data sourced from realestateVIEW.com.au

» Settlement dates, ownership information, lot/plan, volume/folio details from Valuer General

» Ability to search and filter data based on location, sales prices, settlement data plus much more

» Powerful mapping functionality for a holistic assessment of a property, including zoning and easements

» Use your agency branding in your rental CMA (comparative market appraisal) reports for clients

» The latest auction results emailed first each Saturday evening

» Simple Statement of Information report.

Locally owned and operated, you can be sure you’re getting the most accurate, up-to-date and reliable data for Victoria.

An example of a comparative market appraisal report is provided in the Appendices.

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Recent Sales

SEARCH CRITERIA Date is between 14/10/2014 and 14/10/2015 Sale Type is one of Auction Sale, Sold Before Auction, Sold After Auction, Private Sale, Expression of Interest, Sale by Tender, Sale Unit/Street Number is 3/1207 Street(s) is one of the following Nepean Street Type is Highway Suburb(s)/Postcode(s) is one of the following Highett Data Source is REI and VG/Gov

29 Turner Rd HIGHETT 3190 (REI) Sale/Passed in Price: $839,999 Sale Date: 10/10/2015 Method: Auction Sale Walls: Brick Veneer Comments:

3 Rooms: 6 Roof:

2 2

10a Stevens St HIGHETT 3190 (REI) Sale/Passed in Price: $1,075,000 Sale Date: 10/10/2015

3 Rooms: -

2 2

Method: Auction Sale Walls: Roof: Comments:

7/29 Graham Rd HIGHETT 3190 (REI) Sale/Passed in Price: $382,500 Sale Date: 08/10/2015

2 Rooms: -

1 1

Method: Sold Before Auction Walls: Brick Roof: Comments:

13 Railway Pde HIGHETT 3190 (REI) Sale/Passed in Price: $790,000 Sale Date: 23/09/2015

3 Rooms: 5

2 2

Method: Private Sale Walls: Roof: Comments: Behind the Mediterranean inspired facade is a unique opportunity to enjoy a quality 3 bedroom townhouse, withcharacter filled living areas - overlooking a private heated courtyard, which is decorated with masses of beautiful, creeping Hoya - Wisteria & Passionfruit. The extra large kitchen is a Chefs Dream, with European Appliances, including an Olivetti Grill ,Quasar Exhaust, & double pantry. Other features include, ducted heating & cooling, ducted vacuum, security alarm ...

CPPDSM4008A 44 V2015.3

Recent Sales in...

3/1207 NEPEAN HWY HIGHETT

1/1141 Nepean Hwy HIGHETT 3190 (REI) 2 1 1 Sale/Passed in Price: Sale Date: 15/09/2015 Rooms: 3 Method: Private Sale Walls: Roof: Comments: Immaculately presented and perfectly positioned in Highett, this private spacious townhouse is nestled behind a brick garden fence and surrounded by tranquil established gardens. This attractive single level, free standing villa unit would make the perfect first home or fantastic down-sizing opportunity. For investors this home has a potential rental return of between $ 330 and $350 per week.This spacious townhouse boasts a large lounge room and dining area. Other features include ...

1/1125a Nepean Hwy HIGHETT 3190 (REI) 2 1 2 Sale/Passed in Price: $430,000 Sale Date: 09/09/2015 Rooms: - Method: Sold Before Auction Walls: Roof: Comments: Small group, big apartment, high style and a hugely surprising location, this one is proof that size does matter! Set on the corner of quiet MacFarlane Crt on in a group of just four, this super-sized two bedroom, 1.5 bathroom ground-floor apartment has space to fit full-sized lounge and dining settings in an open-plan, a fresh all-white bathroom with separate shower and bath plus an additional powder-room and over-sized double bedroom each with wall of streamlinedrobes. But this ...

408/1146 Nepean Hwy HIGHETT 3190 (REI) 2 1 1 Sale/Passed in Price: Sale Date: 06/09/2015 Rooms: - Method: Private Sale Walls: Roof: Comments: Complete and Ready to Move In !Magnificient 2 bedroom apartment in building of only 47 apartments.Spacious interiors are just the beginning with over 74sqm of internal living as well as an 11sqm balcony for outdoor enjoyment.Kingston Park Apartments represents the ideal opportunity to secure your new home in this boutique Bayside lifestyle.Features, designer kitchen with ample cupboard space, Fisher & Paykel appliances, Caesarstone benchtops and glass splashback.Spacious ...

1173a Nepean Hwy HIGHETT 3190 (REI) 4 3 2 Sale/Passed in Price: $1,200,000 Sale Date: 31/08/2015 Rooms: - Method: Private Sale Walls: Roof: Comments: PRICED TO SELLSpace, grace and grand family living! Built as a state-of-the-art Display Home on approx 609sqm for Glenvill Homes, this sensational 4 bedroom, 2.5 bathroom, triple zone home showcases the best of family living on a full-sized family block - all set behind high walls with plentiful parking including a double auto-garage.Built to display the best of everything with spectacularly spacious rooms, lofty 2.7m ceilings and luxury finishes, this impressive home ...

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Currently on the Market in Highett

23-25 Beaumaris Parade HIGHETT 3190 (REV) Price: Rooms: Property Type: Land (Commercial) Bedrooms: Comments: Hockingstuart commercial are pleased to present this highly strategic development opportunity to acquire two side by side properties, being 23 & 25 Beaumaris Parade, Highett with the following key attributes:* Extremely rare land allotment: 42.67m* x 42.97m*: 1834sqm* total land* Two properties, two titles, being sold together as one* Hot Bayside location, surrounded by successful new townhouse and unit developments* Neighbourhood Residential Zone 3 under City of Bayside* ...

6/49 Beaumaris Parade HIGHETT 3190 (REV) Price: $450,000 - $500,000 Rooms: Property Type: House Bedrooms: 2 Comments: Step beyond the hedged parking area of this secluded group inc security gate with intercom & discover a surprisingly stylish rear unit in gorgeous gardens. Rendered this 2 bedroom home has a surprise inside - a big ensuite off the master bedroom in addition to the main bathroom/laundry! With polished floorboards through light-filled living, built-in robes in both bedrooms & a fresh white kitchen with room to eat-in, this bayside unit has it all including reverse cycle heating & cooling & ...

8/55-57 Chesterville Road HIGHETT 3190 (REV) Price: $590K - $640K Rooms: Property Type: Townhouse (Single) Bedrooms: 3 Comments: Terrific townhouse set at the rear of the block, affords privacy and quiet offers large proportions sure to impress. From the front door your eye is drawn straight through to the lush greenery bordering the deck and an overwhelming sense of luxurious open space offering a relaxing comfort and warmth. The hub of the home is the galley-style kitchen with European appliances and a breakfast bar overlooking the huge open expanse for living and dining pleasure. Outdoors features a partly ...

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RELEVANT RECENT SALES

3/1207 NEPEAN HWY HIGHETT

29 TURNER RD HIGHETT

Description

Price: $839,999 Month/Year: 10/10/2015 Rooms/Bedrooms: 6/3 Land Size (m2): 186

10A STEVENS ST HIGHETT

Description

Price: $1,075,000 Month/Year: 10/10/2015 Rooms/Bedrooms: -/3 Land Size (m2): -

7/29 GRAHAM RD HIGHETT

Description

Price: $382,500 Month/Year: 08/10/2015 Rooms/Bedrooms: -/2 Land Size (m2): -

13 RAILWAY PDE HIGHETT

Description Behind the Mediterranean inspired facade is a unique opportunity to enjoy a quality 3 bedroom townhouse, withcharacter filled living areas - overlooking a private heated courtyard, which is decorated with masses of beautiful, creeping Hoya - Wisteria & Passionfruit. The extra large kitchen is a Chefs Dream, with European Appliances, including an Olivetti Grill ,Quasar ...

Price: $790,000 Month/Year: 23/09/2015 Rooms/Bedrooms: 5/3 Land Size (m2): -

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Disclaimer: The information contained herein is to be used as a guide only. Although every care has been taken in the preparation of the information, we stress that particulars herein are for information only and do not constitute representations by the Owners or Agent. Sales data is provided as a guide to market activity, and we do not necessarily claim to have acted as the selling agent in these transaction.

Past sales data from your agency is also an important source of statistical data. Over time, this accumulated information will help you to identify trends that can be used in your presentations to potential clients.

Shown below is some data relating to property sales in Reservoir between February 2010 and February 2011.

For commercial agents working within the Central Business District (CBD) you can subscribe to other speciality sites to obtain relevant sales data. One such site is City Scope - www.cityscope.com.au

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http://www.cityscope.com.au/

7.2 Conduct an inspection and complete a listing sheet As part of an appraisal, you should always conduct an inspection of the property.

When inspecting the property you should build your knowledge to assist in the estimate of the selling price, the best method of sale and obtain a thorough description to market the property.

You should confirm and write down on a listing sheet:

Facts about the property

Property size

• The size of the block of land or allotment.

• The size of the building/s.

• Any measurements on the Certificate of Title.

Age, type and construction of building

• The architectural design or period and the age of the building/s.

• What the building is made of (brick, brick veneer, brick cladding, weatherboard etc).

• The type of roofing material (tin, tiles etc).

• Any renovations or significant improvements to the property and when they were completed.

Amenities

• Location to public transport, schools, clubs, shops, sporting facilities, city, parks etc.

• Parking availability.

• For commercial properties, ease of access to main roads and storage or shipping yards, rail sidings, etc.

Property use

• Current use and zoning (residence, business, rural, commercial or industrial uses).

• Whether the property will be sold as vacant possession or if tenanted, sold with an existing lease or tenancy agreement to continue after the settlement of the sale.

• The annual return of rent from the property or potential rental return.

Chattels and fixtures

• Which chattels and fixtures are included in the sale and their condition and age.

• Which chattels and fixtures are excluded from the sale.

(We talk more about chattels and fixtures later in this Guide).

Condition and presentation of property

• Identify any areas or issues of poor condition.

• Record the general condition of the property.

• Identify any minor repairs that should be fixed before the property goes on the market.

• Consider how the property can be best presented and marketed to potential purchasers.

Distinct features

• Built in pools and spas, outdoor features or structures, security systems, heating/ cooling, etc.

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Local Council Rates Notice

• Request a copy of the Latest Council Rates Notice. It provides you with valuable

information relating to the value of the property including:

• Land or Site Value – this is the value the Council has set for the land.

• Capital Improved Value (CIV) – this is the value of the land and improvements made on the land. It is based on valuations prepared for Council by property valuers at intervals of 2 years.

• Net Annual Value (NAV) this is the amount that the Council believes the property could return if it was leased. It is usually set at 5% of the CIV.

• While these figures are interesting, they should not be relied on as current market value.

Plans of the property

Does the vendor have a copy of plans relating to the property, including the plan of title and historical plans showing all easements that affect the potential use of the land? If so, ask for a copy.

Public liability insurances

Check if the vendor’s home and contents insurance covers public liability for public inspections of the property

About the vendor

Motivation to sell

• Market conditions – buoyant market?

• Why is the vendor selling the property?

o Moving (new job, family commitments, retiring, illness, down-sizing etc)?

o Purchased another property?

The motivation to sell will affect the timeframe for selling, price and terms.

Expected settlement terms

The settlement period is the time between signing the Contract and handing over possession or title of the property to the new owner. What is the vendor’s preferred timeframe for settlement? Usual periods are 30, 60, 90 or 120 days. Is this negotiable, and if so, under what conditions?

Deposit

What deposit amount/percentage the vendor is prepared to accept to secure an offer from a purchaser (usually 10% of the sale price). Note conditions of Contract of Sale.

Choice of legal representative

• Confirm the vendor’s preferred choice of solicitor or licensed conveyancer to prepare legal documentation – Section 32 (Vendors Statement). Also a contract of sale if the property is to be auctioned.

• You should advise the vendor of their obligation to prepare a Section 32 – Vendor’s Statement, a legal document which describes disclosures about the property being sold. (We talk more about this later in this Guide).

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7.3 Determine the estimated sale price Refer to sections 47A, 47AB, 47AC, 47AD, 47AE ,47B, 47C, 47D of the Estate Agents Act

Along with your research and inspection of the property, you should estimate selling prices based on your experience using your skills and knowledge.

7.3.1 Methods of calculating the estimated sale price There are various ways of estimating the selling price. The most commonly used method is the comparable sales data. This is when your estimated selling price is based on comparing the vendor’s property with similar properties recently sold in the area. Section 47AC requires that this method be used in the case of residential sales.

Other methods include capitalisation and summation. Capitalisation is where you determine the estimated selling price based on the annual rent that could, or is, being paid for the property. Rental values can be accessed through PDOL and tapping into the specialist knowledge of your property management department.

The summation method is when you calculate the value of the land (usually dollars per square metre) plus the value of the buildings and any improvements on the land, taking into account any depreciation. The estimated selling price will be the total of the land and buildings less depreciation.

7.3.2 Stating the estimated sale price In the case of residential property, the agent or agent’s representative must, before obtaining the vendor’s signature on a sale authority, ensure that it contains an estimate of the selling price (Section 47A Estate Agents Act). While the Act at one stage required this in the case of all real estate it is now only required in the case of residential real estate. In Section 4(1) there is the following definition: The estimate must be stated as either:

• a single amount (for example $930,000) or • a price range where the top end of the range cannot be more than 10% above the bottom end of the range (for

example $900,000 to $990,000) The estimate and the vendor’s reserve price do not have to be the same (Section 47A(2)). It is the agent’s estimate and should not be influenced by the vendor; it must be reasonable and determined in accordance with Section 47AC. Section 47AC states that in determining the estimate of selling price the agent or agent’s representative must take into account the sale prices of 3 comparable properties that they reasonably consider are most comparable to the residential property they are estimating. In determining which properties are the most comparable the agent must have regard to: 1. The standard and condition – the following features must be considered:

o its external construction – for example, the building materials used o its architectural style and layout o its size including floor size of the dwelling and land size of the property as applicable o the number of bedrooms, number of bathrooms, the number of car parking spaces o any special features, for example, a swimming pool or a tennis court.

2. Properties in a similar location – it should be as close as possible to the property for sale, but must be within:

(i) a 2 kilometre radius of the property if it is in the Melbourne metropolitan area; or (ii) a 5 kilometre radius of the property if it is not located within the Melbourne metropolitan area.

When considering whether a property is in similar location you must consider the following matters:

distance between the properties o zoning and street frontage

o neighbourhood features (eg proximity to shops, transport, schools, parks, business and industry). Where considering multiple potential comparable properties that are otherwise the same the three closest to the property for sale are to be preferred. 3. Recently sold properties - The comparable properties must have been:

(a) sold within the preceding 6 months, if the residential property is located within the Melbourne metropolitan area: or

(b) sold within the preceding 18 months, if the residential property is not located within the Melbourne metropolitan area.

The Melbourne Metropolitan Area The Melbourne metropolitan area is very large and is made up of the following municipalities: City of Banyle City of Maribyrnong City of Bayside City of Maroondah City of Boroondara City of Melbourne City of Brimbank City of Melton Shire of Cardinia City of Monash City of Casey City of Moonee Valley City of Darebin City of Moreland City of Frankston Shire of Morning Peninsula City of Glen Eira Shire of Nillumbik City of Greater Dandenong City of Port Phillip City of Hobsons Bay City of Stonnington City of Hume City of Whitehorse City of Kingston City of Whittlesea City of Knox City of Wyndham City of Manningham City of Yarra Shire of Yarra Ranges (“Determination of the Melbourne Metropolitan Area” issued by Director, Consumer Affairs Victoria 12 April 2017) How to determine comparable properties when there are undisclosed sales An agent must use all data and information available about recently sold properties, including details of undisclosed property sales, to meet their obligations under section 47AC of the Estate Agents Act 1980 to choose the three most comparable properties.

This applies even if you: • sold a property and your agency agreement, or other verbal or written confidentiality agreement you entered into,

prohibits or restricts the use or disclosure of details of the sale • are aware of a sale by another agent, regardless of any agreement that agent may have entered into, that prohibits or

restricts the use or disclosure of the details of the sale • see the details of a sale in a property database, regardless of whether the sale is recorded as undisclosed or another

similar description • are acting for a seller who enters into a contract of sale that intends to restrict details of the sale being disclosed.

(Section 47AC and “Guidelines for selecting comparable property sales – residential property” issued by Director, Consumer Affairs Victoria 12 April 2017) However, comparable properties should not include properties that are ‘under offer’ or ‘under contract’, as the sale process has not yet been finalised. If there are not three comparable properties There will be instances where three comparable properties that fit within the parameters above cannot be found. Section 47A still requires that the agent provide an estimate ‘of the selling price of the residential property”, and that the estimate may be a single figure or a range where the difference between the top and the low end does not exceed 10% of the low end. The Act and Consumer Affairs Victoria have not given any guidance on how the estimate is to be arrived at in these instances. Warning All the action regarding the identification of comparable properties and the determination of an estimated selling price must be undertaken before the authority can be completed and signed [Section 47(1)]. Once an authority has been completed Consumer Affairs Victoria could require you to provide details of the comparable properties you used in arriving at your estimate. Revision of estimated selling price Section 47AE requires that if the estimate on the sale authority ceases to be reasonable and the agent could reasonably be expected to know, then the agent must notify the vendor in writing, stating –

(a) that the estimate contained in the engagement or appointment has ceased to be reasonable; and (b) why they believe the estimate has ceased to be reasonable; and (c) that they propose to revise the estimate in the authority; and (d) the amount of the new estimate.

As soon as practicable after notifying the vendor of the above the agent or representative must revise both copies of the sale authority. The change to the authority should be initialed and dated on both the agent’s and the vendor’s copies. False representation to seller or prospective seller An agent must not make a false representation to a seller or prospective seller of residential property as to the estimate of the selling price (Section 47B), so giving a prospective seller an inflated estimate in order to obtain the listing of their property places the agent at risk of a large penalty.

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7.4 Determine the method of sale

7.4.1 Types of method of sale There are two methods used to sell property:

• private sale (which goes by many names – expression of interest, tender and so on) • auction

Legislation and regulation deals specifically with sale by auction but not with other methods of sale. While in most instances this is not a problem, difficulties can arise where a property is being offer for private sale and more than one buyer wants to buy it at the same time. There is no prescribed way of dealing with this and processes used may vary from agency to agency.

7.4.2 Private sale (Also known as private treaty, sale by negotiation, sale by closing date, expression of interest,)

This method usually involves advertising the property at a single price or with a price range. Properties can also be advertised without a price, but in the case of residential properties there must be a Statement of Information containing an indicative price. Prospective buyers can make offers to the vendor through the selling agent. Expressions of interest, sale by tender and similar methods seek offers by a certain date to try to draw interest and create urgency among prospective buyers.

The potential buyer will usually view the property through a group open for inspection or seek a day and time to view the property privately.

If the purchaser is interested in buying the property, they will make an offer either verbally or in writing. The vendor can direct the agent as to the form of offer they are prepared to consider, and buyers should be advised that only offers in that form should be submitted. For instance, a vendor could specify that they will only consider written offers. Ideally an offer should be made in the form of a contract of sale signed by the buyer, so if the vendor wishes to accept the offer the contract can be signed and exchanged so that both buyer and seller have a copy with both signatures on it and a binding agreement is created. Section 126 of the Instruments Act specifies that a sale of real estate must be expressed in writing, so verbal agreements present the risk of either party changing their mind before getting to contract stage.

When presented with an offer a vendor has two choices, they can either accept it or reject it. If rejecting it they can suggest the changes that would need to be made in order to make the offer acceptable. Price is not the only factor a vendor should consider, others include settlement date, special conditions and the deposit paid. The rejection of an offer requires the agent to seek an offer which is more likely to be accepted by the vendor, so it is important to establish why the offer was rejected. Despite what a vendor may say is acceptable, you cannot be sure until they have accepted an offer by signing the contract.

Benefits to the vendor of a private sale Vendors may be attracted to sell their property by private sale because:

• they are not under any pressure to make a decision within a specified time and have more time to consider offers;

• the property can be marketed at a pace that suits the vendor and allows greater flexibility in arranging inspection times;

• depending on location the expenses associated with a private sale may be lower than selling by auction.

Disadvantages of a private sale • If the vendor’s asking price is not a reflection of the current market, it will remain unsold and may become

stagnant.

• If at any time there is more than one potential buyer, the sale process requires careful management for the vendor to realize the full potential of the sale.

• Purchasers or vendors may request that special conditions be inserted into the Contract such as extended settlement terms. These conditions may result in delays and at times, a failure for agreement to be reached. For instance, a purchaser may make their offer conditional on being able to arrange finance. If the purchaser fails to obtain the finance, the sale of the property may not proceed, and the agent and the vendor must start the sales process again.

• There is no guarantee of selling for the Vendor’ asking price.

Additional information about private sales For residential property under a private sale and rural property not exceeding 20 hectares, there is a ‘cooling off’ period of three clear business days (section 31 of the Sale of Land Act). This means the purchaser can end the Contract within three clear business days of signing it. A purchaser who cools off will have to pay a penalty of either 0.2% of the purchase price, or $100, whichever is greater. If an offer is still being considered by a vendor, the buyer can withdraw it. This withdrawal is not the same as “cooling off” and does not incur a penalty.

7.4.3 Auction Public auction is where the property is offered to the public for competitive bidding on a certain date and time. The vendor will usually specify a minimum sale price, called the reserve price. Potential purchasers attend the auction, make bids and the property sells to the highest bidder at or above the reserve price.

Benefits to the vendor if selling by auction • Certainty of time. The auction campaign has a start and end date. The majority of properties presented at auction

are sold before or on the day of auction and the vendor may have some certainty as to the outcome. This assists them in planning their future. Those not sold either before or on the day become a private treaty sale and often sell thereafter.

• It is and open process which can be observed by the vendor. • It creates a sense of urgency and pushes buyers to decide. • Certainty of Contract. Auction sales are ‘unconditional’ and the subsequent Contract of Sale is enforceable by both

parties. The cooling-off provisions (s31 of the Sale of Land Act) do not apply if sold at auction or within three clear business days before the auction was to be held, or in the three clear business days after the auction was held.

Disadvantages to the vendor • If the vendor’s asking price is not a reflection of the current market, it will remain unsold and may become

stagnant.

• It requires two or more interested buyers

• It can publicly expose the lack of interest in a property • There is no guarantee of reaching the vendor’s reserve price. • The highest bidder will only bid as far as they are pushed by the underbidder. • It limits the range of potential purchasers to those who can purchase unconditionally. • It can be more expensive to market and promote the property over a short period of time.

7.4.4 Choosing a sale method

When deciding which method to use, you should consider:

• the method most beneficial for the vendor;

• your vendor’s expectations on sale price, timeframe and preferred method of sale and their reasons for the sale;

• current market conditions;

• the most commonly used method in the area that maximises sale potential;

• purchaser demand for similar properties in the area;

• the type of property (residential, commercial, industrial, retail etc);

• the uniqueness of the property and/or its location;

• your agency’s preferred sale methods.

7.5 Determine property ownership

Refer to the Transfer of Land Act 1958, Property Law Act 1958 and Native Title Act 1993

In Victoria, there are four types of ownership relating to the sale of property:

The Crown - this is land owned by the State or Federal Government.

Native - is the recognition by Australian law that indigenous people have rights and interests to their land that come from their traditional laws and customs. The concept comes from a common law doctrine that land rights exist for the aboriginal land owners and continued to exist despite settlement.

Leasehold –– in Australia this means land that is bought for a given amount of time (say 99 years) but at the expiration of the period reverts to the Crown. It is very rare in Victoria but can be found in Canberra and in the case of some large pastoral properties in northern Australia.

Freehold (sometimes referred to as fee simple) - under this form of ownership, a person owns the land outright and can use their land as they see fit, as long as they comply with local laws such as environmental, building and planning requirements.

Within freehold, there are different types of ownership depending on the number of people who own the property.

• Sole ownership – where one person owns the property. They have the legal right to sell or transfer their property

without the consent of any other person. They will be the registered owner on the Certificate of Title.

• Joint ownership means the property is owned by two or more people. All joint owners are named on the Certificate

of Title. The owners will be either ‘joint tenants’ or ‘tenants in common’.

oint tenants (or joint owners) “the rule of survivorship”

Where two or more people own the land equally. If a joint owner dies, ownership rests in the survivors.

Tenants in common (or owners in common)

Where two or more people own the land, but they do not necessarily own it in equal proportions.

Each owner can sell or transfer their proportion/interest of the title to whoever they wish. If an owner dies, the other owners do not automatically receive the deceased person’s share. The deceased nominates in their will who they want to receive their interest of the title.

7.5.1 Multi-unit ownership

Company Share

This is when a private company (known as a Service Company) owns the land and a block of units on the land. You can buy shares in the company that will entitle you to use and occupy to the exclusion of all others a unit within the block of units and use the common areas. The company has articles of association regarding management of the block of units and the up-keep of those units.

Stratum title (Pre - 1967)

A form of ownership whereby each owner in a development has a Certificate of Title for their unit/flat and also owns shares in a Service Company that administers, manages and maintains the common areas on behalf of all the shareholders.

Strata title

A form of property ownership where each owner owns parts of a building and has joint rights with other owners over the common areas administered by an Owners Corporation pursuant to the Owners Corporation Act.

7.5.2 Ownership documents – certificates of titles

There are two different forms of land title ownership in Victoria. These are General Law Titles (Common Law Title) and Torrens title.

General Law titles (Property Law Act)

This type of title is no longer used. It is the original form of title that was used to identify the owner through a sequence of historical transfers of title to a property. This is often referred to as a chain of title where ownership from the Crown by way of a Grant was conveyed to the first owner. Each time the ownership changed it would be recorded by way of a conveyance to the subsequent owner. To verify the right to sell, the current owner must provide the chain 30 years from the date of sale, the first property owner to the current owner. If there is a break in the chain, (where one document is missing 30 yrs), the current owner may have difficulty in proving the right to sell. Today, if a general law property is sold, it is transferred into the Torrens system of title.

Torrens titles (Transfer of Land Act)

The Torrens system was designed in the 1858 in S.A. and is the title system used today. Titles are registered with the Registrar of Land (Land Victoria) who holds the original and provides copies to owners or mortgagees (e.g. banks). Unlike the general law title, the State Government guarantees that the person listed as the owner on the title has the legal right to sell (except where errors or fraud have occurred).

Details shown on the title include:

• description of land – lot number on title plan, plan of subdivision, strata plan or plan of consolidation;

• volume and folio numbers – the numbers that identify the title;

• the name of the registered owners;

• details of the registered easements, covenants and caveats (e.g. if registered, the name of the mortgagee, or lender).

In the past, certificates of title were provided as hard copy and included more information about the title including plans, history of ownership and measurements of the property.

Today, most titles are generated by computer and don’t include the extra information. This information can be obtained through a separate search with the Registrar of Titles.

Examples of an original Torrens Certificate of Title and a computer-generated title are provided on the next 2 pages.

Example of original Torrens Certificate of Title

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Example of a computer Certificate of Title

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7.5.3 Information shown on the Title

Covenants

A restriction on the use of the land or the use of building occupying the land. Covenants remain with the property and are passed from owner to owner.

For example, the restriction on the height of a front fence.

Caveats

A notice on the Certificate of Title to make it known another person/s (other than the owners) has an equitable interest in the title of the land. This may affect the transfer of the title from one owner to another because the new owner may not want a third party to maintain a financial interest in their title.

Sometimes legal representatives for purchasers lodge a caveat with the Registrar of Titles, immediately after the purchaser signs the Contract of Sale and pays a deposit. This is done to protect the purchaser’s financial interest in the title. This caveat will be removed at the point of settlement.

Mortgages

A mortgage is the obligation of a person (the mortgagor) to make periodic repayments of a loan with interest to a finance provider (the mortgagee) for property.

The mortgagee has rights over the mortgagor’s land until the mortgage is fully paid (discharged).

Any mortgages will be shown on the title to notify potential purchasers that there is money owed against the title.

Easements

A right to use another person’s land or a right to prevent the owner from using the land in a particular manner.

A frequently listed easement is a right of access through land to enable supply of utilities such as water, gas or electricity.

Details of easements appear on a title (unless they are implied or unregistered).

Implied or unregistered easements (Not on title)

An implied easement is a restriction on the property that is not written on the Certificate of Title but is a requirement, for example, access to the property or allowing sufficient light for the building.

Unregistered easements are usually developed over time by common use of the land. For example, a short cut pathway through a property.

Vendor Terms (Not on title)

A vendor may sell their property to a purchaser who makes 2 or more payments(other than the deposit and the final payment) before the purchaser becomes entitled to a conveyance or transfer of the property title.

The purchaser will have possession of the property but the Certificate of Title will show the vendor as the owner until the purchaser has paid off the full purchase price. Once paid, the vendor will transfer the title to the purchaser as the new legal owner.

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7.5.4 Conduct a Title search Before signing a vendor to the agency, you must ensure the vendor is the owner of the property and they are legally entitled to sell it. To do this you may wish to conduct an online title search. There are various websites to check ownership. The most commonly used site is www.landata.vic.gov.au

Because of the competitive environment in which agents work it often may not be practical to do a title search before having the authority signed. Vendors are not always accurate when stating who the owners of a property are. Ideally the sale authority should be signed by all the owners. If it happens that only one or some of the owners sign the sale authority it does not invalidate it or prevent the sale going ahead. The vendor who signed the authority is the one responsible for paying the agent. Once the vendor statement is available it will be clear who the property is owned by and the signatures of all owners will be required on the vendor statement and contract of sale.

The Registrar of Titles will require evidence of identity of the parties to a transaction, both vendors and buyers. This will be done by the conveyancers or lawyers acting, or in the case of unrepresented people by the people themselves. Some vendors will be surprised by this, as while it has always been prudent for identification to happen it has only been a requirement since 2015.

7.5.5 Personal Property Securities The Personal Properties Securities Register (PPSR) deals with interests in property other that real estate. When listing any property, care should be taken to ask questions about the nature of ownership of fixtures and chattels. It is possible in rare circumstances that a third party has registered their interest on the PPSR in relation to part of the property that is included in the sale.

General condition 11 of the REIV/LIV Contract of Sale of Land contains provisions for dealing with items that are listed on the PPSR.

7.6 Develop a marketing strategy and plan When dealing with potential vendors, you will need to devise a strategy for marketing their property. This includes preparing a marketing plan which shows how, when and where the property will be advertised and promoted.

The volume and frequency of marketing will depend on the method of sale and where the property is located. For private sales, marketing is usually steady over a greater period. For auction sales, it is usually an intense marketing campaign over a shorter period. Like an auction campaign, tender sales are mostly advertised for a designated period.

Types of marketing tools Various tools can be used to market a property for sale.

Internet The internet is the most powerful and widely used tool for marketing properties for sale. There are dedicated and well known sites for advertising property. These include:

• the agency’s own website;

• www.realestateview.com.au

• www.realestate.com.au

• www.domain.com.au;

• www.realcommercial.com.au

• www.ruralview.com.au

When internet advertising is interactive and done well, it can provide potential purchasers with a range of useful information to attract their interest and lead to the next step in the sales process. Today’s internet advertisements include:

http://www.landata.vic.gov.au/

http://www.realestateview.com.au/

http://www.realestate.com.au/

http://www.domain.com.au;/

http://www.realcommercial.com.au/

http://www.ruralview.com.au/

• the ability to print brochures;

• bookmark properties so the user keeps a record of and can readily access the properties they have viewed;

• virtual tours, where an agent walks through the property onscreen explaining its features and benefits;

• Promotional video of the inside and outside of the property (sometimes with sound to enhance the marketing of the property)

• mortgage calculators where the user can identify an estimate of the monthly payments to afford the property;

• the ability to email the agent directly from the advertisement;

• a tool to view inspection times and save those times to the user’s electronic calendar with set reminders;

• the ability to request the sale documents such as Contracts online;

• the choice to receive electronic updates of similar properties;

• a Statement of Information in the case of residential properties.

When discussing internet options with a potential vendor, you can offer property alerts and a ‘priority’ listing option, which will rank their property at a higher level than similar properties for a specific period of time. You will need to advise them that this is an extra cost.

Social media Increasingly, agents are using social media tools such as Facebook, Youtube, Blogs, Twitter and Linkedin to advertise properties for sale. To increase the marketing exposure, agencies have developed their own Facebook page and twitter accounts which are used to promote newly listed properties.

There are significant users of these mediums locally and globally and social media has opened up new ways to market properties.

Blog – is a type of website or part of a website that is usually maintained by an individual or a group of regular users. It provides commentary, descriptions of events or other materials such as graphics or video. Great for search engine optimisation, building followers and reputations.

Linkedin – is a business related site that allows users to network professionally.

Facebook – is a website that allows people to create personal profiles, add users as friends and exchange messages.

Twitter – enables users to send and read text-based messages and links. Good for search engine ranking, building brand and followers.

YouTube – is a video sharing website which users can upload, share and view videos. Very effective for viral marketing campaigns.

Print media (newspapers and magazines) Although the internet and social media have become the predominant advertising tools, print media still plays a role in real estate advertising. Vendors often prefer their property to be marketed in print.

Some potential purchasers still rely on local and State newspapers to view properties for sale. In Victoria, a print media campaign will usually include advertising in the Age, the Herald Sun, Weekly Times, Weekly Review, local newspapers or a combination of any of these.

Print media can also include specific media publications such as foreign language papers or special interest magazines. Consider the audience, the coverage and the cost, as well as the frequency of the advertisement, the size and the wording.

You could seek the opportunity to showcase the property in the Property-of-the-week section or request a free editorial. The extra exposure can be very effective for the vendor and the agency.

Many franchise groups have their own publications which are typically high gloss magazine-style and include listings

of properties from all of their franchised agencies.

Brochures Brochures are an effective physical tool for potential purchasers to take away and view properties. They are usually printed in high quality, on glossy paper, with professional photographs and a floor plan. Brochures are often available at open-house inspections and at the agency office.

Signboards and pointer boards A common component of a sales campaign is the signboard which displays photographs, descriptions of the property and agency contact details.

The signboard should be effectively positioned to attract the attention of passing traffic.

A pointer board is a sign that directs potential purchasers to the property for sale. They are usually placed at the end of the street or at the nearest major intersection.

When planning your signage, you must ensure the boards comply with local Council by-laws. Many local Councils will not allow the placement of signs on public land and some may have size limitations. Penalties apply for breaching Council laws.

Direct marketing Direct marketing involves targeting a specific geographical area or audience to attract interest for the sale of a property. It includes telemarketing, letter box drops, email, sms and promotional letters.

This type of marketing is often used to alert potential purchasers (individuals and businesses) of a property that has just come on the market.

Remember to comply with Privacy laws when using direct marketing methods.

Window display Properties are displayed by way of photographs and copy in the agency windows to support the other marketing tools. When discussing the marketing plan with the potential vendor, you should mention that the window display option is available for a cost and that they can choose different display options such as static printed material or electronic interactive advertising. The cost will vary depending on what options they choose.

Marketing plan A good marketing plan is targeted to the audience you are seeking to attract, maximises exposure and provides value to the client.

Most agencies will have standard marketing plan templates.

When developing your marketing plan, consider the:

• method of sale (auction, private etc);

• marketing budget;

• reasons for selling;

• timeframe required for selling the property

• target market.

When writing your plan to present to the potential vendor, you should include:

• the name and address of all vendors and the address of the property;

• how the property may be marketed (newspapers, internet, sms, email, signboard etc);

• whether or not there are extra costs to have priority listings on the internet;

• the vendor approval process for all photographs and text to be used in advertisements;

• size, type (text or photo) number and location of signboards;

• size and frequency of advertising in print media;

• details of any other marketing such as; video production and social media exposure;

• a breakdown of costs for each marketing method used.

You should devise an itemised schedule of advertising that will show costs for the types of marketing materials and what mediums of advertising will be used (TV, radio, newspapers, internet, signboard etc). The total cost of this schedule should be included on the Sale Authority form.

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V2015.3 63

A sample of a marketing plan or schedule is provided below.

Marketing Plan and Costs

Property address 45 Adam Street Fitzroy Vic 3067

vendors Jenny and Marcus Georgios

Name of agent Mi-Favourite Real Estate Company

Date 14 July 2019

Page 1 of 1

Activity Date Cost

Internet listing Realestate.com.au Realestateview.com

4 weeks duration (date from – date to)

$3000.00

Domain.com.au

Mi-favouriterealestate.com.au

Magazines Size Date

RE Magazine ½ page Week 1 (date) $50000

The Weekly Review 1/3 page Week 1 (date) $600.00

RE Magazine ½ page Week 2 (date) $400.00

The Weekly Review 1/3 page Week 1 (date) $400.00

RE Magazine ½ page Week 3 (date) $500.00

Newspapers

Age Newspaper ¼ page Wed week 1 (date) $1,500.00

Age Newspaper ¼ page Sat week 1 (date) $2,000.00

Herald Sun newspaper ¼ page Wed week 1 (date) $800.00

Herald Sun newspaper ¼ page Sat week 1 (date) $800.00

Herald Sun newspaper ¼ page Wed week 2 (date) $800.00

Herald Sun newspaper ¼ page Sat week 2 (date) $800.00

For sale sign board 8’ x 4’ $520.00

Photography and floor plans $700.00

Brochures $300.00

Total of all marketing including GST

$13,620.00

vendor signature Date

Marketing properties for sale is covered in greater detail in the unit CPPDSM4OI4A Market Property for Sale.

CPPDSM4008A

64 V2015.3

Some vendors will be surprised by the suggestion that they pay for advertising. You will need to develop a script to explain the logic behind the vendor paying for advertising. The vendor is in control of whether to accept an offer on a property, so if the agent was meeting the cost of advertising and the vendor didn’t accept an offer, even if very good, the agent would simply do a lot of work, spend a lot of money and receive no return. Section 48B(1) of the Estate Agents Act prevents the agent from profiting from advertising as it specifies that the agent cannot charge more for the advertising than was paid by the agent.

7.7 Determine Commission As previously mentioned, commission is the amount paid upon sale to the agent by the vendor for using the agent’ services.

Calculating commissions and fees Refer to sections 49A and 50 of the Estate Agents Act Commission and outgoings, such as advertising, are negotiable [Section 49A(1)(b)]

Commission fees can be negotiated between the agent and the vendor. Commission can be stated as a:

• fixed dollar amount that stays the same regardless of whether the sale price for the property is higher or lower than the vendor’s price.

• percentage of the sale price of the property so the amount of commission depends on the actual selling price. If stating any commissions as a percentage, both the percentage and a dollar amount must be shown on the Sale Authority form.

It is common practice for agencies to calculate commission using the percentage method.

The following example shows on a Sale Authority form, commission that has been calculated as a percentage (which must also show an actual dollar amount).

Vendors are required to pay 10% GST on agency commission and fees and any outgoings such as advertising. To avoid misleading vendors, agents should quote fees inclusive of GST as required by the Australian Competition and Consumer Commission. To find the amount of GST in a GST inclusive figure divide it by eleven.

7.8 Ask the question

You have by this stage done some research prior to inspecting the property, provided the owner with a lot of information and you have gathered a lot of information from them, all of which may have been very interesting and enjoyable but it doesn’t produce an income for you or get the property sold for the vendor. So, ask the owner if they are happy to appoint you to sell the property.

If they wish to appoint you, prepare a sale authority (see Chapter 8) and have them sign it leaving a copy with them and you taking the original.

To give yourself the opportunity to progress to a listing in this way it is essential to be prepared, particularly in the case of residential properties. Preparation includes making sure you have a full range of sale authorities and marketing schedules and are confident in the completing the authority in a legally compliant way. In the case of residential properties it is essential that

you are able to state on the authority an estimate of what you believe buyers will be prepared to pay for the property and you must know which comparable properties you took in to account in making that estimate. (Sections 47A, 47AB and 47AC)

7.9 Prepare a presentation kit for the vendor Once you have gathered all information about the property and the vendor, you should prepare a presentation kit which contains all details and data collected.

While it is appropriate in the case of those potential vendors who are undertaking an information gathering exercise before appointing and agent, others will be prepared to appoint you before going through the formality of this stage.

The kit should include:

• the vendor’s details; • a report on the facts about the property and current market analysis; • a profile of potential purchasers for their property; • the estimated selling price, commission and marketing costs; • recommendations for the method of sale; • a prepared Sale Authority form; • a copy of the property title you have generated from a title search; • a draft marketing plan; • testimonials of services for both you and the agency.

This is another opportunity to present your findings, establish your credentials and demonstrate you are the right agent to sell the property.



1. A Comparative Market Appraisal report (CMA) should show:

a) comparable sales data from similar properties, points of interest and proximity to amenities and street and aerial views of the property and immediate neighbourhood; b) your testimonials; c) whether the property will be sold with an existing tenant; d) a list of all estate agents operating in the area.

2. When stating an estimated sale price of a property it must be stated: a) in writing using black ink; b) at a higher price to make sure you secure the listing; c) as either a single dollar amount or a price range; d) at a lower price to make sure you attract more purchasers.


3. When choosing a method of sale, you should consider the current market conditions, the most commonly

used sales method in the area, the vendor’s expectations on sale price and purchaser demand for similar properties in the area.

True or False

4. In Victoria, there are five types of ownership relating to the sale of property (The Crown, Leasehold,

Freehold, vendors Exclusive Right and Owners Corporations)

True or False


5. What should be included in a presentation kit to the vendor?

6. What factors must be considered in selecting comparable property sales for the purpose of estimating what buyers might pay for a residential property?

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Chapter 8 Signing clients to the agency When a vendor decides to use your services, before you start marketing or selling their property you must formally sign them to the agency.

To do this you must make sure the necessary legal paperwork is completed. This is:

• a Sale Authority • a Notice of Commission Sharing (if applicable) • a Rebate Statement (if applicable)

Your agency may also require the vendor to complete a checklist.

8.1 The Sale Authority

Refer to sections 49A and 50 Estate Agents Act

This is a written authority signed by the vendor and you and sets out the terms of appointment of the agent and the entitlement to commission. Once signed by all parties and a copy is given to the vendor the Sale Authority is a legally binding contract. Without a properly completed authority the agent does not have a valid claim for commission payment. The authority does not appoint you as an individual but appoints the licensed entity that is the agent for example XYZ Pty Ltd trading as Best Real Estate Brighton. There are not prescribed authorities, but the Estate Agents Act prescribed some of the content which must be in the authority. Most member agencies in Victoria use REIV sale authorities which are available online at new.vicforms.com.au, in some cases also in hardcopy and in other cases as complimentary forms on the members website. REIV forms are only available for use by member agencies so other agencies obtain form from other suppliers.

The authorities referred to in this learner guide are the six types of REIV sale authorities available to member agencies:

• Exclusive Sale Authority • Exclusive Auction Authority • General Sale Authority • Tender Authority • Exclusive Business Sale Authority • General Business and Property Sale Authority

The first three of these are the most commonly used and are commented on below

The Exclusive Sale Authority

This is the most frequently used Authority.

Used for residential property, vacant land, commercial and rural properties but not suitable for the sale of a business where no freehold is being sold or for off the plan sales (i.e. where at the time of the sale the title for the property has not been registered).

Used mostly where only one agent is appointed to act on the vendor’s behalf in arranging the sale of the property. It may also be used for conjunctional sales where the vendor appoints 2 agencies to sell the property. The agent/s engaged in this way are entitled to all the agreed commission and outgoings if the property is sold pursuant to the general condition of the authority.

The benefits of an exclusive Sale Authority include:

• vendors have a single point of contact and are assured that the agency will intensively promote the property;

• vendors are able to hold the agency accountable during the Authority period;

the Authority has an end date and the vendor can be confident the agent has and incentive to achieve a sale by that date. If not, they can extend the current arrangement with a new authority or appoint another agency.

Exclusive Auction Authority

This Authority is similar to the Exclusive Sale Authority, but it is used when the vendor chooses to sell their property by auction.

The REIV Auction Authority has an additional field to specify the auction date and time.

It also has an additional clause that the vendor may refuse a binding offer made between the date of the vendor signing the Authority and the date of the auction without any liability to pay the agency’s commission and marketing costs.

If one of the vendors intends to bid at auction as a co-vendor, the agency will need to get a signed disclosure from the vendor stating their intention to bid.

General Sale Authority

The vendor can sign a general authority with just one agency or sign them with two or more agencies, leading to more than one agency trying to achieve the sale of the property at the same time. The vendor reserves the right to sell the property themselves without having to pay commission. It can be used to sell the same type of property as an exclusive sale authority. Commission is payable to the agency that sells or is the effective cause of the sale of the property. Any other agency engaged under a general authority is not entitled to commission. Any amount for agreed expenses stated on an authority is still payable, irrespective of entitlement to commission., provided that the amount has been expended as agreed. If at the date the property is sold another agent holds an exclusive authority for the sale of the property, the vendor will have to pay commission to that agent. The agent with the general authority will not be entitled to commission, even though they may have sold or been the effective cause of the sale.

As it is for all documents used in sales, it is crucial to accurately fill out Sale Authority forms. Incorrect or incomplete information may cause legal problems for you and your employer and you may lose the commission and authorised outgoings on a sale. If sections of the form or document are not relevant, you should put a line through them to show they do not apply. Do not leave sections of a form blank. Any changes, deletions or insertions made to a document after signing, should be initialed by both you and the client on both party’s copies of the document.

Any subsequent Contracts of sale for the property will contain information and terms listed in the Sale Authority form, and therefore you must complete the Authority form correctly and comprehensively.

If there is a dispute regarding agency services, commission and outgoings, vendors and legal practitioners will usually scrutinize agency documentation, particularly the Sale Authority and Contract of Sale. They do this to determine whether the vendor has a right to avoid paying commission and outgoings.

What a Sale Authority form must specify Section 49A of the Estate Agents Act specifies that for an agent to obtain payment the agent holds a written engagement or appointment and all Authorities must contain:

• the agreed commission, fees and outgoings to be paid by the vendor;

• where the commission or fees have been calculated as a percentage, both the percentage and the dollar amount

must be shown based on a relevant price (which is either the vendor’s price or a price within your estimated sale price);

• a rebate statement if the agent receives any benefit from third parties which must be passed onto the client;

• a statement that the agent is not entitled to retain any rebate and must not charge the client an amount for

any expenses that is more than the cost or those expenses;

• a statement, in the form approved by CAV, identifying where a complaint about any commission or outgoings can be made.

• a statement, in the form approved by CAV, identifying any person outside the agency where there is shared

commission.

For the sale of any residential real estate, section 47A of the Act also requires you to complete an estimated selling price before the client signs the Authority. The Act permits a single price or price range of up to 10 percent (from the lower amount in the range) that must be filled out in the Authority. An authority which does not comply with the Act will, in the case of a dispute, leave you without a claim to commission.

As well as the prescribed information, the Sale Authority should contain:

• the agency’s legal name and address;

• the vendor’s name and address;

• the address of the property being sold;

• the Authority period;

• settlement period;

• the vendor’s price (optional);

• commission sharing notice (if applicable);

• vendor acknowledgement;

• a Privacy Statement;

• Goods (chattels) to be included in the sale

Exclusive Sale Authority Warning

The REIV exclusive sale authority is not suitable for use in the case off the plan sales. There is a notation to this effect in the entitlement to commission part of the authority. Off the plan sales are those were at the time the contract is signed the title for the property has not been registered but will later be registered once certain compliance requirements have been met. As you will see in Chapter 10 legislation provides opportunities for the purchaser to rescind the contract and the contracts written by solicitors for these sales often provide opportunities for the vendor to rescind the contract. The effect of this is that the contract remains conditional on the registration of the title until such time as it is registered.

he REIV exclusive sale authority gives the agent an entitlement to commission when they obtain a binding contract for the sale of the property. There is also an entitlement to commission if the agent obtains an offer at or above the vendor price on the authority and on the vendors terms regarding settlement date, deposit and so on, which would if signed by the vendor and exchanged with the purchaser form a binding contract. A binding contract is one in which there are no conditions which would allow either party to end it. Contracts for off the plan sales are conditional on the registration of the certificate of title within a specified timeframe or if none is specified, 18 months from the date of the contract. Hence, they could be deemed to be non-binding and if terminated could leave the agent with no entitlement to commission. Your agency may have engaged a solicitor to write an addendum to the authority giving the agent an entitlement to at least some commission in the case of a rescission.

Some vendors of off the plan properties have their solicitor prepare an authority for the agent to sign. You should be very wary of such authorities as they may not have been written in compliance with the Estate Agents Act and may be heavily biased in favour of the vendor.

Authorities are very important documents, getting them wrong can have a serious impact on income of both you and the agency. A court has ordered an agency to refund commission of over $3 mil because their authorities did not comply with the Estate Agents Act.

At the end of this chapter, we ask you to complete a learning activity on completing an Exclusive Sale Authority form. In this section we will show and explain what information must be included in the Authority.

Agent name, address and contact details

• Make sure that your full agency details are shown. You need to include the name of the licensed entity, followed by the Australian Company Number (ACN) if it is a company. Under the Corporations Act the ACN must follow the corporation name on all public documents, such as this form. You should also state your agency trading name.

• Name the Agent handling this listing and all contact details should be included.

• If you are working in conjunction with another agency the names of both agencies must be in the “Agent” field.

Vendor’s name and address and address of property being sold

• You must write the FULL names of ALL vendors. Refer to your title search to see if there are joint owners and if so, ensure all owners are included. The vendor name must be the name of a person or company. You cannot use business or trading names on their own or abbreviate names as they are not a legal entity. You should include the ACN number if dealing with a proprietary limited company.

• Ensure the address of the property for sale is correct. For multi-unit buildings or a sub-division of land, it is best practice to have a separate Sale Authority for each address or lot of the property.

Goods

Goods (previously referred to as chattels) are moveable items in the property such as furniture or garden ornaments. Fixtures are items that are affixed to the land or the building such as light fittings, floor coverings or window furnishings.

There are two tests that can be used to determine if a good has become a fixture:

1. How the item is attached to the property. If the item has been attached so that it is hard to remove and in doing so will cause damage to the rest of the property, then it may be a fixture.

2. The purpose or intent for which the item has been attached to the property. If the item is attached to the property for the purpose of permanently improving the property, then it is a fixture. If it has been attached in a manner that is easily removable and for a temporary purpose, then it remains as a goods.

In the Sale Authority, you should specify any goods included in the sale. If you need extra space to record all goods, you can attach a list and refer to it in the Authority. If you refer to an attached list – remember to attach it!

A common area of dispute in the sale of a property is whether goods were included or excluded from the sale. It is important that you are thorough in this aspect of your work to avoid issues such as false or misleading representations in your advertising. If there is likely to be any dispute as to whether something is included or not, make it clear on the authority.

Authority period

Exclusive Authority Period: This is the period that the vendor engages the agent to sell the property. When determining the Authority period, you should consider the timeframe needed to sell the property in the current market.

You should always state an Authority period but if it is not stated, the default period under S54 of the Act is 60 Days from the date when the Exclusive Authority is signed by the vendor. (For an Auction Authority the default period, if there is none stated, is 30 Days from the day of the Auction).

Continuing Authority Period: A Continuing Authority Period is an additional amount of time to enable you to continue to sell the property. During this period, you do not have exclusivity and the vendor may engage other agents on a non-exclusive basis to sell their property, or sell it themselves, or bring it to an end at any time by notice in writing.

Possession terms

Vacant possession or subject to tenancy: The property can be sold with either vacant possession or subject to an existing tenancy. Vacant possession means that at settlement, the property will be vacant (no tenants or vendors occupying the property and no goods in it that were not included in the sale.

If the property was an investment property with tenants occupying the premises under a fixed term tenancy, then the Subject to a Tenancy box would be checked instead of the Vacant Possession box.

On Payment of the Full Purchase Price. This is the most common way vendors sell their property. The purchaser will only take possession or be entitled to the rent upon payment of the full purchase price.

Upon terms on payment of is only used if the vendor agrees to hand over possession on the payment of a deposit amount, with the remaining amount of the purchase price to be paid later in instalments with the title only transferring once all instalments have been paid.

Vendor’s price

This is an amount the vendor is willing to sell for. The Act does not prescribe that it must be included on an authority and its inclusion can cause the vendor to have to pay commission if they don’t accept an unconditional offer on a contract of sale at or above the vendor price, rather than just having to pay commission if the property is sold.

In the case of residential properties, the indicative selling price on the Statement of Information and any price in advertising or provided otherwise cannot be less than amount in the vendor price area of the authority. This remains the case if the vendor informs you of their price, but it is not included on the authority.

Payable in

This is the vendor’s preferred settlement period, in other words the number of days between when the contracts are signed and when the purchaser becomes the owner of the property. It is an indication only, and the vendor’s preference may change during the marketing of the property.

Agent’s estimate of selling price Since May 2017 it has only been essential to complete this section in the case of residential properties. It must be completed before the vendor signs the authority. It must be stated as either:

• a single amount (for example $900,000) or • a price range where the top of the range cannot be more than 10% above the bottom of the range (for

example $900,000 to $900,000) The estimate and the vendor’s price do not have to be the same [Section 47A(2)]. It is the agent’s estimate and should not be influenced by the vendor; it must be reasonable [Section 47AB(a)] and determined in accordance with Section 47AC [Section 47AB(b)].

Commission

Commission is negotiable and must be stated inclusive of GST. It can be either a fixed dollar amount or a percentage of the sale price. If it is a percentage of the sale price, as is commonly the case, an example calculation of the commission must be shown. It must be based on “the reserve price or any other relevant amount set out in the engagement or appointment” [Section 49A(1)(c)(ii)]. This would normally be:

• the vendor’s price on the Sale Authority; or

• if no vendor’s price is specified, your estimated sale price or the highest of your estimated price range listed on the Sale Authority.

If you are thinking of a % commission as excluding GST but want to convert it to a % that includes GST, multiply the figure by 110%. For example: 1.7% excluding GST becomes 1.87%, which is 1.7x110%.

To calculate the amount of GST in a GST inclusive figure, divide the GST inclusive figure by 11.

If sold at a *GST inclusive/*GST exclusive/*not subject to GST. This is show whether the price on which the example calculation of commission is based is inclusive of GST, exclusive of GST or not subject to GST. If you are unsure about the GST status of the proposed sale it may be best to select the inclusive of GST option and add the words “if GST applies”. To confirm if GST applies, seek advice from the vendor’s accountant or legal representative, but as this is probably not practical prior to getting the authority signed the alternative just described could be used.

The following table provides a brief summary of whether GST generally applies to a sale:

Residential property

There is generally no GST applicable on the sale price of existing residential property.

Whether or not GST is applicable depends on:

• if the age of the building is 5 years or less from the date of construction being finalised.

• whether it is used as a “commercial residential premises”, such as a registered boarding house, hotel or motel.

Commercial and industrial property

Any sale of an existing commercial or industrial property (such as a factory, shop, office building, car park, hotel or motel), will usually attract GST on the sale price of the property.

There are circumstances of GST not applying to a commercial or industrial property such as the vendor not having to be registered for GST.

Rural property

If the vendor has been carrying on a farming business for at least 5 years and the purchaser intends to carry on a farming business, the sale of the farmland is not subject to GST.

If the vendor is registered for GST and the purchaser intends to subdivide the farmland into residential, GST applies.

Vacant land

GST does not generally apply to the sale of vacant land, unless the vendor is registered for GST.

Business

The sale of a business, where the new owner will conduct the same type of business, is generally GST free.

Where GST applies, you should advise potential purchasers that it applies and if it is a sale by auction, the auctioneer should announce that GST is applicable. Marketing expenses Marketing expenses are negotiable and the total agreed amount including GST must be stated on the authority for it to be claimable. The marketing expenses will usually be itemised in a marketing schedule provide to the vendor, but it is the authority and not the marketing schedule that gives the agent an entitlement to claim payment. You also need to show whether the vendor will pay marketing expenses upon signing the Authority or on written request at some later date.

Never tell the vendor that the marketing expenses will be payable when the property is sold, because the property may never be sold, leaving the agency with a cost for no gain. The agreed amount is payable irrespective of whether the property is sold, provided the expenditure has been incurred. If prepayment is made and the amount is not fully expended, any surplus must be refunded to the vendor.

Date of Authority and agent and vendor signature/s

• Date. This is the date when the vendor signs the Sale Authority. The date must be entered on that day and not left

blank or it may be deemed invalid and your commission and marketing expenses may be at risk.

• Agent. You sign here on behalf the agency.

• Vendor(s). All vendors listed on the Sale Authority must sign here. Notices and disclosures on the Sale Authority form In this section we show the notices and disclosures to the vendor. The purpose of these notices is to provide information to the vendor about their obligations under the terms of the Sale Authority. It also outlines the agency’s duty to disclose information to the vendor under the Authority agreement.

Notices and disclosures on the Sale Authority form In this section we show the notices and disclosures to the vendor. The purpose of these notices is to provide information to the vendor about their obligations under the terms of the Sale Authority. It also outlines the agency’s duty to disclose information to the vendor under the Authority agreement.

Item 1 – Agent’s entitlement to commission

This item provides details about your entitlement to commission. It specifies the vendor’s agreement to pay commission and the circumstances under which it is payable.

Item 2 – Continuing Authority period

This item provides an explanation of the continuing Authority period and what is means to the vendor. Note that continuing authority period provide little protection for the agent.

Item 3 & 4 – Making a complaint Item 3 is a mandatory item which must be included in accordance with section 49A of the Estate Agents Act. Item 4 informs the vendor that the agency has a dispute resolution process. Item 5 – Warranty of REIV membership

This item guarantees to the vendor that your agency is a member of the REIV.

Item 6 – Rebate statement – No Rebate will be received

A rebate is a monetary or other discount received by an agent in the course of doing business with third party suppliers on behalf of the vendor. This includes all outgoings such as advertising publishers, maintenance Contractors or insurance providers. Under section 48A, all rebates received must be passed on the vendor.

You always need to provide a statement to the vendor on whether or not rebates will be received by the agency. In the REIV Sale Authority, the statement used specifies that no rebates will be received. If rebates are to be received, you will need to complete and attach to the Authority a Rebate Statement in the form approved by Consumer Affairs Victoria and available on the CAV web site.

Warning

If the hardcopy authority you are using doesn’t include the wording “the agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that it more than the cost of those expenses” you should attach to the authority the long form rebate statement which is obtainable from the CAV site. As a result of a court decision on 2017 the online versions of authorities were amended to include this wording, however existing stocks of hardcopy forms held by agencies may lack the wording.

Item 7 Exclusive Authority Period (no time stated)

If no authority period is stated it defaults to the durations specified in Section 54 to the Estate Agents Act.

Item 8 Agent’s role

This item states an overview of the agent’s role in the property sale.

Item 9 – Commission sharing

This item specifies that if any commission is to be shared with any other person who is not an estate agent or an agent’s representative employed in the agency, you must complete a ‘Notice of commission sharing’. The notice must be in the form approved by Consumer Affairs Victoria and given to the vendor before the vendor signs the Sale Authority. If a commission sharing situation arises after the authority was signed, then the commission sharing notice should be given and a new authority prepared to replace the previous one.

Item 10 – Vendor acknowledgements

The vendor acknowledges:

• being informed fees and expense are negotiable and having read the entitlement to commission part of the authority.

• marketing expenses must be paid, whether or not the property is sold

• commission is payable if the property is sold

• personal information will be collected

• being inform the agent has procedure for resolving disputes

• receipt of a copy of the authority

• in the caser or residential property sale details may be disclosed

Privacy statement

This statement is required as part of privacy laws if the agency is subject to those laws either because of the amount of its turnover or because it has opted to be subject to them. It outlines the agency’s obligations on gathering, using, disclosing and accessing the vendor’s personal information. If the statement is not part of the authority

attach one to it.

General conditions The general conditions provide definitions and explanations for the terms of the Sale Authority. Any additional conditions of the Authority must be attached separately and signed by the agent and the vendor/s.

In this guide they will not each be covered in detail, but some are worthy of being highlighted:

1.13 Definition of “sold”.

1.3 Definition of “binding offer”.

1.7 Definition of “Introduced to the Property”.

4. “A person signing this Authority for or on behalf of the Vendor is personally liable for the due performance ot the Vendor’s obligations…”

5. If the agent is asked to transfer money to the vendor’s legal representative the vendor agrees to the agent retaining an amount the has or will become entitled to as a result of the sale of the property.

6. The vendor authorized the agent of deduct fees and associated taxes from the deposit money.

7. If the property is sold and no deposit moneys are held by the agent the vendor will pay the agent’s fees and agreed expenses on demand.

12. If the contract of sale is ended by agreement or default the agent is still entitled to commission and agreed expenses.

Providing a copy of the Sale Authority to the vendor A requirement of section 49A and 53 is to provide a copy of the Sale Authority to the vendor.

This should be done at the time of signing.

For electronic communication of an Authority, you must send the entire document and have the vendor return the entire document as an acknowledgement of all the terms and conditions of the agreement.

Conjunctional sale A conjunctional sale is when one agency works with another agency to sell a property. Both agencies are listed on the one Sale Authority form and the details of the working arrangement are disclosed and agreed to by the vendor. The vendor pays one commission. The commission is shared between the agencies and the percentage of commission is negotiated by each agency.

Conjunctional sales can occur when:

• there are different functions performed by different agencies. For example, one agency lists the property and

the other agency markets and manages the sale;

• a property is located outside of the agency’s geographical area. For example, an agency’s existing rural client

(vendor) wants to sell their property they own in the city. The rural agent introduces the client to a city agent and both agencies work together on the sale of the property, drawing on their local knowledge to achieve the best result for the vendor;

Under a conjunctional sale arrangement, all agencies have an equal responsibility to meet their obligations of performance under the Sale Authority. An agency introducing a purchaser to the selling agent is not a conjunctional sale. If the introducing agent is claiming to have some control over the buyer, they must be acting for the buyer as their agent. If they are not, then the buyer is free to deal with any selling agent without the selling agent having to share commission with anybody else. An agent acting for buyer should have a purchase authority from the buyer so that they can be paid by the buyer. An agent cannot act for both buyer and seller in the one transaction.

8.2 Vendor Check List form

As best practice, after signing the client to the agency you should ask the client to complete a Vendor Checklist form.

This document will assist you and the agency with further information about the property. It will help you to represent the property to prospective purchasers about its condition and features and establish the goods that will be sold with the property.

Discuss the checklist with the Vendors and have them acknowledge the information by signing the form. 8.3 Learning activity Multiple Choice (choose one only – circle your answer)

1. The sections of the Estate Agents Act relating to claiming commission and outgoings are:

a) 49A and 53; b) 49A and 50; c) 47A and 50; d) 49B and 50.

2. The three types of Authorities for selling land are:

a) the Exclusive Sale Authority, the General Sale Authority and the Exclusive Auction Authority; b) the Exclusive Sale and Managing Authority, the General Sale Authority and the Auction Authority; c) the Exclusive General Sale Authority, the General Auction Authority and the General Sale Authority; d) the Exclusive vendor Authority, the General vendor Authority and the Exclusive Auction Authority.


3. When you are charging commission as a percentage of the sale price, you must state the commission as a

dollar amount as well as a percentage.

True or False

4. Section 49A of the Estate Agents Act requires the inclusion of the vendor’s price on the Sale Authority.

True or False


5. Name some of the benefits of an Exclusive Sale Authority.

6. What is a rebate, how do you notify the vendor of rebates and when must rebates be passed on to the vendor?

Best Practice Tip You should review the

checklist to make sure the information provided by the

vendor is consistent with what you know about

the property.

CPPDSM4008A 84 V2015.3

8.4 Learning activity – completing forms

Chris and Emma Bainbridge decided to sell their family home.

They have engaged Melissa Todesco of ABC Realty Pty Ltd ACN 123456 789 trading as Millers Real Estate to sell the property.

The agency’s details are:

Address: 335 Camberwell Road, Camberwell 3124

Phone number (03) 9999 9999 Mobile: 0400 000 000 Fax: 03 9999 9998

Email: [email protected]

Property Address: 233 Kings Road, Glen Iris, Victoria 3146

Contact phone number: 03 8888 8888 Mobile: 0499 999 999 Email: c&[email protected]

Authority period: 60 days with a further 30 days continuing period.

Goods: A list of items will be attached to the Contract of Sale.

Settlement Terms: on full purchase price with vacant possession on a 60 or 90 day Contract.

Vendor’s Price: $730,000.

Your estimate of the likely selling price: $680,000 to $740,000.

Commission Rate negotiated: 2.75% (including GST) of the selling price.

Marketing expenses: $4,500.00.

Other expenses: $75.00.

Fill in the front page of the Exclusive Sale Authority using the information provided above. Where information is not provided please make up the information on your Authority to complete the document.

CPPDSM4008A

V2015.3 85

mailto:[email protected]

mailto:c%[email protected]

Chapter 9 Prepare Statement of Information

This chapter should be read in conjunction with 7.3.2.

9.1 Statements of information

The agent must prepare a Statement of Information, in an approved form, for each residential property they are engaged to sell, regardless of whether the property is advertised as being for sale.

The Statement of Information must be:

• in the form approved by the Director of Consumer Affairs (4 approved forms can be found on the CAV site) • displayed at all open for inspections • included with online advertising • given to a prospective buyer within two business days of a request • updated if there is a change in the indicative selling price • kept as a copy including any revised version

The Statement of information must include:

• an indicative selling price • details of the sale of the three most comparable properties, or if three such properties could not be identified, a

statement to that effect • the median selling price for residential property in the suburb and the type of residential property to which the median

relates 9.2 Indicative Selling Price

The indicative selling price may be a single figure or a range where the top end id no more than 10% above the bottom end. The single figure or the lower end of a range must not be less than any of the following:

• The agent’s single figure estimate contained on the sale authority • The lower limit of the agent’s estimated range contained on the sale authority • The amount of a written offer rejected by the vendor on the basis of price • Any amount the seller has advised (whether orally or in writing) the agent or representative is the amount that the seller

will accept as the selling price or if the seller subsequently revises the amount, the revised amount. 9.3 Three Most Comparable Properties

These are the sales results of the three properties selected by the agent as being the most comparable at the time of arriving at the estimate included on the sale authority. If three comparable properties could not be identified, then Option B on the Statement of Information must be selected. If only one or two sales of comparable properties could be found, and therefore Option B had to be selected, it has been permissible since 16th September 2019 to also give details of the one or two comparable property sales.

9.4 Median house or unit price for the suburb

The median in a group of sale results is the price point where half of the sales fall above that point and half fall below that point.

Section 47AF requires that the Statement of Information “include the median price for residential property -

(i) sold in the same suburb in which the residential property (ii) is located; and

(iii) sold during a period of not less than three consecutive months and not more than 12 consecutive months ending not more than 6 months before the information statement is prepared”

The same section of the Act requires that the Statement of Information show the type residential property to which the median relates, and the period used to determine the median. Although it is not required by the Act the Statement of Information forms prescribed by the Director of Consumer Affairs require that the source of the data be specified.

This part of the legislation and statement of information is difficult to comply with. Firstly, the legislation seems to assume that all residential property is in a suburb, clearly this is not the case as it could be in CBD, in a regional city or town or in a rural region. Since 16th September the prescribed statement of information allows for the specification of the type of property to which the median refers. The Act and the Statement of information also overlook the fact that many localities, because of the small number of sales, have no median price information.

9.5 How to complete a Statement of Information if there is no median price

If there is no published median price for a suburb or locality and you are unable to calculate a median price, include the following note, or a note along similar lines, in your statement of information:

Important advice about the median sale price: When this Statement of Information was prepared, publicly available information providing median sale prices of residential property in the suburb or locality in which the property offered for sale is situated, and our sales records (if any), did not provide a median sale price that met the requirements of Section 47AF(2)(b) of the Estate Agents Act 1980.

If the property for sale is vacant land which is part of a residential development, consider whether a median price can be calculated as other blocks of land in the development are sold and, as required, update the Statement of Information for the property for sale.

If there is no publicly available median price, but you have sales records or other information that helps you to calculate a median price for the suburb or locality, you should calculate the median and include it in the Statement of Information for the property for sale with the following note, or a note along similar lines:

Important advice about the median sale price: The median sale price is provided to comply with section 47AF(2)(b) of the Estate Agents Act 1980. The median selling price for a residential property sold in the same suburb or locality in which the property offered for sale is located has been calculated on the sale prices of [insert number of sales] residential properties sold during the period specified by the section. Because of the small number of sales, the median selling price is unlikely to be meaningful statistically and should be considered accordingly.

9.6 Caution regarding median prices

In some discussions with buyers and sellers it may be necessary to explain to them why the estimated price on the property for sale differs so greatly from the median price for the locality. In addition to the points already mentioned, the median can appear unrelated to the property if a large proportion of the properties sold in the period over which the median has been calculated differ significantly in the same way from the property. For instance, the property to be sold may be a large new luxury unit, yet the vast bulk of recent sales in the area may have been apartments with one or two bedrooms that were 40 to 60 years old. In such a case the property for sale will seem very expensive relative to the median price for the locality.



1. A Statement of Information must be prepared for:

a) Residential properties if they are advertised on the internet

b) All properties irrespective of whether they are advertised

c) All properties listed for auction

d) All residential properties irrespective of whether they are advertised

2. A Statement of Information must be updated if:

a) The median price for the locality changes

b) The vendors reduce their reserve price

c) An offer above the indicative price is rejected because the vendor wants more

d) An offer above the indicative price is rejected because it is conditional on finance


3. Comparable properties are those that have sold for about the same amount as the vendor wants.

True or False

4. All properties containing a residence must have a Statement of Information when being sold because they are residential.

True or False


5. What information must be included on the Statement of Information if you can only find two comparable properties that sold within the prescribed time and location.

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6. What action should be taken if on identifying the three most comparable properties you notice on the sales database that one of the properties is marked with an asterisk indicating that the vendor doesn’t want the price disclosed.

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Chapter 10 Selling property

10.1 Record the listing When the client has signed the Sale Authority, you need to ‘list’ their property on the agency’s database. The listing should detail all information about the property that you have obtained from your appraisal, the Sale Authority and the Vendor’s Checklist.

When entering the listing details of a property, you should make sure the information is comprehensive and accurate because this information will be relied on by your agency to answer potential purchasers’ enquiries. It should be the one-stop-shop for knowledge about the property.

When you have listed the property, you can begin the process of selling.

If the agency has other sales agents who will have the opportunity to sell the property, they will usually want to inspect the property, and depending upon agency procedure this may be during a scheduled team inspection of newly listed properties.

10.2 Obtain the Section 32 Vendor’s Statement

This statement which is commonly referred as ‘the section 32’ is a requirement of the Sale of Land Act and contains a range of information about the property. The information that must be included in the statement is listed in Section 32 of the Act and the statement is prepared by the vendor’s conveyancer or solicitor. It is an offence to fail to give to a purchaser a section 32 statement signed by the vendor before the purchaser signs the contract. (Section 32L(c))

You will need to tell the vendor to appoint a conveyancer or solicitor and have them prepare the section 32.

While the property cannot be sold in the absence of the section 32, it can be advertised, and buyers can be introduced to it.

Section 32 takes up several pages of the Sale of Land Act and should be read. While the statement contains important information, buyers should not treat it as the source of everything they need to know about the property. For instance, Section 32 does not require a declaration of:

• whether there are structures on the property without the required approval • substandard or dangerous building materials that form part of the building • whether there have been applications for planning permits for the redevelopment of nearby properties

The following table describes many of the things that must be included in the section 32:

Best Practice Tip You should check the

section 32 to make sure that the name/s of the

title owner is identical to the name/s stated on

the Sale Authority.

Topic What the disclosure must contain

Building

• Notification of any building works at the property in the previous 6 years (or 7 years if the property is sold by an owner-builder).

• Insurance and guarantees of any building works carried out.

Planning and road access to the land

• The name of the local shire or Council, the geographical zoning (metropolitan or

rural), how the property is going to be used (residential, business or industrial etc.) and the road access to the land.

Outgoings and statutory charges

• Outgoings and charges against the land such as Council and water rates, land tax etc.

Warning Notice

• A warning notice to the purchaser that they should make their own enquiries about the permitted use of the land.

Services

• Details about the utilities (gas, electricity, water and sewerage, telephone) not connected to the land.

Title

• A copy of the Certificate of Title or in the case of land title by chain of title, a copy of the last conveyance in the chain.

• Existing registered or unregistered mortgages over the land.

• Proof of the right to sell the property if the vendor is not the registered owner, such as a bank’s right to sell in the situation of a mortgagee sale.

• A copy of the registered plan of subdivision (if it applies e.g. off-the-plan sales).

• Registered easements, covenants or restrictions over the land.

» An easement is the right to use the land of another or a right to prevent the owner of that land from using that land in a particular manner, such as a restriction from erecting a building over the pipes used to supply water to the land.

• Covenants are restrictions imposed on the owner regarding the use of the land, such as the height of a fence permitted or the number of dwellings permitted to be built on the land.

Owners Corporations

• If the Title forms part of an Owners Corporation, then a certificate stamped with the Owners Corporation seal, must be provided. The certificate outlines the costs to the lot owner of:

» fees and monies outstanding;

» proposed fees or costs;

» insurance;

» repairs and maintenance costs.

It will also include details of the Owners Corporation manager, services provided to lot owners, a copy of the Owners Corporation rules, and legal matters affecting the Owners Corporation, the lot owner or the common areas of the Owners Corporation.

CPPDSM4008A 92 V2015.3

10.3 Preparing the Property To attract as many purchasers as possible, before marketing a property, the vendor should take steps to ensure the property is presented to its full potential.

Depending on the nature of sale, there could be little or no preparation necessary. For example:

• a property is to be demolished; • it is an off-the-plan sale (there are no existing buildings); • the property is a ‘shell’ structure, for example a warehouse which is basically walls, roof and floor which does not

require any improvements.

For properties that require preparation and improvement, the vendor should make sure that the property is:

• clean, tidy and uncluttered, both inside and outside; • gardens are maintained; • the paint finishes of the property are presentable; • windows, doors, gates etc. are operational and in good working order; • any obvious leaks are repaired; • in some cases, vendors also invest in having residential properties professionally furnished for the marketing period.

10.4 Taking photographs and presenting the floor plan You will be responsible for organising photographs of the property which will usually be taken buy a professional photographer. You will need to organise access the property with the vendor or tenant.

If the property is tenanted your will require the permission of the tenant to enter the property for the purpose of taking sale photographs as the Residential Tenancies Act does not state this as one of the purposes for which there is a right of entry to the property. Also, if any of the tenant’s possessions are to be included in photographs you will need the permission of the tenant. If permission is obtained it should be done so in writing in case of future disputes. If access to tenanted property is required to measure for a floor plan, the tenant’s permission will be required.

Floor plans should be accurate, and photographs should not be altered to give a false impression by say deleting powerlines or inserting a green lawn.

All the photos taken do not have to be used, as stated previously their purpose is to entice prospective buyers to inspect the property.

If a drone is used relevant air safety regulations should be complied with and avoid angst from neighbours in adjacent properties by blurring any part of their property that is captured in the photographs.

10.5 Writing marketing copy In most cases, real estate advertisements contain text (called marketing copy) which describes the property and its features. Some agencies employ the services of a copywriter, while others rely on the listing agent to develop the copy in consultation with the vendor.

When writing copy for real estate advertisements, you should include:

• the address; • how the property is being sold (privately, by auction, by tender); • approximate land size (don’t rely on what the vendor tells you; • the number of rooms including living rooms, bedrooms, bathrooms; • the number of garages or car parking spaces (if applicable); • the proximity of the property to amenities such as schools, shops and public transport; • the period style or age of the building;

• any features of the property that gives it a point of difference and entices purchasers; • the sale price or price range. Of course, the description should also be accurate. 10.6 Legal obligations in advertising Refer to sections 18, 30, 152 and 157 of Schedule 2 of the Competition and Consumer Act, section 42 and 47C of the Estate Agents Act and the Estate Agents Professional Conduct Regulations

A critical part of promoting the property is the sale price. When preparing copy for advertising you need to reflect the vendor’s sale price as it is stated in the Sale Authority. If you advertise a property less than the vendor’s sale price, it is false and misleading. Potential purchasers could assume that the price or range you have advertised is the vendor’s selling price or range.

If the vendor’s sale price is unknown, any price indicator in advertising or supplied by other means must not be less than the estimate you supplied to the vendor as required by Section 47A of the Estate Agents Act (see 7.3.2 in this guide). If the price for a residential property is stated as a range the top end of the range must not exceed the bottom end by more than 10%. (Section 47C(2))

When marketing residential property you must not make any statement about selling price that is modified by words or symbols. (Section 47C(2A)) For instance you cannot say “$900,000 plus” but you could say $900,000 - $990,000, provided that the vendor price was not greater than $900,000 or the vendor price was not known the bottom end of your estimate was not greater than $900,000.

In all forms of marketing, you and the agency have an obligation to comply with consumer laws and the Estate Agents Act.

The primary legislation that governs the conduct of real estate agents for advertising is the Competition and Consumer Act and the Estate Agents Act. They specify requirements and penalties for any false or misleading advertising. You must not make a false and misleading statement about a property for sale, either verbally or in writing, in any advertisements, including photographs, pictures and drawings.

Under section 42 of the Estate Agents Act, it is illegal to willfully make a false or misleading statement in advertising and Section 47 deals extensively with pricing. The Estate Agents Professional Conduct Regulations also state that when performing your functions as an agent’s representative, you do so with due care, skill and diligence as well as acting fairly and honestly.

Penalties for not complying with consumer laws and the Estate Agents Act can be significant for both you and the agency.

10.7 Completing and getting approval for the advertisement Once the photographs and copy have been finalised, the advertisement is collated into the finished product and shown to the vendor for approval. You may be responsible for preparing the advertisement or the agency may have a person dedicated to preparing marketing material.

When the advertisement is complete, before publishing, you should ask the vendor to approve the description wording and photographs. If the vendor wants to advertise in a way which conflicts with consumer law or the Estate Agents Act, you need to advise that it cannot be done and why this is the case.

10.8 Advertising and promoting the property When the advertisements have been approved by the vendor, you should implement the advertising schedule as agreed in your marketing plan.

Show the property to prospective purchasers

10.9 Introduce prospective purchasers to the property

In order to sell the property, it is necessary to show it to prospective purchasers and in the process to comply with a range of legal and ethical requirements.

Many purchasers identify properties of interest through advertising and arrange to inspect them. As an agent you may also have a list of prospective purchasers you can contact about the property to see if they are interested in inspecting it.

Inspections may happen by appointment or at an advertised open for inspection.

10.9.1 Access to residential properties

If the vendor occupies the property, they may have preference regarding the type of inspection, but in the case of residential properties, if they are not willing to have advertised open for inspections, they may severely limit the number of people inspecting the property. Sometimes when an inspection is made easy and non-threatening by being an advertised open time, people who were not sufficiently motivated to organise an appointment will inspect and may on seeing the property turn into motivated potential purchasers.

If the property is tenanted there are limitations on access to the property for the purpose of showing it to prospective buyers. In the case of residential properties refer to Sections 85 – 91 of the Residential Tenancies Act. Some key points are:

• Access can be had to the property at any time if the tenant has consented not more than 7 days before the entry. • If the tenant has not consented there is a right of entry to show the property to a prospective buyer or lender, provided

that the entry is between 8 am and 6 pm on any day except a public holiday and at least 24 hours written notice has been given.

Warning: There is no right of entry to conduct an open for inspection at a tenanted residential property, because the Act states that access can be had to show a property to a prospective buyer not a group of prospective buyers. However, a tenant can consent to an open for inspection and many do so because it is seen by them to be more predictable and less disruptive to their lifestyle than inspections by appointment. It would be wise to obtain this agreement in writing. Conducting an open for inspection without the consent of the tenant could expose the landlord to a compensation order should the tenant take the matter to VCAT.

10.9.2 Access to commercial properties

In the case of commercial properties, the lease will usually contain provisions for access to the property for the purpose of showing it to a prospective buyer. The selling agent should abide by the provisions in the lease and avoid disrupting the functioning of the business in the premises.

10.9.3 Considerations when accessing properties

Advise the occupants of the property, whether owner or tenant, to take sensible precautions regarding their possessions, particularly those that are small and valuable.

Ask those wanting to inspect the property to supply photo ID and a contact number. Some people will react negatively to this request and you may need to be firm about it as a condition of entry to the property. If you don’t have this information you will be in a very embarrassing position should an occupant of the property call the police about an alleged theft during the inspection.

Identify dangers in the property and where possible have the owner rectify them. If there is anything that is obviously dangerous but cannot be rectified, such as an unusually steep stair, either only allow access to that area under supervision or put up warning signs and warn people verbally. Your agency may also require that those inspecting sign a waiver form, however this will not always protect the agency in the courts.

Exercise extreme caution if taking people onto build sites as there are often many dangers and the dangers can change from one day to the next.

In commercial and industrial properties adhere to the safety requirements applicable to the business operating in the premises. If the commercial premises are vacant take the action described above regarding identifying risks and controlling access.

10.9.4 Documents to be displayed at inspections

The following documents must be on display at during inspections:

• You must ensure that a statement of information compliant with the Act is on displayed at any inspection of a residential property by potential purchasers. (Section 47AF(3) Estate Agents Act)

• If your agency is subject to the Privacy Act, you must have on display a notice which sets out what you will do with the information you collect from those inspecting the property.

• A due diligence checklist obtainable from Consumer Affairs Victoria must be on display at any inspection of a residential property. (Section 33B Sale of Land Act)

• At an open for inspection immediately prior to an auction you must have on display for a minimum of 30 minutes before the auction starts the appropriate Schedules from the Sale of Land (Public Auctions) Regulations and any other conditions applying to the auction, this would include the contract and the section 32 vendor statement.

10.9.5 Behaviour at inspections

Ensure that you have the keys either with you or in a key safe at the property.

If conducting an open for inspection place appropriate signs, ensuring that you comply with council bylaws.

Arrive with time to check on the presentation of the property, e.g. blinds open, lights on, hazards removed, wallets, jewellery, phones etc not on display.

If the occupant requires that shoes be removed abide by it yourself and have a sign informing attendees, and also ask them to remove their shoes.

You are in charge at the inspection, so if you observe inappropriate behaviour you should take immediate action to correct it. Examples could include food being consumed in the property, children climbing on furniture and personal possessions being handled.

When conducting inspections, you are also on display as a representative of your agency and the vendor. The people inspecting the property are not all intending purchasers, they may be:

• Investigating the market before buying at a later date, however they may bring forward their plans on inspecting the property.

• Curious local residents, sometimes they become buyers on seeing the property or they inform interested friends or relatives about the property.

• Property owners thinking of selling and comparing the property to theirs, and/or checking your performance as an agent. While these people may be important for potential future listings, don’t forget that the purpose of the open for inspection is to sell the property for your current client.

• Friends or family of the vendor, inspecting on their behalf to see how you are performing as an agent. • People with no particular intent, but who on seeing the property they fall in love with it. These people may be the

buyers. • People who have been seeking a property for a long while and are frustrated, having missed out in the past. If they like

the property these people are ready to act and may even be prepared to pay a premium price to bring the searching and disappointment to an end.

• Buyers who have just started looking, some will buy quickly while others may look for months or even years.

If you have the opportunity during the inspection, talk with those inspecting, ask open questions and above all listen and observe, as you may find out a lot of useful information.

At the end of the inspection ensure that everybody has left the property and return the property the way it was when you arrived. Ensure that doors that were locked are again locked and return blinds, lights and so on to the way they were. Leave a note for the occupant confirming that you were there as arranged.

After the inspection, it is important to contact and follow-up with each party that attended, but only if you have made it clear that you may contact them at the time of collecting their personal information. You should also report to the vendor.

10.9.6 Answering questions

As the agent acting for the vendor you will inevitably be asked questions about the property by those inspecting it or deciding whether to inspect it. Some buyers think you have a duty to inform them of all the negative aspects of the property, this is not the case, as you are the representative of the vendor and such action would not be in the vendor’s interest. However, in the Estate Agents (Professional Conduct) Regulations as prescribed by government there are regulations relevant to the agent’s handling of questions, they include:

Regulation 10 - Fairness and honesty

(1) An estate agent or an agent’s representative must at all times act fairly, honestly, in good faith and to the best of the estate agent’s or agent’s representative’s knowledge and ability in performing the functions of an estate agent or agent’s representative.

(3) An estate agent or an agent’s representative must not mislead a purchaser to prospective purchaser about a seller’s instructions.

Regulation 11 Acting in principal’s best interests

An estate agent or an agent’s representative must always act in the principal’s best interests except if it is unlawful, unreasonable, improper or contrary to the instructions of the principal, for whom the estate agent or agent’s representative is acting, to do so. (NB: In this context the selling agent’s principal is the vendor)

Regulation 15 Estate agent or agent’s representative to ascertain information

An estate agent or an agent’s representative must make all reasonable enquires to ascertain the information relevant to a service or transaction relating to the estate agency practice to be provided or performed by the estate agent or agent’s representative.

From these it could be interpreted that if an agent is asked a question and knows the answer, he or she needs to answer that question honestly. There will be many instances where the agent doesn’t know the answer and should admit to this as part of acting honestly.

Regulation 15 suggests that the agent find the answer when they don’t know it. This may prove impractical and runs the risk of the agent transmitting inaccurate information either through being misled at the source or through transmitting it incorrectly. Also, there is a risk that in some circumstances, as a result of a demanding and manipulative potential purchaser, it may start to seem that the representative is acting for the purchaser rather than the vendor.

As an agent’s representative you need to remember that you are not a solicitor so cannot give legal advice, you are not a building inspector so cannot give building advice, you are not the local council so cannot give planning advice, and you are not an investment advisor so cannot give investment advice. Buyers should be encouraged to engage relevant professionals rather than seek advice from you. This also has the benefit of avoiding accusations of a conflict of interest.

10.9.7 Your safety when accessing properties

You too are at risk from the physical dangers at the property, but in addition there can be other dangers. Agents have been threatened and assaulted in the course of their normal work activity and number of years ago an agent in Victoria was murdered during an inspection. Incidents such as a fall or the onset of a medical condition can be of greater consequence when agents are working alone. Worksafe Victoria has recommendations which are covered in the unit “Work in the real estate industry”.

10.10 Negotiation As the marketing campaign draws in interest, you may start obtaining offers from prospective purchasers. The principles of negotiating are the same for all types of sales.

Your role as the agent is to facilitate and negotiate the best outcome for the vendor.

Offers to purchase the property could be received verbally or in writing. Unless you have written instructions from the vendor that state otherwise, you must inform the vendor of all offers as soon as possible. [Reg 16 Estate Agents (Professional Conduct) Regulations]

10.10.1 Formal Negotiation

Ideally the offer should be obtained by having the purchaser sign a contract of sale after being supplied with copy of the Vendor Statement (Section 32(1) Sale of Land Act). You will also need to retain at least one copy of the vendor statement with the purchaser’s signature on it as acknowledgement of their receipt of the statement. Despite having yet to obtain the vendor’s signature on the contract you must give a copy of it to the purchaser (Section 53 Estate Agents Act). You should also collect from the purchaser the deposit or part deposit and issue a trust account receipt. If the offer is not accepted the deposit must be refunded. However, by following this process if the offer is accepted but the purchaser subsequently cools off, provided you collected a sufficient amount as cleared funds, you will be holding enough to cover the cooling off penalty payable to the vendor.

The purchaser may wish to include special conditions in the offer. Common special conditions relate to:

• Finance approval • Building inspection • Pest inspection

If the vendor accepts the offer by signing a contract with special conditions on it, the purchaser’s right to withdraw from the contract without penalty will apply if the conditions are not met within the timeframe specified.

The standard form of contract contains finance, building inspection and pest inspection special conditions which can be activated by you filling in the appropriate parts of the contract. You are not permitted to write special conditions, as to do so is a breach of the Legal Profession Act (see Section 53A Estate Agents Act), they can only be written by solicitor or conveyancer. Your agency may have commonly used special conditions already prepared by a solicitor and if so, these could be used. You may also need to point out to a purchaser that the vendor will not only be considering the amount offered but will also take account of special conditions on the offer. Special conditions make an offer less attractive to the vendor, but ultimately it is the decision of the purchaser as to whether to include them.

If the vendor finds the offer acceptable, they should sign it and you should leave a copy with them. A copy of the contract with the vendor’s signature on it should then be delivered to the buyer, and you should obtain their written acknowledgement of the receipt as confirmation of the exchange of contracts.

Advertising for the property should be changed to show the property as “Under Offer” and should be shown as “Sold” once the cooling off period has ended in the case of an unconditional contract, or otherwise once the contract becomes unconditional.

If the vendor doesn’t accept the offer a process of negotiation will need to take place with you going back and forth between the vendor and the purchaser until hopefully agreement can be reached. Negotiation points could include the sale price, settlement period and special conditions. This can involve the vendor making a counter offer by altering the contract to be acceptable to them, signing it and initialling and dating the alterations. If this happens you can return to the buyer with clear evidence of what the vendor is prepared to accept. Agreement is then achieved if the purchaser initials the alterations and the exchange of contracts is completed by ensuring that the vendor and the purchaser acknowledge being given the fully signed agreed version of the contract. If due to many alterations and initialling the contract becomes very messy, it can be replaced with a neater one.

Provided that signing and initialling is complete and that contracts have been exchanged, the messy version will remain binding on the parties until replaced with the neat version.

Agreement will not be achieved in many instances in which case the deposit will need to be refunded, but the agency’s copy of the offer must be retained and filed. The refund of the deposit can sometimes cause angst because of the restrictions trust accounting legislation and regulations impose on what agents can do. Following are important points regarding the handling of deposits:

• On receiving any part of the deposit, the agency must immediately issue a trust account receipt. • The payment must be deposited in the agency’s trust account by the end the next business day if the bank is located

within 16 kilometres of the agency, in other cases it must be deposited before the end of the third business day. • If the negotiation concludes very quickly and before the payment has been deposited, it can only be refunded before

paying it into the trust account if the buyer immediately returns the original of the receipt, which will need to be held in the agency’s records as a cancelled receipt.

• Once the deposit is in the trust account it can only be refunded once it is classified as cleared funds in the account. • Refunds from the trust account can only be made by way of a trust account cheque or an electronic transfer.

You will need to use this basic information about trust accounting to avoid disputes that could arise because of assumptions purchasers might make.

10.10.2 Informal Negotiation

If the vendor agrees, informal offers (i.e. offers that are not on a contract) can be presented. If the offer is acceptable or if agreement is reached in subsequent negotiations contracts can then be prepared and signed. Until the contracts are signed and exchanged there is still no binding agreement (Section 126 Instruments Act), so this process is fraught with danger. If the parties keep to their word and no other purchaser appears, all will be well, however things do not always proceed this way, as sometimes either the vendor or the purchaser may change their mind, or another purchaser may appear.

10.10.3 More than one purchaser

Sometimes situations arise where more than one purchaser will want to buy a particular property at the same time. While government regulation prescribes the how public auctions, which of course are suited to this situation, are to be conducted, the way in which private sales are to be conducted in these circumstances has been left unaddressed. The agency in which you work may have procedures to be followed in these circumstances. Whatever process is used you should take account of the following points:

• As the selling agent you must act in the best interests of the vendor except where it would be unlawful, unreasonable, improper or contrary to the vendor’s instructions to do so. [Reg 11 Estate Agents (Professional Conduct) Regulations]

• You must act fairly and honestly. [Reg 10 Estate Agents (Professional Conduct) Regulations] • Unless otherwise instructed by the vendor you must communicate all offers to the vendor. [Reg 16 Estate Agents

(Professional Conduct) Regulations] • If two or more offers are submitted to the vendor at the same time, the vendor can either accept one of the offers or

reject all offers. Some purchasers have the mistaken belief that if their offer is not accepted, they will always be able to make a revised offer.

• In the interests of fairness, if Purchaser A makes an offer thinking theirs is the only offer and Purchaser B makes an offer knowing there is already an offer from another purchaser, then Purchaser A should be given the opportunity to revise their offer with knowledge that there is an offer from another purchaser.

• Some agents reveal the amount of one purchaser’s offer to the other purchaser. This may be a breach of privacy, but it has yet to be tested legally. However, to do this is not in the best interests of the vendor, as the buyer getting this information and increasing their offer will usually only do so by a small margin, but if simply invited to put in their best offer may increase by a much greater amount.

• You may need to explain to purchasers that while price is an important element of an offer the vendor will also be considering special conditions, settlement date and deposit arrangements. Therefore, sometimes the highest offer is not the successful one.

10.11 Contract of Sale

When a prospective purchaser wishes to make a formal offer to buy a property, they will sign the section 32 document already signed by the vendor.

They will also sign a Contract of Sale. For the Contract to be enforceable in the State of Victoria, section 126 of the Instruments Act 1958 requires the contract to be in writing and signed by all parties. The REIV and the Law Institute of Victoria provide standard Contracts of Sale.

The Legal Profession Act 2004 prohibits an estate agent from preparing a Contract of Sale. The Contract must be prepared by a legal practitioner or licensed conveyancer. This means, as an agent’s representative, you cannot draft and insert conditions into a Contract, but under section 53A of the Estate Agents Act you are permitted to fill in the particulars of the Contract.

You need to ensure the particulars of the Contract are filled in correctly. Incorrect or incomplete Contract details could render the Contract being unenforceable and result in a loss of commission, or other disciplinary action. You should carefully check all details in the completed Contract of Sale for accuracy before providing it to a prospective purchaser.

The REIV and the Law Institute of Victoria publish a contract of sale. While it is widely used it is not the only type of contract of sale you will come across. Solicitors and conveyancers can draft contracts of sale and it is particularly common for them to do so in the case of auctions, where there has been a long tradition of this.

In addition to filling out the contract you need an understanding of it to answer basic questions that may come from either the purchaser or the vendor. If you cannot accurately answer a question you should seek the assistance of your manager or suggest the questioner speak to their solicitor or conveyancer.

10.11.1 Understanding and completing a contract of sale

The following information is based on the edition of the REIV/Law Institute of Victoria contract first published in August 2019.

Notices and warnings Page 1. Notice to purchasers about their cooling off rights.

Notice to purchasers of property off the plan. There is a requirement in legislation that this notice appear, however estate agents should not use the contract for off the plan sales.

Page 2. Warning to estate agents to not use the contract for the sales of off the plan properties. The contract for this purpose should instead be prepared by the vendor’s solicitor or conveyancer.

Signing Page 2. The requirement for the purchaser to state under what authority they are acting if they are signing on behalf of

somebody else.

Acknowledgement by signatory that they received a copy of the contract at the time of signing.

A statement that the offer, which is what the contract is until it is also signed by the vendor, lapses after three clear business days unless a different number or days is inserted.

Provision for signatures and dates. Refer to General Conditions 1-4 on Page 7. Electronic signatures are acceptable.

A signatory for a proprietary limited company is personally liable. The vendor may require a director’s guarantee if the purchaser is a proprietary limited company. The purchaser may nominate a substitute or additional purchaser but remains personally liable.

The dates must be the dates on which the signatures were added.

All vendors need to sign.

Table of contents Page 3. This makes it easy to find answers to many questions.

Particulars of sale Page 4. A large amount of information can be recorded on this page but sometimes areas may be left blank:

Vendor’s estate agent – state the names as you would on an authority, i.e. the licensed entity followed by the ACN and trading name.

Vendor – include names of all vendors as per the title.

Vendor’s legal practitioner – this information will usually be on the of the Section 32 statement.

Purchaser’s estate agent – this would only be relevant if the purchaser has a buyers’ advocate acting for them.

Purchaser – the name/s of the purchaser/s who will be signing, or the name of the purchaser on whose behalf an appropriately authorised person is signing.

The purchaser must be an individual or a company. It cannot be a business name or trading name as they are not legal entities.

If the purchasers are individuals rather than a company, ask for photo identification to verify their identity.

If the purchaser is a company, ask the person who will be signing to provide photo identification. Note General Condition 2 which states the signatory is personally liable for the purchaser’s obligations under the contract.

Purchaser’s legal practitioner or conveyancer – the purchaser may not have selected one yet, so the information could be obtained later if the offer is accepted. It will be needed as the agent will need to send a copy of the contract to them as soon as possible after contracts are exchanged.

Land – one of two options can be used. The first option is to record in the boxes provided the description of the land found on the Certificate or Title. Beware that some properties being sold as one may be made up of two or more titles, in which case the details of each title would need to be included.

The second option allows the description of the land contained on the title documents in the Section 32 Statement to stand as the description for the land for the purposes of the contract. This is clearly the easier option and avoids the risk of error when transcribing information. If the second option is used a line should be put through the first option

This part of the contract states that “The land includes all improvements and fixtures”.

Refer to General Condition 7 on page 8 which indicates the purchaser should carefully check the identity and description of the land before signing the contract. General condition 13 relates to the sale of general law land which is rare.

Page 5 Property address – the address by which the property is known.

Goods sold with the land - If something that is not a fixture is included with the sale it is “goods” and should be listed here. Sometimes goods are referred to as chattels. Examples of goods might be:

• a free standing garden seat • a billiard table • a free standing workbench

• a refrigerator If something is included in the sale and you are unsure about whether it is a fixture or goods you should record it in this part of the contract.

If any items that could possibly be considered to be fixtures are not included in the sale, the vendor should have their solicitor or conveyancer draft a special condition to the effect that despite the description of the land on page 4 of the contract the following items are not included in the sale. Just as for listing goods, if there any doubt, it is best of specify what is not included. Examples might be:

• Home theatre systems • Children’s outdoor play equipment • Wall mounted TVs and the associated brackets

Payment – refer to General Condition 14 Price - is the full purchase price.

Deposit – is the amount (usually 10% of the price) which must be paid shortly after exchange of contracts, if it has not already been paid at the time of making the offer.

by – is the date by which the full deposit must be paid if it was not paid with the offer.

of which – the amount of deposit paid at the time of signing the contract. If the full deposit was paid at the time of signing the contract, then the amount should be recorded here as well as in the deposit area.

Balance – the price minus the deposit.

Deposit bond – refer to General Condition 15. Only tick the box if the purchaser is offering a deposit bond rather than paying a deposit.

Bank guarantee - refer to General Condition 16. Only tick the box if the purchaser is offering a bank guarantee rather than paying a deposit.

GST – refer to General Condition 19. In most instances you will not be ticking any of the boxes as the price stated in the payment area will be inclusive of GST if there is any. The boxes should only be ticked on the written advice from the vendor’s solicitor or accountant.

Settlement – refer to General Conditions 17 and 26.2. This is the date on which the balance of the purchase price is to be paid and the purchaser takes ownership of the property.

The reference to a lot in an unregistered plan of subdivision is not relevant in the case of the standard contract. It relates to off the plan sales, which something the standard contract should not be used for. However, you will come across similar terminology in contracts drafted by solicitors or conveyancers.

Care needs to be taken if the property is tenanted but the purchaser is to get vacant possession of it at settlement, as time must be allowed to get the tenants out of the property in line with the Residential Tenancies Act. Also, settlements between Christmas and mid-January may not be feasible as most solicitors and conveyancers are closed during that period.

Lease – refer to General Condition 5.1. Only tick the first box if the purchaser will not be entitled to vacant possession of the property. If it is ticked, then one of the subsequent boxes must be ticked to describe the type of lease the contract is subject to.

There is a risk of a tenancy being overlooked if the property is tenanted but the purchaser is entitled to vacant possession, as there is no provision in the contract to state that the property is currently tenanted. The tenancy would only be apparent in the Section 32 Statement. An existing tenancy has a major impact on the selection of a settlement date in instances where the purchaser is entitled to vacant possession and this will be dealt with later.

Terms Contract – refer to General Condition 30. Terms contracts are rare and where they do exist it is likely the contract will be prepared by the vendor’s solicitor. See later description of terms contracts.

Loan – refer to General Condition 20. If is often the case that offers are made subject to finance, so this section will need to be completed. Ensure you read GC 20 as it specifies what the purchaser must do.

Building report – refer to General Condition 21. It is often the case that offers are made subject to a building report. Ensure you read GC 21, as it specifies what the purchaser must do. Note that it only allows the purchaser to end the contract if there is a major building defect in a structure on the land.

Pest report – refer to General Condition 22. It is often the case that offers are made subject to a pest report. Ensure you read GC22, as it specifies what the purchaser must do. Note that for the purchaser to end the contract the report must show that there is a major infestation affecting a structure on the land.

Special conditions Page 6 Either the vendor or the purchaser may want to add special conditions. The special conditions must be written by a

solicitor or conveyancer, as it would be a breach of the Legal Profession Act for the agent to write them.

This is the last of those parts of the contract that need to be filled out. The rest of the contract is made up of General Conditions, some of which have already been mentioned.

General conditions The following very brief summary should not be treated as a substitute for reading the General Conditions, but it might assist with answering questions from purchasers or vendors.

Page 7 1. Electronic signature - electronic signatures are permissible.

2. Liability of signatory - a signatory for a company is personally liable for the performance of the contract.

3. Guarantee - if the purchaser is a company the directors may have to give personal guarantees.

4. Nominee - an additional or substitute buyer may be nominated.

5. Encumbrances - the purchaser buys the property with all encumbrances except for mortgages or caveats.

6. Vendor warranties - the vendor can sell the land. - the vendor has no knowledge of claims over the land, except for rate notices and land tax where applicable. - where work has been carried out as an owner builder, the vendor warrants that the Building Act has been complied with.

Page 8 7. Identity of the land - an omission or mistake in the description of the property does not invalidate the contract

and the purchaser cannot claim compensation.

8. Services - the vendor does not guarantee the services will be adequate for purchaser’s needs. - the purchaser is responsible for organising and paying for connection of services.

9. Consents - the vendor must obtain any consents or licenses to enable the sale. 10. Transfer & Duty - the purchaser and vendor must cooperate and be timely in actions to enable transfer of title. 11. Release of security interest - the vendor will supply their date of birth if the purchaser wishes to search the

Personal Property Securities Register. - the vendor will obtain a release of any personal property security.

12. Builder warranty insurance - the vendor will provide details of any applicable builder warranty insurance. 13. General law land - the vendor must convert the title to a Torrens Title.

- additional processes are specified should the conversion not happen for some part of the land.

Page 10 14. Deposit - the form in which the deposit can be supplied.

Page 11 15. Deposit bond – a description of a deposit bond.

- the actions by a purchaser if a deposit bond is used. - the actions by the vendor if a purchaser using a deposit bond defaults.

16. Bank guarantee - description of a bank guarantee.

- the actions undertaken by a purchaser if a bank guarantee is used. - when the vendor is obliged to return a bank guarantee. - the actions by the vendor if a purchaser using a bank guarantee defaults.

Page 12 17. Settlement - the vendor and purchaser obligations at settlement. 18. Electronic settlement - vendor and purchaser must each engage representatives who are subscribers for the

purposes of the Electronic Conveyancing National Law. - the vendor must prior to settlement deliver any keys, security devices and codes to their estate agent or in accordance with the alternative arrangements described.

Page 13 19. GST - in some circumstances the purchaser must pay to the vendor, in addition to the purchaser price, and

amount for GST.

20. Loan - the provisions that apply if the contract is subject to approval for a loan. 21. Building report - the provisions that apply if the contract is subject to a building report.

Page 14 22. Pest report - the provisions that apply if the contract is subject to a pest report. 23. Adjustments - the way in which periodic outgoings and income received will be apportioned between purchaser

and vendor at settlement. 24. Foreign resident capital gains with holding - if the vendor is not a foreign resident, they will provide a clearance

certificate from the Taxation Office to that effect. - if the vendor is a foreign resident or fails to provide the clearance certificate, and the sale price is above a prescribed figure, the solicitor or conveyancer acting for the purchaser will pay part to purchase price to the Australian Taxation office.

Page 15 25. GST withholding - only applicable to new residential premises or potential residential land.

- it may be necessary for the purchaser to pay part of the purchase price to the Australian taxation office.

Page 16

26. Time and cooperation - parties to the contract must act promptly. - time extends to the next business day if the time for performing an action falls on other than a business day.

27. Service – how and on whom, documents and notices may be served.

Page 17 28. Notices - unless they relate to periodic outgoings, the vendor is responsible for any notice, order, demand or

levy made before the day of sale and the purchaser is responsible for any made on or after the day of sale. 29. Inspection - the purchaser’s right to an inspection in the week prior to settlement.

30. Terms contract - obligations and rights of the purchaser and vendor specific to a terms contract.

31. Loss or damage before settlement - the vendor must ensure that at settlement the property is in the condition it was on the day of sale except for fair wear and tear. - what can happen if there is a dispute about the condition of the property.

32. Breach - a party who breaches the contract must compensate the other party.

Page 18 33. Interest - the penalty interest rate to apply in the case of default.

34. Default notice - when a default notice is needed and what must be in it.

35. Default not remedied - the consequences for the parties if a default is not remedied. 10.11.2 Contract of sale for auction

Although it is not specified in legislation or regulation that it must be the case, contracts where the property is being offered for auction are usually prepared by the vendor’s solicitor or conveyancer. They may contain additional special conditions that are directed towards the protection of the vendor’s interests. Auction regulations specify documents containing the conditions of the auction must be on display for a minimum of 30 minutes prior to the auction, so this includes the contract. Hopefully it will be available earlier than this so that prospective purchasers can be clear on the content of the contract and can seek legal advice if necessary. If you are engaged in selling a property before auction and the solicitor/conveyancer prepared contracts are not yet available, you can use a standard contract just as you would in the case of a private sale. However, once the solicitor/conveyancer prepared contracts are available you should use them including in cases where you are selling at any time after the property failed to sell at auction.

10.11.3 Contract for off the plan sales

These are sales that take place before the registration of the certificate of title for the property. There will be a parent title but it will be the title for a property which under a proposed plan of subdivision is to be subdivided into two or more lots that will have separate titles once certain compliance requirements have been met and the registrations has been completed.

Section 9AA of the Sale of Land Act contains some specific requirements that apply in these sales, except for the rare instances where the purchaser is a statutory body or authority:

• The deposit must be paid to a legal practitioner, conveyancer or licensed estate agent acting for the vendor. So, money received directly by the vendor cannot be paid into a joint account with the purchaser as is permitted in Section 25 for other sales.

• If received by a licensed estate agent acting for the vendor, the money must be held “on trust for the purchaser” until the title is registered. In the case of other sales, the Act refers to the deposit being held as a stakeholder. This has implications for the transfer of money, as will be explained later.

• The deposit cannot exceed 10% percent of the purchase price.

• The contract must contain a conspicuous notice to the purchaser stating that: 1. Subject to the 10% limit mentioned, the purchaser may negotiate the amount of deposit payable. 2. A substantial time may elapse between the signing of the contract and when the purchaser becomes the registered

proprietor. 3. The value of the lot may change between the signing of the contract and when the purchaser becomes the

registered proprietor. Section 9AE(2) states that if the title is not registered within 18 months of the date of the contract of sale the purchaser may rescind the contract. However, the Act also allows the possibility of stating a different period in the contract. These are referred as sunset clauses.

The Act states that if the contract contains a sunset clause enabling the vendor under a residential off the plan contract to end it if the plan is not registered or the occupancy permit has not been issued within the timeframe stated, the vendor may only do so if they:

obtain the written consent of each purchaser after giving 28 days notice of the proposed rescission

or

obtain an order of the Supreme Court

In a rising market the vendor may see financial advantage in delaying a project and rescinding contracts that were entered into at a price lower than the properties could now sell for. However, since amendments to the Sale of Land Act in 2019 it has become more difficult for them to engage in this type of behaviour.

In a falling market the vendor may not delay registration of the title, but for those buyers needing a loan to complete the purchase there can be problems, as the lender is likely to value the property at significantly less than the contract price, thereby limiting the amount they can borrow and perhaps causing them to be unable to perform the contract. The vendor could then rescind the contract and the buyer will forfeit their deposit and if the vendor subsequently sells the property for a lower amount the buyer will be at risk of being sued for damages.

Rescission can also be possible in other circumstances such as by the purchaser where here land sold does not accord with the plan.

You should not attempt to advise a vendor or a purchaser about rescission rights and processes, but instead suggest they seek the advice of a solicitor with property law expertise.

Depending on the wording of the agent’s authority, the rescission of an off the plan contract can have serious consequences for the agent’s entitlement to commission.

10.11.4 Terms Contract

Terms contracts (sometimes referred to as vendor terms contracts) are described in Section 29A of the Sale of Land Act as being a contract for the sale of land “...under which the purchaser is:

(a) obliged to make 2 or more payments (other than a deposit or final payment) to the vendor after the execution of the contract and before the purchaser is entitled to a conveyance of transfer of the land; or

(b) entitled to possession of the land or the receipt of rents and profits before the purchaser becomes entitled to a conveyance of the land...”

In practice this means that the purchaser pays a deposit much greater than the usual 10% and then pays the balance of the purchase price and interest in instalments which may be spread across years. While paying these instalments the purchaser has possession of the property or is entitled to the receipt of rents and profits, but the title does not transfer to the purchaser’s name until after the final instalment has been paid.

The Section 32 vendor statement must also contain additional information in the case of a terms contract (Section 32A(d)). This is in the form of a schedule of payments and costs associated with the vendor finance.

Terms contracts are rare, but one category where they may be found is in the sale of farms. It can be difficult to obtain finance for the purchase of a farm, so to achieve a sale a retiring farmer may offer a vendor terms contract with the interest on the outstanding amount providing a retirement income.

10.11.5 Contracts of sale for house and land packages

Preparing and handling Contracts of Sale for house and land packages also varies from standard Contracts. Some of the differences include:

• if buying a house and land package, there are two Contracts involved. The Contract of Sale (for land), the same that has already been referred to for private sales, and the Building Contract (completed by a Registered Builder);

• special conditions are included in the Building Contract relating to such things as planning restrictions, commencement and completion of building construction;

• having to conform to building engineering and design guidelines;

• confirming what added extras are included with the sale (upgrades to quality of materials etc);

• attaching to the Contract, building, and service plans for gas, electricity and water and external and internal drawings;

• payment of the Contract price is usually specified in stages. For example,

» 5% of purchase price at Contract signing

» Slab Stage – 10%

» Frame Stage – 15%

» Lock up Stage – 35%

» Fix Stage – 25%

» Completion – 10%

Building contracts are not specifically the work of real estate agents so reference to them is no found in real estate legislation and regulation. If advice is needed you should obtain it from the builder’s solicitor.

10.12 Settlement dates for tenanted residential properties

In some sales of residential properties there may be a tenant in the property at the date of sale, yet it is proposed that the purchaser have vacant possession of the property at settlement. If this is to happen, you need to be very cautious in the selection of the settlement date.

If the tenant has already been given a notice to vacate or has given notice that they will be vacating, they are entitled to stay until the end of the notice period.

If the tenant is occupying the property under a fixed term lease, they are entitled to remain in the property until at least the end of the fixed term. A fixed term can only be shortened if there is mutual agreement between tenant and landlord or if there is an order by VCAT (Victorian Civil Administrative Tribunal). If there is no action by the tenant or landlord to end the tenancy at the end of the fixed term it goes on to become a month by month tenancy.

Provided that the proposed vacate date is not before the end of a fixed term lease, a notice to vacate can be given under the provisions of Section 259 of the Residential Tenancies Act which reads:

“259 Premises to be sold

(1) A landlord may give a tenant a notice to vacate rented premises if the premises are immediately after the termination date to be sold or offered for sale with vacant possession.

(2) If the landlord has entered into a contract of sale of the rented premises and the contract is subject to one or more special conditions which, if not satisfied, entitle a party to the contract to terminate the contract, the landlord may, within 14 days after the last of those conditions is satisfied, give a tenant a notice to vacate the rented premises.

(2A) If a landlord has entered into a contract of sale of the rented premises which is not a contract of sale of the kind referred to in subsection (2), the landlord may, within 14 days after the contract of sale is entered into, give a tenant a notice to vacate the rented premises.

(3) A notice under this section must specify a termination date that is not less than 60 days after the date on which the notice is given.”

In addition to the 60-day notice period it is also necessary to allow time for the service of the notice which could be as much as eight days. Also, at the time taking the offer you don’t know how long the vendor will take to decide, and then there needs to be time for the managing agent to do their bit regarding the issuing of the notice.

10.12 Sales Deposit See Sections 59, 62, 63 90, 91 and 94 of the Estate Agents Act, the Estate Agents (General, Accounts and Audit) Regulations and Sections 9AA and 24-27 of the Sale of Land Act.

10.12.1 Receiving the deposit

When a Contract of Sale has been signed by a purchaser as a formal offer to purchase the property, they will be expected to provide a deposit to confirm their intent to purchase.

We have covered the deposit payment process in the previous Contract of Sale section. As a reminder:

• the deposit is generally 10% of the sale price;

• if the vendor agrees, you can accept a lower amount as the deposit;

• in an off the plan sale i.e. before the title has been registered the deposit must not exceed 10% of the sale price;

• in a terms contract the deposit will usually be greater than 10% of the sale price.

• the deposit can be either in full up-front or a part deposit and the balance by a certain date as specified in the contract.

See later comments under “The purchaser’s right to withdraw or to cool off”.

Money received by an estate agent whether directly or by an employee or agent’s representative on behalf of any person in respect to of any transaction is referred to as trust money (Section 59 Estate Agents Act). The Act refers to this money being as being held in trust or as a stakeholder. There are stringent requirements set out in the Estate Agents Act and the Estate Agents (General Accounts and Audit) Regulations and enforced by Consumer Affairs Victoria. Your agency should have in place procedures for the handling of trust money that comply with the Act and Regulations. Non-compliance has resulted in significant penalties including fines and the loss of the right to work in real estate.

Best practice is to ask for the deposit as either an electronic funds transfer into the agency’s trust account or a bank cheque, but a personal cheque and cash can also be accepted. If you receive cash for a deposit payment, you need to be aware of and mitigate risks associated with handling large sums of cash.

The REIV/LIV Contract of Sale states:

“Payment of the deposit may be made to tendered:

(a) in cash up to $1,000 or 0.2% of the price, whichever is the greater; or

(b) by cheque drawn on an authorised deposit-taking institution; or

(c) by electronic funds transfer to a recipient having the appropriate facilities for receipt.

……..”

Regardless of how the deposit is received, it must be banked into the agency’s trust account before the end of the next business day after the day on which the money is received. However, if banking facilities are not available within sixteen kilometres of the agency the period for banking is extended to the end of the third business day after the day on which the money is received.

You must always issue a receipt for any deposit payment received. The receipt can be either an electronic record or hard copy receipt issued in numerical order and it must contain certain information as prescribed in the Estate Agents (General, Account and Audit) Regulations:

• the name under which the estate agent carries on business as an estate agent;

• the number of the receipt;

• the date the receipt is made out and, if different, the date on which the trust money is received;

• the amount of money received;

• the form in which the money was received including in cash or by cheque or by electronic funds transfer or otherwise;

• the name of the person from whom the money was received;

• the name and reference number or other identification of the person on whose behalf the money was received;

• particulars sufficient to identify the purpose for which the money was received;

• the name of the person who made out the receipt.

10.12.2 Holding and transferring the deposit As well as the requirements under the Estate Agents Act, there are also requirements for handling deposit money under the Sale of Land Act (Sections 9AA and 24-27).

Section 24 states that deposit money received by a legal practitioner, conveyancer or estate agent acting for the vendor shall be held by them as a stakeholder until settlement takes place, or in the case of a terms contract, the purchaser becomes entitled to possession or receipt of rents and profits.

The statement in Section 24 that the deposit is held as a ‘stakeholder’ is in conflict with Section 9AA which states that in the case of an off the plan sale the deposit paid to the legal practitioner, conveyancer or estate agent acting for the vendor is held by whoever received it ‘on trust’ for the purchaser. Section 24 goes on to say that the deposit can be transferred between legal practitioners, conveyancers and estate agents acting for the vendor, but whoever receives it must continue to hold it as a stakeholder. Given that in off the plan sales the deposit is to be held ‘on trust’ for the buyer rather than as a ‘stakeholder’, it should not be transferred from the agent to the vendor’s legal representative.

It often happens that the solicitor or conveyancer acting for the vendor will request that the deposit be transferred to them. In some cases, this is essential because the vendor’s mortgage on the property may be so large that the deposit is needed to contribute towards the mortgage discharge at settlement. Practice is that when an agent transfers deposit following a request under the provisions of Section 24 the agent retains in their trust account part to the deposit equal to the agent’s fee and any marketing expenses that the vendor has yet to pay under the provisions of the sale authority. Some solicitors will pressure the agent to transfer the entire deposit, but this should be resisted as it will leave the agent to invoice the vendor for fees and agreed expenses and perhaps have a lot of difficulty being paid. Depending upon the authority you have used this action may be authorised by the vendor (see REIV Exclusive Sale Authority General Condition 5).

Some vendors and buyers believe that agents benefit from interest by holding money in their trust account. This is not correct as under the provisions of Section 60 of the Estate Agents Act the government has directed that the financial institutions approved for trust accounts must pay the interest to the government. Instead of benefiting agents incur significant expenses such bank charges and auditor’s fees.

10.12.3 Vendors not using an agent

Section 25 deals with vendor not using an agent and therefore directly receiving the deposit.

10.12.4 Termination of contract

Entitlement to the deposit if contract is rescinded (terminated) is dealt with in Section 26:

1. If the vendor rescinds the contract as a result of a default by the purchaser, the vendor is entitled to the deposit. 2. If the purchaser rescinds the contract as a result of a default by the vendor, the purchaser is entitled the deposit. 3. If there is a dispute regarding the entitlement to the deposit it can be determined by a court.

If the vendor is entitled to the deposit the agent can retain from it the agent’s fee and agreed expenses

If the buyer is entitled to the deposit the entire amount of the deposit must be refunded to them and the agent will have to take separate action to recover the fee and agreed expenses from the vendor.

If there is a dispute regarding entitlement to the deposit the agent must retain the deposit in the trust account until the dispute is resolved.

10.12.5 Early release of deposit

Together with General Condition 12 of the Contract of Sale, Section 27 of the Act enables the vendor to seek early release of the deposit monies before settlement date. When you (or the vendor’s legal representative) are holding the deposit in the trust account, the vendor may require the funds to be released to purchase another property. This is common if the vendor has just sold their home and is looking for another place to live. While early release may happen, vendors should be advised that it is in no way guaranteed.

For early release of deposit money, in accordance with Section 27 of the Act:

The purchaser can authorise early release of the deposit:

o Where the contract is not subject to any special condition benefiting the purchaser; and

o Where the purchaser has accepted title or is deemed to have done so; and

o The vendor has given the purchaser notice in writing (commonly called Section 27 Certificate) setting out particulars of any mortgage and or caveat on the property, and the purchaser has within 28 days given notice he is satisfied with those particulars.

Where the purchaser fails to do any of the above within the 28 days of receiving the Sections 27 Certificate, he is deemed to have accepted the particulars and to have authorised the deposit release.

Before releasing the deposit to the vendor, the agent should await written instructions from the vendor’s solicitor or conveyancer that one of the above circumstances has been satisfied.

Section 27 authorises the agent, when releasing the deposit to the vendor, to retain from it the agent’s fee and any agreed expenses that remain unpaid. Some vendors will be surprised by this, so it is wise inform those relying on the deposit release that they will not receive the full amount.

Where the purchaser is not satisfied with the particulars in the Section 27 Certificate, he shall within 28 days give notice in writing stating that he is not satisfied with the particulars and give the reasons why. The vendor’s solicitor or conveyancer may be able to resolve the dispute, it is not something in which the agent should intervene.

The Section 27 Certificate is usually served on the purchaser by the vendor’s solicitor or conveyancer. However sometimes it is provided to the agent before the sale, in which case the agent should give it to the purchaser as soon as possible after contracts have been signed and exchanged. The certificate should have two places for the purchaser to sign, one acknowledging receipt of the information and the other authorising release of the deposit. You should only obtain the purchasers signature to the acknowledgement of receipt and the agent should retain a copy to forward to the vendor’s solicitor or conveyancer along with the contract.

Release of deposit cannot be authorised in the case of off the plan sales.

108 CPPDSM4008A V2015.3

10.13 The purchaser’s right to ‘cool-off’ At any time prior to an offer being accepted a purchaser can withdraw their offer, irrespective of the method of sale or the type of property, without incurring any financial penalty. Both you and the vendor need to take this into account as a risk if the acceptance of an offer is being delayed. There is even the risk of this in an auction where for instance the successful bidder may refuse to sign contract.

The right to cool off, which is dealt with in Section 31 of the Sale of Land Act, is not the same as the right to withdraw an offer. The right to cool off allows the purchaser in some circumstances to end the contract after their offer has been accepted by the vendor, but they incur a penalty.

The right to cool off does not apply to the purchase of:

(a) land used primarily for industrial or commercial purposes; and (b) land which is more than 20 hectares and is used primarily for farming

Also, the right does not apply if:

(1) the sale is by publicly advertised auction; (2) the sale is within three clear business days before the day the auction is to be held; (3) the sale is on the day on which the auction is held; (4) the sale is within three clear business days after the day on which the auction was held; (5) the vendor and purchaser have previously entered into a contract for the same land in substantially the same terms; (6) the purchaser is an estate agent or an agent’s representative; (7) the purchaser is a corporate body

The right to cool off lasts for three clear business days from the date on which the purchaser signs the contract. Note that even though it is only relevant as an option after the vendor has accepted the offer by signing the contract, the three clear business days during which the right to cool off can be exercised date from when the buyer signs the contract.

Note that in the rare circumstance where the auction is not held, but a sale takes place on the day the auction was scheduled to be held, the buyer will have a cooling off right.

If the contract is ended under the cooling off provisions all money paid by the purchaser must be refunded except for the sum of $100 or O.2% of the purchase price (whichever is the greater), which may be retained by the vendor. Therefore, as minimum, at the time of taking the offer you should collect at least enough from the purchaser to cover the cooling off penalty.

A notice detailing the cooling off provisions must be on the contract.

The purchaser cannot forgo or be excluded from their right to cool off.

10.14 Secret commissions Refer to section 176 of the Crimes Act

As an estate agent or agent’s representative, you are prohibited by law from receiving a secret commission. This also applies to your parents, partners, children and business associates.

A secret commission is an inducement or reward that you receive from a person (other than your client), with the intention of influencing, favouring, deceiving or defrauding the client in favour of that person.

An example of a secret commission in real estate would be when you are acting for the vendor but you accept from a purchaser, money to assist them to buy the property at their preferred price rather than the vendor’s.

Penalties and consequences for accepting secret commissions include:

• fines and/or imprisonment

• disciplinary action by the BLA to restrict, suspend or cancel your licence or employment in the real estate industry.

The vendor may also take action against you and your agency which could include, terminating the Authority, refusing to pay commission and suing for damages.

10.15 Restrictions on agents buying property listed with their agency Refer to sections 55 & 55A of the Estate Agents Act

From time-to-time a licensed agent, their representatives and other staff members, may wish to purchase a property that is being offered for sale within their own agency.

When this occurs, the Estate Agents Act puts restrictions on these types of transactions. The restrictions apply to:

• the licensed estate agent, or their associates (which are spouse, domestic partner, parent, brother, sister or child or child of domestic partner or spouse);

• any agent’s representatives of the agency or their associates (spouse, domestic partner, parent, brother, sister or child or child of domestic partner or spouse);

• all other associates (all other employees of the agency);

• a corporation where the licensed estate agent, their agent’s representatives, and/or associates have a beneficial interest (e.g. Executive Officer, Director or Trustee).

Under the Act, if any of the above persons wish to purchase any real estate or a business listed within their own agency they must:

• obtain the vendor’s written acknowledgement in the Approved Form that the vendor is aware of a restricted person’s interest in the purchase of the property;

• act fairly and honestly in the transaction;

• ensure no commission or other reward is payable in the transaction; and

• the vendor is in substantially as good a position as they would be if the real estate or business were sold at fair market value to another person/s.

10.16 Estate agents promising finance to purchasers Refer to section 51 of the Estate Agents Act and Estate Agents (General, Account and Audit) Regulations.

Under the Estate Agents Act, an estate agent or auctioneer (or their representatives) can promise a loan for a purchaser to enable a sale of property or business to proceed.

This is not common practice in today’s market, however, if a loan is promised there is a strict process you need to abide by. You need to provide, before a Contract of Sale is signed by the purchaser, a written statement that includes:

• a description of the property or business;

• the name and address of the vendor and purchaser;

• the loan amount;

• the amount of interest payable on the loan;

• the date by which the loan is to be repaid including any installment dates;

• who is providing the money (financial institution or other person/s);

• your signature and the date that the statement is given.

The statement must be given in the prescribed form as provided in the Estate Agents (General, Account and Audit) Regulations.

If you are promising a loan and do not follow the correct processes, you or the agency may be liable for breach of duty of care to the vendor, fines, and/or compensation for damages.

10.17 Stamp Duty Stamp duty is a State Government Tax administered by the State Revenue Office and payable by a purchaser of real estate. Over the years the assessment of stamp duty has become increasingly complex, with some of the circumstances that determine the amount payable in any particular case including at least two the following factors:

What is the dutiable value of the property?

Is the property a principal place of residence?

Is it a purchase before registration of title?

Is it being acquired by a foreign purchaser?

Is the buyer acquiring their first home?

Is the buyer acquiring their first farm?

Is the buyer a pensioner entitled to a concession?

Is it a transfer between related parties?

Given the complexity involved you should not attempt to calculate stamp duty but instead refer people to the State Revenue Office.

10.13 After the Contract is signed – finalising the sale 10.13.1 Final inspection

The purchaser is entitled to a final inspection of the property in the week prior to settlement (Contract of Sale General Condition 29).

This is the only right of access to the property between exchange of contracts and the settlement date. The purpose of the inspection is to confirm the property is in the same condition, apart from wear and tear, that it was at the time of sale.

10.13.2 Settlement

Refer to section 45 of the Transfer of Land Act

Settlement is the day that all remaining monies owed by the purchaser are paid in exchange for the Certificate of Title. It is usually 30, 60 or 90 days from the date the purchaser signed the Contract of Sale.

Settlement is handled by the legal representatives of the purchaser and vendor.

The legal representatives of both the vendor and the purchaser will organise a date and time to meet. At this meeting, there could also be representatives from the financial institutions that have an interest in the sale. You, the vendor and purchaser do not usually attend this meeting.

At the meeting the parties will have prepared the paperwork and finances to enable the transfer of land from the vendor to the purchaser. This will include the official ‘Transfer of Land’ form which has been signed by the vendor.

Alternatively, the conveyancing can be done electronically, thereby avoiding the need for the legal representatives from each side having to meet. (General Condition 18)

Once the exchange of monies and title has occurred, the vendor’s legal representative should contact you to advise that settlement of the property has been finalised and authorise you to hand over the keys to the new owner. Only hand over keys on the instruction of the vendor or their representative and not the purchaser.

If the deposit is still be held in the agent’s trust account, the vendor or their legal representative will need to give instructions as to whom and how it is to be paid. It can only be paid by cheque or electronic transfer. It can be paid to whoever the vendor or their legal representative directs in writing. The agent can also transfer from the deposit in their trust account to their general account the agent’s fee and any expenses still owed by the vendor.

Although the settlement process is handled by legal representatives, you will still play a role after the sale and before settlement of the property sale which may include:

• sending to the legal representatives of both parties a copy of the Contract, together with a covering letter as

confirmation that a sale has occurred on the property. This enables the legal representatives to prepare for the settlement of the property.

• confirming your agency is holding a deposit for the sale in your trust account.

• conducting a final inspection with the purchaser to confirm the condition of the property is consistent with what

was specified in the Contract when the purchaser signed;

• answering any enquires from the vendor, purchaser or their legal representatives relating to the sale;

• providing the keys and any security instructions and codes for alarm systems if supplied;

• finalising the sale in both the electronic and hard copy filing and key register systems.

10.13.3 Accounting to the client

Refer to section 49A and 50 of the Estate Agents Act and section 27 of the Sale of Land Act

During or after settlement you will be expected to provide a financial statement to the vendor and their legal representative which outlines your charges for commission, marketing and other outgoings on the sale. In the industry,

this is known as an ‘Account Sale’.

10.13.4 After sales promotions

After finalising a sale, there is an opportunity to promote the result. At the consent of the vendor, you may be able to use the sale price achieved on the property to attract new business. This includes:

• testimonials from the vendor regarding your service, professionalism and performance;

• advertising to the owners of properties in the area that you have recently sold a property for this price, within this timeframe;

• using the sale as a benchmark for presentations to potential clients.

10.14 Sales checklist Provided below is a checklist summary for selling a property.

• Source clients and their properties for the agency.

• Publicise and create awareness of you and your agency to attract new clients.

• Appraise property:

» Conduct research on the property and current market conditions.

» Conduct a pre-listing inspection of the property and complete a listing sheet.

» Gather information about the vendor (owner) and the land title.

» Determine the estimated selling price and turn-around time to sell the property.

» Evaluate and determine the best method to sell the property.

» Determine commission payable.

» Determine the marketing budget and costs.

» Develop a marketing strategy for the property including the property’s presentation and how to best attract purchasers.

• Ask the owner if they are happy to have you sell their property and if so prepare and authority.

• If the owner is not ready to appoint you prepare a presentation kit which includes:

» the vendor’s details;

» a report on the facts about their property and current market analysis;

» a profile of potential purchasers for their property;

» the estimated selling price, commission and marketing costs;

» recommendations for the method of sale;

» a prepared Sale Authority form;

» a draft marketing plan;

» a copy of the property title you have generated from a title search;

» testimonials of services for both you and the agency.

• If the vendor chooses to use your services, make sure all details in the Sale Authority form are correct and get them to sign the completed form. Once signed, provide them with a copy of the Sale Authority. Pay particular attention to:

» the licensed name of the agency;

» your estimate of selling price if it is a residential property;

» your example calculation of commission;

• After the Sale Authority is signed, ask the vendor to complete a Vendor’s Checklist form which will provide further information about the property including its features, conditions and what goods will be included in the sale.

• Inform them that they are required to provide a signed section 32 – Vendor’s Statement. This statement should be completed by a legal representative and provided as soon as possible.

• Prepare a Statement of Information if the property is residential.

• Record the listing on the agency’s database. Include as much information as possible.

• Prepare the marketing material for the advertising campaign, as agreed to by the vendor in the marketing plan.

• Unless otherwise instructed by the vendor, get the vendor to approve the marketing material and photos before going to print or posting on the internet.

• Start marketing the property as agreed to by the vendor in the marketing schedule (e.g. internet, newspapers, magazines, open for inspections, private viewings etc). Make sure all advertisements comply with consumer protection laws.

• Answer enquiries and qualify prospective purchasers to confirm they are genuinely in the market to purchase and capable of negotiating at the price the vendor is seeking.

• Schedule and conduct Open for Inspections

• Regularly communicate with the vendor on the progress of the marketing campaign.

• Review the marketing campaign and make recommendations to the vendor on any necessary changes driven by market conditions.

• Unless instructed by the vendor in writing, inform the vendor of all offers for the property.

• Formalise offers from purchasers by completing a Contract of Sale and explaining the Contract terms and conditions to both the purchaser and vendor.

• If selling by auction, prepare for auction day and ensure it is conducted in compliance with the relevant laws.

• Negotiate the best possible price for the vendor.

• When the vendor agrees to accept an offer, check that details and dates in the Contract are correct and get the vendor to sign the Contract. Provide a copy of the fully signed Contract to both the vendor and the purchaser.

• Ensure all sales deposits are banked and receipted in accordance with section 59 of the Estate Agents Act and the Estate Agents (General, Accounts and Audit) Regulations.

• Finalise the sale by answering any enquiries and complete the file.

• Follow the instructions of the vendor’s legal representative regarding hand-over of keys and security codes etc for the property.

• Complete and provide an Account Sale to the vendor and their legal representative confirming the costs of commission, marketing and other outgoings, as specified in the Sale Authority.

• Follow up with clients. Keep in contact about future sales or property management opportunities.

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1. The purpose of the section 32 is to:

a) advise the vendor of your commission; b) make the advertising and marketing of the property easier; c) disclose certain information about the property being sold; d) provide legal representatives the opportunity to change the disclosures of the property.

2. When completing a contract of sale, the agent or representative cannot:

a) proceed unless the purchaser supplies details of their legal representative; b) draft and included a special condition about the sale being subject to the purchaser selling their existing property; c) record a proposed settlement date on and off the plan sale; d) record the legal description of the property being sold.


3. The buyer is liable for any damage that occurs to the property between the day on which

contracts are exchanged and the date of settlement.

True or False

4. If a buyer has a right to cool off, the right lasts for three clear business days from the date on which the

vendor signs the contract.

True or False


5. In accordance with the Estate Agents (General, Accounts and Audit) Regulations, what should be included in a receipt for a deposit?

6. After the vendor has accepted an offer by signing the contract what must you do with the contract?

Chapter 11 Conducting an

Chapter 11 Conducting an auction Refer to sections 37 – 48 of the Sale of Land Act and the Sale of Land (Public Auctions) Regulations

11.1 On auction day - preparing the property and the vendor for the auction 11.1.1 Set up and meet with the vendor

On the morning of the auction you should organise sign boards (also known as A frames) to be placed at appropriate locations to identify and promote that an auction is taking place that day. You should also arrange for a flag to be placed on the sign board prominently at the front of the property being sold.

You should arrive at the property at least an 45 minutes before the auction to set up and meet with the vendor.

At the meeting with the vendor together with the auctioneer you should confirm the reserve price and strategy for the auction. This includes:

• how many genuine bidders are anticipated to attend; • how and when you will communicate with the vendor during the auction; • what suitable bidding increments you will likely accept or offer to reach the reserve (for example, increments of

$50,000, $10,000 and/or $1000); • what happens if the reserve is not met; • dealing with any other vendor questions and concerns about the auction.

Alternatively you may prefer to meet with vendor a day or two before the auction to brief them on the auction day process and the considerations they should have when setting a reserve price, then on the auction day you can simply confirm the reserve price. You may also choose to record the reserve price on the authority. The Estate Agents Act does not require that the reserve price be recorded on the authority, but Section 49A(1)(d) requires that at the agent give to the vendor a copy of the authority. The authority is the contract between the agent and the vendor, so any change to it should be initialed and dated by both the agent and the vendor/s on both the agent’s copy and the vendor’s copy. In the case of the REIV auction authority, if on the day of the auction or a later date during the exclusive authority period you obtain an unconditional offer at or above the vendor’s reserve price as shown on the authority and on the terms set out in the particulars of appointment in the authority and the vendor does not accept the offer the vendor is still liable to pay commission. Note that the REIV auction authority only entitles the agent to commission in respect of an offer prior to auction day if the offer is accepted by the vendor.

11.1.2 Display the mandatory rules and information The Sale of Land Act requires certain information to be publicly displayed at an auction. Most agents display this information as a physical laminated document, placed in a prominent location.

This includes the appropriate set of rules and other information concerning the conduct of public auctions.

There are four sets of auction rules prescribed in the Sale of Land Regulations. These are called Schedule 1, Schedule 2, Schedule 3 and Schedule 4. Only one set of these rules apply to the auction. You need to determine which rules apply and display them no less than 30 minutes before the auction commences.

The most commonly used rules are Schedule 1 (General Rules for the conduct of public auctions of land). These rules permit only the auctioneer to make bids on behalf of the vendor.

If one or more of the co-owners (vendors) will be bidding to purchase the property from the other

owner/s, then eith

er Schedule 2, 3 or 4 will need to be displayed. If:

• one vendor intends to bid to purchase, display Schedule 2 (Rules for the conduct of public auctions of land — one vendor intends to bid to purchase);

• more than one more than one (but not all) vendors intend to bid to purchase, display Schedule 3 (Rules for the conduct of public auctions of land — some vendors intend to bid to purchase);

• all vendors intend to bid to purchase, display schedule 4 (Rules for the conduct of public auctions of land — all vendors intend to bid to purchase).

Along with the rules, you must also always display Schedule 5 (Information concerning the conduct of public auctions of land) for a minimum of 30 minutes before the auction commences. Schedule 5 provides more information on how the auction will be conducted.

Samples of the schedules are in the appendices. In addition to the schedules, Regulation 6 states that “any other condition applying to the auction” must be available for public inspection not less than 30 minutes prior to the auction. This is normally just a matter of having the contract and section 32 vendor statement available for inspection.

11.1.3 Conduct a pre-auction open for inspection

Open for inspections are usually held for 30 minutes before the auction commences as most attendees will want to inspect the property for either a first or final time before bidding at the auction. The open for inspection also gives purchasers the opportunity to ask agency staff any last minute questions about the property.

11.1.4 Crowd and vendor management

As the time for the auction nears usher the attendees to the place where the auctioneer proposes to conduct the auction and late arrivals can excluded from entering. The vendor/s will normally remain inside the property to be available for consultation with the auctioneer during the auction and for contract signing after the auction. If the property is tenanted the tenants are entitled to stay in the property throughout the inspection time and auction.

11.2 The auction

11.3.1 Preamble

Introduction Most auctioneers will use a bell to announce that the auction is about to start and get the attention of the audience. They will usually thank the audience for attending and introduce themselves and the agency they work for.

Auctioneer announcements

In accordance with the auction rules and laws, there are mandatory statements that an auctioneer must announce before proceeding with the auction. These announcements must be made at all auctions before accepting the first bid. The announcements are:

• the auction will be conducted in accordance with the rules and any additional conditions that were made available for inspection;

• that the auction rules prohibit you from accepting bids or offers f after the property has been knocked down to the successful bidder;

• the auctioneer will identify bidders on request. If someone asks ‘who made that bid’, the auctioneer will identify the person and the amount of their bid.

• that the law:

» prohibits false bids;

» prohibits major disruptions by bidders;

» prohibits bidders attempting to prevent others from bidding;

» provides penalties for any of this conduct.

As well as the announcements specified above, if the rules in Schedule 1 apply, you must also announce either:

• that no bids will be made on behalf of the vendor; or

• that the law permits the auctioneer to bid on behalf of the vendor; that the auctioneer will be making one of more bids on behalf of the vendor; and advise which words they will use to identify that they are making a vendor bid. For example “I will now make a vendor bid of ”.

• If the rules in Schedule 2, 3 or 4 apply, you must also make additional announcements depending on whether one, more or all of the vendors intends to make bids against other vendors to purchase the property. The announcements that must be made for Schedules 2 to 4 are specified in the Sale of Land Regulations – Regulation 7. These schedules also impose different restrictions on the agent’s ability to place vendor bids and this must be announced as per the schedule.

When all legal announcements have been made, the auctioneer will then usually talk about the benefits of the property (location, size, quality) and ask for an opening bid from the crowd.

11.3.2 Bidding

If no opening bids are received from the audience, the auctioneer may commence the auction with a vendor bid.

From that point on the auctioneer will control the flow of the bidding and as per the rules for all auctions, they may determine the amount by which the bidding is to be increased and refuse any bid.

Upon request, the auctioneer must identify the person who made a bid. It is illegal for a person to make a false bid (also known as a dummy bid) or for an auctioneer to knowingly accept a dummy bid. Significant penalties and compensation apply.

As the bidding continues, the outcome of the auction could be:

• The reserve price is met and the auctioneer can declare that the property is “on the market” and will be sold

to the highest bidder. When the highest bid is made, the hammer falls, the auction is over, and they declare the property sold. Once the hammer falls it is illegal to accept another bid (late bid). Importantly, once the vendor’s reserve price has been met the auctioneer should not place any further vendor bids as such a bid may be the last one and the property would have to be passed in despite the reserve having been reached. At the end of the auction, the auctioneer will invite the purchaser to sign the section 32 and Contract of Sale and pay the deposit. Once the section 32 and Contract is signed by the vendor and purchaser, each party should be given a copy. It is only when this has happened that there is a binding contract in place.

• The reserve price is not met. The auctioneer will either ‘pass in’ the property on either a bid from the audience

(a genuine bid) or a vendor bid. If it is ‘passed in’ on a genuine bid, the highest bidder has the first right to negotiate for the purchase of the property. This is known as ‘the first right of refusal’. The vendor and the highest bidder can enter into private negotiations. If the highest bidder and vendor cannot agree on a sale price, then the agent or auctioneer may approach other bidders and try to negotiate a sale. If there is still no sale, the agency will discuss with the vendor options to re-advertise and market the property at an agreed price.

11.3.3 Forbidden activities at auctions

The law forbids any of the following:

• any person bidding for a vendor other than – o the auctioneer (who can only make bids for a vendor who does not intend to purchase the property from their

co-owner or co-owners); or o a representative of a vendor who is a co-owner of the property wishing to purchase the property from their co-

owner or co-owners; • the auctioneer taking any bid that the auctioneer knows was made on behalf of the vendor, unless it is made by a vendor

(or their representative) who is a co-owner wishing to purchase the property; • the auctioneer acknowledging a bid if no bid was made; • any person asking another person to bid on behalf of the vendor, other than a vendor who is a co-owner intending to

purchase engaging a representative to bid for them; • any person falsely claiming or falsely acknowledging that they made a bid; • an intending bidder (or a person acting on behalf of an intending bidder) harassing or interfering with the other bidders

at a public auction of land; • an intending bidder or a person acting on behalf of an intending bidder doing anything with the intention of preventing

or causing a major disruption to, or causing the cancellation of, a public auction of land. Substantial penalties apply to any person who does any of the things in this list.

.

Auctions are covered in greater detail in the units CPPDSM4004A Conduct Auction and CPPDSM4OI9A Prepare for Auction and Complete Sale.

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1. Under the Sale of Land Act, prior to commencing an auction, an auctioneer must announce:

a) their name and which agency they work for; b) that they intend to make one or more bids on behalf of the vendor; c) the property will probably sell for more than the advertised price; d) their licence number.

2. If one of the vendors intends to bid on their own behalf to purchase the property, which two Schedules

must be displayed to the public before the auction commences? a) Schedule 1 and Schedule 4; b) Schedule 1 and Schedule 5; c) Schedule 2 and Schedule 5; d) Schedule 2 and Schedule 3.


3. The auctioneer does not have to identify who is making a bid at an auction?

True or False

4. After the hammer falls, an auctioneer can accept a late bid as long as they receive instructions from the vendor.

True or False


5. Under the Sale of Land Act what disruptions to an auction are prohibited?

6. At the meeting with the vendor before the auction commences, what should the auctioneer discuss?

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Chapter

Buyers Advocates Buyer’s advocates are agents who have the specific purpose of acting and communicating on behalf of a prospective purchaser. The purchaser is the client (not the vendor). Buyer’s advocates locate suitable properties and negotiate with other agents to buy a property on behalf of the purchaser.

The buyer’s advocate will require the prospective purchaser to sign a Purchaser’s Authority form in order to claim any fees, commissions or outgoings. Like a Sale Authority, a Purchaser’s Authority must comply with sections 49A and 50 of the Estate Agents Act.

A buyer’s advocate will usually specify their services on the Authority. These services may include:

• spending time searching for suitable property that meets the prospective purchaser’s criteria;

• inspecting and reporting on properties in an area that the prospective purchaser has an interest;

• providing comprehensive Comparative Market Analysis (CMA) reports for a prospective purchaser on property

types or designated geographical areas;

• organising private inspections of a property for a prospective purchaser;

• negotiating with the selling agent to organise building or pest inspections of a property;

• conducting negotiations with a selling agent and submitting offers on behalf of a prospective purchaser;

• bidding on behalf of a prospective purchaser at auction to buy property.

Buyer advocate functions fall within the definition of section 4 of the Estate Agents Act and therefore any person wishing to act as a buyer’s advocate must be either a licensed estate agent or an authorised agent’s representative employed by a licensed estate agent.

Buyer’s advocates are covered in greater detail in the unit CPPDSM4001A, Act as a Buyer’s Agent.

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Chapter

Selling businesses

13.1 About business sales

The sale of a business is significantly different to the sale of a property. Generally, the sale of a business is best described as selling the ‘goodwill’, together with any business equipment, assets and stock.

Goodwill is not recognisable like an asset, such as a motor vehicle or computer hardware. It is the value placed on the reputation of a business that creates customer loyalty and ultimately revenue. For example, a cafe’s goodwill could be based on their reputation as having the best coffee in the local area which has attracted regular customers. This places value on owning that cafe business.

If the business operates in leased premises the values of the business will be influenced by the nature and term of the lease and any further options available.

The other components that are included in a business sale; the equipment, assets and stock will depend on the nature of the business. Usually a vendor will pass onto a purchaser, the items that would enable the new owner to easily continue to operate the business. Using the cafe as an example, the sale could include such items as refrigerators, display cabinets, coffee machines, crockery, cutlery, tables, chairs, coffee beans and other food items in stock, the cash register and the EFTPOS facilities.

Salespeople who sell businesses are known in the real estate industry as Business Brokers. While the sale of businesses differs to the sale of property, there are some similarities in the sales process. These include:

• using available data to prepare a Comparative Market Analysis report for vendors;

• obtaining a vendor’s Authority to sell, negotiating commission and outgoings;

• understanding and knowing the business;

• obtaining legally binding instructions from the vendor;

• conducting inspections of businesses;

• obtaining financial performance information from the vendor to provide to potential purchasers;

• preparing and explaining marketing options;

• preparing marketing material and confidentiality agreements;

• conducting marketing and placing advertisements;

• answering and tracking enquiries from advertising;

• informing vendors of progress with marketing activities and purchaser interest;

• qualifying purchasers and negotiating a sale price;

• obtaining binding offers in writing from purchasers and processing deposits.

A business sale can involve the sale of the business on its own without including the actual title of the land (known as the ‘freehold’).

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Differences in selling a business compared to a residential sale include:

• the business is sold on the basis of revenue and/or profits for a specific industry;

• there is no legislative requirement to provide an estimated sale price for the business as part of the Sale Authority;

• explaining a trial period and its purpose to both vendors and purchasers. A trial period is the timeframe that gives the new owner the opportunity to verify whether or not the business income stated by the vendor in the section 52 document is accurate.

• understanding commercial leasing rents and terms and their impact on a sale of a business;

• analysing and interpreting accounting statements and budgetary forecasts of a business;

• being familiar with different business structures and operations;

• when marketing the business, not disclosing the business address or location to avoid negative public perceptions of the performance of the business;

• when qualifying potential purchasers, seeking the vendor’s approval for releasing information about the business;

• all purchasers and prospective purchasers sign a confidentiality agreement as part of the sale and marketing arrangements;

• in-depth negotiation with solicitors and landlords about tenant approval, lease terms

and conditions. The documentation to sell a business is also different in its content.

13.2 The Sale Authority Like selling a property, a business broker must complete and obtain the signature/s of the vendor on a Sale Authority form, in order to claim commission and outgoings. The Sale Authority for a business contains different terms and conditions to that of a sale of a property. In principle, the contractual obligations remain the same i.e. it is a legally binding Contract that must be signed, and a copy retained by both parties.

For business sales there are two different types of authorities:

• Exclusive Authority: Sale of Business;

• General Business and Property Sale Authority.

The differences in a business Sale Authority to an Authority for the sale of land include:

• a statement from the vendor on the gross income of the business;

• the name of a business rather than a title of land that is sold with property;

• a condition that the vendor of the small business will promptly supply the statement required by section 52 of the Estate Agents Act, to enable the sale of the business to occur. (if applicable)

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13.3 Small business Vendor’s Statement (section 52) Refer to 52 & 53 of the Estate Agents Act

Under section 52 of the Estate Agents Act, if the business being sold is valued at $350,000 or less, vendors must provide a signed ‘Statement by a vendor of a small business’ which has been certified by a practising accountant.

This is known in the industry as a section 52. In principal it is the same as a section 32 required for the sale of a property Title, but it discloses different information to potential purchasers such as the financial position of the last two accounting periods, (which either a financial year or a continued period of 12 months of operation). The report will include detail about the revenue, total expenses and profits or losses for the business and must be certified by a practicing accountant.

Even though it is not mandatory under law to provide a section 52 for businesses that have a sale value that is greater than $350,000, it is in the vendor’s best interest to provide accurate financial information to assist a potential purchaser in deciding whether or not to buy the business.

The section 52 must be given to a purchaser before the Contract is signed and a deposit is paid. Fines apply for not supplying the ‘Statement by a vendor of a Small Business’. The information is prescribed under the Estate Agents (General, Accounts and Audit) Regulations and includes:

Section A Important Information for vendor

Specifies when the statement must be completed and that it must be signed by the vendor and a practising accountant.

Section B Important Information for Purchaser

Provides information that the prospective purchaser should consider before buying the business.

Section C Business Information

Contains information to identify the vendor and agent. Also specified here are details of the business including the business name and description, the timeframe the vendor has operated the business and business operating hours.

Section D Vendor’s Business Operating Report

Provides financial information for the business being sold including income, profits and operating expenses.

The financial information must cover trading of the business for the last two accounting periods (usually financial years), unless the vendor has not owned the business for that long.

The information provided in this section must always be certified as correct by a:

• registered company auditor with the Australian Securities and Investments Commission; or

• Member of CPA Australia or the Institute of Chartered Accountants in Australia; or

• Member or Fellow of either the National Institute of Accountants or the Association of Taxation and Management Accountants; or

• Fellow of the National Tax and Accountants’ Association Limited.

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V2015.3 137

Section E Vendor’s Declaration

Details any recent matters, known to the vendor, that have affected the conduct or profits of the business.

The vendor must sign in this section.

Section F Acknowledgement of Receipt by Purchaser

The purchaser signs and dates this section to acknowledge they have received the statement.

As the salesperson, you are not responsible for the accuracy of the section 52. As best practice, you should check its accuracy and make sure it has been signed by the appropriate persons. If you are concerned about the accuracy of a section 52, you should seek further advice from qualified professionals.

If the legislated requirements for the section 52 are not met, that is

a) the statement does not include the prescribed information,,or b) it is incorrect or not given to the purchaser

then, the purchaser has the right to withdraw from the Contract and ask for any money they have paid to be returned.

13.4 Contract of Sale of business There are some similarities and some differences between a Contract of Sale of real estate and a contract of sale for a business.

The formation of each Contract is similar in that both provide particulars (such as the parties - the agent, the vendor and purchaser), a price, settlement terms, general conditions, special conditions, warranties, and adjustments. However, the information within those conditions is quite different.

Some of the differences between a Contract of Sale of Real Estate and a contract for the sale of a business are:

• the requirements for confidentiality of information between the parties with the sale;

• the lease (or freehold) of the premises that comes with the purchase of the business;

• a restriction of the vendor not to trade in a similar business within the area of the business being sold;

• addressing the employment of any existing staff under the new ownership of the business including apportioning wages and leave entitlements;

• schedules that list the assets and/or equipment hire Contracts of the business;

• vendor warranties specific to the financial statements and business records;

• how and by whom the business will be run leading up to and after settlement of the sale.

Form 3 of the Estate Agents (Contracts) Regulations 2008 is a prescribed form. REIV members are advised to have contracts for the sale of a business prepared by the vendor’s solicitor or

conveyancer.



1. When selling a business, you are also selling the ‘goodwill’ of the business. This means:

a) the assets of the business;

b) the reputation of the business which generates customer loyalty and income;

c) how much the business contributes to charity each year;

d) the business has records of customer service surveys.

2. The purpose of a trial period for the sale of a business is to:

a) see if the new owner likes working in the industry;

b) allow the existing owner to have some time off before selling the business;

c) give the new owner time to buy equipment and stock;

d) provide the purchaser the opportunity to verify whether or not the business revenue stated in the section 52 is accurate.


3. Under a Sale Authority for a business, you must provide an estimated sale price for

that business? True or False

4. The sale of a business can proceed without the exchange of

a title of land. True or False


5. Name 4 of the differences in selling a business compared to a property sale.

6. What are salespeople who sell business also known as in the real es

tate industry?

Chapter 14 Communication

14.1 Communicating with potential clients

As a real estate salesperson, you are primarily focused on setting and meeting your personal and agency goals and targets. Whether it is the number of ‘cold’ calls to potential clients in any given day, or the sales that you set out to achieve in a month, these objectives are met by being organised, motivated and effective in your communication.

As most purchasers and vendors come into the market for only a short period of time, they are relying on you to be able to provide accurate information so they can make informed decisions about a sale or purchase. Successful agents are able to answer questions supported by research and product knowledge. This helps build rapport with the client and instils confidence and trust in you as you an agent.

Clients do not just fall into your lap. To generate opportunities in real estate, you need to proactively communicate with many people to gain information about their profiles and motivations to sell and buy.

Building networks and establishing rapport is a key ingredient to being successful in promoting yourself as a real estate salesperson. Think about the networks that you can tap into – whether they are old school networks, sporting clubs, through your hobbies, or other business associations. The key motivator is to get yourself known as a person who can be trusted to look after your clients for their real estate needs. Many agents build successful profiles through local media offering regular column advice on real estate matters or editorial comment.

When communicating with clients, it is important to listen to their views and incorporate those views when making decisions on selling their property.

You will want to get as much information from the client as possible. Questions you might ask include:

• Where (or how) did you find out about our agency?

• Why are you selling - what is your motivation?

• What price do you have in mind if you were to put the property on the market today?

• Have you visited our website to view our current listings and services offered?

• Have you asked other agents to appraise your property? If so, do they offer the full range of services and a service

guarantee?

Effectively communicating and connecting with potential clients increases your opportunities to list properties for you and your agency.

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14.2 Communicating with vendors Most vendors expect that you regularly provide feedback, both verbally and in writing, about the status of their property sale and updates of purchaser reactions and opinions about their property.

Some vendors might take a hands-off approach and only want to hear from you when someone is ready to make an offer. Others want to be informed of all steps in the listing and selling process and to be kept up-to-date on a regular basis. When communicating with vendors, you should consider their preferred communication style:

• Frequency of communication; how often do they want to hear from you?

• Preferred method of communication; Email, phone calls, face-to-face, SMS, Facebook, Twitter? During business hours or afterhours?

• Information content; what do they expect to receive from you? Full details or just the significant points.

Remember, that along with the vendor’s instructions for communicating there are also legal obligations. For example, you must communicate all offers from potential purchasers unless instructed otherwise by the vendor [Reg16 Estate Agents (Professional Conduct) Regulations].

14.4 Communicating with purchasers

Purchasers expect timely and professional communication. Effective communication from the outset will also increase your opportunities to gain their business if they decide to sell in the future.

To help match purchasers with properties listed with the agency, you can ask questions such as:

• How long have you been looking?

• How many properties have you seen in the area? Which of those did you like or dislike?

• When will you be ready to purchase?

• Do you have pre-arranged finance to make an offer on a property?

• Do you have a price range or budget in mind?

While your role is to act on behalf of the client (the vendor), the purchaser is your customer. Purchasers expect you to return calls, follow up enquiries and consistently provide the necessary feedback to assist the purchaser to make their next decision.

When communicating with all clients and customers, do not assume everyone understands real estate terms, jargon and processes. It may be the first time a person has entered into a real estate transaction and you need to effectively communicate the process. You should gauge their level of real estate knowledge and adjust your terminology and explanations accordingly.

14.5 Communicating with colleagues Along with meeting your personal goals, you must also strive to achieve success for your agency. Regular and effective communication with colleagues both within and outside your agency plays an important role in this success.

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V2015.3 147

Linking people, sharing knowledge and the status of listings will not only coordinate activities, but maximise future business opportunities and improve agency efficiency.

Agencies may have different ways for communicating in the workplace. There could be standard procedures, regular meetings and reporting.

As well as communicating with colleagues in your agency, you can network with other agents and professionals in the industry to gain insights into current market conditions, sales results and potential new business. REIV hosts a number of events for members each year when new industry contacts can be made.

14.5 Recording communication To show the trail of events for a sale, you should record all communication either on a database or as hard copy on a file.

This includes:

• the Sale Authority form;

• the Contract of Sale;

• the Vendor Check List;

• listing details and expenditure;

• vendor’s solicitor’s or conveyancer’s details;

• details of any offers made on the property;

• the Statement of Information if it is a residential property

• the reasoning behind any revision of the estimated selling price in the case of a residential property and a copy of the notice to the vendor (Section 47AE Estate Agents Act)

• Instructions from the vendor and any changes to those instructions

• any other communication related to the sale.

14.6 Dealing with conflict and disputes Sometimes in your role as a salesperson, you will need to deal with issues of conflict. Good conflict management skills include demonstrating empathy, active listening, paraphrasing to reinforce that messages are understood, flexibility to see both sides of the story and a strong ability to solve problems.

Some basic steps to help deal with conflict and disputes:

Step 1

Rectify any misunderstandings

Often what can seem like the beginning of a dispute is just a misunderstanding between the parties and can be easily resolved. You should make sure all parties involved are not basing their issue on assumptions, misinformation or inaccurate advice. By clarifying information as soon as possible you may find that the problem resolves itself.

Step 2

Negotiate an outcome

If after clearing up any misunderstandings, the conflict is still ongoing, you should try to negotiate a compromise between the parties. An acknowledgement of the other party’s position in a dispute is a key element that will lead to a positive negotiated outcome.

During the negotiations you should gather all the facts and listen to all sides of the story:

• Who is involved? • What is the issue about and what has been done to resolve it? • Why did it happen? • Where in the property or process does it relate to? • When did the problem arise? • What are the expectations of the parties in resolving the conflict? Remove emotions from the situation, look at the situation objectively and explaining options and resolve matters that suit both parties.

Step 3

Use third parties to assist

When you cannot resolve a conflict yourself, you may require a third party to intervene and mediate the dispute. You may seek the assistance of the OIEC, Sales Manager or the designated person to handle the matter and resolve it without going through a formal process.

Or, you may seek resolution through a formal mediation process conducted by an independent mediator. For this to happen, all parties must agree to the mediation (unless VCAT has ordered that mediation has to proceed)

The mediator will provide options to resolve the dispute which the parties may accept or reject. The objective of mediation is to get the parties to agree on an outcome to avoid any further legal action.

In conciliation, the matter could be handled by a regulatory body that will act as an independent facilitator of the dispute, refer to legislation (if it is applicable), and recommend outcomes to resolve the dispute.

Step 4

Go to VCAT or Court

• If other dispute resolution tools have failed to reach an outcome the dispute will need to be determined by VCAT or another Court of law.

• Purchasers or vendors can apply to the Magistrates Court and the County Court. However, if a claim has already been lodged at VCAT, the matter cannot be dealt with by another Court.

• Using a Court to resolve matters is generally more expensive than using VCAT.

CPPDSM4008A V2015.3 149

14.7 Managing complaints from clients A requirement of the Estate Agents (Professional Conduct) Regulations 2008 is that all estate agencies must have a dispute resolution process in place to deal with complaints from their clients.

You should treat all complaints seriously, act on them quickly and refer them onto the complaint handling person if you have not been able to resolve it. A client will want acknowledgement that their complaint has been received. You should send an acknowledgement immediately or as soon as possible. Advise the client of the time expected to deal with the matter and what process you will undertake to resolve it.

When dealing with complaints from clients you should consider the following:

• Has the agency failed in its duty regarding the Sale Authority or instructions from the vendor?

• Would the vendor take their business away from the agency if the issue is not resolved and if so, what are the repercussions for the agency?

• What are the costs to the agency for dealing with the matter through a third party such as Consumer Affairs

Victoria or a Court?

It is best practice to have a register for recording client complaints within the agency. The register may include:

• what the complaint was about;

• the property involved (if applicable);

• the remedy (if any) sought by the client;

• who it was about, when it occurred;

• the action taken to resolve it;

• the outcome of the complaint.

• the person responsible for rectifying the issue

Tracking complaints can be a valuable tool for the agency business to develop and improve agency practices and service delivery.

Complaint registers should be reviewed regularly to identify common or recurring faults or trends. If this is the case, processes and procedures and/or training can be identified and put in place to negate the possibility of these issues re-occurring.

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1. When communicating with clients and customers why should you be careful about using real estate jargon?

a) Because the terminology changes regularly; b) Because your manager doesn’t like it; c) Because people may have no or limited knowledge of real estate transactions; d) Because your colleagues in the industry may not like it.

2. What should the register of client complaints include?

a) What the complaint was about, the property and people involved, the remedies sought and the action taken to resolve it and the outcome;

b) The names and address of complaint handling organisations; c) The age of the complainant; d) Your personal opinion on what the outcome should be.


3. Successful agents are able to answer questions by researching and developing product knowledge.

True or False

4. Standard communication and reporting procedures are not necessary because most agents are regularly out of the office.

True or False


5. Name 3 questions you may ask a vendor during the listing stage.

6. To show the trail of events for a sale, what communication should be recorded on the agency’s database or files?

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Learning answers Chapter 2 answers

Multiple Choice

1. Land Victoria is the Government body responsible for:

d) land titles in Victoria.

2. The role of the State Revenue Office in real estate transactions is:

a) collecting tax on the sale of property and administering the first home owner grant and the first home grant;

True or False

3. The Victorian Property Fund enables claims of reimbursement for misuse of trust money.

True

4. Today, copies of Certificates of Title can only be obtained in a computer generated format.

True


5. What do estate agents use Land Victoria for?

To conduct searches of Certificate of Titles to confirm ownership of land before selling a property or land.

6. Which Acts relating to property sales is CAV responsible for administering and enforcing?

• Residential Tenancies Act and Regulations.

• Estate Agents Act and Regulations.

• Sale of Land Act and Regulations.

• Owners Corporations Act and Regulations.

• Australian Consumer Law (ACL) of the Competition and Consumer Act (a joint responsibility shared with

the ACCC).

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Chapter 3 answers

Multiple Choice

1. The Act that specifically prohibits secret commissions is the:

a) Crimes Act.

2. One of the main purposes of the Transfer of Land Act is to:

d) provide a registered system for recording, transferring and searching land titles in Victoria.

True or False

3. Estate agents and their representatives should provide advice on financial matters including mortgage advice and insurance. False

4. The Sale of Land Regulations specify the rules and processes that must be followed if you are conducting a

public auction.

True


5. Name 4 key points relating to property sales practices under the Competition and Consumer Act.

• misleading or deceptive conduct;

• unconscionable conduct;

• false and misleading representations

• consumer guarantees;

• false testimonials;

• bait advertising;

• unfair Contract terms.

6. Why is the Australian Tax Office A New Tax System (Goods and Services Tax) Act relevant to the real estate

industry?

As an estate agent or agent’s representative, you need to know when GST is applicable to the sale or rental of a property as well as understand your obligations to explain the GST component of your commission and the outgoings or expenses in a transaction.

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Chapter 4 answers

Multiple Choice

1. The penalties for not complying with the Estate Agents (Professional Conduct) Regulations:

c) can be the same as not complying with the Estate Agents Act, including fines, disciplinary action or Court action.

2. Three professional conduct laws and codes that apply to estate agents and their representatives are:

b) The Estate Agents (Professional Conduct) Regulations, the REIA National Principles of Conduct.

True or False

3. You cannot accept a payment for commission from a vendor if you have already been retained by the purchaser to negotiate the sale of the property on their behalf.

True

4. Personal information is any information that can identify an individual.

True


5. Under the Estate Agents (Professional Conduct) Regulations, what are the obligations of an agent or agent’s representative regarding the communication of offers to vendors?

Unless instructed in writing by a client not to do so, you must communicate to them all offers to sell a property or business, whether those offers were made verbally or in writing. This must be done as soon as possible after the offer has been made.

6. Under the Estate Agents (Professional Conduct) Regulations, what is an agent’s duty of care to the vendor if they have signed an agreement with another agent?

The agent must not induce or attempt to induce the vendor into signing an agreement that would make them liable to pay commission to more than one agency without giving clear written advice to the vendor of the potential liability to pay more than on commission.

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Chapter 5 answers

Multiple Choice

1. What typical tasks may a real estate salesperson perform?

c) Listing, prepare advertising, conduct marketing, arrange inspections, receive offers, negotiate the sale.

2. For completion of a Contract, what is the role of the selling agent?

c) Receive offers, sign up purchasers, take deposits and obtain the vendor’s acceptance (signature).

True or False

3. An assistant salesperson is usually learning the role and performs basic sales functions and administrative tasks.

True

4. Salespeople that work in a larger agency may specialise in one area of sales.

True


5. In what time frame must a final inspection for the purchaser be conducted from the date of settlement?

Within 7 days.

6. What role should a sales manager play in managing sales staff?

The sales manager will usually conduct or organise in-house training for sales staff. They will also mentor new salespeople to pass on their experience and knowledge of the industry.

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Chapter 6 answers

Multiple Choice

1. You want to conduct some telemarketing on a Sunday. Between what hours can you call?

c) You cannot make telemarketing calls on a Sunday.

2. Why is it most important not to make false or misleading statements when advertising yourself or your

agency’s services?

b) False and misleading advertising could have consequences for you and your agency including poor reputation, complaints, legal action and loss of income.

True or False

3. The term ‘farming’ in real estate refers to marketing to potential clients in a designated geographical area.

True

4. When conducting an open-house inspection you should let everyone see the property first before greeting

or talking with them.

False


5. What are some of the social marketing tools you can use in networking to inform people of property market trends, new listings and agency events?

Facebook, Twitter, LinkedIn, Myspace, Youtube, Foursquare.

6. What are two ways you can source new clients by knowing what’s happening in your local area? Look out for private sellers that have placed an ad in the ‘for sale’ section of a newspaper or online.

Access records of local planning and building, identify land and building developers, and build relationships.

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Chapter 7 answers

Multiple Choice

1. A Comparative Market Appraisal report (CMA) should show:

a) Comparable sales data from similar properties, points of interest and proximity to amenities and street and aerial views of the property and immediate neighbourhood.

2. When stating an estimated sale price of a property it must be stated:

c) as either a single dollar amount or a price range.

True or False 3. When choosing a method of sale, you should consider the current market conditions the most commonly

used sales method in the area, the vendor’s expectations on sale price and purchaser demand for similar properties in the area.

True

4. In Victoria, there are five types of ownership relating to the sale of property (The Crown, Leasehold,

Freehold, vendors Exclusive Right and Owners Corporations)

False


5. What should be included in a presentation kit to the vendor?

• the vendor’s details;

• a report on the facts about the property and current market analysis;

• a profile of potential purchasers for their property;

• the estimated selling price, commission and marketing costs;

• recommendations for the method of sale;

• a prepared Sale Authority form;

• a copy of the property title you have generated from a title search;

• a draft marketing plan;

• testimonials of services for both you and the agency.

6. What factors must be considered in selecting comparable property sales for the purpose of estimating what buyers might pay for a residential property.

When the sale took place – needs to be within the last six months for the metropolitan area and in the last 18 months for other areas.

Distance from the subject property – needs to be within 2 kms in the metropolitan area and within 5 kms in other areas.

• Properties of a similar standard and condition

• Properties in a similar location

• Recently sold properties

• Build status

Chapter 7 answers

Multiple Choice

1. The sections of the Estate Agents Act relating to claiming commission and outgoings are:

b) 49A and 50.

2. The three types of Sales Authorities are:

a) The Exclusive Sale Authority, the General Sale Authority and the Exclusive Auction Authority.

True or False

3. When you are charging commission as a percentage of the sale price, you must state the commission as a dollar amount as well as a percentage.

True

4. Section 49A requires the inclusion of the vendor’s price on the Sale Authority.

False


5. Name some of the benefits of an Exclusive Sale Authority.

• Vendors have a single point of contact and are assured that the agency will intensively promote the property.

• Vendors are able to hold the agency accountable during the Authority period.

• The Authority has an end date and the vendor can be confident the property will be sold by that date. If not, they can appoint another agency.

6. What is a rebate, how do you notify the vendor of rebates and when must rebates be passed on to the vendor?

A rebate is a monetary or other discount received by an agent in the course of doing business with third party suppliers on behalf of the vendor. This includes all outgoings such as advertising publishers, maintenance Contractors or insurance providers. Under section 48A, all rebates received must be passed on the vendor. You always need to provide a statement to the vendor on whether or not rebates will be received by the agency. If rebates are to be received, you will need to complete and attach to the Authority a Rebate Statement in the form approved by Consumer Affairs Victoria.

Chapter 8 – completing forms answer See appendix

Chapter 7 answers

Multiple Choice

1. A Statement of Information must be prepared for:

d) All residential properties irrespective of whether they are advertised

2. A Statement of Information must be updated if:

c) An offer above the indicative price is rejected because the vendor wants more


3. Comparable properties are those that have sold for about the same amount as the vendor wants.

False

4. All properties containing a residence must have a Statement of Information when being sold because they are residential.

False


5. What information must be included on the Statement of Information if you can only find two comparable properties that sold within the prescribed time and location.

As less than three comparable properties could be identified, none need to be shown on the Statement of Information. Select Option B ‘The estate agent or agent’s representative reasonably believes that few than three comparable properties were sold .....’. While Option B must be selected, the two comparable property sales can still be recorded on the Statement of Information. The option of including the sales information in circumstances like this has only been possible since 16th September 2019.

6. What action should if on identifying the three most comparable properties you notice on the sales database that one of the properties is marked with an asterisk indicating that the vendor doesn’t want the price disclosed.

The ‘undisclosed sale’ must be used on the statement of information as it is one of the three most comparable properties. The fact that the vendor may have wanted the sale price to be undisclosed is overridden by the obligations placed on the agent by the Estate Agents Act. There is a Consumer Affairs Victoria directive on this matter and if necessary, the vendor or buyer of the now disclosed sale could be referred to it.

Chapter 7 answers

Multiple Choice

1. The purpose of the section 32 is to:

c) disclose certain information about the property being sold.

2. When completing a contract of sale, the agent or representative cannot: b) draft and included a special condition about the sale being subject to the purchaser selling their existing property.

True or False 3. The buyer is liable for any damage that occurs to the property between the day on which contracts are signed and

the date of settlement.

False 4. If the buyer has a right to cool off, the right lasts for three clear business days from the date on which the vendor

signs the contract.

False


5. In accordance with the Estate Agents (General, Accounts and Audit) Regulations, what should be included in a receipt for a deposit?

• the name under which the estate agent carries on business as an estate agent;

• the number of the receipt;

• the date the receipt is made out and, if different, the date on which the trust money is received;

• the amount of the money received;

• the form in which the money was received including in cash or by cheque or by electronic funds transfer or otherwise;

• the name of the person from whom the money was received;

• the name and reference number or other identification of the person on whose behalf the money was received;

• particulars sufficient to identify the purpose for which the money was received;

• the name of the person who made out the receipt.

6. After the vendor has accepted an offer by signing the contract what must your do with the contract?

Leave a copy with the vendor and obtain their written acknowledgement or the receipt of the copy.

Deliver a copy to the purchaser and obtain their written acknowledgement of the receipt of the copy.

See Section 53 of the Estate Agents Act.

Send copies to the legal representatives for both the vendor and the purchaser.

Retain a copy in the file at the agency.

160 CPPDSM4008A V2015.3

Chapter 7 answers

Multiple Choice

1. Under the Sale of Land Act, prior to commencing an auction, an auctioneer must announce:

b) that they intend to make one or more bids on behalf of the vendor.

2. If one of the vendors intends to bid on their own behalf to purchase the property, which two Schedules must be displayed to the public before the auction commences?

c) Schedule 2 and Schedule 5.

True or False

3. The auctioneer does not have to identify who is making a bid at an auction?

False

4. After the hammer falls, an auctioneer can accept a late bid as long as they receive instructions from the

vendor.

False


5. Under the Sale of Land Act what disruptions to an auction are prohibited?

An intending bidder or a person acting on their behalf cannot:

• cause a nuisance.

• Harass any rival bidder with the intent of preventing others from bidding.

• Prevent or hinder another person who is a rival bidder from attending or bidding at the auction.

• Cause a major disruption or cancellation of the auction.

6. At the meeting with the vendor before the auction commences, what should the auctioneer discuss?

• How many genuine bidders are anticipated;

• How and when they will communicate with the vendor during the auction;

• What suitable bidding increments they will likely accept or offer to reach the reserve (for example, increments of $50,000, $10,000 and/or $1000);

• What happens when the auctioneer declares the property sold;.

• What happens if the reserve is not met; and

• Any other vendor questions and concerns about the auction.

Chapter 7 answers

CPPDSM4008A V2015.3 161

Chapter 13

Multiple Choice 1. When selling a business, you are also selling the ‘goodwill’ of the business. This means:

b) the reputation of the business which generates customer loyalty and income.

2. The purpose of a trial period for the sale of a business is to:

d) provide the purchaser the opportunity to verify whether or not the business revenue stated in the section 52 is accurate.

True or False

3. Under a Sale Authority for a business, you must provide an estimated sale price for that business?

False

4. The sale of a business can proceed without the exchange of a title of land.

True


5. Name 4 of the differences in selling a business compared to a property sale.

• there is no legislative requirement to provide an estimated sale price for the business as part of the Sale

Authority;

• explaining a trial period and its purpose to both vendors and purchasers.

• understanding commercial leasing rents and terms and their impact on a sale of a business;

• analysing and interpreting accounting statements and budgetary forecasts of a business;

• being familiar with different business structures and operations;

• when marketing the business, not disclosing the business address or location to avoid negative public perceptions of the performance of the business;

• when qualifying potential purchasers, seeking the vendor’s approval for releasing information about the business;

• all purchasers and prospective purchasers sign a confidentiality agreement as part of the sale and marketing arrangements;

• in-depth negotiation with solicitors about tenant approval, lease terms and conditions.

6. What are salespeople who sell business also known as in the real estate industry?

Business Brokers

162 CPPDSM4008A V2015.3

Chapter 13

Multiple Choice

1. When communicating with clients and customers why should you be careful about using real estate jargon?

c) because people may have no or limited knowledge of real estate transactions.

2. What should the register of client complaints include?

a) What the complaint was about, the property and people involved, the remedies sought and the action taken to resolve it and the outcome.

True or False

3. Successful agents are able to answer questions by researching and developing product knowledge.

True

4. Standard communication and reporting procedures are not necessary because most agents are regularly

out of the office.

False


5. Name 3 questions you may ask a vendor during the listing stage.

• Where (or how) did you find out about our agency?

• Why are you selling - what is your motivation?

• What price do you have in mind if you were to put the property on the market today?

• Have you visited our website to view our current listings and services offered?

• Have you asked other agents to appraise your property? If so, do they offer the full range of services and a service guarantee?

6. To show the trail of events for a sale, what communication should be recorded on the agency’s database or

files?

• The Sale Authority form. • The Statement of Information if it is a residential property.

• The Contract of Sale.

• The Vendor Check List.

• Listing details and expenditure.

• Vendor’s solicitor’s or conveyancer’s details.

• Details of any offers made on the property.

• Any other communication related to the sale.

CPPDSM4008A V2015.3 163

Appendix 1 – Official elements and performance criteria

Element Performance criteria Chapter in this Guide

1 Develop knowledge of property sales.

1.1 Types and characteristics of land tenure systems are identified in line with legislation.

7

1.2 Legislation regulating the sale of properties is identified in line with agency practice.

3

1.3 Information provided on the Certificate of Title is checked for accuracy against the agency agreement.

7, 8

1.4 Types of property ownership are identified in line with legislation.

7

1.5 Legal requirements relating to the sale of property are identified and interpreted in line with legislation and agency requirements.

8, 9, 10

1.6 Requirements of ethical and conduct standards and consumer protection and privacy legislation in relation to the sale of property are identified in line with legislative requirements and agency practice.

4

2 Develop knowledge of sales processes.

2.1 Need for demonstrating effective communication strategies in establishing rapport with clients, determining client needs, providing accurate advice, addressing client concerns and dealing with conflict is identified in line with agency practice.

6, 7, 10, 14

2.2 Listing opportunities are identified and assessed in the context of legislative requirements and agency practice.

6

2.3 Methods of selling property are identified and assessed in the context of legislative requirements and agency practice.

7

2.4 Sale Authority agreements are identified, completed and stored in line with legislative requirements and agency practice.

2.5 Strategies for marketing property are

identified and assessed in the context of legislative requirements and agency practice.

8 7

2.6 Purpose and terms of statutory statements required to be prepared by sellers for the sale of property and businesses are identified and interpreted in the context of legislative requirements and agency practice.

9, 10, 13

164 CPPDSM4008A V2015.3

Element Performance criteria Chapter in this Guide

2.7 Contractual documents relating to the sale of property are identified, interpreted, completed and stored in line with legislative requirements and agency practice.

10

2.8 Process for settling the sale of property is identified in the context of legislative requirements and agency practice.

10

2.9 Processes for receipt, recording, banking and release of deposit moneys are identified in the context of legislative requirements and agency practice.

10

3 Identify roles and responsibilities of sales personnel.

3.1 Relationship between salesperson and agency principal is identified in the context of legislative requirements and agency practice.

5

3.2 Roles and responsibilities of agents in sale of property including general disclosure requirements are identified, interpreted and assessed in the context of legislative requirements and agency practice.

5

3.3 Restrictions on agents purchasing property and sanctions for violations of restrictions are identified, interpreted and complied with in line with legislative requirements and agency practice.

10

3.4 Controls and sanctions on secret commissions are identified in the context of legislative requirements and agency practice.

10

3.5 Entitlements and commissions for agents are identified and calculated in the context of legislative requirements and agency practice.

1

CPPDSM4008A V2015.3 165

Glossary of real estate terms

A Abstract of title A chronological summary of conveyances, mortgage or leases and other

deeds giving the names of the parties and the description of the land, arranged to show the continuity of ownership of general law land not under the Torrens system.

Acceleration clause A clause in a mortgage document which requires the immediate repayment of the entire balance due under the said mortgage at any given time should there be a breach of the conditions of the mortgage e.g. Repayment default.

Acceptance Legal consent to the terms and conditions of an offer made to purchase real estate.

Access rights The right of entry to and exit from a property that is next to an existing street or highway. The Certificate of Title will show those parties that have been granted the right to use the access point.

Accessible housing A dwelling designed to allow easier access for physically disabled or vision impaired persons.

Account sales A statement, in the form of an invoice, provided by an agent to a principal (the vendor) giving full account for all deposit money received in a sale less commission and outgoings such as advertising costs.

Acquiring authority A Government department, local authority or other body empowered by statute to acquire land compulsorily.

Act A document that has been passed by Parliament and is law. Adjournment Rescheduling of a case that has already been set down for a Hearing

before a court or Tribunal. Adjustments Apportionment of rates, taxes, body corporate fees, rent, insurances etc

up to the date of possession or settlement on a sale or letting. Advertising costs Same as Marketing Expenses. Affidavit A formally signed statement, often used in a court or Tribunal Hearing, of

a person’s account of the facts in writing. Agency Authority Written agreement for the agency to act on behalf of another party. Agency transfer The transfer of the management of a property from one agency to

another agency. Agent Same as estate agent. Agent’s representative An employee of a licensed estate agent who is authorised in writing to

act on their behalf to perform the functions of that agent as specified. Apartment A room or suite of rooms used as a dwelling unit. The term flat is used to

describe a self-contained dwelling unit in multi-unit dwellings. Appraisal An opinion of the potential sale price or rental price of a property or

business by a Real Estate Agent. Appreciation An increase in value of property or business. Arbitration A method of alternative dispute resolution (ADR). It is a binding decision

made by an independent third party rather than a court. An Arbitrator (the decision maker) is appointed by the parties in accordance with the terms of the agreement they have signed.

Arrears Unpaid debts such as rent or Owners Corporation fees or levies. Assignment of lease The transfer of a lease, including all rights and responsibilities, from one

tenant to another tenant.

166 CPPDSM4008A V2015.3

Auction A public sale of property by an auctioneer whose aim is to achieve the selling price through bids from prospective purchasers.

Auction Authority A written agreement that the vendor signs with the agency to sell the property by auction. It will include details such as the date and time for the auction of the property, a vendor’s reserve price, and negotiated commission and advertising schedule.

Auctioneer An agent who is authorised to conduct an auction. Authority period The period of time given to an agent by a client to perform their

appointment such as sell or lease a property or business. Authority to act A document signed by the Officer in Effective Control or Principal Agent

and given to an employee (an Agent’s representative or another Licensed Estate Agent) prior to commencing work and authorising the employee to perform the functions of an Estate Agent as set out in Section 4 of the Estate Agents Act.

Authority to lease and manage

A written agreement that the landlord signs to engage the agency’s services. It details the agreement between the landlord and the agency. It will include details such as the rental price, outgoings to be paid by the agent on the landlord’s behalf, negotiated commission, advertising costs and the Authority period for the agent to find a tenant.

Authority to purchase A written agreement that the purchaser signs to engage the agency’s services. It provides details such as negotiated fees and commission and the Authority period for an agency to find a purchaser.

Authority to sell A written agreement that the vendor signs to engage the agency’s services to sell the property or business by private sale. The details include the vendor’s price, negotiated commission and advertising costs and the period given to the agency to find a purchaser.

B Bid A verbal or physical indication made by a bidder to purchase a property at a price during an auction.

Body corporate A previously used term to describe the body representing the building owners that share common areas of the premises.

Bond (rental) An up-front payment by a tenant as security for the condition of the premises.

Branch Manager An Estate Agent who manages the branch office of an estate agency business.

Branch office Any agency office, other than the principal office, from where real estate business is conducted.

Breach of contract The breaking of one or more of the terms or conditions of a contract. Breach of duty notice Written Notice that informs one party (either landlord or tenant) that a

breach of the Tenancy Agreement has occurred and requests that the breach be rectified.

Building code of Australia (BCA)

Sets minimum community standards for buildings in terms of health, safety and amenities in buildings.

Building inspector An authorised person who is responsible for ensuring buildings are constructed in accordance with building standards.

Building line The setback from the site boundary required by Statutory authorities for buildings.

Building permit A permit issued by local Government authorities to build or make structural alterations to a building.

CPPDSM4008A V2015.3 167

Building Regulations The Building Code of Australia detailed standards for the design and construction of buildings.

Building restrictions Planning and development controls that limit the use, size and location of buildings or other improvements on the land.

Business Any commercial operation. In real estate it includes goodwill, plant equipment, chattels, stock and any other assets.

Business broker A licensed estate agent or Agent’s representative who sells businesses on behalf of a business owner, such as cafe, or medical services.

Business day Any day other than a Saturday or Sunday or gazetted public holiday. Business owner The person that owns the business. Through registration or incorporation. Buyer The person/s that intends to, or has bought the property. Buyer beware Same as caveat emptor. Buyer's advocate or

buyer’s agent Represents a property purchaser in negotiations with a vendor or his/ her agent. The purchaser's agent is paid by the purchaser. Purchaser's agents should be licensed Estate Agents or be an Agent’s representative employed by a Licensed Estate Agent.

Buyer's market The condition which exists when, under competitive conditions, the pressures of supply and demand are such that market prices are at a relatively low level, giving the purchaser an advantage. An over-supply causing prices to decline.

C Capital gains tax A Commonwealth tax payable on the Capital Gain made on the sale of an investment property. Refer to current requirements of the Australian Taxation Office (ATO).

CAV Consumer Affairs Victoria. Caveat A notice on the Certificate of Title to make it known another person/s is

making a claim over the land other than the owner of the Title. Caveat emptor A Latin expression meaning, 'Let the buyer beware', that the risk in a

property transaction lies with the purchaser in determining the quality of the purchase of the property or business.

Certificate of completion A document issued by a building inspector on completion of the final mandatory inspection of the property.

Certificate of compliance A document issued by a building inspector which states that the building or improvements to the building of the land meets the requirements of the planning for which it was intended.

Certificate of Title A document that shows who owns the property, the size of the land and whether there are any limitations on the title such as mortgages, easements or encumbrances.

Chattels Any moveable item of the property. It may include machinery, implements, tools, furnishings, fittings, which may be associated with land use, but which are not fixed to the land or premises.

Client A person who engages the services of an estate agency. Commercial property Means real estate used or intended to be used for business, professional,

retail or industrial purposes. Commission The fee or payment made to an agent for services rendered. It is

negotiable between the client and the agency and may either be a fixed amount or a percentage of the client’s price stated on an Authority or a combination of a fixed amount and percentage.

168 CPPDSM4008A

V2015.3

Common law A system of laws that are followed by judges which are based on other court decisions.

Common property The shared areas that are used by all residents in a block of units, flats or apartments.

Company title Method of obtaining ownership of real estate by way of company shares. The company's shareholding structure is organised so that ownership of a certain number of shares entitles the shareholder to exclusive possession of a part of the building. It could also mean the land and buildings are owned by a private company

Comparative market analysis

The process of determining the sale price of a property using recorded sales data and current properties for sale.

Compulsory acquisition Where an asset is acquired by a Statutory Authority through legislation, irrespective of whether an owner is willing to sell or not.

Condition report A report on the current condition of residential property when a bond is paid by the tenant.

Conditions of sale The conditions specified in the Contract of Sale which are relied on for the transaction to proceed.

Conjunctional sale A sale where, on approval by the vendor, different agencies work with each other to achieve a sale of the property or business and agree to share the commission.

Consideration In real estate terms, is the value (usually money) that is promised in exchange for the title or possession of the land.

Contract A legally binding agreement when signed by all parties concerned. Contract of Sale A legal document relating to the sale of property, which expresses the

terms and conditions of sale. Conveyance A deed which transfers ownership of common law title from one person

to another. Conveyancing Transferring the ownership of a property from the vendor to the

purchaser and performed by a solicitor or licensed conveyancer. Cooling-off period Three business days for the purchaser to change their mind and end the

signed Contract of Sale on residential or rural property (of not more than 20 hectares).

Co-owner bidding A genuine bid by one or more of the co-owners of a property to purchase that property during an auction.

Co-owners Where two or more persons/organisations have joint ownership of a property.

Counter-offer A new offer as to price, terms and conditions, made in reply to a prior unacceptable offer.

Covenant A restriction on the use of the land or the use of building occupying the land

Crown land Land owned by a State or the Commonwealth Government Customer Means a person who transacts business with an agency but does not

retain their services

D Damages Money ordered to be paid as compensation for injury or loss

Date of settlement The date on which a Contract of Sale is finalised and final payment is made.

CPPDSM4008A V2015.3 169

Deed A legal document (like an agreement) that usually identifies someone has a right to something, like access or use of property.

Defect of title Any matter which restricts the purchaser from obtaining clear title to the property.

Demographics The profiles of a population or a section of the population. Deposit A percentage of the total price payable, usually paid when an offer is

made to buy a business or property. Depreciation The assessment of subtracting an amount from the original cost of an

asset or property. Disbursements Recoverable costs. For example, in the case of real estate sales, expenses

paid by an agent on behalf of an owner, such as advertising, rates and taxes.

Disclosure statement A document containing all information about retail premises that is given to a prospective tenant or purchaser.

Domestic building insurance

Insurance taken out by builders to protect home owners from loss arising from defects to a building or for incomplete work.

Dummy bid A false bid made or accepted by the Auctioneer. Any bid made on behalf of the vendor by anyone other than an Auctioneer under auctions rules is considered a dummy bid.

Duration of lease The period of the lease. The remaining time for which the property is leased. Also known as the lease term.

E Easement A right to use the land of another or a right to prevent the owner of that land from using that land in a particular manner.

Employment agreement The contract that sets out the terms and conditions of employment for an employee and which is agreed between an employer and employee.

Encumbrance A third party’s right that obstructs the use or transfer of a property. Examples are easements, mortgages and caveats.

Enforceable undertaking A promise, confirmed in writing that is enforceable through the Magistrates Court. An undertaking is usually entered into between a Government body, such as Consumer Affairs Victoria with an estate agency acknowledging a breach of the law has occurred through an agency practice and the agent makes a promise that the breach will not reoccur.

Equity law Old law founded on the principles of fairness and natural justice to supplement the rules and procedures of the common law.

Estate agent A licensed person who is authorised to act on behalf of another person to bring about the sale, purchase, lease or management of a property or business.

Estimated rental price The price or price range an agent or Agent’s representative estimates a property will rent for in the current market using their skills, knowledge and experience to determine that price or price range. Unlike sales, there is no obligation to provide a rental price in the Authority, but an agent or Agent’s representative must not make false or misleading statement regarding that price.

Estimated selling price The price or price range an estate agent or Agent’s representative estimates a property will sell for in the current market using their skills, knowledge and experience to determine that likely selling price or price range. When quoted as a range in the Authority it cannot be more than 10% more from the lower amount of the range.

Ethics The standards governing the conduct of real estate practitioners. These standards may be set in legislation or by an industry.

170 CPPDSM4008A V2015.3

Eviction The removal of a person from a property by legal means with the use of a warrant and conducted by the Police.

Exchange of contracts A formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties.

Exclusive agency Same as exclusive listing. Exclusive agency

Authority The agreement between an agent and a vendor establishing an agent’s exclusive right to sell the property for an agreed period of time.

Exclusive Leasing and Managing Authority

the agreement between an agent and the landlord, which allows the agent to find a tenant for an exclusive period of time and then manage the tenancy or lease that the agent has arranged on the landlord’s behalf.

Exclusive listing The right of the appointed agency to act alone without the interference of other agencies when selling, leasing or buying properties.

Extension of lease An agreement that extends or renews the terms of a lease for a period beyond the expiration date.

F Fee simple The highest form of property ownership of unlimited duration and where ownership passes to heirs or beneficiaries upon the owner’s death.

First home owners grant (FHOG)

A Government scheme providing first home owners with a non-means tested one-off payment.

First refusal (right of) The right granted to a person to have the first privilege to buy or lease real estate, or the right to meet any offer made by another.

Fittings Installed items that may be removed from real estate without causing irreparable damage to the land, structure or use of the premises.

Fixed interest rate An interest rate that remains unchanged for a set period, for example, for the whole term of the loan, or the first year of a loan.

Fixed-term tenancy A Tenancy Agreement that has starting and end dates. Fixtures Those parts of a property affixed to structures such as buildings or the

land, which usually cannot be independently moved without damage to themselves or the property it is attached to. Fixtures are usually included in a sale and commonly include items such as carpets.

Flat A self-contained dwelling unit in a multi-unit building. Foreclose Removing the right, title and interest of the owner of a property or asset,

usually due to a default of mortgage payments. Freehold Absolute ownership subject to limitations imposed by the State (the

Crown); also known as a fee simple estate.

G General agency Authority

The client appoints an agency but reserves the right to appoint other agencies or to personally sell or lease the property or business.

General law title The original system of recording title owners through a chain of title. General sales Authority A sales Authority under which the vendor appoints an agency to sell the

property but reserves the right to appoint other agencies or may sell the property themselves.

Going concern An operating business that will remain in operation for the foreseeable future. Properties sold as a “going concern” may be treated differently for taxation purposes.

Goods Same as Chattels. Goods and services tax

(GST) A consumption tax imposed by the Commonwealth levied on the provision of goods and services.

Guarantor A person who undertakes to fulfil a contract if the main party defaults.

CPPDSM4008A

V2015.3 171

H Hearing A formal proceeding usually carried out in a court or tribunal, where evidence is presented by parties to a Member, magistrate or Judge who makes a determination based on that evidence.

Hearsay evidence A form of evidence given at a court or Tribunal by a person giving an account of what they were told rather what that person has directly experienced themselves.

I Implied easement A restriction on the property that is not written on the Certificate of Title but is a requirement, for example for access to the property or allowing sufficient light for the building.

Implied covenant An obligation that is accepted rather than expressly written usually into a commercial lease. On the part of the lessor (the landlord) this could include an asset, (such as an air-conditioning unit), being fit for the purpose for which it is let and allowing for quiet enjoyment. On the part of the lessee (the tenant) it could include keeping the premises clean.

Improvements All work done and material used on and for the benefit the land that improves the value of the land.

Industrial property Property located on land that is zoned for industrial purposes, which is usually factories and warehouses.

Insolvent A person or business who has stopped paying debts in the normal course of business and is bankrupt or in an administrative arrangement with creditors to pay their debts.

Institute Means The Real Estate Institute of Victoria Ltd (ACN 004 210 897) or its successors.

Insurance An agreement with a third party, whereby they agree to protect the agency against loss or from a specific hazard.

Interest The payment made by a borrower to a lender in return for the loan of

money, in addition to the principal repayments. Interest only loan Only the interest on the loan amount is repaid during the term of the

loan. At the end of that time the original loan amount is repaid as a lump sum.

Interest rate The rate of return earned on an investment, or charged by a lender, expressed in the form of a percentage per annum.

Investment property Property (land or a building - or part of a building - or both) held to earn income or for capital gain or both

J Joint tenants A form of ownership of Title where there is two or more people that are owners. In the event of a death of an owner, the Title ownership is automatically passed onto the surviving owner/s.

Jurisdiction The right and power of a court, tribunal or authority to deal with an issue, dispute or other matter in applying the law.

K Knocked down The action of the auctioneer to bring down a hammer or gavel, or otherwise indicate, that property has been sold and the auction is over.

L Land agent Same as an estate agent.

Land owner Same as property owner. Land tax A tax payable annually by the Title owner, which is calculated usually

based on the unimproved value of land.

172 CPPDSM4008A V2015.3

Land usage The use being made of the land or the uses permitted under the relevant Zoning.

Landlord The owner of a property that is leased to a tenant. In commercial management they are also referred to as the lessor.

Late bid A bid to purchase the property that is made after the property has been sold at auction.

Lease An agreement between the landlord (the lessor) provides exclusive use and quiet enjoyment of the property to the tenant, (the lessee), in exchange for periodic payments of rent. The term ‘lease’ is mostly used in commercial property management.

Lease abstract A summary of a lease document listing the specific details of that lease. Lease term The period of the lease. Leasehold Possession and use of a property by the arrangement of a lease. Leasing To find tenants on behalf of the landlord for their property. Legal capacity A person’s ability to enter into a contract. Legal representative A solicitor or conveyancer. Legislation Laws in the form of Acts and Regulations made by a State or Federal

Government. Lessee Same as tenant. Lessor Same as landlord. Liability for trust money The Officer in Effective Control or Principal Agent is personally liable for

any trust money received by the agency. Licensed real estate

agent A person who holds an estate agent’s licence from the Business Licensing Authority.

Lien A charge, security or encumbrance upon property for the payment of debt.

Listing A term commonly used by agents for obtaining an instruction to sell or lease real estate. The term is also used to describe the current properties available for sale by an agency.

Listing agent The estate agent or Agent’s representative who acquires the client’s property or business on behalf of the estate agency.

Long-term lease A phrase mostly used in commercial property management that refers to a lease extending for ten years or more.

M Maintenance The work required to maintain the premises the premises in good condition.

Management agreement Same as Exclusive Leasing and Managing Authority. Management fee The fee a landlord pays for the agency to collect rent from the tenant.

The fee may also include the cost of managing other tasks relating to the tenancy.

Managing agent The agency authorised in writing to manage the property on behalf of the landlord.

Margin scheme A method of determining the amount of GST payable on the sale price of real estate, when applicable.

Market price The price that purchasers are willing to pay for the property in the current

market.

CPPDSM4008A V2015.3 173

Market value The price that purchasers are willing to pay and sellers are willing to accept for the property in the current market.

Marketing expenses The negotiated amount of monies that the agent can spend on behalf of the client (the vendor or landlord) to attract potential purchasers or tenants. Marketing plan – a written description of how the agency intends to advertise a sale property so as to achieve the best result for the vendor or landlord.

Median The middle number when data is arranged from lowest to the highest in sequence. If there are two median scores, they are averaged to provide the true median.

Mediation The process by which a third party assists two disputing parties to reach a mutually agreeable outcome. A recommendation made by the mediator is not necessarily binding on the parties.

Mortgage The obligation of a person to make periodic repayments of a loan with

interest to a finance provider for property. Mortgage guarantee

insurance Paid by the borrower to protect the lender against failure by the borrower to keep up mortgage repayments or to pay back the loan in full when it is due.

Mortgagee Finance provider who lends money against property as security. Mortgagee sale Sale of a property where, in the case of a default of payments of a loan

by the mortgagor (the property owner), the mortgagor (the finance provider), has the right to sell the property to recover the full amount of the loan.

Mortgagor A person (usually a purchaser or property owner) who takes out a loan of money for a property.

Multiple listing The client’s decision to use more than one agency at the same time to list their property for sale or lease. Importantly, the client will only pay one commission on the transaction regardless of which agent introduced the tenant or purchaser.

N Negligence A failure to exercise a duty of care that is the direct cause of another person’s loss or injury.

Notice A formal document to notify a tenant or landlord or their agent of an issue regarding the tenancy.

Notice to quit A legal notice, used in commercial property management, served on the tenant requiring them to vacate the property.

Notice to Vacate A legal notice served when a tenant or landlord wishes to end the tenancy.

O Occupancy Having possession of a property. Physically residing in the property as the owner or a tenant.

Offence Breaking the law. Offer In real estate terms, a promise to give something in exchange for

something else. For example, an offer to buy a property in exchange for the title of the property.

Officer in Effective Control

The person responsible for a company estate agency business. This person must be a licensed estate agent.

Off-the-plan This is the purchase of a property that is yet to be built. It is a purchase usually based on the building designer’s or surveyor’s plans and models.

Old system title Same as Common Law Title. 174

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On-the-market A term used during an auction to identify the property has reached the reserve price and will be sold to the highest bidder.

Open for inspection The times set aside and advertised when prospective purchasers can view a property for sale.

Open listing Same as general sale Authority.

Order A legally binding decision by a court or tribunal.

Outbuildings A building separate from but associated with a main building, for example a garage, workshop or shed.

Outgoings Any money spent on a client’s behalf by the agency that is recoverable from the income derived from the sale or leasing of the property or business. It is also the costs that the tenant (in a commercial property) is responsible for under the terms of a lease, such as rates and Owners Corporation levies.

Over capitalisation The situation of over spending on an improvement to the property that does not add value to the property.

Over quoting The over estimating by an agent to the vendor of the likely selling price of the property.

Owner The person/s name as the owner on the title of the land. Owners Corporation The current term used to describe the body representing the building

owners that share common areas of the premises.

P Party in default The party to the contract that is in breach of the contract or terms of the contract.

Passed-in The situation of when a property is not sold at auction because the owner's reserve price has not been reached.

Penalty A form of punishment for a breach of the law, usually in the form of a fine, jail sentence or both.

Penalty unit Penalty and fee units are prescribed in Victoria’s Acts and Regulations to describe the amount of a fine or a fee. The value of the Penalty Unit is updated annually and published in special Victoria Government Gazettes. These can be viewed at www.vcec.vic.gov.au

Periodic lease Where a tenant continues to rent / occupy the property after the fixed- term has expired.

Periodic tenancy A Tenancy Agreement that has a commencement date and continues from one rental period to another.

Planning approval Approval from the relevant authority to use property for a specified use such as building or renovating.

Pointer sign Means a sign which indicates by its design and/or by the use of colour and/or words and/or devices and/or symbols and/or figures the direction in which something is located

Preliminary hearing A hearing to set the details and directions of a main hearing. Premises A house, building or other structure together with the surrounding

grounds that collectively forms the Title. Prescribed A mandatory requirement of the law. Principal The agency’s client/s. Principal office The head office of the estate agency. Private sale A property or business that is sold by an agency through negotiations

with a purchaser/s.

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Private sale by owner Where an owner offers a property for sale without engaging an agent. Private treaty sale Same as private sale. Professional Indemnity

Insurance A policy provided by a third party who provides protection for the agency against legal liability arising from the conduct and practice of the business and its employees.

Property The premises that is owned by the client for sale or lease. Property management The process of managing the owner’s property including rent and

maintenance. Public liability insurance A policy provided by a third party who provides protection for the

accidental death, injury or damage caused to another person or property by the negligence of an estate agent or their employees.

Purchase price The amount agreed between the vendor and the purchaser for the property.

Purchaser The buyer; the person who acquires title to or ownership of a property or an interest in a property.

Q Qualified valuer Means an individual who is certified by the Australian Property Institute ("API") to perform property valuations.

Quiet enjoyment A right to undisturbed occupation and possession of the premises.

R Rates Periodic property taxes.

Real estate The land and its improvements. Real estate agent Same as estate agent. Real property All the rights, interests, and benefits related to the ownership of real

estate. Real property is a legal concept distinct from real estate, which is a physical asset.

Realty Same as real estate. Rebate A discount that may be monetary or not received by an agent and that

must be passed on to the vendor or landlord [s48a through s48e Estate Agent’s Act 1980].

Registered proprietor The person whose name appears on the title to the property. Regulations Rules made under an Act of Parliament. Remedy A legal order addressing a wrong or enforcing a right. Rent A payment made periodically by the tenant (or lessee) to the landlord (or

lessor) for the use of premises. Rent review A periodic review of the rental under a Tenancy Agreement or lease Rent roll A group of rental properties managed by a real estate agency. Rental determination A valuation report by an independent valuer fixing a rent, in

circumstances where the lessor (landlord) and lessee (tenant) have been unable to negotiate an agreement.

Rescind/rescission To cancel or terminate a Contract of Sale. Reserve price The minimum price acceptable to the vendor. Residential property Property zoned and used for residential living such as houses, flats and

apartments. Residential tenancies

list The list of all Hearings relating to residential tenancy disputes for determination before a Member of VCAT.

176 CPPDSM4008A V2015.3

Residential Tenancy Agreement

The agreement entered into between a tenant and landlord of residential premises.

Residential tenancy database

A risk management tool used by agents to review any history noted about a tenant.

Retail property A category of commercial property zoned and used for retail buildings such as shops and shopping centres.

Retainer The minimum salary that an Agent’s representative must be paid in advance of any commission earned.

Right of access Where an ongoing right of access has been given to enter the premises or land.

Right of entry The entitlement of the landlord to inspect the rented premises during the time the tenant is in possession.

Rural property Property zoned by Government for non-urban uses.

S Sale by tender The sale of a property through written and confidential submissions from interested purchasers by a certain date.

Salespeople Estate agents and agents’ representatives working in sales in an estate agency.

Secret commission Any gift or consideration given or promised to be given by a third person to an estate agent or Agent’s representative where it may influence that person from acting in the best interests of the client.

Security deposit A bond paid in relation to a commercial lease. Seller's market An under-supply of property causing prices to increase. Selling agent An estate agent or an Agent’s representative acting on behalf of a vendor

to facilitate the sale of a property. Set sale A sale method used to market the property seeking offers from

purchasers by a set date. All offers are evaluated and the vendor may elect to accept one or reject all of the offers.

Settlement The final payment of the contract price in exchange for title and possession of the property.

Settlement date The date on which settlement occurs. Special condition A condition that must be met for a contract to be legally binding. Stakeholder An estate agent, solicitor or conveyancer who receives or holds money

in trust on behalf of any person in respect of a real estate transaction, pending the completion of that transaction.

Stamp duty The tax imposed by state Government on the sale of property payable by the purchaser.

Statute A law made by Parliament. Statutory body A Government agency established through an Act of Parliament. Stock and station agent Estate agents that broker transactions which involve livestock, rural

property and agricultural products on behalf of their clients. Strata plan The registered plan of title property showing the boundaries of lots and

unit entitlements. Strata title A scheme of property ownership where each proprietor owns parts of

a building and has joint rights with other proprietors over the land and other common areas.

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Stratum title A form of ownership whereby each owner in a development has a certificate of title for each property and also owns shares in a service company that administers, manages and maintains the common areas on behalf of all the shareholders.

Subdivision The division of all or part of a parcel of land, into separate allotments (or sections), each with a separate title, in accordance with a 'plan of subdivision' approved by the planning authority.

Sub-lease / sub-let A contract where the whole or part of the property is rented to another person.

Subpoena Same as witness summons. Survey The measurements of the land and its improvements undertaken by a

registered surveyor.

T Tenancy Agreement Same as residential Tenancy Agreement.

Tenant A person or entity paying rent in exchange for the occupancy of a building or dwelling. See also Lessee.

Tenant's agent A Tenant's Agent should be a licensed real estate agent, who acts on behalf of a tenant in a commercial property transaction.

Tenants in common Same as joint tenants or joint owners Tender Providing a written and confidential submission for a property by a

certain date. Termination The act of ending something. In real estate terms, usually a tenancy or a

Contract of Sale. Title A legal document that shows who has a right of ownership of a property. Title deeds Documents evidencing the ownership of property. Torrens title A system of title by registration. Tort Damage, injury or a wrongful act done deliberately, negligently or without

excuse for which a civil action can be brought. Transfer of land A written record of the change of ownership of a property from the

vendor to the purchaser. Tribunal A body that hears and makes decisions about disputes. Trust account A bank account where monies are held by an agent for or on behalf of

another person e.g. Deposit for a sale, rent money etc. Trust money Money received by an estate agent held on behalf of another person

U Under quoting The practice of understating the likely selling price to prospective purchasers to encourage greater interest in the property.

Under seal A formal process of signing for signing and consenting to written agreements

Unencumbered property Property free and clear of mortgages, restrictive covenants, or leases. Unenforceable contract A defective contract. Unfair contract term A term in a consumer contract that unreasonably favours of one party

over another. Unimproved value A Government method of determining the value of the land. Urgent repairs Immediate repairs required to the property to ensure they are fit for use

and safe.

V Vacancy An unoccupied property.

178 CPPDSM4008A V2015.3

Vacancy rate The percentage of rental premises which are vacant. Vacant possession The duty to ensure the property is vacant for the new owner on

settlement of the sale. Vacate To give up occupancy; to make vacant; or move out of property. Valid contract A contract that meets the legal obligations to make it binding. Valuation A formal determination of the value of a property. Valuation report A document that records and specifies the details of the valuation. Valuer Same as qualified valuer. Variation An addition, removal or alteration to a contract or to the contract

conditions. VCAT Victorian Civil and Administrative Tribunal Vendor The seller of a property. Vendor bid A bid made by an auctioneer on behalf of the vendor where auction rules

allow. Vendor terms contract A contract when the purchaser takes possession of the property before

paying the final instalment of the purchase price. Vendor’s statement A formal disclosure document signed by the vendor, usually drafted by

their legal representative, which is given to a prospective purchaser to review before the signing of a Contract of Sale.

Void Not binding, invalid or has no legal effect.

W Wear and tear The reasonable deterioration of the property through every day use.

Without reserve An auction conducted without a reserve price. Witness summons A notice to a person requiring they appear in a court or Tribunal. Also

called a subpoena. Working day Same as business day.

Y Yield The calculated percentage return of a property assessed from the net income and the market value or price.

You In this Guide means you as an Agent’s representative or estate agent.

Z

Zoning

A local planning policy to control the present and future development of land including residential, business and industrial uses.

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