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CPPDSM4008AIdentify the legal and ethical requirements ofProperty Sales to complete agency workMRT Training Pty LtdRTO Registration Number 21687CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 2 of 54CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 3 of 54CPPDSM4008A – Identify the legal and ethicalrequirements of Property Sales to complete agency workThis unit of competency specifies the outcomes required to meet the core legal andethical requirements associated with property sales.This includes awareness of the legislation relating to property sales, the role andresponsibility of agency personnel in property sales, the administration of salestransactions and the completion of sales documentation.The unit may form part of the licensing requirements for persons engaged in realestate activities in those states and territories where these are regulated activities.This Unit of Competence (CPPDSM4008A) is one of the core units in the CPP40307– Certificate IV in Property Services (Real Estate) qualification and an elective unitin the CPP30207 – Certificate III in Property Services (Agency) qualification. Theseparticipant notes also provide underpinning knowledge for other units in thesequalifications.AssessmentAssessment for this unit includes tasks to be marked by your assessor, which mayinclude multiple choice questions, short answer questions, case studies, projects,role-plays and / or demonstrations.Assessment activities for this unit are provided in a separate assessment document,which has been customised to meet the legislative requirements in your state orterritory.You may apply for assessment through MRT’s recognition process whereby youdemonstrate your current competence through prior learning (RPL) by compiling aportfolio of evidence to demonstrate your skills and knowledge. Your RPL will besupported by interview questions and / or third party reports to confirm your skillsand abilities.Competence in this unit will be demonstrated when you are able to show that youcan meet the Elements and Performance criteria, shown on the following page.These have been extracted from the full Unit Descriptor which is available uponrequest.Tutorial AssistanceShould you require help, assistance or tutorial support at any time during yourstudy, a course facilitator is available to assist you. To request support sendan email to [email protected] with a brief outline of yourquery.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 4 of 54Introduction – The Business of Real EstateWithin the property industry the term “real estate” generally relates to the sale,management and leasing of land and property.The real estate sector is made up of many small businesses, which are often a partof a Franchise group or a Marketing network. The best known franchise groupsinclude Ray White, LJ Hooker, Century 21 and Raine and Horne (amongst others)whilst the Professionals and First National offices belong to marketing networks.The vast majority of real estate businesses derive the vast majority of their incomefrom residential sales and property management. The commercial and industrial realestate markets, as well as strata management, are specialist areas generallyserviced by fewer agents.Real estate agencies vary considerably in size, from small husband and wifepartnerships who may service a small local area up to large international businesses,with many specialist departments catering for all real estate functions and services,as well as offering other business services associated with real estate (eg specialistaccountancy / removals / conveyancing etc).This unit applies to urban real estate – which is town or city real estate, however,many of the concepts and principles carry over into other specialist areas.Generally urban agencies have one licensee (principal or owner), a propertymanagement department, a sales team, administrative staff and a receptionist.The sales department creates substantial revenue for real estate agencies. Howeverincome from the sales department can fluctuate between highs and lows. On theother hand, the income from the property management department is more stableand tends to be more regular without extreme peaks and troughs.In order to provide a stable income base with potential for growth, most agencies willhave both sales and property management departmentsWhatever the business type, a fee (or commission) is charged to clients that coversthe cost of paying the salaries and commissions of staff members, the fixed costs ofthe business (eg rent, rates and insurances) and the running expenses (overheads)of the business (marketing, advertising, utility accounts, etc, etc).Business owners (office principals and directors) have invested in their business andare seeking a return on their investment, so the total income needs to be sufficientto run the business profitably, by covering all fixed costs, salaries and expenses andleave a net profit.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 5 of 54Winning Real Estate BusinessA real estate sales business is one in which the salespeople need to be proactiveand actively look for new business. Salespeople that wait for business opportunitiesto walk through the door will find their business short lived.“Prospect or Perish” is a motto that a good business should live by. Finding, nurturingand building a strong, active “leads” database is critical to success.The most effective way of building business is referrals from satisfied clients andcustomers. Word of mouth is very important in a ‘people-focused industry’ like RealEstate. If someone knows and respects the skills of the agent and / or agencybusiness, this is an important recommendation that can be used to great effect.Reputation plays a significant role in this process.In the competitive world of real estate consumers have been exposed to a variety ofpractices by some less than scrupulous agents over the years that have led to aperception of mistrust and lack of confidence in the provision of services.Often, current affairs TV programs have been able to draw ratings from their“exposure” of agents involved in less-than-reputable practices. Therefore, the firstthing that agency employees need to do is to overcome this perception (if it exists)by establishing rapport and empathy with clients and potential clients.In the case of referrals, this has been largely done by the person that referred thebusiness. However, there is still a need to reinforce the perception that led to thereferral. That is good for both the referrer and the referred!So how does an agent obtain referrals? The old saying goes: “If you don’t ask, youdon’t get!” It is essential to build a client database and ask for referrals from satisfiedclients to continue to build that database.For new starters in the field of sales, a list of contacts such as family, friends andacquaintances is a good starting point. A brief note or card, letting them know a newcareer is underway and asking them to mention your name if the topic of real estatecomes up in conversation, is a good strategy for “getting your name out there”.Referrals can also be obtained from a business referral network of professionals whowork in related fields. Agents and Property Managers need to comply with the rulesof disclosure regarding their relationship when referring people to otherprofessionals.(Note: There are specific provisions in the Rules of Conduct, Estate Agents Act, onthe disclosure of relationships, which will be discussed later).CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 6 of 54Prospecting in Real EstateBuilding a client base is one of the most important functions of a Real Estate Agent.This section looks at some of the more productive activities that can be undertakenby Salespeople to build their database.Having a database, where the potential clients have given you permission tomaintain contact is going to be a vitally important consideration for the future.Already, consumers complain about “cold calling” activities such as telephonecanvassing and door knocking. There is little doubt that future legislation will furtherrestrict activities such as these, making it harder for agent to be able to add contactsto their databases.However, whilst these opportunities still exist, canvassing and the development of adatabase should be considered the agents “savings account”. Every contact on thedatabase represents a future business opportunity.Door to Door CanvassingTypically, real estate sales agents are allocated a dedicated marketing or “farm”area. The number of properties in your farm will vary according to the area, the typeof properties and the characteristics of the property owners.“Door knocking” in your marketing area is a great way to meet homeowners andintroduce yourself to them.Door knocking is often known as “cold calling”. You will be knocking on home owner’sdoors and introducing yourself and the services of your agency. Whilst you areunlikely to list property this way, you will increase their awareness of you and youragency.One thing to remember about door knocking is that you should not be asking forbusiness – it is better to give something to people. Some ideas include calendars,fridge magnets, children’s colouring books if they have kids, but what ever you leave,make sure it features your name and your agency’s name and logo, so that thepeople you speak to will have something to remember you by.That way, next time you call on them, it will be a ‘warmer’ call because the peopleyou are door knocking may already know you.It is important to set aside time eachweek for this activity (in sales, some new entrants will devote an hour or more a dayto doorknocking).You will need to consider what time of day you call. It should be when people aremost likely to be at home, which could well be outside normal working hours.Organising yourself, and being prepared to face rejection are two important qualitiesCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 7 of 54– there are many homeowners who will simply not want to speak to you – persistenceis important.You never know who might be thinking of selling or leasing their home, but when youbear in mind that about 5 – 8% of all property comes onto the market each year, thechance is that out of every 100 door-knocks made there are likely to be at least 5that are thinking of either buying or selling property in the next six months or so!One of the better “reasons” to doorknock (or letterbox drop – see below) is to let localresidents know about property (for sale or lease) that has just come onto the market,or has just sold or been leased.Letterbox dropsPeople receive many offers through their letterbox so the material needs to sparkinterest or it will quickly be consigned to the rubbish bin.Letter box drops may consist of newsletters, brochures, invitations to seminars inyour office, personal introductions, almost anything at all. The idea is, like the doorto-door canvassing, to let people know you are around and are able to help them inproperty matters.If you are putting fliers and letters in residents’ letter boxes, make them somethingworthwhile – something that people will want to look at and that help you to establishyour image locally. You need to make sure that whatever message you give isinteresting and eye-catching.Have an organised system in place when letterbox dropping – don’t just throwrandom material into random streets – and make sure that you have a system inplace to follow up afterwards. Use your marketing or farm area and plan to carry outyour letter box drop throughout your area on a regular basis – not just as a one-offactivity.Take note and do not place material in any letterbox if the box is marked “Nounsolicited advertising material” or similar. Remember the idea is to create businessnot to antagonise people so that they will avoid your services.AdvertisingAnother well used area that must be carefully planned and spark interest to succeed.Publicising your success works well. However, advertising is expensive anddeserves careful planning and preparation to be fully effective.Sometimes agencies include “properties wanted” in their advertisements in the localpapers. This is an attempt to generate interest from prospective vendors. If you areCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 8 of 54doing this, make sure you do have genuine interest from purchasers in the type ofproperty you are targeting.If you use newspaper advertising make sure you vary the copy each week and don’tjust use the same advertisements.Another idea, which you have probably seen is the weekly real estate papers, is towrite a general interest column about real estate. You can get professionaljournalists or copy writers to prepare this for you if you want. The purpose of this isto raise the profile of your agency in the community.SignboardsObviously, the more “For Sale” signs you have in an area the better – “Sold By”stickers on signs are better yet! If you are the most active agency in your area, thechances are people will come to your agency for an appraisal or listing presentation.A sign on a new listing in conjunction with letterbox drops and/or door knockingneighbouring properties gives you an excellent profile and coverage.A sign is a 24 hour salesperson – day and night, rain, hail or shine. The letterboxdrops and door knocking process can be repeated to invite people to open housesand notify of your success when the property is sold.Signboards do not only advertise your skills and success, but can also draw inquiryfrom people about the price of the property if they are thinking of selling or leasingthemselves.Open HomesOne of the better ways to obtain listings is the open for inspection. There are severaladvantages, as potential purchasers or tenants are also potential vendors orlandlords.The open house gives potential clients the opportunity to watch the agent “in action”,and the visitor list increases the database and therefore more opportunities to makecontact with more people.All visitors to open homes should be followed up to gauge their interest in theproperty and establish their motivation for visiting the Open Home.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 9 of 54Private Sales / Private LeasesSometimes vendors try to sell or lease their properties without using an agent andthey are quite entitled to do this. The owners obviously want to achieve a real estategoal, or they would not be trying to do so themselves.People want to conduct their own transaction for a variety of reasons. They maybelieve they can save money by not paying a fee to an agency, or think they can doa better job. Sometimes they have had a bad experience with an estate agent in thepast.Your approach is important, but don’t try to hide the fact you are an agent. If you askdirectly for the listing you will probably not get it. Offer to help them to sell or leaseprivately by helping them create a catchy advertisement, or advise them of some ofthe benefits of using a professional agent.If you offer to help them, stay in touch and provide some assistance, they may wellgive you the opportunity to do business with them if (or when) they don’t succeedthemselves. The greater proportion of land and property that is transacted is doneso with the use of an agent, so the odds are with you.The Rent RollThe rent roll itself is an underutilised resource for building the property managementdepartment. Many landlords would welcome the opportunity to build their investmentportfolio. In order to help them achieve this good communication between the salesand property management departments is essential – suitable rental propertiesshould be actively marketed to existing landlords and they should also be kept up todate with current market information, such as re-appraisals of their current propertiesthat will encourage them to grow their personal portfolio.We mentioned earlier that 5 – 8% of all property comes onto the market each year.If an agency has 200 properties on the rent roll, it is likely that 10 – 20 of these maycome onto the market each year. If a lessor is selling it is better that they sell withyour company than with another agency.If any of the agency’s landlords are considering selling, an annual review of thepotential value of their property may just prompt them to remind them to list with youand / or your agency.TelemarketingMany agents undertake telemarketing within their marketing area. This works bestwith practiced scripts and some agents leave this to the experts and employexperienced telemarketing people to do this on their behalf.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 10 of 54Office Walk-ins or Phone-insSometimes you can obtain listings simply by people walking into your office andasking you to sell their property. Don’t rely on these as you will invariably work withother salespeople who will share in this form of prospecting. In many offices theseenquiries are shared on a rotational basis.“Orphans”An “orphan” is a term for those people (eg. customers, former clients or potentialclients) that have had a previous contact with the agency, but the relationship isinactive.Orphans could comprise:1. Listing clients where the agency expired or the client withdrew their property. Reestablishing a relationship will take a concerted effort on your part as the peopleare usually disappointed by their previous lack of success.2. Potential buyers or tenants that showed an interest some time ago and who maynot been followed up for a long while. They represent another opportunity to “askthe question”.3. These could be clients that have previously had properties managed by youragency, but currently no longer use your services. There could be many reasonsfor this, but a friendly ‘keep in touch’ letter or phone call will remind them of youand your agency.4. Lost listings – where you have been called in to appraise a property for sale orlease, but have not won the business on the first attempt. A follow up call a fewmonths after the appraisal to ‘see how they are going’ represents anotheropportunity to “ask the question”.Builders, Developers and TradespeopleThese are a great source of listings if they are active in your area. You should addlocal builders, developers and tradespeople to your database and keep theminformed with local market information. They will also depend upon you for expertisein marketing properties. Therefore, make sure that any information you give them isup to date and useful to them.Quite often, builders and developers may well retain one or two properties they havebuilt in a development in order to grow their personal property portfolio. Again theold adage applies: “If you don’t ask, you don’t get!”Conjunction Listings with Other AgentsOften agencies are reluctant to share a listing they are sure will sell. However, oftenif agents are having difficulty selling a home they may be prepared to work inconjunction with another agent to achieve a result for their client. It can do no harmto ask, but don’t expect great results.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 11 of 54There are many avenues to prospect for listings but the key is to build yourself aprofile in your market place. Everyone needs to recognise you. Advertising andmarketing material with your photo on it is a good way to achieve this. A profile willbuild business quicker than experience.Experienced salespeople who are not recognised may lose business to new andenthusiastic ones who have spread their image far and wide in their marketing area.In addition to prospecting undertaken by individual agents, many real estateorganisations promote their businesses in a variety of ways, in order to raise publicawareness of the agency, groups of offices or the organisation as a whole.These may be local, regional or national and might include:  Internet websites Displays and Exhibitions Phone books (White and YellowPages) TV or radio advertising Periodicals and magazines Vehicle signage Sponsorships Corporate apparel Charities affiliations and auctions Community involvement Think aboutThe various ways you could increase a ‘market awareness’ of your entry to thereal estate sector in your area.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 12 of 54Appraising PropertyIf the salespersons prospecting activity is successful salespeople will be able to gainappointments with homeowners to appraise their property.An appraisal represents an opportunity for the agent to: Build a relationship with the prospective client andDemonstrate their skills and knowledge Property owners request appraisals for many reasons – many are thinking of selling,and are comparing different agents before making a choice as to who they willappoint to sell their property.On the other hand, the property owner may be thinking of extending, rebuilding,renovating or just wanting to keep abreast of the marketplace. Whatever the reason,preparation is the key to making the right impression and being able to meet theowners needs for information.Whatever the reason, preparation is the key to making the right impression and beingable to meet the owners’ needs for information.Appraising a property (determining a current estimate of likely selling price)requires skill and research on behalf of the real estate salesperson.In order to determine an estimate of price in any market, extensive research andknowledge of the target market is requiredHomeowners expect agents to be able to demonstrate their local knowledge at anappraisal. Having up to date information about recent sales, as well as extensiveknowledge about the facilities and services available in the local area, is vital. Soisthe ability to be able to identify the target market and the benefits and features thatprospective clients look for in particular properties.Most real estate agencies have access to databases of recent property sales suchas Australian Property Monitors (APM), RP Data and Residex (probably the mainproviders of such information). Council web-sites also provide data on averageprices for land and property within their local government areaDriving round the area, monitoring properties for sale and properties that have beensold can provide agents with substantial local knowledge. Potential vendors mayalready have this knowledge themselves – they will already have compared theirproperty to others that are for sale or have recently sold. A successful agent mustbe more knowledgeable than their potential client.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 13 of 54Other methods of gaining local knowledge include: Checking old office files anddatabases – the property may have been appraised or even sold by the officepreviously.Agents can be liable for damages in a court of law for failing to exercise reasonableskill, care or diligence when appraising property. It is important to remember thatagents need to be able to justify their appraisal to the Office of Fair Trading, shoulda particular appraisal be challenged. (EAS s47 – Requirement to substantiate sellingprice estimates). The price that is estimated at the appraisal should, be within 10%of the expected sale price; any greater variance is likely to be considered misleadingand / or negligence by the agent.The practice of over quoting to vendors to win a listing is also outlawed under theEAA (s.47B – False representation to seller or prospective seller).Many agents think that providing a higher selling estimate to the vendor of a propertywill help them secure the listing. It may, but the chances of selling the property at aninflated figure will be minimised.The net result is more likely to be that the property takes longer to sell, and sells ata price close to or even below the true estimate of value at the time of appraisal, dueto the fact that it has “gone stale” on the market.The worst outcome is that the salesperson loses the listing to a competing agent(who correctly estimated the selling price at the appraisal) and therefore loses outon achieving a sale, the potential rewards available, as well as the time and efforttaken to achieve a negative result.Consumer Affairs Victoria has numerous guides on lineincluding Property sales method and priceComparative Market AnalysisThe most common method of appraising residential property is by conducting a“Comparative Market Analysis” (CMA) – some agents refer to this as a “CompetitiveMarket Analysis”. This is usually sufficient for a typical house, similar to others in aneighbourhood or suburb.A CMA involves researching property that has recently been sold or leased thatcompares with the subject property.The estimated value of the property is then determined by examining the results ofsales of comparable properties in the locality, as well as those properties that arecurrently available for sale or lease and that are likely competition for the subjectproperty in the current market.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 14 of 54The following elements should form the basis of the comparison:1. Size of the property and living areas,2. The number of bedrooms, bathrooms and toilets etc.3. The land size (especially in inner urban areas).4. Outdoor living space and the extent of ‘usable land and garden / yard5. Entertainment areas.6. Location of the property (in relation to schools, public transport and shops)7. Outward appearance, design & standard of construction and finish.8. Age of the building.In some cases, however, it will be necessary to use more than one method ofappraisal, and these are typically used where, for instance, there are no directcomparisons; for instance, the house or land may be totally unique in some way, orthere are other special circumstances, such as vacant land, subdivision, commercialor semi-commercial properties.Other methods of appraising property include:SummationThis method entails adding the value of the various parts of the property such asland, buildings and improvements such as landscaping, swimming pools, inclusionsetc., to calculate a monetary figure. You would also take into account any extraimprovements to the property, such as landscaping and fences.CapitalisationThis method is commonly used with commercial property and is based on the netincome a property can generate.The net income is the income received after all property expenses and outgoingsare deducted from the rent received. Therefore, the net rental income equals grossrental less all expenses.The capitalisation rate will depend upon a number of factors such as the property’slocation, lease term, lessee, and type of construction, economic conditions and manyother factors. This figure is again determined from historical comparative analysis.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 15 of 54Hypothetical Development MethodIn the case of projects and property development a “what if” or hypothetical methodmay be used which incorporates factors such as: Gross expected sales income (again based on comparable sales)Costs of selling the project or developmentProfit margin with a percentage included for any risks attached to theproject such as wet weather, labour strikes or delays and marketfluctuations etc.Cost of the development including any holding charges, interest onborrowings and contingencies as mentioned in profit margin risks. Until you have gained the essential local market knowledge, guidance and adviceshould be sought from experienced agents when appraising a property, especially ifit is ‘non-standard’ in some way.The policies and procedures used in the agency in which you are to operate mustbe clearly understood. It is important, as well as a help in learning more about thearea, to draw on the experience of others before you attempt to undertake thisfunction without supervision.Professional real estate agents would have pre-prepared “Listing Kit” to give to theproperty owners at the appraisal.Most real estate agencies have developed their own listing kits. The kit is apresentation document or folder that you will leave with your prospective client, andshould therefore reflect the professionalism of both you and your agency.The listing kit should contain information about the agency and the services offeredby the agency and a sample agency agreement. It may also include details ofcomparable properties & sample marketing schedules.A high quality listing kit, that incorporates visual aids, will help you sell your servicesand the services of your company to the property owner at the appraisal.Naturally, you cannot sell your services unless you understand the owners’ preciseneeds, expectations and motivation. Therefore, your communication skills(questioning, listening, analysing and presenting) must be finely tuned.When undertaking the appraisal, you should ensure that you collect all relevantdetails as a record of your visit, information about the owners and the property.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 16 of 54The details you collect will be used for maintaining your property database, toprepare advertising and to advise prospective customers once the property is listed.It should include at least the following information: Owners details and property addressVendors’ Solicitors’ detailsType of property, together with detailed features including room sizesInclusions (chattels) in the property that the owner is leaving in thepropertyExclusions (chattels) in the property that the owner is taking from thepropertyAccess arrangementsClients expectations in respect of the propertyAgent’s estimate of the selling or letting price. Very often, a clients expectation of a property’s value may well differ from the agentsestimate, and their figure may or may not be realistic in the market at that moment.Once again, the agents’ communication skills will be one of their essential tools.Further information in conducting appraisals (both sales and property management) arecovered in the Unit of Competence: CPPDSM4003A – Appraise Property.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 17 of 54Listing PropertyThe listing of property is the “product” or “stock” that the agency has to offercustomers. Unless the agency has a portfolio of listings there will be nothing to offerfor sale. Nor will there be any properties to be marketed, further diminishing theprofile of the agency.Without listings, a salesperson will have nothing to sell, other than colleagueslistings. Relying on your peers listings is unwise – not only will you only benefit fromthe “selling” proportion of the fee; they may well begin to resent your taking “their”business. Many agencies have internal rules that govern the circumstances underwhich salespeople can sell others’ listings.Agency managers and principals therefore place a lot of emphasis on prospectingand lead generation activities to secure listings.Prospecting generates Appraisals – Appraisals generate ListingsAn agent cannot list a property for sale without first having undertaken a physicalinspection of the property prior to entering into the agency agreement. The contractwould be considered unenforceable if the property had not been inspected prior tothe clients’ signature.As you will see in the section entitled “Provision of Information to Buyers”, agentscan be liable for any misstatements made about the property, or any falseinformation provided to buyers of the property.It is important, therefore that you collect as much information as possible about theproperty at the listing meeting. Vendors have an obligation to reveal to the agent allmaterial facts that may affect the property, and as an agent you are obliged todisclose these to potential buyers.One aspect of listing property that is important is that as the agent you have to besure that all owners have agreed to list the property for sale.Therefore, before accepting the listing you must verify ownership, and all jointowners must be party to the agency agreement. This would be a part of your duediligence, to ensure that you represent all owners and all have agreed to the sale.In addition, you should be sure that you are not mis-describing the property. Thereare many properties that are being used incorrectly – property zoned non residentialbeing used as a home, properties without building compliance certificates etc etc.Whilst you might think that these are matters for the buyers solicitors to sort out oncea purchase has been agreed, you do not want to find yourself investigated as a resultCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 18 of 54of a mis-description, simply because you did not establish the facts before acceptinginstructions.The agency agreement is a legally binding contract between the client and theagency, which creates rights and obligations upon both parties.Listing property is fully covered in the Unit of Competence: CPPDSM4012A – ListProperty for Sale.Agency AgreementsThe agency agreement is a legally binding contract between the vendor and theagent, which creates rights and obligations upon both parties.By signing an agency agreement, clients are effectively handing over some of theircontrol and freedom to the agent – the freedom to sell, lease or manage theirproperty themselves. The different agency agreements represent varying loss offreedom for the client.The EAA creates a strict set of rules regarding the information which must beincluded in agency agreements, specifies many terms that must be included andprocedures that must be followed.Non-compliance with any of the requirements will render the agency agreement nulland void and the likelihood that the agency will be unable to legally claim a fee,commission or expenses in the event of a sale under defective agreement, as wellas make the agent and agency liable to penalties such as fines and / or loss oflicense for non-compliance.In all cases a physical inspection of the land or property must be undertaken and anagent cannot act on behalf of a principal (client) unless the agent has done so.An agency should have a written authority to sell a property before it is offered forsale. The agent loses any entitlement to the fee as well as any other incurredexpenses without an agreement.This section states that an agency agreement must be: In writing,Signed by, or on behalf of, the personSigned by the licensee (or their nominated person, i.e. The salesperson)and CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 19 of 54Generally, where an agreement is signed and all parties are present, a copy isimmediately given to (served on) the client. However, where remote transactionsoccur (eg an overseas vendor) the agent MUST send the client (by mail or fax) afully signed copy of the agreement. Section 53 of the Estate Agents Act states Copyof contract etc. to be delivered to person signingIn Victoria the forms to be used are not prescribed, but they must contain certaininformation as stipulated in the Estate Agents Act:Entitlement to commissionAn agent cannot claim or sue for commission or expenses for a property or businesstransaction unless they: have a written authority that includes all of the information and statements requiredby the Estate Agents Act 1980give the client a copy of the signed authorityinform the client that the commission and expenses are negotiable, before they signan authority. An authority to buy, sell, lease or manage is the document that is given to a client(seller, landlord or other person) to appoint an agency to act on their behalf.An agent may: draft their own authorityengage a legal practitioner to draft an authority for themuse a standard form authority available from the Real Estate Institute of Victoria(REIV), if they are a memberpurchase an authority from a commercial publisher. Contents of an agency authorityAn agent must include the following information and statements in all authorities: details of the commission and expenses agreed with a clientthe agreed commission and expenses stated as a dollar amount or a percentage (ifa percentage is stated, an example of the dollar amount it represents must also begiven)a statement, using the wording approved by Consumer Affairs Victoria, advisingwhere a complaint about commission or expenses can be madea rebate statement using the wording approved by Consumer Affairs Victoria. An agent who uses an authority that does not include this information risks losingthe commission and being fined.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 20 of 54Additional information must be included in particular authorities: an authority to sell must state the agent’s estimate of the selling price, in the wordingapproved by Consumer Affairs Victoria. This price can be a single figure or a rangeof up to 10 per cent.a sole or exclusive authority must have a statement advising that, unless otherwiseagreed, the authority ends:30 days after the date of an auction, oro o 60 days after the date an authority is signed for a private sale.Download a copy of the Director approved form for use in agency authority –estimated selling price (PDF, 31KB).Download a copy of the Director approved form for use in agency authority – makinga complaint concerning commissions and/or outgoings (PDF, 22KB).RebatesAn estate agent or agent’s representative must complete the rebate statement in anauthority, to indicate whether or not they will receive any rebates or discounts. Thesemight be received for advertising, maintenance or other expenses paid on behalf ofor by a client.Consumer Affairs Victoria provides two approved rebate statements. Choose thestatement that suits your agency’s practices, based on whether you receive rebatesor not.It is illegal for an agent to keep a rebate, either monetary or non-monetary. It mustimmediately be paid to the client except if in anticipation you have already paid theamount or reduced the expenses charged.If an agent receives a non-monetary rebate, the equivalent dollar amount must bepaid to the client.When calculating a client’s expenses, any rebates the agent receives or expects toreceive should be factored in. If the exact expense is not known, it should beestimated. If the actual expense is less than the estimate, the difference mustimmediately be paid to the client.A client may recover any rebate they are entitled to but have not received.An agent who illegally keeps a rebate is liable for a fine of up to 60 penalty units. Ifthis occurs on three separate occasions over 12 months, the fine is up to 240 penaltyunits. For more information, view our penalties page.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 21 of 54Download a copy of the Director approved form for use in agency authority – rebatestatement (PDF, 40KB).Download a copy of the Director approved form for use in agency authority – rebatestatement – no rebate will be received (PDF, 26KB).Commission sharingIf an agent is sharing commission with anyone other than an estate agent or agent’srepresentative who works in their agency, they must notify the client before the clientsigns an authority.A commission sharing notice must be in the wording approved by Consumer AffairsVictoria. It may be a separate document or, for convenience, included in an authority.Download a copy of the Director approved form for use in agency authority – noticeof commission sharing (PDF, 36KB).http://www.consumer.vic.gov.au/businesses/licensed-businesses/estateagents/running-your-business/authorities-commissions-and-contracts/authoritiesrebates-and-commissionIn practice, all real estate agencies will use pre-printed agency agreements that willcomply with this section of the Act. As a real estate operative it is essential to havea comprehensive understanding of the agency agreements so that client’s rights andobligations under the agency agreement can be explained to the seller (vendor) andthe salesperson needs to be able to fully answer their questions.Types of Sales Agency AgreementsThere are several different types of agency agreements.The most common types of agency agreement are: General agency agreementSole Agency agreementExclusive Agency agreementAuction Agency agreement Note: An auction forms part of an exclusive agency agreement if this is the methodof sale that is to be used.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 22 of 54General Agency AgreementWhere land or property is given to more than one agent to sell and only thesuccessful selling agent is paid a fee. The owner can also sell the propertythemselves, without having to pay a fee to any of the agents involved.This is the least popular agreement with agents as they potentially spend time andmoney and may not receive any remuneration in return for their efforts.Agents have little control over open listings and therefore will generally not spendadvertising dollars on a property the vendor or a competing agent may sell. There isno guaranteed commission even though the agency may put in a lot of work tryingto sell the property.However, some agents use open listings as a tool to demonstrate their commitmentto the vendor and later convert the agreement to an exclusive listing.Sole Agency AgreementA Sole Agency is when the property is listed with one nominated real estate agentfor a designated period of time. The vendors retain the right to sell the propertythemselves, and not pay the agent a fee, if they do so.Sole agency agreements are generally not widely used either. Many agencies willnot accept sole agency agreements, but some agents use sole listings as a tool todemonstrate their commitment to the vendor, and later convert the agreement to anexclusive listing.Developers often choose sole agencies, as these allow the developer to market andsell their properties themselves as well as through an agency.Exclusive Agency AgreementAn Exclusive Agency is when the property is listed with one nominated real estateagency. The vendors DO NOT retain the right to sell the property themselves.This listing agreement is for a designated period of time. If the vendors sell privatelyduring the listing period or subsequently to a buyer introduced to the property duringthe listing period, they are still liable to pay the fee to the agent.Exclusive agency also allows the agent to choose to conjunct with other agentswithout the vendor’s permission.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 23 of 54Auction Agency AgreementUnder an Auction Agency agreement, the property is listed for sale by public auctionwith one nominated real estate agency. Typically, the auction is set to take placebetween 4 – 6 weeks after the start of the agreement.In the event that the property does not sell at auction, the agency agreementcontinues for a set time as an exclusive agency.Conjunction Agency AgreementsA Conjunction agency occurs where one of the following applies:1. Two or more agencies are selected by vendor to jointly handle the sale oftheir property. The agencies decide on the commission split between them.2. An agreement is made where an agent with an exclusive agency‘subcontracts’ another agent to jointly perform the service for a principal andshare the fee.Conjunctions are also take the form of Multiple Agencies, where groups of officeswhere all offices in the network conjunct with each other under a written internalagreement.By law, agencies must have a written conjunction agreement between them.Occasionally, client may wish to co-list their property. Under this arrangement, theclient lists their property exclusively with 2 or more specified agents, who will have acommission sharing arrangement between them.Often, the successful agent may receive, say, an 80% share of the total commission;the unsuccessful agent receives 20%. Under a co-listing arrangement both agentsreceive some reward for the efforts they have made on behalf of the client.Co-listings are relatively rare – occurring usually in rural areas, where the subjectproperty is situated between two towns, each of which would be a source of enquiryand interest for the property.Listings of these types are normally fall under the banner of exclusive listings, wherethe agent(s) have exclusive selling rights for the agency period.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 24 of 54Agency FeesThe agency agreement you enter into with a seller must specify the fee that you willcharge the vendor for your services, and specify any additional charges that thevendor will be liable for, such as marketing and advertising.Typically, agency fees are represented as a flat percentage fee based on theeventual sale price of the property. e.g. If the fee is expressed as 2.5% and the salesprice achieved is $560,000, the fees payable including GST will be $14,000.Fees must always be quoted including GST. Therefore, in the above example theGST component is $1272.72 and the net fee to the office is $12727.28.Some agents try to build in an incentive fee, and this is permissible as long as it isfully and unambiguously expressed in the agency agreement. Under the EstateAgents Act this must be negotiated.For instance, let’s assume that the agent’s opinion for a property (based on the CMA)is in the range $550,000 – $580,000. The vendor and agent may agree an incentivebased agency fee: 2.5% if a sale price of up to $565,000 is achieved and10.0% for every dollar achieved above that.If this property goes to auction and the bidding takes the sales price up to $588,000,the agency fee would be calculated as follows:a. 2.5% on $565,000 = $14,125b. 10% on $23,000 = $ 2,300Total Fee $16,425 (incl GST)Agents CommissionIn Victoria, real estate salespeople who hold an Agent’s Representative qualification& have an Authority to Sell issued by the Officer-In-Effective Control of the agency,must be paid a salary (payable at least monthly) in accordance with the provisionsof the Real Estate Industry State Award. Current pay rates can be found at thiswebsite:http://www.fwc.gov.au/Unfortunately, the individual salesperson will not receive the full agency fee earnedon a property sale, but a proportion, based on their commission structure, if there isone in place. Different offices have different ways of calculating incentive payments,and salespeople can negotiate different arrangements depending on their skill andexperience.Generally speaking a proportion (typically 30% – 50%) of the net office commission(i.e. the commission earned by the office less GST, franchise costs or listing fees) iscredited to the person who lists the property, and a proportion of the net officecommission is credited to the person who sells the property (often these will be theCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 25 of 54same person). The proportions may vary according to the state of the market, or thetype of agency agreement.An agent is not entitled to, or paid their commission until the sale is completed orsettled, and this can be many months after the property is listed, and usually 6-8weeks after the contracts for sale are exchanged. The salesperson’s proportion ofthe commission is not usually credited to their ‘account’ until the office physicallyreceives their commission, and is paid to them on the next payday.There are various models used to calculate individual commissions, but the two mainsystems are “Debit / Credit” and “Target”.Debit / credit: The cost of the salesperson’s wages and allowances is debited to aninternal account, and their share of the office commissions (which could varybetween 30 – 50%) are credited to the account. At the end of each month, if theaccount is in credit this amount is paid to the salesperson. If the account is in debit,the debit balance is carried forward to the beginning of the next month. A debitbalance is never a debt to be repaid to the employer – salaries can never be “clawedback”.Target: An agreed target is set for the value of commissions to be earned by thesalesperson each month, quarter or year. Once those targets have been exceededa proportion of the excess is paid to the salesperson, often on a sliding scale.When the Agency Fees can be in DisputeAn agent’s obligation is always to act in the best interest of their client and obtain thebest possible outcome for them. In the sales department, this is usually representedby achieving the highest price in the shortest possible time on terms and conditionsfavourable to the vendor.Agents may jeopardise their fee if they: Breach the agency terms and conditionsBreach their fiduciary obligationsBreach any specific instructionsBreach contracted obligationsHave more than one agreement operatingDo not have a correctly completed agreement CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 26 of 54If the client can provide evidence that the agent did not adequately execute theirduties and obligations of good agency practice and legislative compliance, the clientcould seek redress against the agent.The receipt of a secret commission is one of the most common breaches of anagents’ duty to act in the best interests of their principal.Secret commissions are gains (whether financial or beneficial) made by an agent towhich they are not entitled. This could be in the form of a gift or consideration madeby a third party (such as a buyer) that may influence the agent from acting in the bestinterests of the principal (vendor).An example could be a buyer offering an agent a financial bonus to enable the buyerto purchase a property below a certain figure. This would quite clearly be actingagainst the interests of the client.Occasionally, vendors withdraw from the sale after contracts have been exchanged.Under these circumstances, the agent has introduced a “ready, willing and ablepurchaser” within the terms of the agency agreement, and therefore the agencyshould be entitled to fees & commission.Methods of SaleAs the agent must act in the best interests of their principal (the vendor) the methodof sale which is recommended during the listing presentation must be the one whichis going to achieve the best outcome for their principal, taking into account: Location of the propertyCurrent market conditions, andCharacteristics of the land or property. The method of sale to be used should be determined by a combination of the abovefactors, with due consideration given to the express wishes of the client.There are three main methods of sales used by agents in Residential Real Estate: Private TreatyAuctionTender CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 27 of 54Private TreatyPrivate treaty is a method of sale whereby the vendor sets an asking price for theproperty (this may be done with or without an agent).Prospective purchasers view the property and interested parties may place offers tothe vendor. Negotiation may or may not occur after offers are made.Once an offer isaccepted the parties enter into a Contract of Sale.Buyers often prefer the fixed price method of purchasing property rather thancompeting in an auction, but the seller of the property must effectively commit to amaximum price when the property goes onto the market.It is important to base the asking price on a figure which represents the value of theproperty as there is little scope for obtaining a price greater than the asking priceunless there is exceptional competition for the property from multiple buyers, as isthe case with a public auction.Agents should be very aware of their obligations under the EAA when putting a figureon a property. There is nothing to stop a vendor asking more for a property that it isworth, but the agent MUST ensure that their recommended selling price on theagency agreement can be justified.However, asking too much for a property is another matter altogether and the agentwill have to suffer the consequences associated with trying to sell an overpricedproperty.AuctionAuction is a method of sale whereby prospective purchasers congregate in a publicplace – real estate agent rooms, a specific venue or at vendor’s property – at aspecified time and competitively bid for the property.The vendor discloses to the agent a pricethat he or she will accept – usually on theauction day – called the reserve price. The reserve price is generally derived fromthe feedback of purchasers during the auction campaign. The reserve is notdisclosed to purchasers, and the desired outcome is that the purchasers will exceedthe set reserve.A sale occurs if the reserve is reached or exceeded during the auction and isimmediate from the sale of the auctioneer’s hammer. If the vendor’s reserve is notreached on the conclusion of bidding the property is “passed in” in favour of thehighest bidder. The highest bidder has the first right to negotiate with the vendor.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 28 of 54Properties that are intended for auction can be sold before auction if the vendor ispresented with an offer that is acceptable. The sale then is a private treaty sale, butthe vendor may stipulate that the sale is subject to auction conditions, and that the‘cooling off’ period is waived.Once the hammer falls at an auction, the contract is made, and the buyer hascommitted to purchase the property on the vendors terms (unless other terms havebeen negotiated beforehand). A deposit (normally 10%) is paid at the fall of thehammer and settlement then takes placeAuction selling is a specialised field in real estate sales.There are statutory requirements relating to the conduct of Auctions contained in theEstate Agents (Professional Conduct) Regulations. The following information is fromthe Consumer Affairs WebsiteIf you buy property at auction, you cannot make the contract subject to conditions(for example, getting finance) and there is no cooling-off period.Before you bid: research the market, search the internet, attend auctions, speak with several estateagents and monitor auction resultsget independent, expert help on legal, finance and building matters. An auction is a public sale, usually conducted by an estate agent acting as anauctioneer, and governed by strict rules.The auction is advertised for a specific place, time and date. Prospective buyers bidand the property is offered to the highest bidder.There is an advertising campaign with open house inspections for several weeksleading up to the auction date. In the lead-up, the agent may contact you to gaugeyour level of interest.On the day of the auction, the property may be open for inspection, generally half anhour before the bidding starts. This gives you a chance to have a final look at theproperty, the relevant paperwork and the auction rules.By bidding, you accept the terms of the contract on display before the auction, soyou will not be able to negotiate matters such as a longer settlement period.Pre-auction offersIf the seller has agreed to consider pre-auction offers, you can make an offer throughan agent prior to an auction.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 29 of 54Your offer will usually be in the form of a signed contract and the process ofnegotiation is the same as buying by private sale.If your offer is accepted less than three clear business days before the auction date,you do not get a cooling-off period (time to change your mind).Auction conductThere are strict rules about how an auctioneer runs an auction, and how peopleattending must behave.The auction rules and the auction information statement outlining Victoria’s auctionlaws, must be on display: for at least 30 minutes before an auction startsat the place where the auction will take place. The auction rules, information statement and announcements the auctioneer mustmake are set out in the Schedules to the Sale of Land Regulations 2005. Substantialpenalties may apply to anyone who breaks the auction rules.Before bidding starts, the auctioneer must tell bidders: the auction will be conducted according to the auction rulesthe rules prohibit bids being accepted after the fall of the hammerbidders will be identified on requestit is against the law to make a false bid, hinder another bidder, or in any wayintentionally disrupt an auctionsubstantial fines apply to anyone who engages in illegal auction conductwhether or not there will be vendor or co-owner bidsany additional conditions that apply to the auction. It is illegal to disrupt an auction, but you can still ask questions. During the auction,anyone can ask the auctioneer a reasonable number of questions about theproperty, the contract, or the auction.If you are bidding, you can also ask theauctioneer to indicate who else made a bid.Bidding at auctionAuctioneers have different ways of conducting an auction. Generally, they aim toencourage as many bidders as possible to compete, to achieve the highest possibleprice.The auctioneer can set the amount by which bids increase. These are called risesor bidding advances.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 30 of 54You can bid at the amount stated by the auctioneer or offer an alternative amount.The auctioneer may choose to accept or reject that bid.Be clear about your bidding limit. To bid successfully: bid confidentlyask relevant questions of the auctioneer, including who made a bid. Generally, the amount the bidding advances will decrease as the auction draws to aclose.The auctioneer may: refuse a bid at any time during the auction, including when the auction hammer isfallingif there is a dispute over a bid, resume the auction at the last undisputed bid or startthe bidding againrefer a bid to the seller at any time before the conclusion of the auctionwithdraw the property from sale at any time. Vendor and co-owner bidsVendor and co-owner bids are allowed at auctions in two circumstances:Vendor bid:The auctioneer bids on behalf of the seller because the seller is not satisfied with theamount of the last bid. This type of bid: can only be made by the auctioneermust be announced by the auctioneer when the bid is made. Co-owner bid:When a property is jointly owned, one or more of the owners who genuinely wantsto buy the property may bid from the crowd.Co-owners may bid themselves or through a representative in the crowd but notthrough the auctioneer.The arrangements for making vendor and co-owner bids must be: set out in the rules displayed before the auction starts announced by the auctioneer at the start of the auction.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 31 of 54Dummy biddingAll dummy bids are illegal. A dummy bid is either a: false bid made up by the auctioneerbid accepted by the auctioneer from a non-genuine bidder from the crowd. Auction language: ‘on the market’ and ‘passed in’On the marketThe auctioneer may halt proceedings and say they are ‘going inside’ or ‘seekingadvice or instructions’ from the seller. They use this time to discuss the progress ofthe bidding with the seller.If the bidding has reached or is close to the reserve price (the lowest price at whichthe seller will sell), the auctioneer will ask the seller if they will sell at the highest bid.If so, the auctioneer will say the property is ‘on the market’. Bidding will continue andthe property will be offered to the highset bidder, at the seller’s discretion.Passed inIf bids do not meet the seller’s reserve, the auctioneer will seek more bids. If bidsstill do not meet the reserve, the property may be ‘passed in’ or ‘withdrawn fromauction’.The highest bidder then gets first right to negotiate with the seller.When is the property sold at auction?There is no legally binding contract until both buyer and seller have signed thecontract of sale.If you are the successful bidder at the auction, you: will be asked to immediately sign the contractcannot make the contract subject to conditions and there is no cooling-offperiodsign the contract before the seller, to make your formal offer to buy theproperty. The seller accepts your offer by also signing the contracthave to pay the deposit specified in the contract (unless otherwise agreed). When you and the seller have signed the contract and the deposit has been paid,the sale is binding and enforceable.The sale is finalised at settlement when: all checks have been madeCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 32 of 54 the title and transfer documents have been exchanged the balance of the purchase price has been paid.Paying a deposit at auctionWhen you sign the contract of sale after an auction, you will need to provide adeposit. There are no laws about the amount of deposit but it is usually 10 per centof the purchase price.If you are using a bank cheque to pay the deposit, your cheque will be for 10 percent of the amount you are prepared to pay for the property. This means that if youbuy the property for less than you expected, your deposit will be more than 10 percent.Before the auction you can ask the seller if they will accept a part deposit with theremaining amount due on a specified date. This would require a change to thecontract. The seller may or may not agree to this arrangement.The deposit is held by the seller’s estate agent, conveyancer or legal practitioner ina trust account until the settlement date. The deposit can be released to the sellerbefore settlement, if you agree.A seller who does not have an estate agent and takes your deposit directly musteither: pay it to their legal practitioner or conveyancerbank it in a special purpose account in an authorised deposit-taking institution inVictoria. The account must be in both the seller’s and your name (Division 4-Publicauctions Sale of Land Act 1962). TenderThis method of sale is mostly used for commercial, industrial, large developmentprojects and luxury homes. Very few residential homes are offered for tender. In thetender process purchasers provide a confidential written offer by a set date. Unlikean auction the purchaser bids as high as possible in the hope that other purchaserswill not bid as high.The vendors (or their agents) prepare a tender document setting out the conditionsof the tender which is sent to interested parties. This document would include aclosing date and time for tender submissions, as well as any conditions that theperson placing the tender would be required to meet, such as settlement dates.The purchasers are also able to offer their terms and conditions, which may helpmake the bid successful. Therefore the successful tender may not be the highestCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 33 of 54price offered but the most attractive to the vendor. A ten percent deposit is usuallyrequired along with the bid.The Contract for Sale of LandEstate Agents (Contract) Amendments Regulations 2011The Contract for Sale would include:1) A schedule (cover page) – which identifies:a) The vendor’s agent (if any)b) The names of the parties and their respective solicitorsc) The purchase priced) The deposit and who will hold ite) Property description including improvementsf) Title detailsg) The settlement dateh) The inclusions and exclusions2) The standard conditions of the contract3) Any special conditions4) Plus the following documents that are legally required under theConveyancing (Vendor disclosure and warranty) Regulation 1986.They are:a) Copy of registered folio that identifies the Lot (Title Deed)b) Zoning – Section 149 Certificate,c) Drainage diagram issued by local water authority,d) Copy of plan of sub-division that the lot is part of,e) Strata plan if applicable,f) Copies of all documents creating easements and covenants thatmay affect or benefit the lot.5) Important notice to vendors and purchasers“Before signing this contract you should ensure that you understand yourrights and obligations some of which are not written in this contract but impliedat law.”CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 34 of 54Owner WarrantiesWithin the standard conditions of the contract there are a number of ownerwarranties (or disclosures) that must be made. These are in place to protect thebuyers, andThe Owner warrants that the property is not affected by: Proposals from government authorities such as:o Any public transport corridors (real or proposed), o Energy Australia (or other statutory authorities) oDepartment of Education, etcBreaches of the Public Health ActFencing disputes or encroachments on adjoining propertiesNotices from the local council in relation to any illegal or unapprovedbuilding work At the time of listing you should be advising the vendor about the contract and theneed to have a contract prepared before marketing starts. At the listing appointmentyou should talk to them about special conditions, as well as about specificdisclosures that should be made to potential buyers.The vendor’s solicitors prepare the contract, but it is the agency’s responsibility toensure it is complete. It is not sufficient to have a draft contract in the office. The testis that the contract must be adequate to affect an Exchange of Contracts.Presenting the PropertyBefore the listed property is made available to prospective buyers, you should lookat the property through the eyes of the buyers that will come through. This will makeit easier to discuss property presentation with the sellers, in the event that somework, maintenance or attention to detail is required in order to present the property.Another way you can overcome this issue with vendors is by having presentationguides for homeowners to read (and there are examples on the industry websites)Other owners may request your opinion, and in such situations, the recommendationof minor renovations or services of a home stylist may be appropriate. Other clientshowever are sensitive on topics such as cleanliness, colour schemes, pets andgardens. In these circumstances examine the problems and offer solutions that arespecific to the type of buyer you are trying to attract to the property.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 35 of 54Marketing and Promoting Property for SaleTypically, the marketing of a property will comprise a mix of the various methodsoutlined below. However, marketing and advertising is not the easy answer to sellingproperty.Developing a specific marketing plan for the vendor is a skill in itself, but manyagencies have standard plans that can be basis for a personal campaign. Thecampaign that is negotiated with the client must be consistent with the agreedmethod of sale if it is to be successful in achieving the objective of selling the propertyin the shortest possible time.It is important to determine the target market – the “audience” at which theadvertising will be directed. The target market will determine the how, when, whereand why of the promotion and advertising campaign for a particular property.Few people buy property without an inspection or the “sales” input of the agent.Marketing and promotion will create enquiries but will not “sell” anything – ultimately,it is down to the skill of the agent in matching property to the needs of customers.When advertising a property the key task is to build an expectation in a customer’smind, and perception is very important when developing marketing and advertisingmaterials. Therefore, the clever marketer needs to consider what expectations willbe uppermost in the target market and those reading or viewing the picture oradvertisement.Different agencies have different policies on whether, and when, the client pays forthe advertising and marketing of the property and you will need to be conversantwith your offices policies and procedures.There is no definitive guide as to the amount of money that a vendor might investinto the marketing of their property. Typical marketing plans might vary from 0.2% ofthe property value up to 1.0% for high end exclusive properties. Auction marketingcampaigns, due to the high exposure needed, often require a greater marketinginvestment than private treaty sales.What you don’t want is to be left with unpaid marketing expenses that become yourliability – it is easy to overspend on advertising and marketing, or to agree to run “justone more advertisement”.Typically, the marketing of a property will comprise of a mix of the various methodsthat follow. Developing a specific marketing plan for the vendor is a skill in itself.However, many agencies have standard plans that can be basis for a bespokecampaign. The campaign that is chosen with the client must be consistent with theagreed method of sale if it is to be successful in achieving the objective of selling theproperty in the shortest possible time.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 36 of 54One of the skills of successful agents is to know their buyers and use their buyerdatabase to generate “matches”, of buyers to property, to follow up on visitors toopen homes and continually add to the database of buyers (who may well becomeyour future vendors if they can see the efforts you are putting in to try to sell property).In addition, effective negotiation skills are just as important as the marketing andadvertising campaign that is undertaken.Everyone involved in marketing property needs to ensure that they have adequateskills and knowledge of the legal requirements. They must know and understandtheir obligations in relation to false and misleading advertising under Competitionand Consumer Act, Fair Trading Actand the Estate Agents Act .It is also important to be conversant with the advertising policies and procedures ofthe agency in which you work before embarking on the development of anymarketing and advertising materials and campaigns.Some real estate agencies have specific departments to handle this part of theprocess, but in most instances the drafting of marketing materials will be part of theindividual agent’s duties.Sign BoardsThe sign board is a 24 hour salesperson, notifying the passing public that a propertyis for available. Signboards range from the simple “For Sale” or “For Lease” sign tolarge colour photo boards.Window DisplayMany passers by inspect agents windows to see what is available, and therefore thewindow card needs to be attractive and show the property in its best light. Manyagents make the mistake of allowing window cards to fade in the sun, and diminishthe potential of the property to viewers.Internet AdvertisingIt’s said that 30% or more of buyers now find their property through the internet. Aswell as company specific websites there are industry wide sites such aswww.domain.com.au,www.realestate.com.auand www.homehound.com.auLetterbox DropsServe the dual purpose of advertising the property for sale to the local area as wellas raising your profile locally.AdvertisingMay be placed in the main newspapers, or in the local colour weekly papers, suchas: Most communities have a newspaper that features real estate advertising in theirarea.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 37 of 54EditorialWherever possible, available properties should be submitted to the localnewspapers as editorial features. Again this provides you with profile buildingopportunities, and will help you promote the features and benefits of the property toa wider audience.Open HomesOpen Homes are one of the best methods to bring potential customers to theproperty, when they are well promoted, advertised and are supported by pointerboards to help buyers find the property. Open homes should not replace viewings,but should supplement inspections by appointment, as it is not always possible forcustomers to attend open homes.When presenting the property at open homes, you should stress to the client theimportance of not being present during inspections. Purchasers may feel intimidatedby the vendor’s presence and will offer opinion and comment more readily when theyare not being judged or monitored.Brochures for the PropertyA well designed and well written brochure will help those that have viewed theproperty remember the key features and benefits. Including a floor plan is consideredby many buyers an integral part of the sales brochure. Brochures should also begiven to customers that visit the office.Direct Mail & Telephone SellingSuccessful agents maintain an up to date database of potential customers, togetherwith their property requirements. Each time a property is listed the salespersonshould contact their database to arrange appointments to view or invite them to theopen house.Providing Property Information to BuyersAs a salesperson, you are not contracted to purchasers. You do however haveobligations to purchasers in terms of your duty of disclosureUnder the Competition and Consumer Act, as well as the Estate Agents Act (s.42 –Advertising) it is an offence to deliberately mislead or make false statements in orderto entice someone to enter into a contract. This includes withholding informationwhich they may be aware about.Firstly advertising must not be misleading and may not deceive (also prohibitedunder the Fair Trading Act). Advertising material must be appropriate and accurate,although, as discussed, puffery is permittedCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 38 of 54The price quoted to prospective buyers of the property must not be misrepresented(EAA s.47C – False representation to prospective buyer). This section also statesthat is not permitted to advertise a price which is lower than the agent’s opinionestablished at the appraisal, and noted on the agency agreement (without the writtenauthority from the vendor). This section is taken to include sales by auction (ortender) as well as those by private treaty.Price ranges are also considered by this provision (under EAA s.47A) –is thatminimum and maximum range is not to exceed 10% of the lower amount.Where a property is to be sold by auction, and the agent has estimated a price of,say, $600,000 to the vendor, and this is the figure entered on the agency agreement,the agent must tell prospective buyers that they expect a figure of $600,000 to beachieved. This restricts agent from underquoting prices to bidders with vaguestatements such as “bidding from $…..”All measurements, such as block sizes, quoted distances to transport or facilitiesmust accurate and given in metric units – imperial measurements may be added aswell as metric measurements, but it is not permitted to quote just imperialmeasurements.(For further information refer back to the section in the unit CPPDSM4080 – Work inthe real estate industry, that discusses Consumer Protection.)Photographs of the property should not be digitally enhanced. Agents have beenknown to remove power lines and other undesirable features from property photos– this is misleading and deceptive. Area or location shots should be identified assuch, and not left to buyers to assume that they are actual views from the propertyIf the property is owned by the salesperson, any member of the agency staff or theirfamily, then this must be disclosed to potential buyers. If an interest exists it must bemade clear in all marketing material that there is an “agent’s interest” (EAregulations)Honest and transparent communication with purchasers ensures efficient andeffective outcomes. When buyers ask technical questions about a property an agentmust answer with facts. If you are unsure of the answer you should seek informationand answer when the facts are known or refer to another authority. Agents mustnever assume or guess information, nor be misleading or deceiving, Remainingsilent about known material facts is also considered to be deceptive.Finally, agents must ensure that customers understand that their ultimateresponsibility is to their client, the vendor, as this may not be clear to all purchasers.Registered & licensed agents are, in law, considered to be more knowledgeable thanbuyers (and for that matter vendors) of real estate. If a false or misleading statementCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 39 of 54is made, the contract for the purchase could be rescinded, and undoubtedly, theagent would find themselves in court.Not only might the agent be found liable, the agency itself, as well as the agencyprincipal, may be liable for disciplinary action and damages under the EAA. In court,the agent is judged upon the information provided. Agent obligations are thoroughlycovered under common law, in the Competition and Consumer Act and Fair TradingActs as well as Real Estate Legislation.Security of Client PropertiesSalespeople are usually entrusted with the keys and alarm codes to their clientsproperties. It is important that the security of the property is not compromised and itis recognised that the agent has a legal liability to protect their clients’ property.Agents must ensure that the owner’s property is secure. They should advise theirowners to secure valuables for open homes and inspections, and ensure thatproperties are securely locked when leaving. This includes windows, doors, garages,and sheds. It is vital to spend time to check the premises are secure before leaving.At open houses or inspections, agents should try to ensure that they don’t leavepeople to wander around without supervision if the home is occupied and furnished.Ideally, there should only be one open entry and exit point with any others keptlocked. The home should never be left unattended whilst showing people around theoutside. If people are keen and want to talk at an open house, arrange a later, privateviewing, or appointment, for them. That way, people won’t be in and out of the homeunattended, while the agent is stuck in a long conversation.If the home is large, or more than one storey, the consider having someone elsepresent to help control visitors. No keys to any locks should be visible duringviewings, and agents should check this is the case, as some owners inadvertentlyleave keys around for easy access or just sitting in the lock.The agent also has a“duty of care” in relation to keys in their possession, to ensure that these are secureand not identifiable for opportunists to take advantage of.Rooms should be checked before inspections to see that small valuables have notbeen left lying about, and steps taken to remove these from view where possible.Real estate offices usually have keys for all properties in their care. They shouldkeep these keys in a securely locked box or safe, and coded with no identifyingaddress attached. The codes should then be kept in a key register book, which isalso kept separately and secure, as it will generally have the property addressesnoted in it.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 40 of 54To provide additional security for properties in their care, each office shouldimplement a key signing in & out system, so that at any time, the whereabouts of thekeys to clients’ properties can be ascertained.Security is an area of great importance. Each salesperson will need to check andunderstand the agency security policy where they are employed. This should forman integral part of their induction when they commence work.NegotiationDuring the initial meeting with the prospective buyer a salesperson needs to “qualify”the buyer to ensure that when they get to the stage of negotiating the sale the buyeris willing and able to purchase.Qualifying the buyer involves asking questions to ascertain what they want, whatthey can afford to buy, what assistance they require in order to put themselves in aposition to be able to buy, when they will be in a position to buy and many otheraspects of their needs, wants and desires in their next property.The process of qualifying a buyer is a skill that needs to be developed. It is best toacquire this skill through practice, through role plays with experienced sales staff,and by regular rehearsal.Excellent marketing is the most successful way to avoid unnecessary negotiating.Properties that are well priced and marketed to the correct target group require verylittle negotiation.However, not all properties are the same nor are the buyers, so developing excellentnegotiating techniques will help you create win / win solutions for vendors andpurchasers.Negotiating is a critical component of sales and requires the salesperson to bediplomatic, tactful and able to negotiate the best offer possible.All negotiations should be recorded in writing to protect the agent in the event thatthere is a future dispute about who said what. When purchasers make offers orrequest items the agent should document this information. Therefore all buyerrequests and offers must be scrutinised and verified by the agent prior to submittingthem to the vendor.The salesperson is also required to ensure that the vendor has all pertinent facts inrelation to the offer being submitted. Estate Agents (Professional Conduct)Regulations states that all offers must be submitted to the principal.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 41 of 54Salespeople need to know more than just the number of dollars someone will payfor a property. The best offer may not always be the best price, and agents shouldexpect to negotiate on other aspects of the sale in order to obtain the best possibleoutcome for their client, the vendor.Agents need to know:1) The price the buyer will pay.2) How the purchaser will pay for the property.3) How firm is the purchaser’s finance? Is the finance approved?4) How much deposit will be paid, and how and when?5) What conditions the buyer may want to include in the contract?6) When does the purchaser want to settle?7) What chattels and / or fixtures are to be included or excluded?8) Any unusual terms or conditions that the buyer or seller requires?Buyers may also want to move into the property under license or insist that anyunapproved structure be approved before settlement of the sale, for example. Otherfactors that may require negotiation include access arrangements, price variations,settlement terms, etc.Negotiation is so much more than just knowing the dollars! All the above pointscontribute to the overall ‘deal’. Negotiation is about getting the buyer and the sellerto reach a successful outcome.Negotiation skills are covered in the Unit of Competence CPPDSM4017A –Negotiate effectively in property transactions. This unit is a component of the RealEstate Licence in some states and territories.Agents also need to understand the role of the solicitor in the transaction. Solicitorsexamine and execute contracts; therefore all information concerning the sale mustbe divulged to both the vendor’s and buyer’s solicitors if the sale is to proceedsmoothly.Any withheld information could delay the exchange of contracts or settlement, andjeopardise the sale, your fee and your reputation.It is important to remember, that whilst agents have contractual duties andobligations towards their clients, the sellers, they also have obligations towards thebuyers.Those obligations include disclosure of material facts – any fact that may affect abuyers decision to purchase the property must be disclosed – remember theCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 42 of 54Gonzalez case. They also have a duty of care towards their purchasers and shouldrecommend that they obtain building and pest inspections prior to purchase, andsatisfy themselves of the accuracy of the information you have provided to them.During the negotiation process you may also be asked to recommend professionaladvisers, such as solicitors, finance providers, valuers, building inspectors andtradespeople.If you do so you must disclose to the appropriate party any interest you may havewith anyone you are recommending (ie. family or business association) and whetheror not you will receive any commission or kickback as a result of the referral. Failureto disclose either of these is considered a serious misconduct.In the case of multiple offers, a salesperson has to be careful that they don’t playone person off against the other to the extent that all parties become disenchantedand break away.Agents need to understand the role of the solicitor in the transaction. Solicitorsexamine contracts not properties therefore all information concerning the sale mustbe supplied to the solicitors. The solicitor does not do everything just as the agentdoes not do everything.Estate Agents Act 1980 – SECT 47CFalse representation to prospective buyer47C. False representation to prospective buyer(1) This section applies to an estate agent who holds a written engagement orappointment to sell real estate, and to any agent’s representative employed by theagent.(2) In making any statement while marketing the real estate, the agent orrepresentative must not state as his or her estimate of the selling price of the realestate a price that is less than the estimated selling price, or in the case of a pricerange, less than the lower limit of that range, stated in the engagement orappointment.Penalty: 200 penalty units.(3) For the purposes of this section, a statement is made while marketing real estateif-(a) it is made in an advertisement in respect of the property that is published,or caused to be published, by the agent; or(b) it is made (whether orally or in writing) to a person as a prospectivepurchaser of the real estate.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 43 of 54Contract of Sale of Real EstateWhen the terms of the sale have been negotiated to the satisfaction of both vendorand buyer, the agent prepares a sales contract which outlines the terms and detailsof the sale.The prescribed ‘Contract of sale of real estate’ consists of two forms, which togethercomprise the contract of sale. Form 1 – Particulars of sale – The form must completed with the details ofthe particulars such as the parties, the property address, deposit, price,settlement date and any special conditions.Form 2 – General conditions – These are printed on a separate document but the MUST be provided to the parties either before or at time of signing.All terms relevant to the sale are in the contract, there are no implied terms.Form 1 – Particulars of saleForm 1 consists of details about the sale to be completed. it consists of anintroduction section that:a) describes the essential agreement between the parties as the ‘vendor agreesto sell and the purchaser agrees to buy the property, being the land and thegoods, for the price and on the conditions set out in this contract’.b) sets out the priority for reading the contract as the particulars of sale followedby any special conditions, the general conditions and lastly the VendorsStatement.c) the day of the sale as the date the contract becomes enforceable; that is, thedate it is signed by the vendor to accept the purchaser’s offer.d) incorporates the attached Vendor’s Statement under section 32 of the Sale ofLand Act as part of the contract.e) alerts prospective purchasers to the cooling-off rights.The introduction also makes provision for the signing of the contract.Once the contract has been drawn up to purchasers instructions and a VendorsStatement has been given to the purchaser and signed by the purchaser, thepurchaser will then sign the contract.At this time the purchaser will lay down an initial deposit which normally, not lessthan 0.2% of the sale price.The purchaser will receive a copy of this contract at time of signing.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 44 of 54This contract is then presented to the vendor, if the vendor excepts all terms andconditions presented to him, he will sign the contract. Once this is done, the contractthem becomes enforceable. The vendor retains a copy of the fully signed contractfor his records.The purchaser will also receives a copy of the fully signed contract.The agency then gives a copy to the vendors and purchasers solicitor for them toinstruct the sale.A deposit (usually 5 – 10%) is paid normally within 14 days of signing the contractsand once the contract becomes unconditional. Meaning that there are no conditionsplaced on the contract that need to met, e.g.: building inspection.Once the deposit has been received it must be deposited in a trust account with atrust account receipt issued to the purchaser – Section 63 of Estate Agents Act. It isusual for the deposit to be held by the agency in their trust account.Where the salesperson is involved in collection and receipt of deposit monies he orshe must comply with trust account requirements of the Estate Agents (GeneralAccounts and Audit) Regulations and Section 59 of the Estate Agents Act 1980.These requirements are covered briefly in the unit CPPDSM4080 – Work in the realestate industry.There is a whole unit devoted to Trust Accounting: CPPDSM4006A – Establish andManage Agency Trust Accounts, which is a mandatory unit of competence for RealEstate Licence courses in every state and territory.Cooling – Off PeriodThe cooling-off period is the period given to the purchasers in which they may avoidthe contract of sale they have signed. It is a period in which purchasers can thinkabout if they wish to proceed with purchase of the property.The rights of the purchaser to cool off are set out in section 31 of the Sale of LandAct. It only applies to contracts of sale for: residential landrural land that does not exceed 20 hectares. Under section 31, purchasers can avoid a contract for the sale of land if th4ey notifythe vendor or the vendors agent in writing that they do not wish to proceed with thecontract. This notification must be signed by the purchaser and given to the vendor,or the vendors agent, within three clear business days of the purchaser signing the‘Contract of sale of real estate’ (section 31 (2). When counting three days, the dayCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 45 of 54the purchaser signs the contract is not counted, and neither are Saturdays, Sundaysand Victorian public holidays.Under section 31 (4) of the Sale of Land Act, if the purchaser takes advantage of thecooling-off period, and rescind the contract, they forfeit $100 or (0.2%) of thepurchase price to the vendor.This is to compensate the vendor who was contracted to sell (without a cooling offprovision) to the purchaser from exchange, whereas the purchaser had the right towithdraw during the cooling-off period.The cooling-off period does not apply under section 31 (1): you bought the property at or within 3 clear business days before or aftera publicly advertised auction; orthe property is used primarily for industrial or commercial purposes; orthe property is more than 20 hectares in size and is used primarily forfarming; oryou and the vendor have previously signed a contract for the sale of thesame land in substantially the same terms; oryou are an estate agent or a corporate body.if the purchaser is a company The vendor cannot include a condition in a contract which attempts to remove thepurchasers right to the cooling-off period. Should such a condition be placed in thecontract of sale, the condition will be void and have no effect.From Sale to SettlementAfter the contract has been signed, the solicitor acting on behalf of the purchaserprepares the ‘Transfer of Land’ document. This document is signed by the vendorand the purchaser, usually before – but in preparation for – settlement.Also at this time, the agent should coordinate and oversee the final stages of thesale. A sale is not binding until the cooling off period has expired and the contract isunconditional, and agencies are not paid until settlement.The amount of time and effort that a salesperson actually puts into the parties afterthe sale can determine who succeeds in the future and who flounders.During the period leading to settlement the salesperson may be required to assistby:CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 46 of 54 Answering questions about the sale for the solicitors, vendors orpurchasers;Organising entry to the property by professionals (e.g. Building or pestinspectors, valuers etc.); andUndertaking a pre-settlement inspection by the purchaser. You should always keep in touch with both parties’ solicitors leading up to settlement.That way you will be the first to know if a problem occurs and you may be able toassist with the settlement process.A friendly call to check how removal plans are going helps confirm that thesalesperson is interested in being of service to the parties involved – on both sidesof the transaction.Vendors will remember the concern and “over-and-above” attention to detail andbelieve they have got value for money in the fees they paid to you. Buyers willremember that you were interested in their welfare too. These generate a goodreputation and, in time, repeat business and good referrals.Ensuring the sale and / or the purchase process is as smooth and trouble free aspossible, and providing the required information at all stages of the process, isimportant for someone who intends to become a sought – after real estatesalesperson.SettlementSettlement is the point in time when the title and ownership of the property passesfrom the vendor to the buyer, all outstanding monies are paid, and the sale isregistered with the Land Titles department and a new Certificate of Title issued.This is when the agent will be entitled to claim their fee for the service performed.The agency fees and final charges are paid at settlement from the deposit monies,paid by the purchaser to the vendor. However, agents may also receive, byagreement, marketing and incidental costs if these were not paid up front or atagreed times during the transaction.When a sale nears completion the vendor or vendor’s solicitor will request in writingdetails of all fees and charges due to the agency, so that permission to release fundsfrom the trust account can be given. This request for information is called an AccountSale. Once notification from the vendors solicitor is given to the agency, they arethen able to withdraw their fees and costs, as per the account sales, from the trustaccount and issue the any remaining funds to the vendor.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 47 of 54However, under section 27 of the Sale of Land Act, allows deposit money to bereleased earlier, provided certain conditions have been met.Sometimes, however, buyers may try to pull out of the contract prior to settlement,and settlement does not take place as planned.There may be a number of reasons for this, but the most common are: The buyer is unable to obtain financeSolicitors advise against the purchaseThe building or pest reports are unsatisfactory, orThe buyer simply changes their mind Whilst you may not be able to stop these things from happening, if you are monitoringthe sale progress closely, you will be aware of any situations such as theseimmediately and can take action, which must include keeping your vendor informed.Once you become aware of something going awry you should be prepared to offersome solutions, which could include: Obtaining alternative financeFinding an alternative buyerRenegotiating the contract to reflect building work or pest treatment thatis essential. You should never assume that the buyer and seller know and understand the salesprocess. You should know more that them and be prepared to inform, guide andadvise them as required.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 48 of 54After Sales ServiceThe same “customer service” philosophy should apply once a sale has been settled.A Christmas card each year will not “buy” loyalty and repeat business but it doesprovide the parties to the transaction with a reminder that the person who sold theirproperty for them or to them is still active in real estate sales.Regular contact, with interesting information, does create an impression and helpsto ensure repeat business from clients in the future and who will provide a referral toothers.Staff Property TransactionsWhen staff buy or sell property through the agency, there is an absolute obligationto disclose this to both clients and customers who may be affected. Completetransparency is required.When the agency is selling a property for a licensee or a staff member, disclose allinformation.Where staff want to purchase property through the agency that has been offered forsale by a client of the agency, the restrictions are far more onerous, and extend toall staff and their relatives.The agency can charge no commission, unless agreed to by the vendor in writing,and full disclosure of the purchaser is required in writing and must be agreed to bythe vendor.Estate Agents Act 1980 – SECT 55Restriction on agent purchasing property55. Restriction on agent purchasing property(1) An estate agent must not obtain a beneficial interest in any real estate or businessthat the estate agent has been commissioned by any principal to sell.Penalty: 240 penalty units or imprisonment for 2 years, or both.(2) An agent’s representative employed by an estate agent must not obtain abeneficial interest in any real estate or business that the estate agent has beencommissioned by any principal to sell.Penalty: 240 penalty units or imprisonment for 2 years, or both.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 49 of 54(3) Without limiting subsections (1) or (2), a person obtains a beneficial interest ifany of the following circumstances arise-(a) the person or an associate of the person-(i) purchases the real estate or business; or(ii) holds an option to purchase the real estate or business;(b) a proprietary corporation of which the person or an associate of theperson is a member-(i) purchases the real estate or business; or(ii) holds an option to purchase the real estate or business;(c) a corporation over which the person (either individually or jointly withassociates) or an associate of the person can exercise control-(i) purchases the real estate or business; or(ii) holds an option to purchase the real estate or business;(d) a corporation of which the person or an associate of the person is anexecutive officer-(i) purchases the real estate or business; or(ii) holds an option to purchase the real estate or business;(e) if the person is a corporation, an executive officer of that corporation oran associate of the executive officer-(i) purchases the real estate or business; or(ii) holds an option to purchase the real estate or business;(f) the trustee of a discretionary trust of which the person or an associateof the person is a beneficiary purchases, or obtains a beneficial interest in,the real estate or business;(g) a member of a firm or partnership of which the person or an associateof the person is also a member purchases the real estate or business;(h) in the case of real estate-(i) the person or an associate of the person has, directly or indirectly, a rightto participate in the income or profits of a business carried on for profit orgain; and(ii) another person carrying on that business obtains a beneficial interest inthe real estate;(i) in the case of a business (Business 1)-(i) the person or an associate of the person has, directly or indirectly, a rightto participate in the income or profits of another business(Business 2)carried on for profit or gain; andCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 50 of 54(ii) another person carrying on Business 2 obtains a beneficial interest inBusiness 1.(4) A person does not contravene subsection (1) or (2) if-(a) the person-(i) before a contract for the sale of the real estate or business is enteredinto, obtains the principal’s written acknowledgment in the form approvedby the Director that the principal-(A) is aware that the person is interested in obtaining a beneficialinterest in the real estate or business; and(B) consents to the person obtaining the interest; and(ii) acts fairly and honestly in relation to the transaction; and(b) no commission or other reward is payable in relation to the transaction;and(c) the principal is in substantially as good a position as the principal wouldbe if the real estate or business were sold at fair market value.(5) In this sectionassociate means-(a) an employee of the estate agent; or(b) a spouse, domestic partner, parent, brother, sister or child of the estateagent or agent’s representative; or(c) a child of the spouse or domestic partner of the estate agent or agent’srepresentative; control has the meaning given by section 50AAof theCorporations Act; executive officer means any person, how so everdescribed and whether or not the person is a director of the corporation,who is concerned, or takes part, in the management of the corporation;obtain includes being in any way concerned in obtaining.Buyers AgentsBuyer’s agency is a specialised field, and a buyer’s agent is a person who is engagedby a buyer to locate and purchase land or property for them.A buyer’s agent is contained in a real estate agent’s licence. It is that you are onlyallowed to act as an agent specifically for the buyer.Under a buyers agency the buyer is the client and engages the services of an agentto find and / or negotiate the purchase of a property on their behalf.Alternatively, the buyer could have found their own property they want to buy, andwant the buyer agent to negotiate the best possible price and terms of purchase.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 51 of 54It is a growing sector of the market, and often buyer agents are asked to select ashortlist of suitable properties to save buyers time.Typically, buyers will pay the agent a fee (of between 1% and 2%) to source andnegotiate their purchase.Buyer agents are prohibited from acting for both the buyer and seller in a transaction,and so if the agency in which the buyer agent works has a property suitable for thebuyer for sale, only one fee can be charged (this could be from wither the buyer orseller but not both)The Rules of Conduct for any sector of the real estate industry need to be understoodand applied by persons working in that sector – including buyer’s agents.Commercial, Retail and Industrial SalesThis is a specialised area of real estate and must be treated as such. Whilst thereis no separate Agents Representative Qualification or Licence for the commercial,industrial or retail sectors, and salespeople are required to hold the sameRegistration or Licence as those in the residential sector, there are significantdifferences in that additional legislation applies in the commercial sector.Where the sale of commercial property also includes the business, then this againis a separate specialised area of real Estate.There is a diverse range of investors and large institutions involved in this sector,which is often referred to as the “Big End of Town”.The major difference between selling residential real estate and selling commercialproperty is the “emotional” component of the purchase. People buy homes based ona “lifestyle” choice. This also applies to residential property purchased for investmentpurposes as investors frequently buy particular investment property because theyfeel they could comfortably live there themselves.With the purchase of commercial real estate, the basis upon which the purchase ismade tends to be more clinically based on financial analysis. The decision to buy is,usually, a simple economic one. The decision is grounded in the achievement ofsound financial advantages.When it comes to high-rise commercial buildings, with multiple tenancies, the “netlettable area” is important. The net lettable area is the area which excludes thecommon areas of the building (lifts, passageways, building entrances, etc). Thedecision to purchase is then based on how much space there is to rent – and thelikely return on that space in the form of rent per square metre.CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 52 of 54The clients that you are likely to encounter in the commercial and industrial sectorare more likely to be professionals who sell and buy for investment, or to enhancetheir business property portfolio.Commercial, retail and industrial property can be appraised by comparative marketanalysis, although in most cases a capitalisation method based on percentage returnto investor will be applied for comparison purposes.Commercial investors are looking to operate their property at a profit – the twopotential sources of profit in the sector are capital appreciation and the rental returns.Commercial & retail sales can involve the sale of: Entire Strata Plan developmentsFactory and Light industrial premisesCommercial office spaceVacant land zoned commercialRetail premises, andLarge shopping centresTransport infrastructure (eg Toll motorways) CPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 53 of 54Conclusion – Real Estate SalesReal Estate dynamic sector of the property industry – enjoying what you do is goingto be one of the keys to your success.You will get to meet a diverse range of people who will be relying on your skill andexpertise so you are required to learn the correct work practices. Honest and ethicalreal estate people earn respect whereas the dishonest or unethical ones do not enjoya long career in real estate.All legislation is reviewed, changed and updated periodically to reflect consumerconcerns or changing work practices.You owe it to your clients (who will be relying on your knowledge and skills) to keepyourself up to date by reading media articles, press releases, announcements andbeing fully aware of economic factors that have an impact on the industry.Get involved with professional organisations whose role is to represent the industry.They are a great source of information and ideas.If you want to keep up with your competition (or get ahead of them!) carefully followthe innovations and advances in technology, especially related to marketing. Alwayslook for new ideas, and be the leader rather than the follower (who has to copyothers).Remember that the legislation, in particular, the Estate Agents Act and Regulationshave varying provisions that may need to be interpreted with reference to othersections rather than in isolation. E.g. one section may need to be read in conjunctionwith another to fully understand it.Above all, you need to be positive and enthusiastic to achieve success in real estate.The market may have its ups and downs, but you should concentrate upon workingtowards the future. That is really what the real estate industry is all about.Estate Agents Act 1980It is advisable for all real estate offices to have a copy of the Act and Regulationsavailable at all times. This could be a “soft copy” – with a link to Consumer AffairsVictoria website or to the Victorian Parliament (Legislation) website on yourcomputer at: www.legislation.vic.gov.auCPPDSM4008A – Identify the legal and ethical requirements of Property Sales to completeagency workMRT Vic Learner Guide CPPDSM4008A – 01042015.docx072013 Page 54 of 54Useful LinksEstate Agents Act 1980 –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsfEstate Agents (Professional Conduct) Regulations –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsfEstate Agent (General Accounts and Audit) Regulations –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsfSale of Land Act –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsfTransfer of Land Act –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsfLand Act –http://www.legislation.vic.gov.au/Domino%5CWeb_Notes%5CLDMS%5CPubLawToday.nsf

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