You have spent $4,000 in marketing costs and still, after 90 days, your real estate agent cannot find a buyer willing to pay the price you want for your property.

Apart from spending another $4,000 on new marketing costs, do you run the risk of paying double commission if you change agents?

Specifically, are you legally liable to pay sales commission to the first agent as well as to the new agent if you sell the property to a buyer who inspected the property through the first agent?

Most sales agency agreements provide that the real estate agent is entitled to the remuneration if the agent is the effective cause of the sale, which is to say, if a person has been 'effectively introduced to the Principal or the Property by the Licensee during the Agency Period … and that person … enters into a contract to purchase the property...'

Not long ago, I received an email from a real estate agent whose agency agreement had been terminated because they had not achieved a high enough offer for a prestige property in Hunters Hill. The email contained this demand: If the property is sold to a purchaser in the list below, we require our commission of $80,000 to be paid. The list contained 138 names!

Fortunately, the name of the buyer who purchased the property through the new real estate agent was not on that list, so a legal dispute was avoided.

But what if the buyer's name had been on that list? A recent decision of the NSW Court of Appeal has shed light on what a real estate agent must do to earn their commission.

The Court said that it was not enough for the buyer's name to be on a list of people who had enquired about or had inspected the property, such as in an open house (see image).

More is required: The first real estate agent must have passed on an offer from the prospective buyer to the seller, and must have continued to assist in the negotiations (as required).

In the Court case, the first agent made a fatal error. They did pass on an offer, and conducted price negotiations. But then they made a fatal error - they went overseas on a holiday over Christmas and New Year, and were uncontactable for a few weeks. The buyer approached a second real estate agent to who completed the negotiations. Note: both agency agreements were non-exclusive agencies.

The Court rejected the first agent's claim for commission.

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