4. AN INTRODUCTION TO REAL ESTATE PROPERTY SALESrealestatecertificateofregistration.com.au/module...them the best advice. Before you start promoting and working on the property, to

WEB. www.realestateacademy.com.auPHONE. 1300 367 412

4.1 Sales and Ownership Law

In Australia there are many types of title and many types of ownership.

We think we sell houses, but we don’t. We sell land that has title, as well as the improvements on that land, which could

be a house, a unit, a townhouse, a farm, a vineyard, or a factory.

When we talk about ownership this is the term that describes the owning of land, when we talk about title however, this is

what describes what the land can be used for and who owns what rights to that land.

For example; ‘fee simple estate’ also known as ‘freehold’ is an example of ownership that could be subject to a

particular title.

If we use Torrens title and Strata title as examples: A Torrens Title property is one in which the purchaser owns both the

house and the land on which it is built. This is the most traditional form of ownership and means that you become

the sole owner of the property (aside from the bank or financial institution providing the mortgage!) and you are

responsible for the property’s upkeep - both inside the property and outside on the block of land. Torrens is also a system

of registering land ownership. Each state and territory will have its own system.

A property such as a villa, townhouse or unit however is usually purchased under Strata. When you buy one of these

properties, there are ‘common areas’ that are used by all of the people living in the complex or apartment block

including driveways, gardens and so on. These common areas have to be maintained by all of the unit owners

collectively, through an Owners Corporation, because they are shared. The individual owner is solely responsible for the

upkeep of the inside of their property, but they must also share the expense of maintaining the common areas.

All Agents need to be aware of the Real Property Act 1900, which governs the sale of land in New South Wales. It

provides the legal framework for ownership of land, defining the different types of title, and then sets the framework for

the transfer of that title. Real estate agents must also abide by the regulations of the Property, Stock and Business Agents

Act 2002, which deals with the laws surrounding Agency Agreements.

4. AN INTRODUCTION TO REAL ESTATE PROPERTY SALES


The most common form of ownership in Australia is ‘fee simple estate’.

A fee simple or a fee simple absolute is an estate in land. It is the most common way real estate is owned by individuals.

It’s ordinarily the most complete ownership interest that can be had in real property.

In New South Wales, estate in fee simple is the highest form of private ownership and the closest the law comes to

recognising absolute ownership for all practical purposes. However, while we refer to a proprietor of an estate in fee

simple as the owner for all practical purposes, their ownership is not legally absolute.

Absolute legal ownership rests with the Crown. However, for all intents and purposes, a person who owns land in fee

simple subject to other legislation can do with it whatever they wish. Sell it, Will it, or Lease it.



4.2 Preparing to Sell and Marketing

When a property comes onto the marketplace, you have to conduct an appraisal and a presentation to assess the

current situation and current market.

In New South Wales different methods work at different times for certain reasons. As an agent, you have to assess

what would be the most appropriate method of sale for a property. Everywhere in the Sydney CBD is a crazy rush of

apartments and housing, which are often auctioned because it’s not known how high the price could go. There have

been cases in Australia where properties have been sold for hundreds of thousands of dollars above expectation;

hence the auction process can be a safe method of selling a home based on the activity and excitement in the

marketplace. However, auctions don’t work for every market.

The three common methods of sale are:

Private treaty

Private treaty means ‘for sale’. When you see a for sale sign on a house, it’s available to the open market with no set time

frame to sell, and it’s known as private treaty. This method of sale also comes with a set price tag or ‘ceiling price’.

Auction

The most popular method used throughout New South Wales in middle to high-range properties is auction, which usually

happens occurs over a four-week period. There’s a defined time and date that the property will go to auction, although

it can be sold beforehand, and properties don’t always make it to the auction date. Unlike private treaty, with auctions

people understand that there is no ceiling price on the property. At public auction the eventual price is undetermined

as it’s going to public auction to see what the public will respond to and actually pay for that property. Often a guide

price is provided, but that in no way guarantees the eventual price that the property sells for.

Tender

Tender means the buyer can submit what they would want to pay for the property, their terms, their conditions, their

settlements. The tenders are all assessed by the Agent and presented to the owner and the owner chooses which is the

most appropriate for them in the sale of their property.


When an owner decides to sell a property, their biggest concern is not selling it, but underselling it. Before discussing and

choosing a method of the vendor prefers, you need to take into account things such as the likely demand in the area

for that property, likely competition for the property from other listings, the common methods of sale used in the area,

the type of property such as townhouse or a villa, a double storey, or a single dwelling. You need to think about the

expectations of the vendor - are they holding their expectations too high? Do you think their property is worth more the

market value? You must consider the broader economic conditions and also why the vendor wants to sell? How quickly

do they want to sell? All these factors need to be considered. A vendor puts a lot of trust in you and you want to give

them the best advice.

Before you start promoting and working on the property, to comply with The Conveyancing Act 1900 and the Property,

Stock and Business Agents Act 2002 you must have:

• A full contract of sale; and

• An Agency Agreement in place.

The full contract of sale, which includes council documents, is provided to you by a solicitor. In New South Wales, either

you or a solicitor can buy and sell. Without the full contract of sale it is illegal to talk, show, or work on that property and a

full authority signed by the owner consenting to the method of sale, conditions, and marketing that you are proposing to

execute the sale of their home must exist.



4.3 Prospecting

Lead generation is about getting people interested in talking to you.

All your communication work is to generate leads for you. When you are invited in to see a home and appraise the

property, you come into the Lead Conversion stage. Lead Conversion is where you again use all your communication

strategies. You maintain eye contact, and share your amazing visuals - your brochures and signboard.

You want to stick.

You must give people reason to stick with you. If you do a street report every six months and include every recent sale,

great information, a picture of you, some results from the owners, and some testimonials, a client will think, “These are

good people. Good facts and evidence have been provided, and they communicate well as professional Agents”.

Prospecting the Business

You can’t work or represent anyone until you’ve actually located a person and a property that needs your service. Very

many years ago people would ring a real estate agency and say they would like to sell their home, but these days the

internet has taken the market to the consumer and you have to take yourself to the client.

Prospecting is finding new properties to list for sale on the real estate market. You have to connect with your community

to understand a property owner’s needs and assist them to list their property for sale.

Prospecting works in a simple way.

If you were to go and hit the footpath in your area and you see Mrs Williams in her front yard, you would say, “Hello, I’m

Lee from Complete Real Estate. We’ve just finished a report on all the sales on your street. Do you mind if I ask, when did

you buy here?”

Mrs Williams would say, “Oh, I bought 10, 15 years ago”.

If someone bought 10, 15 years ago their net cash asset has changed enormously. It could be that it’s doubled in price

and more often than not it has.

If Mrs Williams has been out of the market for years, she may not realise that she is worth another couple of hundred

thousand dollars more in her personal wealth.

If you gave Mrs Williams a report detailing all the recent sales on her street, the date it sold, and what it achieved, this

information creates the first connection to her and she might say, “Oh look, I’m not moving now but next year on 2nd

February I’m moving to Byron Bay and I’m going to get rid of this place”.


You would place that information in your database and you would keep providing information in the hope that Mrs

Williams will think, “I don’t need to ring another real estate company. I’ll just get Lee in – he’s a nice chap, and he will

look after me”.

That’s prospecting.

Getting to know your demographic is also prospecting. Every area is different from suburb to suburb. You’ve got to know:

• the ethnic make-up of the area,

• the age distribution of the population,

• the type of properties contained within that area,

• is the area mainly owner occupied or is it investment properties?

• what are the average incomes of the residents?

• the turnover rate of property?

• what are the trends with prices?

• are areas going to be rezoned?

• how many apartments are being built?

• any new infrastructure projects coming online?

• what’s happening with overseas investors?

Profile the area you are going to work in. Set targets and prospect plans. Conduct Agency and individual promotional

activities. Maintain your client base, and constantly report on prospecting because trends do change.

Go onto Realestate.com.au and do a search on sold properties on a specific post code, you can even do a search

on homes that are similar to yours. You may type in four bedrooms, two bathrooms, garaging, the post code, and it will

show you every single property that sold in a similar price range and provide a specific description of a home. Look at

the photos, drive past those homes, and get a feel for your turf, because knowing your turf is where you can bring a lot of

value to the consumer.



4.4 Agreements

In real estate we enter into legally binding contracts between ourselves and landlords, vendors, and sometimes purchas-

ers - depending on if we are acting for them on a sale, on a purchase, or the lease of commercial or residential prop-

erties. It is vital to understand these Agreements, your legal obligations, and to complete the Agreements diligently and

clearly.

All assets of real estate have Agreements, and you must understand the different types of agreements and, most impor-

tantly, how to fill them in.

A Selling Agency Agreement

A Selling Agency Agreement is a written agreement whereby the Agent is authorised by the seller or owner to find a

buyer for a particular property. The Agent is required by law to have written authority as detailed in Part 4 of the Property

Stock and Business Agents Act, 2002.

The Act deals with Agency Agreements and with Regulations, and sets out all the requirements that agents must follow.

Section 55 of the Act states that, “An agent cannot claim commission or expenses from any person unless there is a valid

written Agency Agreement in place”.

There are a number of useful links in the Certificate of Registration Course, including a link to the website that contains

the Act. The Act and Regulations also prescribe the form of specific conditions and other matters that must be included

in the Agreement, or followed to make the Agreement enforceable. Therefore, Agents should be particularly aware that

they must take due care and diligence when using or filling out Agency Agreements, because if an agent fails to do it

correctly at any point, then the Agent loses his right to claim commission and expenses. You can also expose yourself to

penalties that can be imposed by NSW Fair Trading.

The Exclusive Agency Agreement

This Agreement means an Agency or Agent has been appointed exclusively to sell the property. The owner has no rights

to sell the property themselves, only the Agent and Agency that has been appointed.

The Sole Agency Agreement

This is similar to Exclusive however, the owner retains the right to sell the property themselves.


A Multiple Listing Agreement

A Multiple Listing Agreement means you are dealing with more than one agency and are working with a network of

Agents. It’s like direct competition; it’s not just competing for a listing, you are also competing for a sale.

The Auction Agreement

This is basically an exclusive Agency Agreement, but it’s putting the house or the sale to auction.

Regardless of which Agency Agreement is selected, the point is you must have one. It seems straight forward but there

have been real estate professionals to whom the owner has said, “Oh, look. Just bring the buyer through and if they like

it, I’ll sign one”. You would never do this, because you would have broken the law. If the purchaser does purchase it, you

have no rights to the commission or work you have done. You cannot show a property in New South Wales without the

proper authority.

Creating the Listing

Once you have written consent from the owner and the owner is happy with what you’ve suggested – you’re off.

You now have to live up to promises you have made to the client.

To make it easier for you, the Real Estate Academy provides you with a bonus document called Listed to Settled.

Listed to Settled is a 135-point checklist that we created from the very best agents in Australia of what you have to do

from the date of listing to settlement.

It contains everything you need to do at the highest level.

Go through that checklist; be clear on it. Compliance is key, and structure is what protects the owner and their asset.



4.5 The Sale

If you’ve done all the hard work and marketing, had the Authority signed, the contract provided by the solicitor, and at-

tracted people through the internet, and actually landed the purchaser who wants to buy the property – what happens

then?

Accept the financial deposit

It is very important that you follow the correct procedures as stipulated by your employer and the law. When the deposit

is provided you must provide a Trust Account Receipt. It’s very important that you make sure that the receipt features:

• The date that it was issued,

• The number of the receipt in numerical sequence is unique ,

• The name of the Licensee and the words “Trust Account” written on it,

• The name of the person from whom the payment was received,

• The name and the ledger reference number of the person on whose behalf the payment was made,

• The amount of money received and whether it was paid in cash or by cheque, by electronic funds transfer.

All these particulars of the transaction need to be sufficiently identified.

When you start in real estate, begin with the end in mind - find out who’s in charge of business administration, and ask

them, “Take me on a simulation. What if I found a purchaser at 7:30 on a Saturday evening? They have come to the

office, they don’t want to go anywhere else until they have put down a deposit. They’re throwing a payment at me, be

it cheque or cash, or want to do a money order transfer, and they want a receipt so they know they’ve actually put a

deposit on this house because they don’t want to miss out”.

You also need to know about the importance of having a written procedure and permission to exchange. Without

those, the contracts have not legally exchanged.

The types of exchange of contracts

The definition of complete exchange of contracts is that this is not completed until you have explained to both parties

what steps and actions you’ve taken. This needs to be in writing. Your office will have an exchange of contracts form.

Again, ask for this.


If lawyers are exchanging contracts they will commonly use a 66W Certificate to execute the no cooling-off period.

However, under New South Wales law Agents can seek permission to exchange contracts, but exchange of contracts

with an Agent must include five business days cooling-off period, which doesn’t include the weekend.

However, those five days are designed for legal counsel or conveyancers to go through the contract to ensure that

everything has been exchanged correctly. You need authority to exchange contracts, otherwise you could execute

paperwork that is not legally binding.

Each office has its own way of doing it; you might find that they call it a blue form or a green form or it’s in the top draw-

er to the left, but you need to know that procedure.

The calculation of commission

When the deal is actually done and contracts are exchanged, the original authority would have stipulated how the

commission is to be paid. Now that settlement is approaching, those instructions must be passed on to everyone so that

the disbursement of money is completed. This means money to the banks, the owner’s bank account, and then finally

money back to the Agency.

What are the different ways that commissions are calculated?

The most popular one would be a percentage of the sale price so, for example, 3% of $100K would be $3K. That is the

most popular way of looking at it.

In New South Wales the average fees through New South Wales range from 2.2% to 2.9%, and some above 3%.

There can also be a sliding scale, for example, 4% of the first $300K of a sales price and then 2.5% for the next $100K. This

scale is commonly used in low sale price areas where you can imagine that someone selling a home at 2.5% of $2m is

very different to 2.5% of $200K. They quite often load the first $100K or $200K as an administration project management

fee, with the balance remaining.


There is also an incentive. For instance, they could ask 3% of the sale price if it’s under $500K, 4% if it’s over $500K. This has

been quite popular, especially with the options achieving the results they did. The agent is actually saying, “Okay, I’ll take

a lesser fee to this level but if it does kick and go above that, I want a greater return.”

Finally, the flat fee. You’re literally saying, “I will take $15K for the sale of this property”. No matter what the final sale price

is you have agreed to a dollar amount rather than a percentage.

Quite often, and more likely than not, all fees are only payable on a successful sale. It is possible to represent an owner

for three to four months in the marketplace, driving around with your petrol showing people through the property, and

the price you achieve is not acceptable. Then no fee is payable.


It’s only the beginning

Congratulations - you’ve reached the end of the content required for the Certificate of Registration Course for New

South Wales.

When you have completed your assessment and you feel confident that real estate is for you, the next part of your

journey is to go through the Real Estate Academy’s street style training. If you’re not sure about making a decision, go

through this training anyway. It will support your thinking and then you can move on to actually apply for the Certificate

of Registration.

What else do you have to do to move into the industry?

1. Receive your Statement of Attainment from the RTO

The RTO will be assessing your work. They will be making sure that you are competent in all areas of the course. If

there are any areas that need tweaking, then we can work on them. There’s no such thing as failing this course. If

you are stuck on some of the questions or do not understand them, call the Real Estate Academy on 1-300-367-412

and we can assist you.

2. Attend the Complete Salesperson Course

This is the Real Estate Academy’s two-day event that Principals and Agents already in real estate undertake to fast-

track their knowledge of real estate. If you complete the Complete Salesperson Course, you’ll be eligible to receive

your full 12 points of CPD for your first year in real estate (CPD points are provided by MRT Training). Make sure you

mention you’ve done this particular Certificate of Registration Course, as the REA offers a student rate to the Com-

plete Salesperson Person course if you have obtained your Certificate of Registration through the system.

Documents

4. AN INTRODUCTION TO REAL ESTATE PROPERTY SALESrealestatecertificateofregistration.com.au/module...them the best advice. Before you start promoting and working on the property, to