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Identify legal and ethical

requirements of property sales


to complete agency work
CPPDSM4008A Part 1

v16.1 December 2014

Identify legal and ethical


requirements of property sales to
complete agency work
CPPDSM4008A Part 1
These materials were prepared by The Real Estate Institute of Queensland.
2015 The Real Estate Institute of Queensland

Version Number: 16.1


Effective: 5 January 2014
This work is copyright. Apart from any use permitted under the Copyright legislation, no part may be
reproduced without prior written permission from REIQ.

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

must not alter their position or refrain from doing so in reliance upon this material; and
should seek independent legal advice with respect to the matters traversed in this material.

The Real Estate Institute of Queensland Limited (REIQ) does not accept or undertake any duty of care relating to this
material. Further, REIQ shall not be liable in any respect to any recipient of this material for:
(a) any loss of profit, loss of goodwill, loss of production, loss of opportunity, business interruption, loss of revenue, loss
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This material has been prepared based on information available at the time of its publication. REIQ does not represent or
warrant that the material is error free, complete or accurate.

CONTENTS
PART 1 - REAL ESTATE AGENCY

16

UNIT 1 - AGENCY PRACTICE

16

[1.1] Contract of agency

16

[1.2] Other legal responsibilities of an agent

17

[1.3] Learning activity 1

17

PART 2 PROPERTY OWNERSHIP

18

UNIT 2 - PROPERTY

18

[2.1] Tenure

18

[2.1.1] Fee Simple (Freehold)

18

[2.2] Old System Title

19

[2.3] Torrens System

19

[2.3.1] State guarantee of title

20

[2.4] Community Title Scheme

21

[2.4.1] Types of developments

21

[2.4.2] Ownership of common property

22

[2.5] Foreign Ownership of Land Register Act 1988

22

[2.6] Learning activity 2

22

UNIT 3 - CERTIFICATE OF TITLE

23

[3.1] Titles registration and the land and water registries

23

[3.2] The title search


[3.3] Which matters affect title?

24
26

[3.3.1] Title encumbrances

26

[3.3.2] Covenants

26

[3.3.3] Easements

27

[3.3.4] Creation of an easement

27

[3.3.5] Caveats

28

[3.3.6] Mortgage

28

[3.4] Non-title searches

29

[3.5] Verifying ownership

29

[3.6] Learning activity 3

31

UNIT 4 - PROPERTY OWNERSHIP

32

[4.1] Real and personal property


[4.2] Real property rights

32
32

[4.3] Chattels and fixtures

33

[4.4] Doctrine of fixtures

33

[4.5] What are the different types of property ownership?


[4.5.1] Co-ownership of land

33
34

[4.5.2] Joint tenants or proprietors

34

[4.5.3] Creation of joint tenancy

34

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[4.5.4] Tenants in common

35

[4.5.5] Creation of tenancy in common

35

[4.6] Subdivision of land


[4.7] Types of property

35
35

[4.7.1] Residential property

36

[4.7.2] Commercial property

36

[4.7.3] Industrial property


[4.7.4] Rural property

36
36

[4.7.5] Businesses

36

[4.7.6] Vacant land

37

[4.8] Learning activity 4

37

PART 3 RESPONSIBILITIES OF SALES PERSONNEL

38

UNIT 5 - CONSUMER LEGISLATION

38

[5.1] Queensland legislation

38

[5.2] Real estate licensing

38

[5.3] Appointment of agent

42

[5.3.1] Requirements to be appointed to act as an agent

54

[5.4] Representations to consumers

54

[5.4.1] Misrepresentation of property

54

[5.4.2] Agents silence of known information


[5.4.3] Representations in advertising

57
57

[5.4.4] Photographic representations

57

[5.5] Fair Trading Act 1989


[5.6] Commonwealth legislation

58
58

[5.6.1] Competition and Consumer Act (Australian Consumer Law) 2010

58

[5.6.2] Two-tier marketing

61

[5.7] Privacy Act 1988

62

[5.7.1] Australian Information Commissioner

63

[5.7.2] Rules of collecting information relevant to real estate transactions

63

[5.7.3] Use of fair, lawful and unobtrusive means to collect personal information

64

[5.8] Do Not Call Register Act 2006

64

[5.8.1] Do Not Call Register

64

[5.8.2] Telemarketing calls

64

[5.8.3] Exemptions

64

[5.8.4] Minimum standards for all telemarketing calls


[5.8.5] Specific information must be provided by telemarketers

64
65

[5.8.6] How to check if someone is on the register

65

[5.8.7] Administration List Washing Account

65

[5.8.8] Agency database

65

[5.8.9] Inferred consent

65

[5.8.10] Express consent

65

[5.8.11] Best practice recommendations

66

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CPPDSM4008A Part 1

[5.9] Learning activity 5

66

PART 4 PROPERTY SALES

68

UNIT 6 - INTERPERSONAL SKILLS

68

[6.1] Communication skills

68

[6.2] Questioning techniques

68

[6.3] Negotiation skills

69

UNIT 7 METHODS OF SELLING

69

[7.1] Methods of selling property

69

[7.1.1] Private treaty

69

[7.1.2] Public auction

70

[7.1.3] Tender

70

[7.1.4] Criteria for deciding the best method of sale

70

[7.2] Best listing sources

71

[7.3] Open for inspection

71

[7.4] Private seller (for sale by owner)

71

[7.5] Private For Sale signs


[7.6] Buyers

72
72

[7.7] Referrals

72

[7.8] Letterbox cards

72

[7.9] Door knocking


[7.10] Door knocking manners

73
73

[7.11] Buildings under construction

73

[7.12] Local Government building application

73

[7.13] Advertising for listings

74

[7.14] Being observant

74

[7.15] Letters to absentee landowners

74

[7.16] Neighbours

74

[7.17] Relatives and friends


[7.18] Schools

74
75

[7.19] Clubs

75

[7.20] Church

75

[7.21] Walk-ins

75

[7.22] Telephone enquiries

75

[7.23] Database usage

75

[7.24] Learning activity 6:

76

UNIT 8 - REAL ESTATE MARKET ANALYSIS

76

[8.1] Accessing market data

77

[8.2] Inspecting the property

77

[8.3] Where to obtain additional information

77

[8.4] Databases

78

[8.5] Marketing plan

78

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[8.6] Market price of property

79

[8.7] Market value of property

79

[8.8] Legal definition of market value


[8.9] The role of the real estate agent

80
81

[8.10] Recommended pricing terminology

82

[8.11] Transactions that do not reflect market value

82

[8.12] Stigmatised property


[8.12.1] Dealing with stigmatised property

83
83

[8.12.2] Is the stigma a material fact?

84

[8.13] Permission to disclose

85

[8.14] Making a disclosure to a consumer

85

[8.15] Agency disclosure policies

86

[8.16] Learning activity 7

86

UNIT 9 - THE COMPARATIVE MARKET ANALYSIS (CMA)

87

[9.1] Comparative market analysis

87

[9.2] Advice about market sale price

88

[9.3] Representation of price of property

88

[9.4] What a quality CMA should include:

90

[9.5] Price ranging

90

[9.6] Over capitalised property


[9.7] When should a CMA be used?

91
92

[9.8] Research and property appraisal

112

[9.9] Recent sales or rentals of similar properties


[9.10] Information sources

112
113

[9.11] Data from these sources may include:

113

[9.12] Consequences of incorrect pricing

113

[9.13] Sellers with unrealistic expectations


[9.14] Agents duty to inform seller

113
114

[9.15] Highest and best use

114

[9.16] The importance of the title search

115

[9.17] The Registered Plan search

115

[9.18] Complete property description

116

[9.19] The Competition and Consumer Act (CCA) and property pricing

116

UNIT 10 - AGENCY LISTINGS

117

[10.1] Soliciting for listings

118

[10.2] Learning activity 8

120

PART 5: SALES PROCESS

121

UNIT 11 - THE SALES PROCESS

121

[11.1] Listing properties for sale

121

[11.2] Disclosure to buyer

122

[11.3] Agents duty of full disclosure

124

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CPPDSM4008A Part 1

[11.4] The Law of Contract

124

[11.5] Deposit monies and the contract of sale

125

[11.6] Receiving and holding of deposit monies


[11.7] Receiving deposits

125
125

[11.8] Types of deposit

125

[11.9] Release of deposit money

126

[11.10] Agents entitlements


[11.11] Payments to the seller

126
126

[11.12] Disputes over deposit money

126

[11.13] Learning activity 9

127

UNIT 12 - AGENTS IN CONJUNCTION

128

[12.0] Introduction
[12.1] Learning activity 10

128
130

UNIT 13 - BENEFICIAL INTEREST

130

[13.0] Introduction

130

[13.1] What is beneficial interest?


[13.2] Associate

130
131

[13.3] Disclosure of beneficial interest to seller

132

[13.4] Learning activity 11

133

UNIT 14 - FEES, CHARGES AND EXPENSES

134

[14.1] Advertising costs


[14.2] Fees and expenses

134
134

[14.3] Commission

135

[14.4] Repayment of excess commissions

136

[14.5] Secret commissions


[14.6] Client bonuses

136
137

UNIT 15 DOCUMENTATION REQUIRED PRIOR TO CONTRACT SIGNING

137

[15.1] Definition of property

137

[15.2] Residential property


[15.3] Non-residential property

137
137

[15.4] Agency practice issues

138

[15.6] Property Occupations Form 7

138

Disclosure of beneficial interest to seller by property agent or property auctioneer


[15.7] Property Occupations Form 8 Disclosure to prospective buyer

138
140

[15.8] Benefits received by any party associated with the transaction

142

[15.9] Contract Warning Statement

145

[15.10] Coolingoff period for residential sales


[15.11] Buyers may waive or shorten the cooling-off period

145
146

[15.12] Shortening the cooling-off period

146

[15.13] Termination of contract during the cooling-off period

146

CPPDSM4008A Part 1

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APPENDIX A - Learning activity answers

147

FORMS
Property Occupations Form 6 with REIQ Residential Sales Schedule and Essential
Terms and Conditions
Property Occupations Form 7 Disclosure of beneficial interest to the seller by a
property agent or auctioneer
Property Occupations Form 8 Disclosure to prospective buyer What we must tell you
before you sign
Realworks form: EF072 Conjunction confirmation by fax or email
Realworks form: EF082 Employment authority

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CPPDSM4008A Part 1

Course Objectives
The learning material of this unit is designed to assist the candidate to gain competency in the module,
CPPDSM4008A Identify legal and ethical requirements of property sales to complete agency work,
and to:

Develop knowledge of property sales

Develop knowledge of the sales process

Identify the roles and responsibilities of sales personnel

Unit descriptor
This unit of competency specifies the outcomes required to meet the core legal and ethical
requirements associated with property sales. This includes awareness of the legislation relating to
property sales, the role and responsibility of agency personnel in property sales, the administration of
sales transactions and the completion of sales documentation.
The unit may form part of the licensing requirements for persons engaged in real estate activities in
those States and Territories where these are regulated activities.

Application of the unit


This unit of competency supports the work of licensed real estate agents and real estate
representatives involved in property sales. It addresses the requirements for licensed real estate
agents and real estate representatives to be able to identify and explain relevant legislation, roles,
responsibility and documentation.
Element

Performance Criteria

1 Develop knowledge
of property sales.

1.1

Types and characteristics of land tenure systems are identified


in line with legislation.

1.2

Legislation regulating the sale of properties is identified in line


with agency practice.

1.3

Information provided on the Certificate of Title is checked for


accuracy against the agency agreement.

1.4

Types of property ownership are identified in line with


legislation.

1.5

Legal requirements relating to the sale of property are identified


and interpreted in line with legislation and agency requirements.

1.6

Requirements of ethical and conduct standards and consumer


protection and privacy legislation in relation to the sale of
property are identified in line with legislative requirements and
agency practice.

2.1

Need for demonstrating effective communication strategies in


establishing rapport with clients, determining client needs,
providing accurate advice, addressing client concerns and
dealing with conflict is identified in line with agency practice.

2.2

Listing opportunities are identified and assessed in the context


of legislative requirements and agency practice.

2.3

Methods of selling property are identified and assessed in the


context of legislative requirements and agency practice.

2 Develop knowledge
of sales process.

CPPDSM4008A Part 1

REIQ v16.1 December 2014

3 Identify roles and


responsibilities of
sales personnel.

2.4

Sale authority agreements are identified, completed and


stored in line with legislative requirements and agency practice.

2.5

Strategies for marketing property are identified and assessed in


the context of legislative requirements and agency practice.

2.6

Purpose and terms of statutory statements required to be


prepared by sellers for the sale of property and businesses are
identified and interpreted in the context of legislative
requirements and agency practice.

2.7

Contractual documents relating to the sale of property are


identified, interpreted, completed and stored in line with
legislative requirements and agency practice.

2.8

Process for settling the sale of property is identified in the


context of legislative requirements and agency practice.

2.9

Processes for receipt, recording, banking and release of deposit


moneys are identified in the context of legislative requirements
and agency practice.

3.1

Relationship between salesperson and agency principal is


identified in the context of legislative requirements and agency
practice.

3.2

Roles and responsibilities of agent in sale of property


including general disclosure requirements are identified,
interpreted and assessed in the context of legislative
requirements and agency practice.

3.3

Restrictions on agents purchasing property and sanctions for


violations of restrictions are identified, interpreted and complied
with in line with legislative requirements and agency practice.

3.4

Controls and sanctions on secret commissions are identified in


the context of legislative requirements and agency practice.

3.5

Entitlements and commissions for agents are identified and


calculated in the context of legislative requirements and agency
practice.

Required skills and knowledge


This section describes the essential skills and knowledge and their level, required for this unit.

Required skills

Ability to communicate with and relate to a range of people from diverse social, economic and
cultural backgrounds and with varying physical and mental abilities

Analytical skills to interpret documents such as legislation, regulations, contracts, contract notes,
sale authority documents and certificates of title

Computing skills to access agency and resource databases, use standard software packages,
send and receive emails, access the internet and web pages, and complete and lodge standard
documents online

Decision making and problem solving skills to analyse situations and make decisions associated
with the sale of property

Literacy skills to access and interpret a variety of texts, including contracts; prepare general
information and papers; prepare formal and informal letters, reports and applications; and
complete prescribed forms

Negotiation skills required for interacting with sellers and buyers

Numeracy skills to calculate and interpret data, such as deposits, entitlements and commissions

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CPPDSM4008A Part 1

Planning, organising and scheduling skills to undertake work-related tasks, such as preparing
correspondence, organising deposits and arranging property inspections

Research skills to identify and locate documents and information relating to the sale of property

Risk management skills to identify risks associated with discussing sale and purchase options with
sellers and buyers

Self-management skills to organise own work, deliver quality customer service and effectively
manage competing demands

Teamwork skills to work effectively in and promote communication between sales, property
management and administrative teams in an agency environment

Verbal communication skills required for face-to-face communication with real estate sellers and
buyers.

Required knowledge and understanding

Agent entitlements and commissions

Contract law in the real estate industry, including agent liability for breach of contract and
negligence

Ethical and conduct standards relevant to licensed real estate agents and real estate
representatives

Key principles of consumer protection and privacy legislation

Key principles and terminology of property law

Legislative limitations on agency practice

Offences and penalties under legislation

Relevant federal, and state or territory legislation and local government regulations relating to:

Anti-discrimination and equal employment opportunity

Consumer protection, fair trading and trade practices

Employment and industrial relations

Financial services

OHS

Privacy

Property sales

Risk and risk management strategies

Roles and responsibilities of estate agency personnel in relation to the sale of property

Sales process, including ways of obtaining listings, methods of selling property, strategies
for marketing property, and the process for settling the sale of property

Trust funds and legislative controls on trust funds.

Range Statement
The range statement relates to the unit of competency as a whole. It allows for different work
environments and situations that may affect performance. Bold italicised wording in the performance
criteria is detailed below.
Land tenure systems may
include:

CPPDSM4008A Part 1

Freehold or fee simple

Leasehold.

10

REIQ v16.1 December 2014

Legislation may include:

Certificate of Title may


include:

Types of property
ownership may include:

Effective communication
strategies may include:

Listings may include:

REIQ v16.1 December 2014

Relevant federal, and state or territory legislation and local


government regulations relating to:

Anti-discrimination and equal employment opportunity

Consumer protection, fair trading and trade practices

Employment and industrial relations

Financial services

OHS

Privacy

Property sales.

A plan of the land

Details of caveats over the land, such as easements and


covenants

Lot, plan and subdivision

Names of registered proprietors

Names of the mortgagees and dates of registration and


discharge

Volume and folio numbers.

Company ownership

Joint tenants

Sole owner

Tenants in common.

Active listening

Being non-judgmental

Exploring problems

Expressing an individual perspective

Providing sufficient time for questions and responses

Providing summarising and reflective responses in conflict


situations

Using appropriate words, behaviour and posture

Using clarifying and summarising questions

Using clear and concise language

Using culturally appropriate communication

Using plain English

Using verbal and non-verbal communication.

Advertising

After-sales letters

Builders and developers

Callers to the office

Conjunctions and multiple listings

Farming

11

CPPDSM4008A Part 1

Methods of selling
property may include:

Sale authority agreements


may include:

Statutory statements
required to be prepared by
sellers may include:

Contractual documents
may include:

Roles and responsibilities


of agent in sale of property
may include:

CPPDSM4008A Part 1

Open for inspections

Owner boards and seller advertisements

Recommendations

Telemarketing.

Alternative sales methods, such as set sales

Auction

Conjunctional sales

Private sale or treaty

Sale by tender

Seller sale.

Auction authority

Exclusive sale authority

General sale authority

Sole sale authority,

Additional sellers statement

Sellers statement

Statement for the sale of a small business.

Contract note

Contract of sale of real estate

Finance statement to buyers

Prescribed or permitted forms used by agents in property sales

Release of deposit moneys.

Agreement to sell

Communication

Completing contract documents

Ethical and conduct standards

General disclosure requirements

Legal responsibility

Listing

Marketing

Negotiating sale terms and conditions

Office procedures for presenting the property

Prospecting

Providing information to buyer

Sale settlement.

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Restrictions on agents
purchasing property may
include:

Restrictions on licensed real estate agents and real estate


representatives

Restrictions on support staff

Restrictions on the spouse or domestic partner, parent, brother,


sister or child of licensed real estate agents or real estate
representatives.

Evidence guide
The evidence guide provides advice on assessment and must be read in conjunction with the
performance criteria, required skills and knowledge, the range statement and the Assessment
Guidelines for this Training Package.

Overview of assessment
This unit of competency could be assessed through case studies, demonstrations, practical exercises
and targeted written (including alternative formats where necessary) or verbal questioning relating to
the legal and ethical requirements of property sales. The case studies, demonstration and questioning
would include collecting evidence of the candidates knowledge and application of ethical standards
and relevant federal, and state or territory legislation and regulations. This assessment may be carried
out in a simulated or workplace environment.

Critical aspects for assessment and evidence required to demonstrate competency in this unit
A person who demonstrates competency in this unit must be able to provide evidence of:

Ability to communicate effectively and accurately with clients

Application and knowledge of ethical and conduct standards and key principles of consumer
protection and privacy in relation to the sale of property

Application and knowledge of the sales process, including ways of obtaining listings, methods of
selling property, strategies for marketing property, and the process for settling the sale of property

Application and knowledge of accurately completing statutory and agency sales documentation,
including authorities and contracts

Application and knowledge of the legislation and regulatory framework relevant to the sale of
property

Application and knowledge of the role and responsibilities of the agent in the sale of property,
including the legislative restrictions on agents purchasing property and the controls and sanctions
associated with secret commissions.

Context of and specific resources for assessment


Resource implications for assessment include:

Access to suitable simulated or real opportunities and resources to demonstrate competence

Assessment instruments that may include personal planner and assessment record book

Access to a registered provider of assessment services.

Where applicable, physical resources should include equipment modified for people with disabilities.
Access must be provided to appropriate learning and/or assessment support when required.
Assessment processes and techniques must be culturally appropriate, and appropriate to the
language and literacy capacity of the candidate and the work being performed.

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13

CPPDSM4008A Part 1

Validity and sufficiency of evidence require that:

Competency will need to be demonstrated over a period of time reflecting the scope of the role
and the practical requirements of the workplace

Where the assessment is part of a structured learning experience the evidence collected must
relate to a number of performances assessed at different points in time and separated by further
learning and practice with a decision of competence only taken at the point when the assessor has
complete confidence in the persons competence

All assessment that is part of a structured learning experience must include a combination of
direct, indirect and supplementary evidence

Where assessment is for the purpose of recognition (RCC/RPL), the evidence provided will need
to be current and show that it represents competency demonstrated over a period of time

Assessment can be through simulated project-based activity and must include evidence relating to
each of the elements in this unit.

In all cases where practical assessment is used it will be combined with targeted questioning to
assess the underpinning knowledge. Questioning will be undertaken in such a manner as is
appropriate to the language and literacy levels of the candidate and any cultural issues that may affect
responses to the questions, and will reflect the requirements of the competency and the work being
performed.

CPPDSM4008A Part 1

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UNIT CONTENT
The learning material of this unit is designed to help the candidate attain the required awareness of
the legislation and ethical requirements relating to property sales, the role and responsibility of agency
personnel in property sales, the administration of sales transactions and the completion of sales
documentation.

Part 1: Real Estate Agency


This part presents the concept of the client/agency relationship. This concept of agency details the
duties imposed on agents, and their staff, to both the seller and the buyer, as a consequence of the
agency relationship. This part also shows other responsibilities of all sales personnel within an agency
practice.

Part 2: Property Ownership


This part will assist to understand the principles of land tenure and the different types of property. It
focuses on the ownership of land and the registration of title.

Part 3: Responsibilities of Sales Personnel


The legal and ethical responsibilities of sales personnel are discussed with a focus on consumer
protection and professional honesty. The legislation is highlighted to ensure the candidate has a
thorough knowledge of the ethical and moral responsibilities of the profession.

Part 4: Property Sales


This part includes information about an agents interpersonal communication skills and methods to
obtain sources for listings. Real estate analysis is discussed with respect to the market value and
market price of property. The ethical and legal responsibility to disclose information is highlighted. The
importance of the comparative market analysis is examined to ensure consumer protection and
adherence to legislative requirements.

Part 5: Sales Process


This part covers information such as the statutory requirements to be appointed as an agent for a
seller, the agents duty of disclosure including beneficial interest, deposits and payments to the seller,
working in conjunction with other agents, fees, charges and expenses and documentation required to
be signed prior to a contract being signed.

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CPPDSM4008A Part 1

PART 1 - REAL ESTATE AGENCY


UNIT 1 - AGENCY PRACTICE
[1.1] Contract of agency
Real estate agency practice exists because of the need to bring together two parties whose
opposing motives need to be matched and satisfied. Through the efforts of real estate
practitioners, buyers (customers) are brought together with sellers (clients) with the objective
of bringing about a sales contract or rental agreement where the real estate agents are
remunerated for their services as an intermediary.
It is important to briefly review the agents role in a transaction and the legal balancing act
they perform between the client and a customer.
The client is the person who legally appoints the agent and who will pay the agent
commission and fees as agreed by the appointment, commonly the seller, except in a
buyers agent situation where the client will be the buyer.
The contract of agency in real estate is the legal relationship evidenced by a written authority
between two or more persons whereby one, the agent, is authorised to act on behalf of
another, the client, to perform a specified service which affect the clients rights and duties in
relation to the third parties. The agent-client relationship authorises the agent to find a third
party (customer) who is willing to agree to the clients terms. The client and the third party
then enter into a binding contract between themselves.
For some, the concept of agency may be foreign. This concept may be referred to as third
party selling. This is because, unlike most other business transactions, an agent acts as an
intermediary and has legal duties and responsibilities towards the two separate parties in a
transaction. The agents ultimate role is to bring those two parties together at a mutually
agreed outcome. This role will become clearer once we have defined the legal
responsibilities of all parties in a real estate transaction.
A fiduciary, at law, is a person in a position of trust, who must take all care to ensure that the
trust relationship is not breached in any way. Should an agent not perform with skill, care and
diligence in carrying out these tasks, the client can sue the agent in a court of law. The client
can sue to recover any financial loss or damages suffered as a result of the agents failure to
exercise a duty of care.
The two types of duties imposed on agents, and their representatives, as a consequence of
the agency relationship:

Contractual duties which both parties agree to perform in terms of their contract; and
oblige the agent to perform the contract of agency in accordance with its terms and
conditions.

Fiduciary obligations, which are implied into the agency contract by common and equity
law; and which arises out of a relationship based on confidence and trust, such as the
relationship between an agent and their client.

There are generally three parties in a real estate transaction; the seller, the real estate agent
and the buyer. The agents duties and responsibilities are prescribed by both common law
and legislation. Common law is law derived from custom or judicial precedent such as
decisions handed down previously in cases appearing before a court.
Legislation, which is also referred to as statute law, is written law enacted through a
legislative or statutory body such as a State/Territory or the Commonwealth Government.
CPPDSM4008A Part 1

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REIQ v16.1 December 2014

The main common law requirements of the agents fiduciary duties are reiterated in statute,
under the Property Occupations Act 2014 (POA).

[1.2] Other legal responsibilities of an agent


Other that with the client, an agent does not have a legal relationship with other parties
involved in a transaction. However, common law and State and Commonwealth consumer
legislation impose a duty of care with respect to all consumers in respect of any real estate
transaction.
Consumer legislation dictates that all third parties in real estate transactions are consumers
and have a right to be treated fairly.
This requires real estate agents, in addition to having a clear obligation to act in the best
interest of their client, to be aware of the rights of the other party, and act accordingly. For
example, statements made by agents to prospective buyers must be truthful and accurate.
An agent must also not mislead a customer even where their client has instructed them to.
For instance, where an agent is asked a question in relation to a property they are offering
for sale or rental, there is a duty for the agent to seek out the information requested by the
prospective buyer.
[1.3] Learning activity 1
Question 1: In the concept of agency, who is the client?
__________________________________________________________________________
__________________________________________________________________________
Question 2: What are the two types of duties imposed on agents, and their staff, as a
consequence of the agency relationship?
__________________________________________________________________________
__________________________________________________________________________
Question 3: In what circumstances does an agent have to seek out information required by
the prospective buyer of a property offered for sale?
__________________________________________________________________________
__________________________________________________________________________

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PART 2 PROPERTY OWNERSHIP


UNIT 2 - PROPERTY
[2.1] Tenure
There are various types of interest in land and different interests exist in particular
circumstances. Each of these interests has different characteristics. Ownership is only one
type of interest in land, and the most important. There are also other types of interest such as
life interest (life estate), easements, restrictive covenants and adverse possession and those
of mortgagees and leaseholder. These interests fall short of ownership, but have rights
attached to them that are recognised in law.
Agents need to be able to identify the rights associated with different types of interests in
land and to identify where there are rights such as easements, restrictive covenants and
adverse possession, claimed by other parties.
Ownership of real estate falls under a number of forms, each of which offers proof that the
property is owned by a particular person or persons. An exception is Crown Leasehold,
where ownership is retained by the government and a long-term lease is granted to private
individuals or a company. In Australia all land rests with the Crown and the highest form of
individual ownership is called fee simple or freehold.
Land in Queensland may be divided into several categories, such as:

Freehold land or land to be granted in fee-simple by the State

A road or reserve, including a national park, conservation park, state forest or timber
reserve

Land subject to lease, licence or permit issued by the State

Unallocated State land which is all other land not subject to grant, preserve or lease
stated above

Generally there are two major forms of landholding:

Fee simple, also described as freehold land

An interest in freeholding or perpetual lease, also described as Crown leasehold land.

[2.1.1] Fee Simple (Freehold)


Almost all land is held in fee simple, which conveys exclusive rights to the holder. This is as
close as one can get to absolute ownership at common law. In Queensland, land held in fee
simple can be disposed of by sale, gift, or will. Although the fee simple estate confers almost
absolute ownership, it is subject to rights reserved to the Crown, such as, rights to minerals,
petroleum and gas, but apart from that it is freely transferable without any restrictions or
conditions. Freehold ownership of land is of unlimited duration, where ownership passes to
heirs or beneficiaries upon the death of the owner.
Fundamental to ownership is having title. Title is simply the status of ownership. The land
title system protects the ownership of freehold land in Australia. Titles are the method used
to prove land ownership.
There are two separate systems of title to land that exist in Australia. Some land is governed
by the general law system, whilst other land is governed by the Torrens system.
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In Queensland, the Torrens System of land tenure is used. This system, which also
incorporates Community Titles Schemes, considers other land tenure systems used by other
Australian States and Territories.

[2.2] Old System Title


This was the first system of land ownership in Australia and dates from 1792 when a land
grant register was commenced. Properties still under Old System Title can trace ownership
back to this time. This system of title of land was evidenced by the production of deeds which
traced the chain of title by reference to various owners who were parties to the deeds.
Each time there is any activity on the property (such as the property being sold, transferred
or mortgaged), the deed which was the document that records the transaction, is added to an
existing collection of documents to form an unbroken chain of title dating from when the grant
was registered. Proof of ownership depends on being able to substantiate that each
document is valid.
If one document is faulty, then it is likely that all the documents that follow are faulty as well.
Unlike Torrens Title, the government does not guarantee title based upon information held at
the Land Titles Office. However, most documents are now registered by the Land Titles
Office as sworn copies of the original, although this is not compulsory. These documents are
given a book and page number, while the originals are retained by the owner or mortgagee
(lender). When the property is sold, ownership needs only to be validated for a minimum of
30 years, but it is common to search back 100 years to establish clear ownership.
Consequently, legal costs are expensive in the sale of property under this system.
A small percentage of properties in NSW are still held under this system, although when a
change of ownership occurs, government policy is to change the property from Old System
Title to Torrens Title.
In 1861, Queensland Parliament enacted the Real Property Act 1861, which is now replaced
by the Land Title Act 1994. Under the Real Property Act 1861, all lands in the colony of
Queensland remaining unalienated from the Crown on that date, when alienated in fee
simple, were subject to the provisions of the Act. All freehold title in Queensland is now
protected and dealt with under the provisions of the Land Title Act 1994.

[2.3] Torrens System


The Torrens system of land title registration was introduced into Queensland in 1861 and
took effect on 1 January 1862. The Torrens system of land registration operates to guarantee
the security of the title for all persons dealing with registered interests. This is not strictly a
legal term for title, but is commonly used to describe the main system of land ownership in
Australia. The correct legal term for this type of title is Real Property Act Title.
The inherent difficulties associated with conveying old title land, particularly the uncertainties
associated with general law priority rule, encouraged law reformers to introduce a new more
efficient and absolute conveyancing system.
What eventually emerged was the system known today as the Torrens system of land
registration. The founder of the system was Sir Robert Torrens, and it was first introduced in
South Australia in 1858. The statutory system was introduced into Queensland and its
provisions are now codified in the Land Title Act 1994.
Robert Torrens sought to rectify the problem of dependant titles under general law. He noted
that the main difficulty with general law title was that the new grantor received the title which
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was dependent upon the title of chain of predecessors. Proving the validity of such a chain
was often expensive and never certain.
Registration under the Torrens System has three basic objectives:
1. To provide a register from which persons who propose to deal with land can discover all
the facts relevant to the title
2. To ensure that a person dealing with land which is registered is not adversely affected by
any defects in the sellers title which do not appear on the register
3. To guarantee the conclusiveness of the register and to provide adequate compensation
to any person who suffers loss as a result of this guarantee.
Its main feature is the division of land into lots on a plan that has been deposited with the
Land Titles Office at the Registrar General. The Deposited Plan (DP) is given a number and
the lot is also numbered. In order to be able to identify the huge number of lots, each lot is
given a folio number (folio simply means page) and kept with others in a numbered volume.
The street address of the property may be different to the title details because, generally, the
house numbers and street names are allocated after the DP has been lodged.
[2.3.1] State guarantee of title
Torrens legislation in most states enables persons suffering loss as a result of the operation
of the Torrens system to seek compensation. The rationale underlying the introduction of a
state guarantee of title is to ensure that any unfair or mistaken loss of title is properly
compensated.
In all states except the Northern Territory, a person who is deprived of all or part of his or her
interest in land and who suffers loss or damage may acquire a right to seek compensation
from the state.
In all states, except for Victoria and Queensland, the deprivation must be of actual estate or
interest in the land. In Victoria and Queensland, the deprivation is not expressly confined to
an estate or interest in land and has been interpreted broadly. In all states, the loss will only
be compensable where it fits within one of the express statutory criteria, which vary
according to the legislation in each state.
Queenslands Land Title Act 1994 requires that the Registrar of Titles must keep a register of
all freehold land, which is called the freehold land register.
The registrar must record in the freehold land register the particulars necessary to identify:

Every lot brought under this Act

Every interest registered in the register

The name of the person who holds, and the name of each person who has held, a
registered interest

If the person who holds a registered interest is a minor; the minors date of birth

All instruments registered in the register and when they were lodged and registered.

The registrar must also record in the freehold land register anything else required to be
recorded by this or another Act. By recording the particulars of the lot of land in the freehold
land register, an indefeasible title for the lot is created. This indefeasible title for the lot is
described as the current particulars in the freehold register about the lot.

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On payment of the prescribed fee, a person can search and obtain a copy of the indefeasible
title of a lot; or a registered instrument; or an instrument that has been lodged but is not
registered (whether or not it has been cancelled); or information kept under the Land Title Act
1994. A person can also obtain, for a fee, a copy of the indefeasible title of a lot, or a
registered instrument, certified by the registrar to be an accurate copy.
[2.4] Community Title Scheme
The community title concept has been used successfully in New South Wales and
Queensland for some time. Other State Governments recognise the need for a more flexible
type of subdivision that will provide greater opportunities for property development and
growth.
In Queensland, the Body Corporate and Community Management Act 1997 (BCCM Act)
repealed previous legislation and established a new system of management of Community
Titles Schemes. Previously, these were known as building units and group titles.
This legislation sets out the rights and responsibilities of certain persons associated with
bodies corporate, particularly lot owners and tenants.
A community title scheme can only exist over freehold land pursuant to Section 9(2) of the
BCCM Act. The purpose of the legislation is to impose different levels of requirements on
developers and owners depending on the type of development.
A body corporate is the legal entity created when land is subdivided and registered under the
Land Title Act 1994 to establish a community titles scheme. The scheme can be a duplex, a
residential unit block, a high rise accommodation complex, a shopping complex or a
business park. Every owner of a lot in a community titles scheme is automatically a member
of the body corporate. Owners do not have a choice as to whether or not they will be a body
corporate member.

[2.4.1] Types of developments


Any person assigned to establish a Community Title Scheme must select a management
module that best suits the particular project.
There are five modules of the Community Title Scheme:

Standard Module Regulation which is intended to be generic, and are suitable for most
residential projects.

Small Schemes Module Regulation which covers smaller buildings (six lots or less) and
allow for informal management by the proprietors.

Commercial Module Regulation which covers retail and office developments, and
business and industrial parks.

Accommodation Module Regulation which is appropriate for holiday lettings, hotels and
similar developments

Two-lot schemes regulation 2011 (the Two-Lot Module) the objective of this module is to
make the day-to-day management of two-lot community titles schemes less complex for
owners

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[2.4.2] Ownership of common property


When a community titles scheme is established, the Registrar of Titles must create an
indefeasible title for the common property for the scheme. The indefeasible title for common
property is the current particulars in the freehold land register about the common property.
Common property for a community titles scheme is owned by the owners of the lots included
in the scheme, as tenants in common, in shares proportionate to the interest schedule lot
entitlements of their respective lots. An owners interest in a lot is inseparable from the
owners interest in the common property.
[2.5] Foreign Ownership of Land Register Act 1988
The main purpose of this legislation is to establish and maintain a register of all land in
Queensland which is owned by foreign persons, corporations and trusts. The legislation
requires all such foreigners, as defined by Section 4(1) of the Foreign Ownership of Land
Register Act 1988, who acquire land in Queensland to notify the Registrar of Dealings of their
acquisition.
Foreign Ownership of Land Register Act 1988
Schedule 1 Dictionary
section 2
foreign person means:
(a)

A foreign natural person; and

(b)

A foreign corporation; and

(c)

A corporation in which, on its last accounting date, a foreign natural person or a foreign
corporation holds a controlling interest; and

(d)

A corporation in which, on its last accounting date, 2 or more persons, each of whom is either a
foreign natural person, or a foreign corporation, hold an aggregate controlling interest.

If the relevant notices, pursuant to sections 17, 18, and 20 of this Act, are not delivered, the
person may be charged with a prescribed offence, resulting in a show cause action that may
prevent the person from obtaining title to the land.

[2.6] Learning activity 2


Question 1: What are the two main forms of landholding in Queensland?
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Question 2: What are the two types of land title used in Australia? Indicate which type is
used in Queensland.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
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UNIT 3 - CERTIFICATE OF TITLE


[3.0] Before selling a property, the seller must be able to prove a good and sound title to the
prospective buyer and is required to produce a title before the sale of the property. This
means the seller must prove registered ownership of the property for sale.
When a property is offered for sale in the Torrens system, it is a simple matter of showing the
prospective buyer the certificate of title. This document can be checked by obtaining a copy
from the Titles Office for a fee. Agents should ensure the persons recorded on the title are
the persons with whom they are dealing.
Whenever a prospective buyer has a query concerning proof of title, the agent should refer to
the title, and advise the buyer that legal advice should be obtained from a qualified lawyer.
The certificate of title (title deed) is a document that provides proof of ownership. The
certificate of title today is simply a computerised transaction notice. It is always a good idea
to sight a copy of the title search as well as undertake a title search to gather as much
information as possible about a property.
The certificate of title number, always located on the top right hand side of the title document,
is essential for the agent to use when completing all listing and selling documentation.
The title deed is an example of a Transaction Notification. This is the official computerised
document that has replaced the old deeds.

[3.1] Titles registration and the land and water registries


Queenslands Department of Natural Resources and Mines Titles Registration provides
accurate, secure and accessible registries for the ownership and other transactions in
freehold and State tenure land and water allocations. Because ownership searches do not
always contain up-to-date ownership information, a title search is deemed the only reliable
source of current ownership information.
The state's land and water registries maintained by Titles Registration include:

Freehold land register

Leasehold land register

Power of attorney register

Register of reserves and trustees of trust land (e.g. reserves and deeds of grant in trust)

Register of licences and permits

Register of easements over unallocated State land (easements over freehold, leasehold
and reserves land are recorded within those registers mentioned above)

Register of State housing leases

Register of foreign ownership of land

Register of deeds (part 18 of the Property Law Act 1974, for dealings affecting any estate
in land)

Register of Harbour Board leases

Register of Water Allocations.

A search of the Titles Register can provide the following information:

Title Search

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Image of Plan of Survey

Image of a Lease or Permit to Occupy

Image of all other Instruments

Image of a Title

Community Title Scheme Statement

Dealing Statement

Power of Attorney Search

Historical Title Search

Agents can search the registers and obtain copies of the title of a block of land, and any
dealing lodged or registered in the Registry. Searches can be conducted either electronically
or at the Department of Natural Resources and Mines offices during office hours and pay the
required fee.
[3.2] The title search
A title search is considered the most reliable of all searches, because it provides critical
information essential for a contract that cannot always be revealed in a general ownership
search.
A title search for instance will reveal:

The full and correct names of the owners The Property occupations (PO) Form 6
(appointment of an agent form) must be signed by all registered owners for it to be valid.

The correct Real Property Description (RPD) A Real Property Description is the manner
a property is described on a plan of subdivision

An RPD will provide a lot number and a plan number. For instance, Lot 2 on RP 456
stands for Lot 2 on registered plan number 456

An RPD also describes the type of subdivision. For instance, Lot 2 on BUP stands for Lot
2 in a Building Units Plan. Lot 2 on GTP stands for Lot 2 in a Group Titles Plan. More
modern subdivisions use the terminology SP that stands for Subdivision Plan.

If the RPD is incorrect the appointment may be invalid, or the agent could be sued for
negligence for failing to provide the customer with correct information

Encumbrances on the title of the property e.g., easements, caveats, covenants,


mortgages. (The law requires the client to disclose all encumbrances to a buyer on the
contract of sale)

Registered Dealings over the land e.g., demolition notices, heritage listings,
contamination etc.

Whether the land is Freehold or Leasehold. If the search reads Fee Simple, this is the
common term for Freehold

Title Reference number. This is the number that must be inserted on all listing and sales
documentation. It is usually found on the top right hand corner of a title certificate.

A title search will not reveal:

The sales history of the property

The legal use of the land (zoning)

Council rates and services provided to the land

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A plan of subdivision for the area, including dimensions and measurements of the land.

Agents should conduct a title search to establish whether there are any matters relating to
the property that will have a negative impact on price or the desirability of a property.
Basically, if there is a matter that makes the property less attractive to a customer, or poses
a health or safety risk, then it should be identified.
Title Search, Department of Natural Resources and Mines, Queensland

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[3.3] Which matters affect title?


A persons title registration (certificate of title) may reveal a number of issues. The following
are examples of matters that will impact negatively on a real estate transaction.

[3.3.1] Title encumbrances


A title encumbrance is any restriction or registered dealing over the title. It is an interest or
right that someone has over the land and can in some cases reduce the value, but does not
necessarily prevent the transfer or leasing of the land by the owner. If an encumbrance is to
be inherited by the new buyer, then it must be declared on the contract of sale. An
encumbrance can be a covenant, easement or caveat.
Agents should question the seller as to awareness of any encumbrances affecting the land,
such as an easement, whether there may be a statutory charge registered against it for local
authority works or unpaid land tax. As a matter of practice, the agent should obtain a title
search prior to the parties entering into the Property occupations Form 6, which will reveal
not only the complete details of the seller/s, but also outline any encumbrances affecting the
land that the seller may be unaware of. In cases of doubt, a legal practitioner engaged by
the seller should be consulted to explain any issues raised in connection with the certificate
of title.
Any existing encumbrances which can be discharged from the purchase money at
settlement, such as a mortgage, need not be set out as encumbrances on the contract.
Under any contract for the sale of any land there is an implied term imposing an obligation on
the seller to execute and deliver a conveyance of the subject land, or instruments of title to
the land, free of any encumbrances. This obligation will be satisfied if the seller will, upon
completion of the contract be able to, and does in fact discharge any existing encumbrance
(again, such as a mortgage) out of the purchase money payable under the contract by the
buyer.
It may be prudent for the agent to ask the seller, if the property is subject to mortgage and
whether the price of the land being sold is sufficient to discharge the outstanding debt
registered by the mortgagee.
As stated above, the only safe method for an agent to ensure that the description in the
Property occupations Form 6, and any subsequent sale contract, conforms to the description
on the title is to undertake an up-to-date title search prior to the parties entering into the
Property occupations Form 6.
[3.3.2] Covenants
A covenant is a promise or agreement given whereby one party promises to do or not to do
certain things, and that promise is (usually) registered on the certificate of title. For example:
I will not build a two-storey building in front of your house and block your view. Restrictive
covenants are similar to negative easements, as both operate to restrict the use for some
specific benefit. Initially, restrictive covenants were used by property owners to control the
use of adjoining properties or neighbouring land. Restrictive covenants merely prevent the
possessors of the land from doing things that would otherwise be permissible.
Today, town-planning legislation largely serves the same function, although many restrictive
covenants remain. For instance, property owners in certain housing estates must agree to
have certain types of housing styles, constructed with designated building materials such as
brick. Some local authorities have covenants against people keeping cats if they are
considered a threat to local wildlife.
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Agents need to make sure that they know if there is a restrictive covenant on the property
because the covenant runs with the title of the property. The covenant is usually included in
the certificate of title as noted in section 97A of the Land Title Act 1994, however some
restrictive covenants (such as those relating to certain housing estates) may be contained in
other documentation. Along with conducting the certificate of title search, agents should
confirm with any seller whether they are obligation under any other restrictive covenants not
listed on the title. Agents must ensure to declare any restrictive covenants on contracts that
they prepare and make full disclosure to a prospective buyer.
[3.3.3] Easements
An easement is a right, owned by a landowner, to use the land of a neighbour in a defined
manner. A common situation in which an easement would be required is when land is
subdivided in such a manner that the allotment is landlocked, or has no access to the
street. In this situation the landowner would need the right to cross a neighbours land to gain
access to the street.
Easements are an encumbrance on a property and belong to the land irrespective of its
ownership. Easements running through a property are regarded as a defect on the title of the
property. In some instances an easement can materially disadvantage the property. In these
circumstances, where a buyer is unaware of the existence of an easement, the buyer may
seek to terminate a contract and receive a refund of their deposit.
It is essential that a real estate agent ask the property owner, at the point of listing a
property, if they are aware of any easements. If this information is not disclosed, it could
jeopardise the completion of any sale of their land.
Easements can create:

Rights of access

Rights of water drainage

Rights of support of adjoining building, such as when two building share a party wall

Rights to air

Rights to light

Some common easements are sewerage, drainage, and power lines. It is now common in
new subdivisions for the local authority to hold easement rights over the property. The local
authority in turn can give authorisation to other entities such as utility companies to use these
easements. The relevant authorities may require the easement to prevent landowners from
erecting buildings or pipes or underground cables. Such an easement is likely to be created
pursuant to a statutory power; known as statutory easements.
Easements may be classified as positive, when they allow a person to do a particular act on
the land of another. Easements may also be termed negative when they give a person the
right to prevent a landowner from doing something on the landowners land.
[3.3.4] Creation of an easement
An easement must be created by grant. In the case of registered land, section 82(2) of the
Land Title Act 1994 requires that the instrument must state the nature of the easement and
its terms; and the land to be benefited, and the land to be burdened by the easement.

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Section 83 of the Land Title Act 1994 also requires the instrument creating the easement to
be signed by the grantor and grantee. The interest is noted on the certificates of title of both
the grantor and grantee.
Agents should make inquiries about easements with the sellers. Unusual easements have
been recognised by the courts. Not all easements are obvious so agents need to exercise
care if they suspect an unregistered easement exists. If this is the case, the agents full
disclosure obligations to the prospective buyer would dictate the buyer be referred to a
qualified lawyer for the appropriate legal advice.
[3.3.5] Caveats
The term caveat literally means beware. In real estate a caveat warns a person, such as
prospective buyers or mortgagees, that another party already has an interest registered in
the land. No further transactions can be registered until the matter has been dealt with first.
A person claiming an interest in a property may lodge a caveat forbidding the registration of
any dealing affecting the land. This gives notice to not only those who already have a
registered interest in the land but to the world at large that the register is frozen and there
can be no dealings on the land until the caveat is removed, either by agreement or by court
action.
To lodge a caveat, the caveator (a person who enters a caveat) must have a recognised
interest in the land. For instance, a person, who is owed money by the landowner, does not
have an interest in the land and cannot lodge a caveat. For example, a real estate agent who
is owed commission does not have the right to lodge a caveat. The agent has a right of
action for damages, but not an interest in the land.
Examples of situations where caveats may be applied include:

Interests of a buyer after signing a valid and binding contract of sale. This could be
particularly applicable if it is a long-term contract such as commercial or industrial sales

Interests of an equitable mortgagee who advances money on the security of an


unregistered mortgage

Interests of a grantee of an easement prior to the registration of the easement

Interests in an instalment contract. In this situation the buyer cannot have clear title to the
property until they have paid the equivalent of one third of the price of the property. To
protect their interest, they will lodge a caveat to prevent the owner from mortgaging the
property or selling to someone else

Interests in an ownership dispute, especially relating to divorce, partnership dissolutions


or disputes amongst beneficiaries of a deceased estate.

Caveats are lodged through a legal process. If the owner of the property disputes the caveat,
the matter will be heard in court. If a caveat is removed after being lodged without
reasonable cause, then the person who was adversely affected or who may have suffered
any loss because of the caveat can claim compensation for the damage.

[3.3.6] Mortgage
A mortgage created under the Land Title Act operates as a charge and not as a transfer of
the estate of the mortgagor (the borrower) and is created for the securing of the repayment of
the loan. Upon registration of a mortgage, under the Land Title Act, the interest created is
said to be a legal interest. The nature of the interest acquired by the mortgagee is called a
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charge. While this is not equivalent to ownership of the land, the chargee can have the land
sold or take possession if the mortgagor defaults on the loan.
Even though a title search will reveal a mortgage registered on a property, a mortgage is not
considered an encumbrance because it can be lifted at settlement so that the property can
be transferred with a clear title.
Upon the sale of any mortgaged property, the mortgagee (finance lender) would execute an
appropriate discharge of the mortgage, and produce the discharge together with the
certificate of title (which is held by the mortgagee) at the settlement of the transaction. The
buyer will lodge the discharge of mortgage documentation, preceding the title transfer, in the
Land Titles Office. This will ensure the buyers title will be issued free of that encumbrance
and transfer will registered.

[3.4] Non-title searches


The following matters should also be fully investigated. Most information can be obtained
from either conducting a Title search, or undertaking special searches available on the
Department of Natural Resources and Mines website. These searches can be accessed
through independent search providers.

Check whether the property is a declared contaminated site. (Department of Natural


Resources and Mines special information search)

Check whether the property has an environmental or vegetation protection order lodged
over it. (Department of Natural Resources and Mines special information search)

Check whether it has been Heritage listed with a state or local authority. (Local Council
and Department of Environment and Heritage Protection)

Is the property subjected to flooding? (Council search)

Does the property have a registered notice over it for structural unsoundness or a
demolition order? (council search)

What is the zoning or legal use of the land? (Council search, ownership search)

[3.5] Verifying ownership


When an agent is appointed by a client to sell their property; the agent is required as per
Section 19 of the Property Occupations Regulation 2014 to take reasonable steps to find out
or verify the propertys ownership and property description.
Property Occupations Regulation 2014
Section 19 Finding out or verifying property ownership and description
(1) Before auctioning property, an auctioneer appointed to sell the property must take reasonable steps to
find out or verify the ownership of the property and property description.
(2) Before listing property for sale, lease or exchange, a real estate agent or real estate salesperson must
take reasonable steps to find out or verify the ownership of the property and property description.

It is strongly recommended that agents carry out title searches at the time of listing the
property. Some agents in the past have only carried out ownership searches (using a
property data base such as CoreLogic RP Data) however prudent agents today conduct
title searches to ensure that the appropriate verification of ownership is made.
Commercial search providers such as CoreLogic RP Data play an invaluable role in modern
real estate practice. Agents can access a vast range of information about properties that they
are listing. For instance, an ownership search will reveal:
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The names and addresses of the current owners (be cautious with this information as
there are delays in ownership information by as much as 3-4 months)

The legal land use or zoning of the land

Whether the property has services such as sewerage and water connected

When the property was purchased and for how much

Its unimproved capital value (the vacant land value for rating purposes)

A plan of subdivision including dimensions

A wide range of research data including average and median selling prices of property in
an area

Radius searches for CMAs

Please refer to the ownership search example on the following page.


Please note: In Queensland, agents subscribing to property databases from the Department
of Natural Resources and Mines are not permitted to use ownership information for any
purposes other than to check ownership and provide market analysis in independently
prepared reports.
Searches, or the information contained within them, cannot be given in its original form to a
third party (for instance, to a customer) or used for any form of direct marketing, including
telemarketing, bulk mail merges, postal canvassing and list brokering.
However an ownership search is not a title search and the courts only recognise a title
search as proof of ownership. For risk management purposes, it is recommended that agents
conduct title searches when listing property for sale and prior to completing contract
documentation.
When agents complete the Property occupations Form 6 it is vital they complete the clients
details exactly as they appear on the title search.
Agents also need to always be mindful of the need to verify material facts about the property.
This should be done before they list a property and afterwards as the occasion arises. This
is in accordance with section 20 of the Property Occupations Regulation 2014 (PO
Regulation).
Property Occupations Regulation 2014
Part 5 Conduct standards
Section 20 Finding out or verifying facts material to the sale of property
(1) An auctioneer appointed to sell property must take reasonable steps to find out or verify the facts
material to the sale that a prudent auctioneer would have found out or verified to avoid error,
omission, exaggeration or misrepresentation.
(2) The steps must be taken before the auctioneer auctions the property and afterwards as the occasion
arises.
(3) A real estate agent appointed to sell, purchase, exchange or lease property must take reasonable steps
to find out or verify the facts material to the sale, purchase, exchange or lease that a prudent real estate
agent would have found out or verified to avoid error, omission, exaggeration or misrepresentation.
(4) The steps mentioned in subsection (3) must be taken before the agent lists the property and afterwards
as the occasion arises

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[3.6] Learning activity 3


Question 1: Name six types of information which can be obtained through a search of the
Titles Register.
1.___________________________________4.____________________________________
2.___________________________________5.____________________________________
3.___________________________________6.____________________________________

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Question 2: There are a number of issues will impact negatively on a real estate transaction.
Name four matters that may affect a persons land title registration.
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________
4. ________________________________________________________________________

UNIT 4 - PROPERTY OWNERSHIP


[4.0] There are two basic types of property. Land is considered real property and all other
belongings are personal property.
The term real property refers to the land and improvements to the land. A building or home
is an improvement. The term estate refers to a persons interests in that land and property
as estate is merely another word for status.
[4.1] Real and personal property
Each type of property has specific characteristics:

Real property includes land and everything affixed to the land; sometimes referred to as
immovables. This includes physical things such as trees, ponds and soil, and intangibles
such as easements

Personal property is also known as chattels and describes all property other than land.
Chattels are movable objects. Examples of chattels may include fixed floor covering,
curtains and blinds, and light fittings.

Real property is a term used to describe interests in land other than leases. Personal
property is a term used to describe all property other than interests in land.
Personal property is divided into two classifications:
1. Choses in possession (the legal term meaning tangibles), which means items with
physical substance. This covers property because it is tangible, which may be under
physical control, such as a car
2. Choses in action, which means that is it intangible and cannot be under physical control,
for example, the copyright of literature.
[4.2] Real property rights
Property rights describe the rights people have in respect to land. Real property rights can be
conceptualised as having a bundle of rights, privileges, powers and control. The right to land
can have the following attributes:

The right to exclude its use by other people

The right to live on the land and use it to harvest and sell produce

The right to make modifications and improvements to the land

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The right to grant a license to use the land or to lease the land to another person

The right to sell the land or leave it at will

Proprietary interests do not always allow all the rights listed above. The specific nature of the
rights will depend on the nature of proprietary interest and will be subject to the areas
zoning, planning, and environmental restrictions.
It is important to note that land may revert back to the Crown or Crown instrumentality
exercising its power as a public authority to resume for public purposes any freehold land or
land being purchased as a freeholding lease under the Land Act 1994.

[4.3] Chattels and fixtures


A contract of sale of real property will include a list of chattels that are included in the sale.
Fixtures automatically come with the land but chattels are required to be specified in the
contract in order to become the property of the buyer. The seller can remove chattels from
the property that are not mentioned in the contract. It is important that the agent ensures
there is a clear understanding about which chattels pass with the property, as there is
potential for disputes to arise between the seller and buyer.
[4.4] Doctrine of fixtures
Chattels become an integral part of property if they are used in the construction of the
property or are attached to the property so as to become fixtures.
The doctrine of fixtures determines when and in which circumstances goods attached to land
lose their identity as goods and merge with the land. The modern test of whether a chattel
has become a fixture is based on the judgment of Blackburn J in Holland v. Hodgson (1872)
LR 7 CP 328 where he said at 334:
'There is no doubt that the general maxim of the law is, that what is annexed to the land
becomes part of the land; but it is very difficult, if not impossible, to say with precision
what constitutes an annexation sufficient for this purpose. It is a question which must
depend on the circumstances of each case, and mainly on two circumstances, as
indicating the intention, viz., the degree of annexation and the object of the annexation.'
In looking at the degree of attachment there are two relevant legal presumptions. Firstly, a
chattel attached to the land other than by its own weight (for example, by screws or bolts) is
prima facie a fixture. This presumption applies even if the degree of attachment is very slight.
The greater the degree of attachment, the stronger the presumption appears to be. When
listing a property in which there is a tenant, agents should always check which fixtures
belong to the tenant.
[4.5] What are the different types of property ownership?
There are different types of interest in property. These interests allow the holder of the
interest rights to certain uses of the land, which are legally recognised and enforceable.
Ownership of the land is the most important of these interests. These rights allow the owner
the full enjoyment of the property and can involve excluding others from using or interfering
with the land.
There are also other types of interest that fall short of ownership but have rights attached to
them that are recognised by law. Agents need to have an understanding of the nature of
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different types of interest in land when selling property by private treaty and be able to
recognise where there are other interests such as mortgage, covenants and easements.
[4.5.1] Co-ownership of land
Land can have more than one owner. There are two common types of co-ownership of land:
1. joint tenancy
2. tenancy in common
The legal meaning of the word tenant is quite precise: a tenant is a person who has an
interest in real property. In common or non-professional usage the word means the occupant
of the premises.
[4.5.2] Joint tenants or proprietors
Joint tenancy occurs when two or more persons hold the rights to the whole of the property,
meaning each owns the whole rather than a share of the whole property. Having an interest
in title, whether legal or equitable, should be distinguished from having the right of
possession. In the case of joint tenancy, the parties each have the rights of ownership of the
whole and each has the right to possession of the whole.
A common example of joint tenancy is when two owners are a married couple, or domestic
partners. The rule of survivorship, from old English law, states where a joint tenant dies, the
other joint tenant is automatically entitled to the deceased persons share of the land.
[4.5.3] Creation of joint tenancy
There are four requirements for joint tenancy, known as the four unities:
1. unity of title which is the interest of each joint tenancy must be created by the same deed
or instrument (or the same will)
2. unity of time which is the interests of the tenants must be acquired simultaneously
3. unity of possession which is each co-owner must have an equal right to possession of the
whole
4. unity of interest which is each co-owner must have the same type of interest, for
example, both must have a fee simple interest
Joint tenancy is created when land is transferred (or conveyed where there is general law
title) and certain words are not used. These words are called words of severance and say
that the intention of the parties is that there is shared ownership and not joint ownership.
Examples of the words used are equally, in equal shares, or between. When such words
are not included, it is assumed there is joint tenancy.
A joint tenancy can be changed to a tenancy in common in certain circumstances, including
alienation, partition, or by committing a crime. A joint tenancy can be changed to a tenancy in
common:

by mutual agreement, if one co-owner sells an interest (note that it is not necessary for
the other co-owner to agree to sever the joint tenancy)

the tenants all agree to sever the joint tenancy (there are no required formalities, but the
most prudent method is by the execution of a deed)

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[4.5.4] Tenants in common


Tenancy in common refers to tenants who hold defined shares in an estate. A tenancy in
common is created when land is sold or devised to two or more persons. The words of
severance are used, for example, in equal shares. Tenants in common can own equal or
unequal shares of the property.
Unlike joint tenancy, there is no right of survivorship. This means when a tenant in common
dies, that share does not automatically pass to the surviving parties. The interest is instead
disposed of by the will or by the intestacy provisions of the Succession Act 1981.

[4.5.5] Creation of tenancy in common


This occurs when land is sold or devised to two or more persons and words of severance are
used, for example in equal shares, share and share alike, to be divided between, or
equally. When a joint tenant sells to a third party, a tenancy in common is created.

[4.6] Subdivision of land


A subdivision is the legally-recognised division of one parcel of land into multiple parcels.
Subdivision approval is required for almost all residential housing tracts and also for some
commercial developments.
The land use would govern the type of development allowed. The zones will vary from
council to council, but in general subdivisions by type of land use may include:

commercial

industrial

urban

residential

rural

With each category there will be a number of options which refer to the available density of
development usually categorised as:

Single unit

Low density

Medium density

High density.

[4.7] Types of property


The definition of residential relies heavily on the use or function of the property rather than
its permitted uses or council property zoning. The onus is upon the agent to determine the
type of transaction and this will impact directly on the statutory cooling-off period as well as
commission payable and any limitation on sole or exclusive agency.
Areas where real estate agents should show particular caution are:

Home offices and small businesses being run legally, or otherwise, from a residential
property. The use is not defined as residential only if the use of the premises is

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substantially for commerce or business. Also an agent should consider if a home


office/business is permissible under the relevant local government ordinances

Land where primary production is still occurring at the time of sale

Mixed use complexes with a residential and business component being sold on the one
title

Bulk project and land sales (certain projects and subdivisions could previously be treated
as a commercial transaction)

Boarding houses and flats on one parcel of land are considered a residential transaction.

[4.7.1] Residential property


Under section 21 of the POA residential property is considered to be real property that is
used, or is intended to be used, for residential purposes but does not include real property
that is used primarily for the purposes of industry, commerce or primary production.

[4.7.2] Commercial property


Commercial property is property intended for use by all types of retail and wholesale stores,
office buildings, hotel, and service establishments. In many property circles commercial
property refers specifically to office property. This category also includes singular or multiple
properties used for a shop or shop/dwelling, shopping group, drive in shopping centre,
restaurant, motel, special tourist attraction, marina, residential institution, car park, retail
warehouse, sales area outdoor (dealers, boats, cars), office (professional offices, finance,
banks, lending agents and brokers), funeral parlour, hospital, convalescent home,
predominantly medical care, child care, hotels/tavern, plant nursery, theatre/cinema, drive in
cinema, licensed club, sporting facilities/club, caravan park, and advertising hoarding and
display area.
[4.7.3] Industrial property
Industrial property is real estate used and/or capable of being used for the purpose of
manufacturing, processing or warehousing goods. This category also includes singular and
multiple properties used for general industry, light industry, noxious/offensive industry,
harbour industry, extractive purposes and may include the following where not used for retail
purposes: warehouses, bulk stores, transport terminals, service stations, oil depots, wharves,
builders yards and cold stores.
[4.7.4] Rural property
Rural property is land used for grazing stock or cultivating crops on a commercial basis. It is
used for the business or industry of grazing, dairying, pig farming, poultry farming, viticulture,
orcharding, apiculture, horticulture, aquaculture, vegetable growing, the growing of crops of
any kind, forestry or any other business or industry involving the cultivation of soils, the
gathering in of crops or the rearing of livestock.
[4.7.5] Businesses
Businesses may include companies and organisations sold or leased as a going concern.
Selling a business usually involves a price paid for goodwill, plant, stock and equipment. The
real estate sales representative is selling to the buyer the right to continue operating a
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business (e.g. a delicatessen) on the business premises in the same way the seller of the
business has previously operated. The seller of the business typically assigns the lease on
the premises (building) to the buyer. This usually requires the agreement of the owner of the
premises.

[4.7.6] Vacant land


Vacant land is land upon which there are no structural improvements, other than fencing.

[4.8] Learning activity 4


Question 1: What relevant state legislation imposes requirements on the sale of land in
Queensland? Explain the effects of that legislation.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Question 2: What is the difference between chattels and fixtures in a contract for sale of a
residential home?
__________________________________________________________________________

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

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PART 3 RESPONSIBILITIES OF SALES PERSONNEL


UNIT 5 - CONSUMER LEGISLATION
Real estate agents work with an extensive legislative framework comprising Acts of
Parliament, regulations, professional standards and codes of conduct. It is essential that
agents gain a significant understanding of the legal requirements and appreciate the need for
complying with legislation.
Knowledge of legislative requirements enables agents to understand their responsibilities
and the consequences of breaching the law. The laws mentioned in this document are
relevant to property sales.

[5.1] Queensland legislation


The POA regulates real estate agency practice in Queensland. The Act sets out who may
own, manage and work in a real estate agency, and the required qualifications, functions and
conduct of real estate practitioners. This legislation is extensive and agents must be familiar
with all various parts and sections.

[5.2] Real estate licensing


All persons working as a salesperson or a property manager must have a full real estate
licence or certificate of registration.
However a person does not act as a real estate agent or real estate salesperson only
because the person, while performing duties as an employee of a real estate agent at the
real estate agents registered office or other place of business:

Collects, and issues receipts for, rents

Gives a person a list, prepared by or for the real estate agent, of premises available for
rent

Does something of an administrative nature in relation to a thing the real estate agent
does as a real estate agent.

Section 26 of the POA states that a real estate agents licence authorises an agent to
undertake the following activities for others for reward:
Property Occupations Act 2014
Part 2 Licensing
Section 26 What a real estate agent licence authorises
(1) A real estate agent licence authorises the holder of the licence to perform the following activities as an
agent for others for reward
(a) to buy, sell (other than by auction), exchange or let real property or interests in real property;
(b) to buy, sell (other than by auction), exchange, or let businesses or interests in businesses;
(c) to negotiate for the buying, selling, exchanging, or letting of something mentioned in paragraph (a)
or (b);
(d) to collect rents.
(2) A real estate agent may perform the activities mentioned in subsection (1) in the carrying on of a
business, either alone or with others, or as an employee of someone else.

Section 115(1) of the POA authorises the holder of a real estate salesperson certificate to
perform any activity that may be performed by the real estate agent who employs the holder.
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A real estate agent who is a principal licensee or an employed licensee in charge of a


licensees business at a place of business must take reasonable steps to ensure each real
estate salesperson employed by the agent is properly supervised, acts only within the scope
of the persons employment agreement.
Immediately after a real estate salesperson commences employment at a real estate agency,
the licensee must give the salesperson an employment agreement, clearly specifying the
activities of a real estate agent the agent authorises the salesperson to perform for the agent
during the salespersons employment by the agent.
This employment agreement should note:

Expected standards of behaviour when dealing with consumers

A defined job description

Authorisation to receive and bank monies on behalf of the agency and its clients

Authorisation and limitations regarding preparing of contracts and statutory


documentations

Procedures for dispute resolution.

A salesperson should ensure that they always seek advice from their licensee on matters
that they may be uncertain about, matters that further guidance may be required or matters
that they feel that the licensee should be made aware of. Some matters are urgent which
must be brought to the licensees attention immediately; these include if the salesperson
becomes aware that the seller does not hold public liability insurance, or if a customer (or
client) makes allegations against the salesperson that could result in the agency being sued.
Other matters that are not as urgent, but are still important include ideas on how to improve
the business, any concerns within the business that the salesperson feels should be brought
to the licensees attention and any concerns about alleged or known unethical practice form
fellow colleagues. These issues are studied in detail in other subjects.

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[5.3] Appointment of agent


Agents should ensure that agreements regarding real estate transactions are in writing in
clear and understandable language, expressing the specific terms, conditions, obligations
and commitments of the parties to the agreement. A copy of each final agreement shall be
furnished to each party upon their signing or initialling, and shall be dealt with in accordance
with the instructions of the parties involved.
Legislation requires the agent to provide to the client certain information about the
commission payable for services. The agent must inform the prospective client, who could be
either the seller or a buyer, as the occasion arises, that the commission is negotiable prior to
signing the appointment of agent form.
The agent must specifically bring to the clients notice the information in the form of the
appointment about the effect of each of an open listing; an exclusive agency; and a sole
agency; and the difference between each type of listing.
If the agent fails to do so before the appointment is signed, such appointment of agent is
rendered ineffective. Also, if the appointment is not in the correct form (as per legislative
requirements) it is considered ineffective from the time it is made.
The Property Occupations Form 6 (PO Form 6) is the approved government form which is
required to be completed when listing a property for sale with a seller.
The statutory document PO Form 6 is a core document, containing the basic range of
information required for appointment. It is somewhat lacking in vital information to permit the
agent to carry out the services for which it is designed. Accordingly, the REIQ have created
a Residential Sales Schedule and Terms and Conditions that outline services an agent may
provide and this schedule, when listed within the PO Form 6 and attached to it, form part of
the formal contractual agreement between the agent and client.

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[5.3.1] Requirements to be appointed to act as an agent


Legislation is specific as to what the appointment and reappointment of agent must contain.
The agent must be appointed before the agent performs any services for the client. An
informal letter written to the agent from the prospective client giving the particulars of the
property, listing price and agreed commission rate does not constitute sufficient evidence of
the appointment to establish the client-agent relationship.
If an agent performs any service without firstly being properly appointed on the approved
form, will not be entitled to obtain, retain, or sue for any commission. This stance is based
upon the provisions of section 104(1) of the POA where it clearly states An appointment of a
property agent or resident letting agent must include the following in the approved form.
The term service, with respect to these provisions, could refer to any act of which is required
to meet the specific conditions of the appointment; that is the clients written instructions. Any
action that could be interpreted as marketing the property, carrying out inspections,
introducing prospective buyers, would be taken to be a service, which requires the agent to
obtain a written appointment of agent in the approved form.
The agent is required to be appointed by the client to perform the activity authorised by the
client in accordance with provisions of section 104 of the POA:
Property Occupations Act 2014
Division 2 Content of appointment
Subdivision 1 Property agents and resident letting agents
Section 104 General content of appointment
(1) An appointment of a property agent or resident letting agent must include the following in the
approved form
(a) a prominent statement that the client should seek independent legal advice before signing the
appointment;
(b) a statement about whether it is a single appointment or a continuing appointment;
(c) for each service, provision for the inclusion of a statement about the following
(i) the service to be performed by the property agent or resident letting agent;
(ii) the fees, charges and any commission payable for the service;
(iii) when the fees, charges and any commission for the service become payable;
(iv) the expenses, including advertising and marketing expenses, the agent is authorised to incur in
connection with the performance of each service or category of service;
(v) the source and the estimated amount or value of any rebate, discount, commission or benefit
that the agent may receive for any expenses that the agent may incur in connection with the
performance of the service;
(vi) any condition, limitation or restriction on the performance of the service.
(2) In this section
continuing appointment see section 102(5)(b).
single appointment see section 102(5)(a).

[5.4] Representations to consumers


[5.4.1] Misrepresentation of property
Before any discussion with a client or customer, an agent must ensure they are suitably
qualified and licensed, if applicable. For example, if agents give investment advice they are
required to be licensed by Australian Securities and Investment Commission (ASIC) as
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financial advisors, or if they provide an opinion or arranging insurance on behalf of their


client, they are required to either hold an Australian Financial Services licence; be appointed
in writing as a distributor; or be an authorised representative, or corporate authorised
representative, of a licence holder.
Agents should pay particular attention and be very careful when discussing:

Value of the land

Lands income producing potential

Sales history of the land

Income tax benefits of buying the land.

Agents are required by legislation, and by the REIQ Standards of Business Practice, to take
all reasonable steps to be informed regarding the essential facts which affect current market
conditions in order to be in a position to advise their clients and, or, to assist customers in a
responsible manner. It is recommended that in specialised areas, which fall outside the
scope of the duty of a real estate agent, that agents advise the client or customer to seek
more specialised advice. (Best practice suggests that this recommendation be provided in
writing to the seller.)
If agents provide appraisals or market forecasts in a volatile market, they should identify the
volatility to the relevant consumer and warn the consumer to keep that volatility in mind when
evaluating their appraisals or market forecasts.
Agents must make accurate representations about properties, including the reasonable
values of those properties, the features of those properties or any other matter that is
material to the sale, purchase or lease of the property by a consumer.
As per section 209 of the POA, a licensee or registered employee must not, in connection
with the sale, or the possible sale, of an interest in land or in connection with the promotion in
any way of the sale of an interest in land, represent in any way to someone else anything
that is false or misleading in relation to the value of the land at the date of sale; or the
potential income from the leasing of the land; or if the land has been previously sold, the date
of the sale and the consideration for the sale; or how the purchase of the land may affect the
incidence of income taxation on the buyer.
Property Occupations Act 2014
Part 11 General contraventions and evidentiary maters
Section 209 False representations and other misleading conduct relating to residential property
(1) A marketeer must not, in connection with the sale, or for promoting the sale, or for providing a service
in connection with the sale, of residential property in Queensland, represent in any way to someone
else anything that is false or misleading.
Note
For remedies for a contravention, see part 9 (QCAT proceedings).

(2) Without limiting subsection (1), a marketeer must not, in connection with the sale, or for promoting
the sale, or for providing a service in connection with the sale, of residential property, or the possible
sale of residential property, in Queensland
(a) represent that the person has a sponsorship, approval or affiliation the person does not have; or
(b) make a false or misleading representation about the following
(i)

the nature of the interest in the property;

(ii) the price payable for the property;


(iii) the location of the property;
(iv) the characteristics of the property;
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(v) the use to which the property is capable of being put or may lawfully be put;
(vi) the existence or availability of facilities associated with the property;
(vii) the value of the property at the date of the sale;
(viii) the potential income from the leasing of the property;
(ix) if the property has been previously sold, the date of the sale and the consideration for the sale;
(x) how the purchase of the property may affect the incidence of income taxation on the buyer; or
(c) offer gifts, prizes or other free items with the intention of not providing them or of not providing
them as offered.
Note
For remedies for a contravention, see part 9 (Proceedings).

(3) Without limiting subsection (1) or (2), a representation is taken, for the subsection, to be false or
misleading if it would reasonably tend to lead to a belief in the existence of a state of affairs that does
not in fact exist, whether or not the representation indicates that state of affairs does exist.
(4) Also, if a person makes a representation relating to a matter and the person does not have reasonable
grounds for making the representation, the representation is taken to be misleading.
(5) The onus of establishing the person had reasonable grounds for making the representation is on the
person.
(6) It is not a defence to a proceeding for a contravention of subsection (1) or (2) for the marketeer to
prove that an agreement with the person was terminated or that the person did not enter into an
agreement because of the representation.
(7) In this section
false or misleading, for a representation, includes the wilful concealment of a material fact in the
representation.
Note
A person may make a claim, under the Administration Act, against the fund if the person suffers financial loss
because of a contravention of this section.

A representation is taken to be false or misleading if it would reasonably lead to a belief in


the existence of a certain state of affairs that does not in fact exist, whether or not the
representation indicates that that state of affairs does exist.
If a person makes a representation in relation to a matter and the person does not have
reasonable grounds for making the representation, the representation is taken to be
misleading.
False or misleading, in relation to a representation includes the wilful concealment of a
material fact in the representation.
Put simply, an agent may liable for engaging in false or misleading conduct or
misrepresentation if the agent:

Leads a consumer into believing a fact regardless of whether the agent intended to
mislead them or not (innocent or negligent misrepresentation)

Knowingly permits a consumer to draw incorrect conclusions (fraudulent


misrepresentation)

Remains silent when there was a duty to disclose a fact.

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[5.4.2] Agents silence of known information


Silence may constitute misleading or deceptive conduct where there is a duty to reveal
relevant facts. Whilst there is no general duty of disclosure in commercial dealings, the
failure to disclose a fact regarding a particular characteristic of a property may be regarded
as being misleading or deceptive, particularly where the recipient of a representation is
entitled to believe that the relevant matter would be communicated.
Most importantly, an agent may be prosecuted regardless of whether a consumer has
entered into a transaction or not, and regardless of whether losses have been sustained.
[5.4.3] Representations in advertising
All representations made regarding the agents description of a property, including the
propertys features, fixtures and characteristics, must be true and must not amount to
express or implied representations that are false. These representations of the description of
a property and its characteristics must be made accurately and without any embellishment.
Real estate agents must not make false or misleading representations about investment
properties, including the reasonable values of those properties, the features of those
properties, the likely rental returns, the nature or effect of long term management contracts,
or any other matter that is material to the sale, purchase or lease of the property by the
consumer concerned.

[5.4.4] Photographic representations


More consumers are using the internet as their primary source of information about a
product. Industry regulators are concerned that photographs of properties which have been
touched up to hide undesirable characteristics or enhance other features could mislead
consumers.
Whether an agents conduct is misleading or deceptive, including portraying photographic
images can depend upon the overall impression, or the implied representation, produced by
that conduct. Therefore, the agent must ensure that photographic images and other market
devices are not used in a manner that can give rise to implied representations that are false
or otherwise amount to misleading or deceptive conduct.
A real estate agent must not alter or permit to be altered photographic images of properties,
digitally or by other means, such that the images no longer truthfully and fairly represent that
property.
Whether the alteration of a photographic representation is misleading or deceptive will
depend upon all of the circumstances. For example, digitally adjusting the exposure of a
photograph so as to brighten the lighting of the photograph taken on a dull day may be
legitimate. However, removing television aerials or power poles adjacent to the property;
brightening up paint work on a house or over-stating the views that might be achieved from
the property may amount to misleading or deceptive conduct.
An agent may be liable for misleading representations contained in photographs that have
originated from external sources such as an advertising sub-contractor or the seller. The
passing on of such photographs by agents to potential buyers can amount to misleading or
deceptive conduct by the agent. Agents should ensure that their contracts with advertising
sub-contractors include provisions to ensure that the sub-contractors do not engage in
misleading and deceptive conduct, including in connection with marketing representations
contained in photographs.
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Agents should also bear in mind that it is generally no defence to an action for misleading or
deceptive conduct for a real estate agent to claim that the consumer concerned should have
checked the information provided by the agent or for the agent to claim that the consumer
has failed to make reasonable enquiries.

[5.5] Fair Trading Act 1989


Whilst the Commonwealths Competition and Consumer Act (CCA) applies primarily to
companies, all states and territories have enacted their own legislation to regulate dealings
and transactions within their jurisdiction. Queenslands Fair Trading Act (FTA) has similar
provisions to the CCA and applies to individuals, as well as companies, engaging in trade or
commerce in Queensland.
The FTA makes it an offence to make false and misleading statements about:

The nature of the interest in land

The price payable for the land

The location of the land

The characteristics of the land

The use to which the land is capable of being put or may lawfully be put

The existence or availability of facilities associated with the land.

The Fair Trading Act imposes civil and criminal penalties and can also enforce the payment
of fines.
[5.6] Commonwealth legislation
[5.6.1] Competition and Consumer Act (Australian Consumer Law) 2010
The Competition and Consumer Act applies throughout Australia to protect consumers
against misleading or deceptive conduct in trade and commerce generally. The Act is
primarily directed towards the activities of companies (corporations). However, specific
sections draw into the net any person who aided and abetted, counselled or procured the
contravention or have been in any way directly or indirectly concerned in, or party to, the
contravention.
The Competition and Consumer Act encourages a fair and competitive environment and
applies to almost every aspect of business. The sections relating to Australian Consumer
Law can be found in Volume 3 Schedule 2 of the CCA.
When listing a property the agent should ensure agreements conform to the requirements of
the POA and are written in plain English and use terms that are standard throughout
Australia. The appointment authority includes the following:

Fee structure

Period of agreement

Advertising and schedule of costs

Other expenses to be incurred

The CCA prohibits unconscionable conduct in both consumer and commercial contracts.
Unconscionable conduct includes:
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Harsh contractual terms

Stronger party unfairly exploiting the weaker partys disadvantage, such as:

The weaker party does not have the ability to understands the effects of a transaction

Information is not disclosed

Stronger party benefits unfairly

A misrepresentation is relied on by the weaker party

Section 21 of the CCA applies to all commercial situations where unconscionable conduct
may arise. It states:
A corporation must not, in trade or commerce, engage in conduct that is
unconscionable within the meaning of the written law.
Section 22 of the CCA prohibits one business dealing unconscionably with another when
negotiating the purchase or sale of goods and services. It applies to any transaction with a
private company valued under $3 million.
The CCA contains provisions that protect consumers and other businesses when they enter
contracts to purchase goods or services; such as:

Prohibition of misleading or deceptive conduct

False and misleading representations

Unfair trading practices

Section 18 of the CCA prohibits misleading and deceptive conduct and sections 30 and 152
of the Act prohibit making false and misleading representations. Agents can breach these
sections if they over-appraise a property. When appraising properties, it is important for
agents to be realistic and base appraisals on a sound understanding of the market.
If the purpose for suggesting an unachievable price to get the property listed with the agency,
it will be deemed to be misleading and deceptive.
Section 30 and Section 152 of the CCA focuses on the activities of any company involved in
real estate transaction, regardless of whether the company is a real estate agency, seller, or
landlord.
It covers sales and property management transaction, and makes it an offence to make false
and misleading statements about:

The nature of an interest in land

The price payable for the land

The characteristics of the land

The use of the land

Agents should take care in designing and writing property sale advertisements. The
advertisements may be read by potential customers from interstate or even overseas,
especially if the agent advertises on the Internet. These potential customers may not wish to
inspect the property.
An agents standards of diligence and integrity are always regarded as high. The
advertisements must make only valid statements and contain no information which cannot
stand up to the rigours of scrutiny. The statements made must be able to be substantiated by
the physical search of the property or by other legitimate inquiries made prior to the
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purchase. The real estate industry and the regulators place great emphasis upon proper
disclosures during the negotiation of the property sale.
Examples of how section 35 and section 157 of the CCA apply to real estate advertising
include:

When advertising the availability of a number of units or blocks of land, it is more


informative to state the price of each; however if a price range is used, it is desirable to
also state the price at which the majority are available.

Advertisements providing information on the location of the land or distance from facilities
are less likely to mislead if they are factual; for example, shops approximately 1.5kms
rather than the subjective walking distance to shops. Care should be taken to ensure
that any factual statements about the characteristics of a property are correct.

Real estate agents should bear in mind that the application of the misleading or deceptive
conduct provisions of the CCA to specific instances of conduct can be complex. If agents
have any doubts regarding any issues under this legislation they should immediately seek
legal advice. Nevertheless, some general principles regarding the application of the
misleading and deceptive conduct provisions of the CCA can be stipulated when:

Determining liability for misleading or deceptive conduct, the intent of a person is usually
not relevant. The issue is whether conduct, tested objectively, has been misleading or
deceptive. It is not necessary for a person to have intended to mislead or deceive in order
for liability to arise under the CCA.

Real estate agents may be liable in civil actions for passing on false information even if
they have received that information from others and reasonably believe the information to
be true, particularly if they appear to have adopted that information.

Assessing whether conduct is misleading or deceptive, a Court will have regard to the
overall impression created by the conduct. Consequently, for example, the Courts will
often look at what has been implied by particular conduct in determining liability. This can
be particularly relevant when considering whether advertisements and other forms of
marketing are misleading or deceptive.

Silence may constitute misleading or deceptive conduct where there is a duty to reveal
relevant facts. Whilst the Courts have stated that there is no general duty of disclosure in
commercial dealings, the failure to disclose a fact may be regarded as being misleading
or deceptive, particularly where the recipient of a representation is entitled to believe that
a relevant matter affecting him or her would be communicated.

The stating of predictions or opinions can give rise to a liability for misleading or
deceptive conduct, particularly when those predictions or opinions are not based on
reasonable grounds.

Disclaimers and exclusion clauses do not, in themselves, absolve a person engaging in


misleading or deceptive conduct from liability.

The ability of intermediaries, such as real estate agents, to avoid liability when they have
merely passed on information without adopting it is unclear, agents maximise their
chances of avoiding liability for representations that have not originated from them when
they make that fact clear to the recipient of the information.
The High Court has suggested that a person who does no more than pass on information
supplied to him or her, making it clear that he or she is merely passing it on for what it is
worth and disclaiming its truth or falsity, may not have engaged in misleading conduct if
the information proves to be incorrect. However a real estate agent is unlikely to escape
liability if they are aware or have cause to believe the representations are false or
misleading.

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It is generally no defence to an action for misleading or deceptive conduct for a real


estate agent to claim that the consumer concerned should have checked the information
provided or for the agent to claim that the consumer has failed to make reasonable
enquiries.

The CCA imposes civil and criminal penalties and can also enforce the payment of fines.
[5.6.2] Two-tier marketing
The Australian Competition and Consumer Commission (ACCC) have publicly expressed
concern about the practice of misleading two-tier pricing, or two-tier marketing. Two-tier
marketing refers to the practice of having two prices or tiers in a real estate market, one for
the locals who know the market values in that area and one price for other buyers, often from
interstate, who are not aware of the local market prices. The ACCC believes the practice is a
form of misleading or deceptive conduct.
Real estate agents should not engage in two-tier marketing, which is the practice of setting
different tiers of pricing, with higher prices being charged to consumers who are, for
example, resident outside the particular area of the property or who are otherwise unaware
of material facts such that they are prepared to pay prices for the property that are higher
than the prices that those who are aware of those facts would be prepared to pay.
Potential buyers of property must not be induced to believe that the stated price of a property
is a fair market value when the price has been inflated by matters irrelevant to the value of
the property, such as marketing fees, commissions and profits. Also, consumers should not
be provided with estimates of market values of properties that are misleading or deceptive.
False or misleading representations about investment properties include the reasonable
values of those properties, the features of those properties, the likely rental returns, the
nature or effect of long term management contracts, or any other matter that is material to
the sale, purchase or lease of the property by the consumer concerned.
Valuations and market appraisals provided by real estate agents must be realistic and based
on a sound understanding of the relevant market. By providing valuations, appraisals or
market forecasts in a volatile market, agents shall identify that volatility to the relevant
consumer and shall warn the consumer to keep that volatility in mind when evaluating the
agents valuations, appraisals or market forecasts.
Agents shall ensure that they do not participate in any harsh or unconscionable conduct with
respect to the marketing or sale of properties.
Real estate agents must advise consumers of any significant beneficial relationships that
they have with any service providers to whom the consumer is referred by the agent and any
commissions, money or other benefits that the agent may receive as a result of that referral.
The offering of gifts or items as being free when the true costs are disguised in the selling
price of the property is prohibited.
The offering properties at discounted prices in a land development when the properties have
in fact not been discounted at all or where the properties will not be available at that
discounted price in reasonable quantities or for a reasonable time is considered to be bait
advertising. If the purpose of the advertising properties at discounted prices is to in fact lure
potential buyers to purchase more expensive properties, the conduct of the agent may
amount to bait-advertising.

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[5.7] Privacy Act 1988


The Privacy Act 1988 (Privacy Act) is an Australian Law which regulates the handling of
personal information about individuals. This includes the collection, use, storage and
disclosure of personal information, and the access to and correction of that information. It
contains a unified set of Australian Privacy Principals (APPs) that apply to both private
sector and the Commonwealth public sector.
The real estate industry is required to comply with privacy laws covering information and
opinions processed by them about individuals whose identity is apparent or can be
ascertained. The privacy legislation applies to all businesses who derive a benefit, service or
advantage by the collection or disclosure of such information.
The terms, benefit, service or advantage, are not limited to situations where information is
traded for money. It covers not only businesses which buy or sell personal information, but
also any other businesses which get some real return from either the collection or disclosure
of information, even if that return is not a payment of money.
Agents who use tenancy databases, for example, rely on a flow of personal information to
and from the organisations maintaining the databases. If this flow of information occurs for a
benefit, service or advantage the organisations and agents must comply with the law.
Legislation requires the quality and security of personal information is maintained, that where
requested and possible, organisations deal with people anonymously or via a pseudonym,
that information is not exported from Australia in an unprotected manner and that
Commonwealth government identifiers are not used or disclosed.
Agents, who obtain and store personal information, have stringent obligations imposed on
them as to how this information can be gathered, used, disclosed, destroyed, accessed and
corrected under the Act, which protects the rights to maintain personal information at a
private level.
Pursuant to the provisions of Privacy Act 1988, agencies are required to:

Have a readily available privacy policy which must contain the following information;
1. The kinds of information that the business collects and holds
2. How the business collects and holds personal information. This includes data storage
and cloud computing
3. The purposes for which the business collects, holds, uses and discloses personal
information
4. How an individual may access their personal information
5. How an individual may seek the correction of their personal information
6. How an individual may complain about a breach of the APPs or an applicable APP
Code, and how the business will deal with the complaint
7. Whether the business is likely to disclose personal information to overseas recipients,
and if so, the countries in which such recipients are located

Ensure the policy is being complied with

Ensure all personal information is stored securely and destroyed or de-identified once it
is no longer required. security systems are adequate

Review the types of solicited and unsolicited personal information gathered during the
course of their business and if it is really necessary

Assess how this personal information is used

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Recognise when disclosures of privacy matters must be made to tenants, sellers,


buyers, lessors, consultancy clients, contractors and agency staff

Regularly review and audit privacy practices and procedures

Pay particular attention to direct marketing campaigns

Take care in the way notes of personal information are recorded

Understand when solicited and unsolicited personal information should not be disclosed

[5.7.1] Australian Information Commissioner


To help business and consumers understand their rights and responsibilities the Office of the
Australian Information Commissioner has developed a broad range of information resources
to provide guidance. For information access the Office of the Australian Information
Commissioner website, www.oaic.gov.au

Under the Privacy Act Commonwealth and private sector organisations should have
measures in place to comply with the thirteen Australian Privacy Principles when processing
personal information in, or for inclusion in, a record. The Privacy Act deals with privacy
information, which relates to what real estate agents do with information and how they
process and store information.
Real estate agents must be very careful about how they collect information and what they
use it for. For instance, the information that an agent includes on the PO Form 6 may appear
innocent when a listing is first processed; but if that information is later inserted in a Tenancy
Agreement or Contract of Sale, this information could unwittingly be used by another party.
When listing properties for sale or rent, it is recommended all agents provide the client with a
privacy statement, informing them how the information being gathered shall be stored and
who may have access to details such as sales and rental prices, telephone numbers etc.
[5.7.2] Rules of collecting information relevant to real estate transactions
Agents should only collect information necessary for their function or activities. However,
agents need to collect a large amount of data when completing sale and property
management transactions, such as:

Bank account details

Name, address and telephone numbers

Credit and personal references

Drivers licence

Financial details

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[5.7.3] Use of fair, lawful and unobtrusive means to collect personal information
An agent should at all times be open and honest with the consumer and make clear that any
information being given to them is being recorded. The agent should always source the
information directly from the party concerned where possible and not rely on hearsay or third
party information. Always verify information first hand before storing it on a database, and
obtain consent before storing a persons information on a database.
[5.8] Do Not Call Register Act 2006
[5.8.1] Do Not Call Register
The Do Not Call Register Act 2006 is Commonwealth legislation that came into effect on 31
May 2007. The legislation applies to anyone making a telemarketing call to a private
Australian phone number (including private mobile phones) regardless of where the call is
being made from, and any organisation commissioning such calls to be made on their behalf.
[5.8.2] Telemarketing calls
Telemarketing calls are defined as a voice call which is made for the purpose to offer, supply,
provide, advertise or promote:

Goods or services

Land or an interest in land

A business or investment opportunity

Solicitation of donations.

[5.8.3] Exemptions
While it is generally unlawful for telemarketing calls to be made to numbers listed on the
register, there are some exemptions. Certain public interest entities are allowed to make
specific types of calls to numbers on the register. These include:

Charities

Educational or religious organisations

Registered political parties and independent members of parliament

Electoral candidates

Government bodies.

Market and social researchers conducting opinion polling and standard questionnaire-based
research calls are also permitted to call. However, these calls will be subject to the industry
standard for telemarketing and research calls

[5.8.4] Minimum standards for all telemarketing calls

Telemarketing calls can only be made between 9 am and 8 pm Monday to Friday

Telemarketing calls can only be made between 9 am and 5 pm on Saturdays and not at
any time on Sundays or public holidays which are gazetted

Anyone making a telemarketing call must provide specific information to the consumer.

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[5.8.5] Specific information must be provided by telemarketers

The contact details and the purpose of the phone call (this is defined as the callers
business phone number and either mail, street or email address)

The caller must terminate the call by either direct or inferred request or when it is
determined that the call contravenes the minimum standards described above.

Telemarketers must ensure that they have caller id displayed and cannot use a private or
withheld number to make a telemarketing call.

[5.8.6] How to check if someone is on the register


Consumers can very easily add their name and number to the Do Not Call Register, meaning
they have registered to NOT be contacted by any telemarketers. Agents will need to check
the register through a process referred to as list washing. This process will be available 24
hours a day, 7 days a week. The agency will need to set up a list washing account. There are
2 types of accounts an administration account and a washing account. The administration
account is considered best suited to most businesses.
[5.8.7] Administration List Washing Account
Once the agency has set up the account (visit www.acma.gov.au) the agency can then
upload the numbers they wish to call. The list washing process will then check the numbers
the agency wishes to call and will validate whether the numbers being washed are
registered. Most agents will utilise the Quick Check option due to the convenience,
practicality and ease.
All numbers submitted must be in a prescribed format. They must be 10 digit numbers and
must start with a zero. Agents can insert brackets, hyphens and spaces. For example:
07 3242 2587 accepted
3242 2587 not accepted
When the list has been washed, it will identify the numbers the agency is able to call, and the
ones that the agency is unable to call. For the fee for list washing, refer to the ACMA website
for price details.

[5.8.8] Agency database


Agents may call people listed on the agency database even if they are on the Do Not Call
Register. However, the agency will need to ensure they have their express or inferred
consent to do so. No agent should make a call to a person on the register without their
consent.

[5.8.9] Inferred consent


Inferred consent is taken when a business relationship exists between the caller and the
individual. Based on this business relationship, there is a reasonable expectation by the
caller that the agency will be calling and contacting them.
[5.8.10] Express consent
Express consent is where an individual has provided a clear directive they would like to
receive phone calls from the agency. It is important to note if there is express consent, it only
lasts for three months, unless otherwise specified.
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[5.8.11] Best practice recommendations

Add in a statement providing express consent for the agency to make contact on all
relevant documentation such as the open for inspection registers, auction bidding
registration forms, tenancy applications, etc.

Insert a timeframe for making contact e.g. indefinite period (the agent should have a
mechanism for the person to remove their consent).

The agency may wish to add the following clause to appropriate agency paperwork to obtain
express consent for telephone marketing calls to ensure compliance with the Do Not Call
Register Act:
I agree that I am the telephone account holder or a person nominated by the account
holder, and understand that (INSERT YOUR AGENCY NAME) may use the phone
details provided here to contact me for marketing purposes until I advise otherwise.
If the clause is provided at the top of a form, it should be amended as follows, and a box
included for the client to tick:
By ticking the box marked marketing consent next to my name below, I agree that I
am the telephone account holder or a person nominated by the account holder and
understand that (INSERT YOUR AGENCY NAME) may use the phone details provided
here to contact me for marketing purposes until I advise otherwise.
These clauses should be used in addition to collection notices already being used for the
Privacy Act. It is very important to understand that to establish express consent of
telemarketing calls, it must be clear the consent is for that purpose, and not for other
purposes such as security reasons or complying with the Privacy Act. The best practice
recommendation when it comes to making telemarketing calls (and for direct marketing
purposes as well), is to always be cautious, ethical, respect peoples privacy and only contact
people when the agent has their consent.
Refer to the websites www.acma.gov.au or www.donotcall.gov.au for additional information
and fact sheets.
[5.9] Learning activity 5
Question 1: Name four circumstances where it is an offence against section 40a(1) of the
Fair Trading Act 1989 to make false and misleading statements
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

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Question 2: What are some of the risks involved in providing specialist advice to clients?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Question 3: What agency systems and processes should be in place to ensure compliance
with the Privacy Act?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Question 4:
Register?

What is the procedure to check if someone is listed on the Do Not Call

__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

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PART 4 PROPERTY SALES


UNIT 6 - INTERPERSONAL SKILLS
[6.0] Agents do not only need product knowledge in order to secure listings, they also need
interpersonal skills when dealing with their clients. Their property appraisal materials can be
presented well, but if they don't know how to use appropriate interpersonal skills with their
clients, they will not proceed very far. Interpersonal skills take into account the following:

communication skills including listening and speaking

questioning techniques

negotiation skills

[6.1] Communication skills


The purpose of communication is to get the agents message across to their client. It involves
agents sending the message to the client so that it can be interpreted correctly. It consists of
sender, message, channel, receiver, feedback and context. By successfully getting their
message across, they convey their thoughts and ideas efficiently and effectively.

Sender To establish yourself as an effective sender/communicator, you must first


establish credibility. This involves using your knowledge of real estate, your client and
listing properties for sale or rent. It is important that you know the needs and motivation of
your clients to make sure that you have not misunderstood their requirements.

Message Written, oral and nonverbal communications are effected by your tone,
method of organisation, what is communicated and what is left out, as well as your
individual style of communicating. If your message is too lengthy, disorganised, or
contains errors, you can expect the message to be misunderstood and misinterpreted.
Use of poor verbal and body language can also confuse the message.

Channel Messages are sent through channels, using verbal including face-to-face
meetings and telephone; and written including letters, emails, memos and reports.

Receiver Your receiver is your client. Your client also enters into the communication
process with ideas and feelings that will undoubtedly influence their understanding of
your message and their response.

Feedback Your client will provide you with feedback, e.g. verbal and nonverbal
reactions to what you say. This feedback will help you check that what you are saying is
understood.

Context The context for your message is real estate and in this situation, securing a
listing of the property.

[6.2] Questioning techniques


At the initial interview with the client, information on the specific motives for selling can be
gained by asking questions. Asking the correct questions in the correct manner is important
because this will determine the quantity and quality of the information obtained. The
questions should be relevant and focus on the information which is required.
There are a number of different types of questions which can be used. These include:

Closed questions are structured to be answered by a simple, brief response. These


are often answered with a 'Yes' or 'No'. For example, "Did you know that your home
presents well in comparison to other properties in the area?"

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Open questions are designed to draw out more complex explanations or opinions.
They allow for a variety of answers and allow the client to explain something in more
detail. They usually start with What, Where, When, Why, How. For example, "How do you
think the presentation of your property compares with other properties in the area?"

Probing questions are designed to stimulate further information to a question already


asked. For example, after the client has answered a question by saying, "I think the
presentation of my property is better than other properties in the area.", questions can be
used to probe further by asking them, "What is it about your property presentation that
makes it better?".

Structured questions all clients are asked the same questions for agents to gather the
same information. For example you will need to know:

the names of the owners and if they are the same as those on the Certificate of Title

details of family members

their likes and dislikes of the house

their reason for selling

Unstructured questions these are general questions that are used during the
interview to gain more information. They may not be asked of all clients.

[6.3] Negotiation skills


To maintain a good working relationship with the client, negotiation should be a win-win
situation so the agent and the client have positive feelings about the situation. Displays of
emotion are inappropriate when negotiating because they undermine the rational basis of the
negotiation and bring a manipulative aspect to them. However, people's emotional needs
must be met otherwise the agreement reached can be unsatisfactory and temporary. Agents
should not discuss their own emotions; however, they could discuss them as if they belong to
someone else.
UNIT 7 METHODS OF SELLING
[7.1] Methods of selling property
There are several ways a client may sell their property including the following.

[7.1.1] Private treaty


Private treaty is used for all non-auction and tender transactions. The agent accepts an
appointment to present the property for sale to interested parties attracted as a result of
advertising. The property is offered at a price and should a prospective buyer express
interest, negotiations commence.
The seller sets a price for the property (in consultation with the agent) and places the
property on the market. The seller retains control of the selling process and is at liberty to
accept or refuse any offer. Private treaty is a common method of sale and is good for
properties where there is plenty of competition from other properties.
Commonly, a private treaty method will be referred to as an open listing, sole agency listing
or exclusive listing.

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[7.1.2] Public auction


Public auction is where a licensed auctioneer offers a property for sale to the public and sells
to the highest bidder at the reserve price (if any) or higher. Or if the reserve price is not
reached, the auctioneer will pass in the property and negotiations may continue with the
highest, or any bidder under private treaty terms.

[7.1.3] Tender

The tender process involves properties and land being sold without the seller disclosing a
price. Owners of these properties (generally commercial) or land will engage a
salesperson to offer the property for sale by tender. This enables interested buyers to
submit a tender for a nominated amount for the property by a specified closing date.

Suitable properties to sell through tender are ones that are:

not suited to private treaty, or auction - this can be decided by the limitations of the
seller, such as a government agency, or by the unusual nature of the property

commercial, retail or industrial

special interest properties

highly priced

difficult to price e.g. The first property in a brand new block may be put out to for
tender just to see what people are willing to offer.

[7.1.4] Criteria for deciding the best method of sale


As well as looking at the type of property and the sellers motivations when deciding on the
method of sale, agents always need to be aware of whats going on in the market place.
There are times when one particular method of sale is more effective than others.
(a) The property

Does the property suit one method of sale?

Can market price be easily established?

Does the property have alternative uses?

Does the property have much competition?

(b) The seller

Is the seller motivated to sell?

Is the seller realistic about price?

Will the seller pay for the marketing campaign?

(c) The market

Is the timing right for selling?

What are the current levels of results for each method of sale?

Where is the market heading?

What are buyers current attitudes?

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(d) Effectiveness
Knowing the market conditions helps agents to determine the effectiveness of each method
of sale.

Which methods get the best results?

Which methods best suit buyer habits?

Which methods get unrealistic sellers quickly conditioned?

[7.2] Best listing sources


There is a wide variety of listing sources available and these generally fall into the following
categories.

The personal approach

Pounding the streets

Making use of current contacts

Research

[7.3] Open for inspection


Open for Inspection is an excellent place to meet prospective sellers. In most cases a home
open provides contacts with buyers and potential sellers people looking and checking the
market before selling their own home. It is important to communicate with visitors to the
home open to find out the nature of their interest in the home open property. Questions need
to be asked and attention paid to the responses. For example, the answer "we live down the
street" indicates general interest rather than committed buyer behaviour.
[7.4] Private seller (for sale by owner)
It is standard procedure for all successful real estate practitioners to scan the newspapers
daily for privately placed real estate For Sale' advertisements. This can be a good source of
listings. Private For Sale' advertisements are found under the suburb headings with Agent's
advertisements. It is a good idea to clip out any relevant ads for private sellers in the area
and paste them in a clippings book.
Before making a call to a private seller, the agent should abide by the Do Not Call Register
legislation and wash the private number to ensure the person has not included their number
on the Do Not Call Register. When making a call to a private seller, the representative must
respect their right to sell privately and offer services carefully and tactfully. It is best to try to
make a time to visit the home and offer to do an appraisal.
It is unwise to negotiate terms and conditions or selling fees over the phone. Where possible
an agent should insist on a face to face meeting. It is unethical for an agent to say that they
have a buyer unless it is true. How does one list from private advertisements?
Good opening questions are:

If a new advertisement: "Is your property still available for sale?"

If ringing after a few ads: "Have you sold your property?"

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This may not get an immediate appointment to list, but possibly in a week or two the sellers
may begin to realise that they may be better off in the hands of a good agent. This is why it is
necessary to keep a record of private classified advertisements over time.
[7.5] Private For Sale signs
Stop and visit the owner when sighting a private For Sale sign in the farming area. If there
happens to be a buyer in the car at this time a representative should simply note the address
and phone number and be sure to return or ring on the same day.
[7.6] Buyers
People who already own a property and wish to upgrade or make a change, often enquire
about other property for sale. Generally, they first want to see what their money can buy
before they make a move to sell. Sellers usually have some firm motivation to move, such as
the need for a larger lounge, a fourth bedroom or a better location or retirement, etc.
Whilst it is important to assist sellers, who have a house to sell, with finding another property
so that they don't purchase and ultimately list with another agent, this must be balanced
against always offering the correct advice. After the sellers have had an initial look for a
property and are better informed as to what they can expect to find or afford, it is the agent's
responsibility to provide advice that provides them with the best net outcome. Unless they
are in a position to obtain bridging finance when making a subject sale offer, they will usually
be paying more than a cash or finance buyer would be.
It is important to offer unbiased assistance and sincerely demonstrate that the agent will only
act in their best interests.
[7.7] Referrals
Whether listing, selling or appraising property, an agent should ask "Of all the people you
know, who do you think is likely to be making a move in the near future?" It is important to
remember that people often associate with others in a similar financial position to themselves
and are therefore quite often considering, or making real estate plans, at the same time.

[7.8] Letterbox cards


Essential items in a letter box card include:

salespersons name, agency name, address and telephone number and an afterhours or
mobile phone number

a message that states listings are being sought, such as: "We are in urgent need of
properties for genuine cash buyers. If considering selling, please call ..." Letterbox cards
can also include a calendar, recipe or useful information that will make people want to
keep it. Fridge magnets included on the flyer are very popular.

Ensure that you have an ethical statement on all letters and marketing such as If your
property is currently listed solely or exclusively with another agent, please disregard this
notice.
If employing a letterbox dropper' the agent should consider that pamphlets will probably be
lost among other catalogues and letter drops. The response will be greater if the agent
personally delivered them, giving the agent an opportunity to learn more about their area.
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[7.9] Door knocking


This is one of the best ways to become established in the area. People are also more likely
to open up about their real estate plans when they see the agents genuine good intentions.
When communicating with people it is necessary to realise that spoken words contribute only
7% of the meaning. Body language and the voice tone used make up 55% and 38% of the
meaning, respectively. Therefore people will have buyers wanting a specific type of house or
a house in a specific area. They may even give boundaries on streets and other good
reasons for wanting property in that area, such as location of their church, school, or shire
boundaries. Door knocking is a good source of listings that should not be restricted to trying
to satisfy specific requests but used as part of the daily and weekly prospecting and
marketing activity.

[7.10] Door knocking manners


Consider the following strategies when door knocking in potential sales areas.

Ring doorbell for only 2 - 3 seconds. Longer could annoy the occupant. If chimes sound,
ring only one full course of the chimes.

If knocking, do so gently. If confronted with a heavy, soundproofed front door, tap gently
on the window.

Listen for sounds that indicate a knock or ring is heard. If nothing is heard, wait a minute
or so before ringing or knocking again.

Take three steps back. Don't stand right in the doorway. This often intimidates the person
opening the door and will put them on the defensive rather than leaning forward - a better
body position for a conversation.

Smile - this helps to remove the occupier's anxiety or annoyance.

Give personal Identification and that of the office distinctly. Offer a business card, and
state the reason for the call. For example: "Good afternoon, my name is Edward Guthrie
of Edward Guthrie Real Estate in Beenleigh. I have a buyer interested in buying a house
such as yours in this area. Would you be interested in selling?"

Prospecting like this often brings good results. It is a case of being in the right place at the
right time, and it is surprising how often a homeowner will be encountered who is considering
selling.
[7.11] Buildings under construction
Watch for houses, blocks of units or commercial or industrial buildings under construction.
The name and address of the owner can usually be obtained from the site supervisor or
council records. Contact the owners by phone or by letter and attempt to obtain a listing. If it
is for lease, then it is a potential management opportunity for the agency or it may be a future
investment sale. (Remember, it is unethical to try to solicit a listing on properties displaying
another agent's 'For Sale' or 'To Let' signboard).

[7.12] Local Government building application


Many enterprising agents make it a practice to obtain copies of the minutes of the local
council meetings for details of building or development applications and approvals. This is
another good source of listings.
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[7.13] Advertising for listings


Many agents find it profitable to look at their prospects' requirements and then advertise in
the local newspaper under `Property for Sale'. This is an expensive way to prospect but if the
employer approves, it does show the wider community that listings are actively being sought
Examples are:

'Bank Officer, finance arranged, seeks four bedroom brick home in Holland Park, up to
$280,000.'

'Young working couple seek 2-3 bedroom cottage within walking distance to Coorparoo
railway Station, up to $365,000.'

Agents should not advertise in this way unless the buyers are genuine and qualified. It is
unethical to do otherwise and is a Competition and Consumer Act (Australian Consumer
Law) offence.

[7.14] Being observant


When driving around use as many different routes as possible. Keep a lookout for signs of
potential listings, for example:

neglected properties

properties being painted or renovated

properties being demolished (what is going to take their place?)

[7.15] Letters to absentee landowners


People who own vacant or developmental land often do not live in the area and may not
know the local agents. The names and addresses of absentee landowners can be obtained
from the local council (there is usually a cost involved to obtain this information). Remember
it is unlawful to use owners information sourced from commercial databases such as Core
Logic RP Data. Write to the owner and ask for a listing; once you have lawfully obtained their
details. Remember to enclose all the listing documents requiring a signature.

[7.16] Neighbours
Representatives must ensure that the neighbours are aware that they are in real estate and
be as friendly as possible.
Often neighbours are good source of referrals. To enhance your real estate standing
amongst neighbours, become the real estate expert in the neighbourhood.
[7.17] Relatives and friends
Relatives and friends can be difficult because they may expect preferred treatment, and
sometimes fail to appreciate a representative's experience. However, they can be good
sources of listings and referrals. If relatives and friends live outside the farming area, try to
ensure that they know their real estate interests can still be looked after by you.

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[7.18] Schools
If you have children at school, ensure that other parents at the children's school, along with
their friends and teachers know that you are in real estate. The school's Parent/Teacher
Association is another good source of business. It is surprising just how much business can
come from these sources.

[7.19] Clubs
Many real estate salespersons are members of civic, social or business clubs, such as Apex,
Jaycees, Lions, Rotary, a businessmen's or veterans' club. When the opportunity arises, club
members should be advised of their involvement in real estate. They are often a good source
of listings and referrals. Business from fellow members can make a big difference to a
Representative's income.
[7.20] Church
Buyers and sellers like to work with people they know and trust. A representative should not
hide their occupation from fellow church members. Be aware of their buying and selling
needs and be of service to them.
[7.21] Walk-ins
Once a salesperson is established in an area, potential clients will walk in off the street to ask
about selling. Handle this type of enquiry immediately. Go with the seller to view and list the
property. Otherwise, he or she may find a more interested salesperson in a competitor's
office.
[7.22] Telephone enquiries
Be prepared to receive telephone enquiries about property sales in the area. Do not give
unconsidered opinions over the phone - offer to complete an appraisal and make an
appointment to view the property immediately, before the seller phones another agent.
Without an appointment an opportunity has been lost to view the property, meet the seller
and obtain a listing. A market sales opinion over the phone is soon forgotten, but a written
appraisal is a permanent record and is the first step to getting the listing.
Remember you must give a written sales opinion when providing a seller or prospective
seller an opinion about a sales price.
There are many other sources of listings, limited only by the salesperson's imagination.
Remain alert for any potential listing and act on it immediately. Look for subtle hints. A seller
may think a person is too successful or too busy to be interested in his small property. A
remark such as: "What's the market like today?" could well indicate a desire to list and should
be followed up in conversation.
[7.23] Database usage
An agent will often add potential sellers to their database so that they can keep in touch with
them on a regular basis about current market trends and conditions. Keeping in regular
contact with people on your database and using your database to its full potential is a great
way of keeping your name and profile at the forefront of a potential sellers mind. Whilst they
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may not be ready to list straight away, regular and consistent updates about current market
trends help educate someone who is preparing to sell their property.
An agent must always ensure that there is a record of the consumers permission to add their
details to a database or mailing list. This can often be through records kept of attendees of
open homes or emails sent to an agency asking for information about the market or industry.
Strict guidelines apply in relation to using personal information on a database that agents
need to be mindful of; including the requirements if asked by a consumer to remove their
personal details from a database or mailing list. An agent must, within 30 days, if requested,
remove a persons details from their database or mailing list.
[7.24] Learning activity 6:
Question 1: Your client asks you for advice concerning the best method of selling the
clients property. List six criteria you should consider before preparing a response as to the
most appropriate selling method.
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________

4. ________________________________________________________________________
5. ________________________________________________________________________
6. ________________________________________________________________________

UNIT 8 - REAL ESTATE MARKET ANALYSIS


[8.0] A real estate market analysis (or better known as a Comparative Market Analysis or
CMA) is an analysis of the market over periods of time. It can be done within the State or on
a National basis. It compares prices which have occurred, and forecasts trends and patterns
which may occur in the future.
Market conditions are reviewed in regard to the social, economic and political environment as
the market value of the property is affected by these factors.
Market analysis information can be obtained from the Real Estate Institute of Queensland
(REIQ), the Real Estate Institute of Australia (REIA), and publications and brochures on
property for sale.
A real estate market analysis compares sales which have occurred and forecasts trends and
patterns which may occur in the future. This will provide the agent with information on:

median house prices

residential property market indicators

dwelling and land sales review

rental markets and vacancy rates

commercial properties

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[8.1] Accessing market data


Every state real estate institute produces a market update every quarter which shows the
following information:

market summary, including a National Roundup of median house prices and vacancy
rates

residential property market indicators

median sale price of established house sales for capital city suburbs and State Regional
areas

dwelling sales review

land sales review

capital city rental markets

commercial property report

This information is useful for the market appraisal presentation to clients as it provides
information on market conditions.
[8.2] Inspecting the property
A physical inspection must be conducted to identify possible building defects and their
remedies. Agents should take note of:

details of the land, contours, the style and condition and age of the home

floor plan

features of the property such as gardens, pergolas

other improvements, out buildings, fencing, etc.

soft furnishings

any other potential defects

Information should be physically checked during the inspection and results confirmed with
the client to ensure that it is a correct record. Advise the client to consult specialist advice
when necessary. Also ensure you always remain within the boundaries of your qualifications
and proceed with caution so as to not be seen to cross the line of giving inappropriate
advice.
[8.3] Where to obtain additional information
Additional information may be gained from the following areas to help the agent to complete
an appraisal:

local government provide details of municipal management, zoning information, rates,


ownership of properties, building by-laws

The Department of Natural Resources and Mines www.dnrm.qld.gov.au maintains the


land register and can provide a current certificate of title showing the title details and
land ownership.

periodicals provide current properties for sale and property news

agent's property management and sales reports, and proprietary database will provide
sales evidence in the area

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newspapers can provide current information concerning properties for sale and
comments on recent sales

commercial property databases such as CoreLogic RP Data (www.rpdata.com)

[8.4] Databases
The REIQ Property Search website at reiq.com contains pertinent information which will
assist in analysing current market trends when conducting a property appraisal. Information
includes:

homes for sale

homes for rent

commercial properties

business for sale

land for sale

rural properties

Real estate agencies commonly have their own client and customer database. It is an
extremely important and vital part of any agency. Proprietary commercial databases are also
available by subscription and may provide detailed information which was obtained, under
license, from the Department of Natural Resources and Mines, on properties in all areas.

[8.5] Marketing plan


A marketing plan is a planned, documented program which outlines how the property will be
exposed for either sale or rent. Good presentation is important when marketing a property
and the agent may be asked for recommendations for improvements which will enhance the
property's sale potential.
Commonwealth and State consumer legislation, State real estate legislation incorporating
codes of conduct, govern advertising in the real estate industry.
It is desirable that a marketing plan be prepared prior to visiting the seller as this can be used
for discussion and agreement gained on the methods to be used. The agent should involve
the seller in describing the positive aspects of the property. When planning the promotion, it
is wise to decide the steps to be taken each week during the period of agency in order to
market the property to its full potential. Advertising a property is the most effective way to
make potential buyers aware of the property. There are a variety of ways that a property can
be advertised.
When selecting marketing methods, the agent must be aware of regulatory requirements to
avoid misleading or false misrepresentation. When a marketing plan has been designed, the
costs need to be calculated and decided which may result in removing or adding marketing
activities to fit the budget.
Normally the seller will give instructions concerning the agencys advertising budget, and
costs should be watched and controlled within the set budget.
A record of all relevant details about the progress of the sale can be presented in a
Marketing Activity Log and will assist in the constant liaison with the sellers. It can also be
used to review the marketing activities and support any changes to marketing strategies.

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[8.6] Market price of property


The market price of a property is the most likely price that a customer will pay for a property
at a specific point in time. Determining the market price of a property involves a high degree
of market knowledge, research, an understanding of pricing methods and most importantly, a
great deal of common sense.
The price that a customer is willing to pay for a property can be influenced by:

the price that a valuer working for the financier thinks the property is worth

the price that the agent thinks the property is worth

the price that the client thinks their property is worth

[8.7] Market value of property


The market value of land and its improvements, like most commodities, is governed by the
law of supply and demand. This law is greatly influenced by economic or man-made factors.
For instance, demand for land usually occurs in cycles driven by periods of high demand
followed by periods of low demand. Obviously, the worth of land is higher in a period of high
demand rather than a period of low demand.
Likewise, some land is in more demand than others. This is driven again by economical as
well as psychological factors. For instance, there is often a greater demand for a block of
land with an ocean view, rather than one without the view. A developer may prefer land on a
main road close to services, while a homemaker may prefer land that is quiet and away from
business and commercial activity.
Generally, the purchase of land represents a long-term investment, and the amount paid for
it, encompasses factors such as its legal use and the buyers expectations of benefits that
will be derived from owning it. This may include having the satisfaction of ownership or the
privilege of residing, or working in the chosen location.
In common with most material possessions, this ownership has a price tag and this is
expressed as the value of the land.
The market value of a property refers to the relationship between a subject property and
other comparative properties. The market value of property is also determined by the number
of willing buyers and sellers in the marketplace. For example, if there are many buyers and
only a few sellers, then it could be assumed that the value will be higher than if there are
fewer buyers and many more sellers. Likewise, if there is an oversupply of rental listings in
the market, and a reduced volume of prospective rental customers, the rental price of a
property could fall dramatically.
The value of a property is its current standing in the marketplace because the value is
constantly changing and can only be representative of the timeframe during which the
appraisal is conducted. If an agent appraises a property on todays date, the appraisal price
refers to the amount of money that can reasonably be expected to be paid for the property on
todays market.
For this reason, a valuer must always date a valuation and ensure that there is clear
reference to the circumstances that apply to the valuation. Most valuers will provide a clause
stating that the valuation is valid for a three-month period, assuming there are no significant
changes in market conditions during that time. Likewise, agents need to be sure they insert a
date on any written market analysis report for a client.

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To summarise the market price of a property is a value that is subject to change. It is not
constant, nor is it necessarily predictable.
A valuer is qualified to provide valuations. A real estate agent or salesperson is not qualified
to value. An agent provides estimated selling prices.
[8.8] Legal definition of market value
The concept of market value was ruled on by the High Court of Australia in 1907 in a
landmark hearing that is now known as the Spencer Case. (Spencer v Commonwealth of
Australia, 5 CLR at 418). Chief Justice Griffiths ruled:
In my judgment the test of the value of land is to be determined, not by enquiring what
price a man desiring to sell could actually have obtained for it on a given day, but
whether by enquiring what would a man desiring to buy the land would have had to pay
for it on that day to a seller willing to sell it for a fair price but not desirous to sell.
The High Court of Australia today recognises market value as:
The price which a property could be expected to realise if sold by a willing but
not anxious seller to a willing but not anxious buyer at the date at which the
value is required to be ascertained.
This definition has been interpreted to include the following provisions:

There is only one value for all purposes. That is, the price at which a property will sell at
any given time is determined between a willing buyer and a willing seller. It is assumed
that these parties are aware of all the facts relevant to the current marketplace, and
therefore capable of making a rational decision as to a fair market price.

The market value of a property for sale or for rent should always indicate a price that the
property would achieve if it was offered for sale or for rent in the open market, allowing a
reasonable time for a customer to become fully informed of the attributes of the property
and the prevailing market conditions.

For this reason, market value is often referred to as the price at which a willing client would
sell or rent and a willing customer would buy or rent neither party being subject to any
abnormal pressure or circumstances.
Other more recent court decisions have ruled that the market price of a property is a price
expected if a reasonable time is allowed to find a customer. In addition, the customer and the
client must also be fully informed of all pertinent facts regarding the property and the current
market.
It becomes apparent that when we look at the strict legal definition of market value, auction is
deemed one of the most reliable means of determining the true worth of a property at a given
time and place. When a property is offered for sale by auction, there is a reasonable amount
of lead-up time (for residential sales, usually 30 days) before the property is put to bidding. In
that time it can be assumed that the buyers and sellers have become conversant with current
market conditions. Buyers in particular will, in the 30 days, have had the opportunity to fully
investigate the property (including arranging finance and conducting building and pest
inspections) to ensure that the price they bid reflects an informed market decision.
For this reason a court of law will usually nominate auction as the fairest method of sale for
determining the worth of real property in matters concerning the distribution of proceeds of a
sale of property under dispute. This is especially important in matters relating to deceased
estates, divorce, receivership, insolvency and the winding up of companies.
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[8.9] The role of the real estate agent


An agent is often asked to perform a similar task of assessing the worth of a property as a
valuer. The major difference between the agent and the valuer, however, is that a
Queensland agent is not, by law, entitled to charge a fee for this service, and an agent does
not actually value a property because they dont hold the required qualification.
A licensed agent is bound by the legislation and statutes set out in the POA. Part of the Act
includes a schedule of transactions (First Schedule) that an agent can perform and the
prescribed commissions an agent can lawfully charge for those services.
The POA relates the payment of commission for services the agent provides on behalf of a
client during a transaction. A transaction is deemed to be:

a sale or purchase (sellers agent or buyers agent)

a rental where an agent finds a tenant for the client and collects rent on behalf of that
client

All activities that are normally associated with a transaction are paid for, upon completion of
the service, by way of commission. Therefore, if the agent is pricing a property for a
transaction, they are not permitted to charge an additional professional fee. This is because
professional fees only apply to the provision of a service that is not a transaction.
Therefore, if an agent is providing a market price for a client that does not relate to a
transaction (e.g. a market appraisal for a client who is not selling or renting, but needs to
know what price their property might attract in the current market), then a professional fee
may be charged. (It is important to note that this is not common.)
However, if an agent charges a fee for conducting an appraisal, they may be considered
accountable by law and may carry the same legal responsibility for their actions as a valuer.
Under such circumstances, they would be required to carry adequate professional indemnity
insurance. Agents should also seek their own legal and professional advice before
undertaking such duties.
On the occasions where agents are required to undertake a written assessment of the worth
of a property they are advised to use a form similar to the REIQ Estimate of selling price and
to have a separate indemnity notice signed by the party requesting the Opinion of Price
before completing the appraisal.
Occasions where an agent may be required to give a written opinion of price include:

Internal transfer of property between family members, or family companies such as a


Family Trust

Deceased estates where an executor requires an estimate of worth of an asset

Stamp duty purposes when an individual or company is reassessing their assets

Insurance appraisals - these are particularly important for property managers who need
to ensure that adequate insurance cover is kept on properties in their care

Listing property for sale

Keeping clients up-to-date as part of after-sales service

If an agent is asked to supply a written appraisal on a property for any of the parties or
purposes of the following list, it would be best to advise them to refer the matter to a
registered valuer.

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Tax purposes especially matters pertaining to Capital Gains and Goods and Services
Tax

Public company or a private company with more than ten shareholders

Government Departments Local, State and Federal

Insurance claims for loss or damage to a property

Exchange of properties

Mortgage purposes

Marriage dissolution or partnership dissolution

Dissolution of a business partnership

Resumption of land

Legal or court proceedings, including those involving the Land Court, a valuation or
general property dispute

[8.10] Recommended pricing terminology


Because an agent is not qualified to conduct a valuation on real property, they are not
entitled to use the term value. It is advisable for agents to become familiar with and use
other terminology that has the same or similar meaning and application as value. Such
items are:

current market estimate

current market opinion

an estimate of price

current market price

probable selling price

current market appraisal

comparative market appraisal

comparative market analysis

[8.11] Transactions that do not reflect market value


When an agent or valuer is required to price a property for sale or for rent, they must by law,
base an anticipated price range for a property upon the following assumptions:

the price can be achieved by offering the property to an open, competitive market

a reasonable time is allowed to find a customer

the customer enters into an agreement in the full knowledge of the propertys market
potential and liabilities (such as zoning and legal use)

the client is educated to current market conditions and is not under any undue pressure
to sell

There are however, some circumstances when an agent, or valuer, must disregard market
facts even though they represent a current sale or rental transaction. Special circumstances
surrounding a sales transaction can affect the sale price. It is therefore important that the
agent or valuer ascertains what the specific circumstances are for each sale.

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Sometimes a property has a special appeal to a particular buyer who, in turn, is willing to pay
a premium for it. Under these circumstances, the selling price may not be a true indication of
market value. Prices above current market levels may be paid in the following circumstances:

Purchase by an adjoining owner

Buyer influenced by family or sentimental reasons

Compulsory acquisitions by statutory authorities (premium price paid can include


compensation)

Tenant purchasing the freehold of premises where they currently carry on the business in
order to preserve the goodwill of the business

Uneducated buyers, particularly interstate or overseas buyers not familiar with local
values. However, if a trend emerges where over a period of time a high volume of
property continues to be sold to interstate or overseas buyers, especially in a preferred
location such as gold coast beach or canal front land, then a recognisable trend emerges
and this becomes an undeniable market fact which must be considered when pricing real
estate

Sales that are leaseback. In this situation the owner sells the property subject to the
buyer granting the owner favourable leaseback arrangements over the property. Usually
a higher selling price is offset by lower rental rates that are more favourable to raising
capital, thus helping cash flow.

[8.12] Stigmatised property


A property may become stigmatised if it has been associated with an unsavoury event that
has occurred (or which is suspected to have occurred) on the property or in the immediate
vicinity of the property. While having no physical impact on the property itself, stigmas can
affect the way certain persons feel about the property psychologically.
Examples of psychological stigma types that might relate to a property or the surrounding
area may include (but are not limited to):

deaths (e.g. murder, suicide and natural causes)

crime (e.g. assault, theft, drug dealing, sexual crimes)

health related issues (e.g. contagious diseases)

troublesome neighbours (e.g. presence of sex offender, aggressive/offensive behaviour)

environmental conditions (e.g. soil contamination, aircraft noise, industrial aromas)

other psychological factors of significance to the buyer (e.g. the rumoured presence of
ghosts)

Stigmas may be current and persistent; however, most stigmas will eventually dissipate over
time. The important thing to remember about stigmas is that they are subjective and may be
dependent upon the particular cultural or religious background of the beholder, including any
particular beliefs, superstitions, experiences or idiosyncrasies they may have.

[8.12.1] Dealing with stigmatised property


Under the Commonwealth Competition and Consumer Act 2010 (CCA), agents are
prohibited from engaging in conduct that may be misleading or deceptive, or that is likely to
mislead or deceive, including via the omission of relevant material facts. The Fair Trading Act
1989 (FTA) and the Property Occupations Act 2014 (POA) have similar requirements.
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Property owners are generally not subject to the CCA, FTA or POA as they are neither a
corporation, nor engaged in trade or commerce, per se.
The sale, or letting, of stigmatised property is an emerging issue in Australia that has not yet
been fully dealt with; thus, common sense needs to prevail. At present, it appears that caveat
emptor (buyer beware) generally applies and there is no specific obligation for an agent to
disclose the presence of a stigma to a consumer. However, in circumstances where a stigma
is considered to be a material fact, non-disclosure would be considered misleading under the
CCA, FTA or POA.
Agents may not simply reply on having no knowledge of a particular stigma and it is therefore
prudent that agents ask the property owner about the possible existence of any stigmas
affecting the property - so as to determine whether or not these are likely to constitute a
material fact for the purposes of the relevant legislation. To facilitate this process, agents
should include a clause in selling or letting agreements requiring the property owner to
disclose all material facts, including those relating to potential stigmas. If the property owner
has any doubt about the presence of a stigma, they should seek their own legal advice.
Agents are not obliged to conduct their own research into the existence or otherwise of
stigmas but may be aware of potential stigmas through local knowledge or media reports.
Agents should inform the property owner if the presence of a stigma is suspected. The
property owner and agent may subsequently come to an arrangement on any role the agent
may play in verifying the presence or otherwise of the stigma.

[8.12.2] Is the stigma a material fact?


In real estate, a material fact is any fact that may have a bearing on a reasonable persons
decision to proceed with a property transaction. Conversely, an immaterial fact is one that is
irrelevant to the transaction. In determining whether or not a perceived stigma is a material
fact, the agent should ask interested consumers if they bring any particular sensitivity to the
transaction, and then carefully consider the following questions:

Does the stigma relate directly to the property itself (as opposed to the surrounding
area)? Note: while some stigmas may relate the surrounding area, they may also relate
directly to the property itself; e.g. an unpleasant industrial odour.

Does the stigma currently impact on the market value of the property?

Is it likely that knowledge of the stigma would affect a consumers decision to proceed
with the transaction?

Could consumers reasonably expect that disclosure ought to have been made
(particularly in circumstances where it is unlikely that the consumer could become aware
of the stigma of their own accord)?

If the stigma relates directly to the property itself and the answer to any of the remaining
questions is yes, then the agent is obliged to make a full disclosure on an up-front basis. In
other circumstances, caveat emptor is likely to apply and disclosure will only be required in
response to a direct consumer enquiry.
When dealing with stigmas that relate to race, religion, disability, gender or political
viewpoint, agents should have regard for Commonwealth and State and Territory antidiscrimination laws that may be applicable. Generally speaking, agents should avoid
perpetuating stigmas relating to these matters.
If any doubt remains as to whether or not disclosure is required in a particular circumstance,
the agent should err on the side of caution and make a disclosure (subject to the
considerations contained in the sections to follow).
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[8.13] Permission to disclose


Making a disclosure about a particular stigma will often affect the saleability of the property
and ultimately the likely market price. Even if the particular stigma is of little or no concern to
a particular consumer, it is likely that the consumer may attempt to use the stigma as the
basis for price negotiation in their favour. This should be considered a normal part of the sale
process in these circumstances and a judgement will need to be made as to whether or not
any proposed price reduction is reflective of actual market conditions. Understandably,
property owners will sometimes be reluctant to disclose the presence of potential stigmas to
consumers.
Agents have a duty to act in accordance with the instructions given by their client, however,
where a conflict between these instructions and the law is evident, the law prevails. While
disclosure is required by law in the circumstances outlined above, agents who disclose the
presence of a stigma without the permission of the property owner may be exposed to a
claim for civil damages.
For this reason, the agent should first obtain written permission from the property owner prior
to disclosing the presence of a stigma and, if the owner refuses permission, the agent should
consider whether or not to take any further part in the transaction. Consistency in this
approach by agents will both protect the reputation of the real estate industry and help
educate sellers that deliberate non-disclosure of material facts is unacceptable.
Once permission to disclose has been granted, the agent and the seller should agree on the
words that will be used by the agent when making the disclosure, and the agreed words are
recorded in writing as an attachment to the selling agreement.

[8.14] Making a disclosure to a consumer


Disclosures may be made to consumers orally, however, disclosures should be made in
writing to protect the agent against any later claim that disclosure was not made. Disclosures
must be made in full, not in part, in the form agreed between the agent and the property
owner. In making the disclosure, the agent should not go into unnecessary detail or express
a personal opinion about the stigma.
Where disclosure concerning a stigma is to be made on an up-front basis, the agent should
make this disclosure at the point where the consumer has expressed more than a passing
interest in the property. While the agent may first point out the more positive aspects of the
property, disclosure should be made early in the sale negotiation process and certainly
before an offer is communicated to the property owner or the consumer incurs a significant
expense as part of the negotiation process (e.g. through commissioning a building
compliance inspection). Disclosure in response to a direct enquiry should be made
immediately, or as soon as possible.
In the case of auctions, the auctioneer should make a direct reference to the stigma before
the auction is conducted. Again, disclosures should be made in writing to protect the
auctioneer against any later claim that disclosure was not made. For instance, written notices
concerning the stigma could be displayed prior to the auction.
It is not a requirement that the presence of stigmas be disclosed within advertising materials.
However, agents must be mindful to ensure that the advertisement does not mislead
consumers by including information that contradicts the presence of the stigma. For example,
an advertisement relating to the sale of a rural property should not include a reference to
fresh air if a disclosure relating to the periodic presence of unpleasant industrial odours may
later be made.

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[8.15] Agency disclosure policies


The licensee should consider establishing a policy on the disclosure of certain stigmas. To
avoid any potential conflict of interest, this policy should be available in writing to provide to
sellers that may engage the services of an agent, prior to any arrangement to do so being
entered into.
In addition, agents have a number of disclosure requirements which must be made to both
sellers and buyers. These include disclosure to all relevant parties if the agent has referred a
buyer or seller to a service provider (such as a finance company) will receive a rebate,
discount, commission from a service provider (such as a finance company) These issues,
and other requirements will be studied in later units.

[8.16] Learning activity 7


Question 1: What is the meaning of market value as used in the real estate industry?
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Question 2: What is considered to be the market price of a property for sale?
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UNIT 9 - THE COMPARATIVE MARKET ANALYSIS (CMA)


[9.1] Comparative market analysis
Real estate agents and auctioneers are required to substantiate any residential property
price quotation they provide with a comparative market analysis (CMA), for an offered
property, which is legally defined a document comparing the offered property with at least
three properties sold within the previous six months that are of a similar standard or condition
to the offered property and are within five kilometres of that property. However, if the CMA
cannot be prepared due to being unable to meet the legislative requirements, a written
explanation must be provided, explaining how the agent decided the market sales price.
The agents role is to provide recent research, including comparative sales, if possible, which
enables the agents client to make an informed decision when putting a price on their
property for sale, rather than the agent just giving the client a price. It is a sensible precaution
for agents to document any advice given to the agents client; and the CMA or written
explanation formalises this process for the benefit of both the agent and the seller.
The applicable sections of the POA are sections 213 and 215.
Property Occupations Act 2014
Part 11 General contraventions and evidentiary matters
Section 213 Representation of price of property to sellerauctioneer
(1) This section applies if a person wanting to sell residential property (a seller) asks an auctioneer for
information about the price at which the residential property that is to be, or may be, offered for sale
by auction (the offered property) is likely to be sold if it is sold by auction.
(2) The auctioneer must give the seller a written notice stating that if the seller does not set a price at
which the seller agrees to sell the offered property (a reserve price), the offered property will be sold
for the price offered by the highest of any bids made when the property is auctioned.
Maximum penalty200 penalty units.
(3) If the seller appoints the auctioneer to sell the offered property, the auctioneer must obtain from
the seller before the offered property is auctioned a written notice stating
(a) if the seller sets a reserve pricethe reserve price; or
(b) if the seller does not set a reserve pricethat the seller understands the offered property will be
sold for the highest of any bids made when the offered property is auctioned.
Maximum penalty200 penalty units.
(4) An auctioneer must not help a seller decide the reserve price for offered property unless, before the
seller decides the price, the auctioneer gives the seller
(a) a copy of a comparative market analysis for the offered property; or
(b) if a comparative market analysis cannot be prepared for the offered property, a written explanation
showing how the auctioneer decided the market value of the property.
Maximum penalty540 penalty units.
Property Occupations Act 2014
Part 11 General contraventions and evidentiary matters
Section 215 Representation of price of propertyreal estate agent
(1) This section applies if a person wanting to sell residential property asks a real estate agent for
information about the price at which residential property that is to be, or may be, offered for sale,
whether or not by auction, (offered property) is likely to be sold.
(2) If the real estate agent decides to give the person the information, the real estate agent must, when
giving the person the information, give the person
(a) a copy of a comparative market analysis for the offered property; or

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(b) if a comparative market analysis can not be prepared for the offered property, a written
explanation showing how the real estate agent decided the market value of the property.
Maximum penalty540 penalty units.

[9.2] Advice about market sale price


A real estate agent, in attempting to obtain an appointment to sell, buy, exchange or lease
property, must not knowingly mislead a person about the propertys market price. If a real
estate agent gives a person an opinion about the market price or market rent for property,
the agent must not accept instructions from the person to act as a real estate agent for the
property unless the agent has given the person a written statement of the material facts that
the agent has taken into account in forming an opinion about the propertys market price or
market rent.
An agent must take all reasonable steps to be informed regarding the essential facts, which
affect current market conditions in order to be in a position to advise their clients and/or to
assist customers in a responsible manner. If agents provide appraisals or market forecasts in
a volatile market, they shall identify that volatility to the relevant consumer and shall warn the
consumer to keep that volatility in mind when evaluating their appraisals or market forecasts.
Property managers must provide to the prospective lessor a written statement of the material
facts that they have taken into account when providing a rental appraisal.
Agents must not engage in the practice of setting different tiers of pricing, with higher prices
being charged to consumers who are, for example, reside outside the particular area of the
property or who are otherwise unaware of material facts such that they are prepared to pay
prices for the property that are higher than the prices that those who are aware of those facts
would be prepared to pay.
[9.3] Representation of price of property
When asked about the estimated sale price of the property, sections 213 and 215 of the POA
(studied earlier in this unit) requires the agent to provide a seller or a prospective seller with a
comparative marketing analysis or a written explanation of the agents price advice. It is an
offence for an agent to make a false representation as to the true estimated selling price of
the property.
There are also restrictions placed upon the agent who is asked by prospective buyers to
reveal the comparative marketing analysis or written explanation given to the seller, without
the sellers written authorisation to release such information. There are similar restrictions
placed upon auctioneers and agents pertaining to the existence of, or the amount of, the
reserve price of a property being sold by auction to any potential bidder or buyer.
Section 213 of the POA refers to the representation of the price of property if a person
wanting to sell residential property asks an auctioneer for information about the price at
which residential property that is to be, or may be, offered for sale by auction (offered
property) is likely to be sold if it is sold by auction. The auctioneer must give the seller a
written notice stating that if the seller does not set a price at which the seller agrees to sell
the offered property (reserve price), the offered property will be sold for the price offered by
the highest of any bids made when the property is auctioned.
If the seller appoints the auctioneer to sell the offered property, the auctioneer must obtain
from the seller before the offered property is auctioned a written notice stating the following:

if the seller sets a reserve pricethe reserve price

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if the seller does not set a reserve pricethat the seller understands that the offered
property will be sold for the highest of any bids made when the offered property is
auctioned

An auctioneer must not help a seller decide the reserve price for offered property unless,
before the seller decides the price, the auctioneer gives the seller a copy of a comparative
market analysis for the offered property; or if a comparative market analysis cannot be
prepared for the offered property, a written explanation showing how the auctioneer decided
the market value of the property.
Section 214 of the POA requires an auctioneer not to indicate reserve or other price to bidder
if a person (the bidder) wanting to bid for residential property that is to be, or may be, offered
for sale by auction (offered property) asks an auctioneer for information about the price at
which the offered property is likely to be sold when it is auctioned.
The auctioneer must not in any way disclose to the bidder:

the reserve price set under section 213 for the offered property

an amount the auctioneer considers is a price likely to result in a successful or


acceptable bid for the offered property

However, the auctioneer does not commit an offence if, on the sellers written instructions,
the auctioneer gives the bidder the comparative market analysis for the offered property; or
the written explanation showing how the auctioneer decided the market value of the property,
which the auctioneer had given the seller.
Section 215 of the Property Occupations Act refers to the representation of the price of
property by a real estate agent if a person wanting to sell residential property asks a real
estate agent for information about the price at which residential property that is to be, or may
be, offered for sale, whether or not by auction, (offered property) is likely to be sold. If the
real estate agent decides to give the person the information, the real estate agent must,
when giving the person the information, give the person a copy of a comparative market
analysis for the offered property; or if a comparative market analysis cannot be prepared for
the offered property, a written explanation showing how the real estate agent decided the
market value of the property.
Section 216 of the POA requires a real estate agent not to indicate reserve price to potential
buyer if a person wanting to buy residential property (potential buyer) asks a real estate
agent for information about the price at which residential property that is to be, or may be,
offered for sale, whether or not by auction, (offered property) is likely to be sold or is, or is
likely to be, offered for sale.
If the offered property is to be offered for sale by auction, the real estate agent must not
disclose to the potential buyer:

the reserve price set for the offered property

an amount the real estate agent considers is a price likely to result in a successful or
acceptable bid for the offered property

If the property is not to be offered for sale by auction and the seller has instructed the real
estate agent not to disclose the price at which the seller is willing to sell the offered property,
the real estate agent must not disclose to the potential buyer the price at which the seller is
willing to sell the offered property.
However, the real estate agent does not commit an offence if, on the sellers written
instructions, the real estate agent gives the potential buyer a copy of the comparative market
analysis for the offered property, or the written explanation showing how the real estate
agent decided the market value of the property, which was given to the seller.
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Legislation requires an auctioneer or agent to provide a CMA or written statement when


called upon by a seller to give information about the price at which their property is likely to
be sold for. The requirement by law for a CMA is three comparable properties within a five
kilometre range of the property to be appraised, that have sold within the past six months.
The above is the minimum legal requirement, however a well prepared CMA containing more
than is legally required is one of the most important tools an agent will use as a real estate
professional.
Whereas the legal requirement focuses on past sales only, there is other data available to
the real estate agent that when compiled into a more extensive CMA, provides far more
information to assist the seller to make an informed decision about the selling price of their
property.
Remember, if a CMA cannot be completed, agents must provide a written statement to the
client.

[9.4] What a quality CMA should include:

three or more recent sales of comparable property as per ownership database research

any recent sales which the agent knows are not yet recorded in databases

a list of comparable properties presently on the market in the same area

a report compiled by the agent describing current market conditions including:

the average time a property is on the market before it sells

selling price compared to list price

any market conditions that could impact on the sale

For agents to be able to competently prepare a CMA they need to have good quality records
of all the real estate activity in their area. They need to drive the area at least once a week to
check out any new listings with other agents, read the local and regional newspapers and
constantly check the real estate websites and proprietary databases.

[9.5] Price ranging


Agents are at a high risk of misleading consumers if they provide misleading estimates on
the likely selling prices of particular properties. The Australian Competition and Consumer
Commission (ACCC) who regulates the Competition and Consumer Act (CCA) has in the
past expressed concern by reports that properties have been listed with a price range where
the reserve price is at the higher end of the price range and at no stage is the seller likely to
sell the property at the lower end of the range.
The ACCC have also expressed concern about agents who have understated the likely
selling price of a property in order to generate interest from potential buyers. There have also
been various reports about agents overstating the likely selling price to the property owners
which enables the agent to obtain further listings or even to entice the sale by auction.
The marketing of properties for sale with reference to a range of prices carries with it a
substantial risk that there will be misleading or deceptive conduct. This is particularly the
case when the range of prices the subject of the marketing includes amounts that are below
those that the seller is reasonably likely to consider accepting.

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Real estate agents must be aware that:

The Competition and Consumer Act requires adequate and appropriate disclosure at all
times of all relevant price information, so that prospective buyers and the general public
can make informed pricing decisions.

Advertising or quoting a property at a price significantly less than the agents estimated
selling price, the reasonable market appraisal or the prices that the seller has indicated
he or she is likely to accept constitutes misleading or deceptive conduct.

Agents must ensure that the use of price range marketing does not mislead or deceive
consumers as to the price at which the sellers of the property are actually prepared to sell
the property; the price at which the sellers of the property have instructed the agent to
sell the property; or the price which the agent believes the property will be sold for or the
estimated market price of the property.

When an agent markets a property using a price range, the agent should obtain written
confirmation from the seller before the property is advertised that the seller will seriously
consider all prices within the advertising range, including the price at the lower end of the
range.

Price ranges advertised by an agent should not include any price that is less than a
price used in a previously rejected offer unless evidence exists that the seller has now
changed his or her mind and would accept that lower price.

Over-quoting by a real estate agent of the estimated market price of a property in order to
obtain a listing from a seller amounts to misleading or deceptive conduct. Further,
underquoting the potential selling price of a property so as to attract the interest of buyers
also amounts to misleading or deceptive conduct.

And consequently:

Real estate agents, in attempting to obtain an appointment to sell, auction, buy,


exchange or lease property, must not mislead or deceive a person about the estimated
market price of the property.

A real estate agent must only express an opinion about the estimated market price of
freehold or leasehold property based on reasonable grounds.

A real estate agent must tell his or her client immediately if the agent considers that the
freehold or leasehold estimated market price of the property has substantially altered
from any estimated market price that the agent has previously placed upon that property.

A real estate agent may only advertise or market a property at price that the agent has
been instructed by the seller in writing to so advertise or market that property.

A real estate agent must not mislead or deceive potential buyer as to the amount or
terms of offers that a seller may consider accepting.

Agents must not engage in bait-advertising.

[9.6] Over capitalised property


There are situations when appraising a property where there is very little direct relationship
between cost and value.
When an agent prices a property there can be a discrepancy between what the property has
cost the owner and what the CMA research says it is worth in the current market. This occurs
when owners overcapitalises their property. An example of this is when buyers purchase a
home for $365,000 in a suburb where houses sell for around $300,000 to $400,000. They
then renovate the house with top of the range kitchen, bathrooms and appliances. Then they
add a media room and put in a lap pool. They also spend another $20,000 on fencing and
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landscaping. By the time they have finished the property owes them around $580,000. Now
the couple decide they want to return interstate for family reasons and decide to sell the
house just 8 months after they bought it.
If the property comes on the market at what the property actually cost it would be considered
by the buyers to be overpriced compared to others in the area. Buyers are usually very
reluctant to buy the most expensive house in an area. If a buyer has $500,000 to $600,000
they prefer to be surrounded with other houses of the same or higher value.
It is the client who ultimately determines the price the property is listed for. Likewise the
buyer is free to make an offer to purchase at the price they believe the property is worth. It
is the agents role to negotiate between the seller and the buyer and guide them to a mutual
agreement in the form of a contract.

[9.7] When should a CMA be used?


A CMA (or a written statement) must always be used when listing and pricing a property for
sale. However, a CMA has many other important uses. It is very useful:

as a backup when canvassing for listings

for following up private sales remember a good CMA can arouse the curiosity of even
the most difficult private seller

when sent out as a periodic report to landlords

used in curb side appraisals for bank managers, valuers, finance companies etc.

convincing a potential buyer of a propertys fair market price

relating the effectiveness of specialised marketing campaigns, highlighting time on


market and selling price

See the following page for an example CMA.

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$500,000

Example of a CMA

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[9.8] Research and property appraisal


An appraisal is a supportable estimate of the worth of a property. It is an estimate of a
propertys monetary value on the open market at a given date. Most appraisals are
undertaken as part of the listing process. For instance, an agent will be asked to inspect the
property and report back to the owners with a market appraisal. In other words, the agent
has to provide a realistic selling range for the property in the current marketplace.
Not all market appraisals result in a listing. Some appraisals are simply a fact-finding
exercise for the property owner who is keen for one reason or another to ascertain the
current worth of their property.
A market appraisal is a supportable estimate of the worth of a property, therefore the agent
must by law, be able to substantiate how they arrived at that price.
A real estate agents appraisal must be based on data obtained from the marketplace. This
data is obtained by researching:

recent sales or rentals of similar properties

current competition from similar properties in the market

current market conditions

assessing the market appeal of a particular property

[9.9] Recent sales or rentals of similar properties


Agents know that it is the customers (buyers and tenants) who ultimately decide the market
price of a property. This is facilitated through an education process of comparing the prices
of similar properties currently on the market or properties that have recently sold or rented.
People who are in the market to buy or rent property usually spend a lot of time researching
before they even enter the market. Much of this is done through the internet and the local
newspapers. Many also visit open for inspections on a regular basis. They are educating
themselves about market conditions and researching prices. They constantly compare
properties to determine what sort of property they should expect to buy or rent for the amount
they are able to spend.
Comparison is by far the most common method adopted by both agents and valuers to price
residential property, and underlies all formal valuation methods. The direct comparison or
comparable sales approach establishes the price of a property by comparing it with the sale
or rental of a similar or comparable property.
Once an agent has isolated recent sales or rentals into a comparable price range, they must
then ascertain all the facts regarding each property to determine its suitability as a direct
comparison.
This is a fairly objective process that involves factors such as:

the features of the land including area, frontage, aspect and general topography and
zoning

the size and quality of improvements on the land

the style, age and method of construction of the buildings

the analysed yield or income from the property

the future development potential of the property

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depreciation and obsolescence of improvements, plant and equipment

By objectively isolating all this information from the sales or rentals of other properties in the
area, an agent is able to more accurately determine market price.
The best transactions to use for a direct comparison are:

most similar to the subject property

in the same or a similar region to the subject property

recent transactions

[9.10] Information sources


Basic sales data can be sourced from a number of suppliers. Agents can access records of
all sales using the internet based proprietary databases from companies such as Pricefinder
or CoreLogic RP Data (there is a subscription fee to access this information). Both of these
companies source their information directly from the Department of Natural Resources and
Mines (DNRM).

[9.11] Data from these sources may include:

the dates of all previous sales transactions in a given area

the selling price and the names of the sellers

the names and addresses of the new owners

the real property description

land area and zoning

department of natural resources unimproved capital value of the land

properties that are presently on the market

Legislation in July 2003 made it illegal for real estate agents in Queensland to use
information obtained from the Department of Natural Resources and Mines in directmarketing (telemarketing, mass-mailing of unsolicited letters etc.) When an agency signs a
contract with a commercial search company, they agree not to use the information for directmarketing purposes.
[9.12] Consequences of incorrect pricing
Property Occupations Act (sections 213, 214, 215 and 216) which was studied earlier were
introduced in an attempt to stop agents from misleading sellers by overpricing their property
in order to win the business. It is an agents legal duty to act according to the POA and to
behave in a professional manner. The public rely on real estate agents to provide them with
research and to tell them the truth which will enable them to make informed decisions when
selling their properties.

[9.13] Sellers with unrealistic expectations


In some instances, no matter how much research an agent provides, some sellers will still
believe their home is worth a lot more than the market value and will argue with the agent.
However, if the agent has provided a CMA or written statement as required by law, the
situation does not become one of, whose opinion is the correct opinion. The agent is not
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providing an opinion of price; the agent is providing research that will enable the seller to
make an informed decision about the price of their property.
If the sellers do not want to make their pricing decision based on the research provided, they
can instruct the agent to market the property at whatever price they choose. If the agent
agrees with the seller and lists the property at the inflated price then the agent is compelled
to market the property at that price. The price will be entered into the PO Form 6 and that will
be the only price the agent can advertise the property at otherwise they would be breaking
the law.
[9.14] Agents duty to inform seller
If the agent knows that the price the sellers are asking for their property is unrealistically
inflated or (on some very rare occasions) under-priced, then the agent has an obligation to
inform them.
If the agent has complied with the law and done all that is possible to inform the seller
regarding the market value of the property and the seller remains unrealistic about price,
then the agent must make the decision as to whether or not they want the listing. The agent
must decide whether they want to spend the next few weeks (or months), putting a lot of
effort into a property that is not likely to sell.
An agent should also advise a client of any occurrences or circumstance that could impact
on the price of a property while it is on the market. If for instance, a similar property sells for
considerably more or less than the asking price of the subject property the client must be
informed.
When appraising a property an agent also has a duty to find out or verify facts material to the
sale, before pricing the property and afterwards as the occasion arises.
Property Occupations Regulation 2014
Part 5 Conduct standards
Section 20 Finding out or verifying facts material to the sale of property
(1) An auctioneer appointed to sell property must take reasonable steps to find out or verify the facts
material to the sale that a prudent auctioneer would have found out or verified to avoid error,
omission, exaggeration or misrepresentation.
(2) The steps must be taken before the auctioneer auctions the property and afterwards as the occasion
arises.
(3) A real estate agent appointed to sell, purchase, exchange or lease property must take reasonable steps
to find out or verify the facts material to the sale, purchase, exchange or lease that a prudent real estate
agent would have found out or verified to avoid error, omission, exaggeration or misrepresentation.
(4) The steps mentioned in subsection (3) must be taken before the agent lists the property and afterwards
as the occasion arises.

[9.15] Highest and best use


When an agent is called upon to appraise a property it is vitally important that the agent
conducts research necessary to ascertain exactly what the property can be used for, its
highest and best use. This means that the agent must conduct a search to discover the
legal zoning of the property and to discover whether the property is zoned for a better legal
use than the one for which it is presently being used. If this is the case it will consequently
attract a higher price than if it was sold under its present use.
An example of this is where a family home is located in an area that has been recently zoned
for unit development. If an agent neglects to carry out this research and advise the seller
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accordingly and the client loses money due to the agents negligence, a court of law is
unlikely to accept as a defence that the agent did not know that the local authority had
changed the zoning. The agent cannot claim to be ignorant of the change of zoning and not
being in a position to assess the impact of these changes on the value of a property.
It is an agents duty to be well informed about real estate, and events and circumstances that
could impact on the value of the real estate, in the agents area of expertise.
It is therefore essential that an agent should not complete an appraisal and give a seller
advice on the price of their property until they have conducted all the necessary research,
and discovered all the pertinent facts relating to the property, in order to provide the seller
with the information they need to make an informed decision.

[9.16] The importance of the title search


As studied at the beginning of this unit, an agent should ensure that they conduct a title
search before they finalise the market price of a property. A title search is the only search
recognised by a court of law as being a reliable indicator as to whether there are any
easements or covenants on the title that could affect the value of the property.
Sometimes sellers are not aware of, or have forgotten that there are easements on their
property titles. There are also sellers who are aware there are easements and hope that the
buyer will not discover the fact.
Easements can affect the value of land enormously and if an easement is not disclosed on a
contract of sale, the buyer on discovering the undisclosed easement can terminate the
contract at any time up until two business days before the settlement date.
Some sellers do not realise this and it is the agents duty to inform them of the seriousness of
not disclosing encumbrances on the title when they are selling their property.

[9.17] The Registered Plan search


A Registered Plan is the only truly reliable source of the land size. If a seller is unable to
show the agent the boundary pegs and it is not obvious where the boundaries are, it is
probably wise to conduct a Registered Plan search.
A prudent agent would firstly ask the sellers if they have a copy as they may have one in
their records from when they bought the property.
Agents need to be aware that people often encroach into council land with their gardens and
landscaping and this can place an agent in the position of inadvertently making false and
misleading statements regarding the property when showing it to a buyer. If a buyer goes to
contract on a property and has a survey done prior to settlement and discovers there is in
fact less land than they were lead to believe they may terminate the contract.
An agent should never indicate to a buyer where boundaries are unless they have actually
sighted the survey pegs.
When an agent is appraising a property it is important that boundaries are discussed and if
there is any doubt where they are then a Registered Plan search should be conducted.

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[9.18] Complete property description


The street number should form part of the address of the property. If this is not possible, the
agent should ensure the correct postal address is used. If there is no defined postal address,
inquiries should be made with the relevant local authority to ensure an accurate location can
be determined.
When describing the property in forms and contracts, the full and correct real property
description is to be used. The description should include the lot number, registered plan
number, parish and the area of the land. It should also include the Certificate of Title (or the
registered number of the Crown lease if applicable). Where possible the information should
be copied directly from the Certificate of Title (or lease); but if this is not possible, it is often
set out in a brief form on the propertys rates notice.
If the seller is in any doubt as to the exact property description the seller should ensure that a
full and proper description is written into the contract.

[9.19] The Competition and Consumer Act (CCA) and property pricing
The CCA provides strict guidelines on an agents duty of care when pricing property. The
areas of the CCA that impact most strongly on an agent are summarised as follows:

The CCA states clearly that an agent may be liable for a false statement even if the
statement was made innocently and with no intention to mislead the property owner

An agent must be able to prove that they had a reasonable basis for making a prediction
or opinion of price

Experts, such as agents, will be taken to have verified information that they provide to a
seller. This means that an agent must have up-to-date information when considering the
price of a property. This includes the current zoning and future development potential,
legal use and its capacity to be put to a higher and better use, and whether or not it
complies with the law

Agents have a legal duty to be an expert (agents are deemed to be experts when called
upon to price property), then the agent must also ensure they do not create a false
impression by what has been left unsaid. For instance, if an agent knows that a
comparable property sold for $40,000 less than the subject property and does not reveal
that fact to the seller and the seller subsequently suffers a loss, then the agent may be
liable. A loss in this case could be income lost due to time on the market or losses
incurred as a result of missing out on another opportunity while waiting for the property to
sell.

An agent is considered to be an expert in their field and the law stipulates that a seller should
be able to rely on the agent to provide research, advice, and information to assist them to
make the right pricing decisions and to achieve the maximum price for their property.

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UNIT 10 - AGENCY LISTINGS


[10.0] In real estate, there are three distinct types of agency listings in which the client and
agent can enter; namely:

open listing

sole agency listing

exclusive agency listing

An open listing is a written agreement entered into between a person (seller) and a real
estate agent (selling agent) under which the seller appoints the selling agent, in accordance
with the terms of the agreement, to sell stated property. Under the agreement, the seller
retains a right to sell the sellers property during the term of the agreement; or to appoint
additional real estate agents and pastoral houses as selling agents to sell the property on
terms similar to those under the agreement; and the appointed selling agent is entitled to
remuneration only if he or she is the effective cause of sale. The appointment of the selling
agent can be ended by either the seller or the selling agent at any time.
Basically, an open listing can be anyones listing.
The only difference between an exclusive agency and a sole agency is the extent of the
entitlement of a selling agent to receive an agreed commission or other reward on the sale of
particular property. Under an exclusive agency, a selling agent is entitled, on the sale of
particular property and in accordance with the terms of an agreement with the seller of the
property (the Property occupations Form 6), to receive an agreed commission or other
reward, whether or not the selling agent is the effective cause of the sale. An exclusive listing
means the listing is exclusively listed with one real estate agent. However, if the sale were
subject to a sole agency listing, the selling agent would not themselves be entitled to the
commission or other reward if the seller were the effective cause of the sale. A sole listing is
still exclusively with one real estate agent however, the seller can sell the property privately
without paying the agent commission.
Prior to the appointment to sell residential property, where such appointment is either an
exclusive or sole agency listing, the agent is required to clearly bring to the attention of the
client the differences between an open, sole or exclusive agency listing before the
appointment of agent is signed. If the agent fails to bring the explicit differences of the three
types of agency listings to the client, the agent commits an offence for failing to do so; and
will result in the loss of all commission pursuant to the provisions of the Property
Occupations Act.
It is prudent for the agent to obtain written acknowledgement, of the agents pre-appointment
advice concerning the differences between the open, sole and exclusive agency listings,
from the client at the same time as signing the appointment. Best practice would dictate to, at
a minimum, have the client initial and date next to the agency provisions to indicate that the
agent has brought this to the clients attention when discussing the appointment. The REIQ
Schedules and essential terms and conditions to be attached to the Property occupations
Form 6, include specific provisions relating to sellers acknowledgements in this regard.
It is important to note that before the client signs the Property occupations Form 6, the agent
must give the client a genuine opportunity to obtain independent professional advice of the
appointment. The main issue raised is that the opportunity to seek advice must be genuine
and withstand the test of scrutiny. Similarly, the agent has an obligation to both the seller and
the prospective buyer of a property, before requiring them to sign any contract for the sale or
purchase of that property.
A sole or exclusive appointment can be no more than 90 days, as per section 103 of the
POA. However, the 90 day limit does not apply if the appointment is for the sale of 3 or more
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residential properties; or is for the sale of a lot in a community titles scheme as part of the
sale of management rights to the person who is to become the letting agent for the
community titles scheme. Should the client (or agent) wish to terminate an appointment of
agent (for sole agency or exclusive agency listings), a minimum of 30 days notice must be
given unless both parties agree to an earlier day for the appointment to end.
However the appointment must be for at least 60 days, unless both parties agree, in writing,
to an earlier day for the appointment to end.
For example, if a client wishes to terminate an appointment in the first week of a sole or
exclusive agency appointment, they may give 30 days notice to the seller, but will be
required to wait until at least 60 days after the appointment commenced before the
appointment will terminate.
An agent can be reappointed for a further term if the property hasnt sold during the original
appointment time frame. Meaning that a maximum time frame for a sole or exclusive is 90
days in length, that is 90 calendar days and starts from the time the client has a copy of the
PO Form 6 (it is then the agent can legally begin working for the client). If the client receives
a copy of the PO Form 6 at 10 pm on the day they signed the document, day one is that day
and there are now 59 days left of the exclusive or sole appointment. It is important to note
that although an exclusive or sole appointment has a maximum time frame of 90 days, the
client may choose to reappoint the agent for a further 14, 30 or 45 days or any other time
frame agreed providing it does not exceed 90 days. It doesnt have to be the maximum 90
day time frame.
If the property doesnt sell during the listing time frame, the client can reappoint the agent for
a further sole or exclusive term. The PO Form 6 can be used. A reappointment can only be
made if:
the reappointment of the agent is made on the approved form (Part 10 of the PO Form 6)
the reappointment is not made earlier than 14 days before the current appointment ends
(it is crucial that agents comply with this measure as significant penalties apply if an agent
seeks reappointment prior to 14 days before the then current appointment expires).
the original appointment has not expired
there are no changes to the terms of the original appointment
If the original appointment has expired, or the parties wish to make changes to an existing
appointment, a new Property Occupations Form 6 must be completed.

[10.1] Soliciting for listings


REIQ ethical standards (Article 9) of the REIQ Standards of Business Practice states:
Members shall not solicit a listing which is currently listed solely or exclusively with another
Member. However, if the listing agent, when asked by the inquiring agent refuses to disclose
the expiration date and nature of such listing the inquiring agent may contact the owner to
secure such information and, in any case may discuss the terms upon which the inquiring
agent might take a future listing or, alternatively, may take a listing to become effective upon
expiration of any existing exclusive listing.
Members shall not harass the public by attempting to obtain appointments to act resulting
from information published in death or funeral notices.

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Notes:
When Members are contacted by the client of another real estate agent regarding the
creation of an exclusive relationship to provide the same type of service, and Members
have not directly or indirectly initiated such discussions, they may discuss the terms upon
which they might enter into a future agreement or, alternatively, may enter into an
agreement which becomes effective upon or after expiration of any existing exclusive
agreement.
The fact that an exclusive agreement has been entered into with another real estate agent
shall not preclude or inhibit any Member from entering into a similar agreement to become
effective after the expiration of the prior agreement.
Article 10 - Interfering with another agents appointment
Members shall not engage in any practice or take any action inconsistent with the agency or
other exclusive relationship recognised by law that other real estate agents have with clients.
Notes:
This Article is not intended to prohibit aggressive or innovative business practices which
are otherwise ethical and does not prohibit disagreements with other real estate agents
involving commission, fees, compensation or other forms of payment or expenses.
This Article does not preclude Members from making general announcements to
prospective clients describing their services and the terms of their availability even though
some recipients may have entered into agency agreements or other exclusive
relationships with another real estate agent. A general telephone canvass, general mailing
or distribution addressed to all prospective clients in a given geographical area or in a
given profession, business, club, or organisation, or other classification or group is
deemed general for purposes of this standard.
This Article is intended to recognise as unethical two basic types of solicitations:

First, telephone or personal solicitations of property owners who have been identified
by a real estate sign or information service as having exclusively listed their property
with another real estate agent and

Second, electronic, mail or other forms of written solicitations of prospective clients


whose properties are exclusively listed with another real estate agent when such
solicitations are not part of a general mailing but are directed specifically to property
owners identified through compilations of current listings, for sale or for rent signs,
or other such sources of information.
This Article does not preclude Members from contacting the client of another agent for the
purpose of offering to provide, or entering into a contract to provide, a different type of real
estate service unrelated to the type of service currently being provided (e.g., property
management as opposed to agency). However, information received through any offer of
conjunction may not be used to target clients of other real estate agents to whom such
offers to provide services may be made.
The REIQ articles (ethical standards) apply to members of the Institute, and through their
membership, accredited agencies agree to uphold and value the ethical standards.

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[10.2] Learning activity 8


Question 1: Name the distinct types of property listings which a client can enter with the
agent.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

Question 2: What are the differences between each type of listing?


_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

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PART 5: SALES PROCESS


UNIT 11 - THE SALES PROCESS
[11.0] The main tasks for a real estate salesperson are:

prospecting for properties to sell

listing properties for sale

obtaining an authorised agreement to sell a property (sales agency agreement) PO


Form 6

marketing properties for sale

presenting properties to prospective buyers

negotiating the terms of sale with buyers and sellers

monitoring the contract completion

monitoring the settlement of the transaction

[11.1] Listing properties for sale


The primary purpose the agents gathering of pertinent information concerning a property is
to ensure that the property is listed at a price that reflects the true state of the market.
Most agencies use proprietary listing form which is used to record all property details. Whilst
the forms used may differ from office to office, they are all designed to record basically the
same information. The listing form is something for the agents personal use and the agency
office. It will not necessarily be seen by sellers or buyers. The type of information an agent
will need to know includes:

the type of property

the features of the property

price and terms of sale

existing mortgage details

when the owner wishes to sell

location

method of sale

The listing form is not the same as the listing (or selling) authority (the PO Form 6). It is the
internal documentation the agent uses when preparing advertisements and when trying to
match properties to prospective buyers.
One of the essential facts to obtain is the reason why the property owner wants to sell. The
sellers motivation for selling will influence their eagerness to sell and their consideration of
offers.
If they have a genuine and important reason for selling, they will probably be more likely to
set a reasonable price for the property, making the sales process easier for the agent.
Some of the reasons people may have for selling include:

being forced to sell by a bank or financial institution

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executing a will

family settlements

have bought another property

financial need, income, investment, superannuation

need a larger or smaller home

wish to move to another area

starting a family

moving for work

There are many more reasons for people wishing to sell their property and finding out the
dominant motive for selling can greatly influence many factors involved in the selling process.

[11.2] Disclosure to buyer


Section 157 of the POA requires that the agent for the sale of residential property must
disclose the following to any prospective buyer of the property of any relationship, and the
nature of the relationship (whether personal or commercial), the agent has with anyone to
whom the agent refers the buyer for professional services associated with the sale; such as:

a family relationship

a business relationship, other than a casual business relationship

a fiduciary relationship

a relationship in which one person is accustomed, or obliged, to act in accordance with


the directions, instructions, or wishes of the other

The agent must also disclose whether the agent derives or expects to derive any benefit from
a person to whom the agent has referred the buyer and, if so, the amount or value of the
benefit; the amount, value or nature of any benefit any person has received, receives, or
expects to receive in connection with the sale, or for promoting the sale, or for providing a
service in connection with the sale, of the property.
Examples of persons who may receive a benefit may be:

finance broker

financial adviser

financier

property valuer

residential property agent

seller

solicitor

The disclosure is effective only if it is given to the prospective buyer in the approved form
Property Occupations Form 8; and acknowledged by the prospective buyer in writing on the
approved form; and given and acknowledged before a contract for the sale of the residential
property is entered into.
The Property Occupations (PO) Form 8 Disclosure to prospective buyer applies only to
residential property sales. The PO Form 8 is a statutory form and the agent must only
provide it in the approved format. The agent must sign the disclosure and provide it to the
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buyer; and have it signed by the buyer, before a contract can be entered into. The detailed
instructions at the end of the form will help to determine what must be disclosed and what
does not have to be disclosed to buyers.
The PO Form 8 must be completed in relation to any benefit the agent or any other person
derives or expects to derive from the sale, promotion of the sale or service in connection with
the sale.
However, disclosure about relationships only needs to be given if the agent has referred a
buyer to a service provider for professional or other services and the agent has a business or
personal relationship with the service provider or the agent has or will benefit from the
referral. If an agent refers a buyer to a person for professional services and the agent does
not have any business or personal relationship with the service provider and is not receiving
any benefit then that part of the disclosure form does not need to be completed.
This disclosure has a major impact on agency practice. The agent is required to declare if
they have, or will be referring the buyer to persons for professional services. The term
professional service is broad and agents are advised to disclose any business relationship
that is the subject of a referral (e.g. lawyers, valuers, and financial advisers).
This provision also includes many of the services an agent has traditionally referred people
(e.g. pest and building inspectors). If the agent is receiving any benefit from the service
provider, or feels obliged to refer business through a professional arrangement, then this
relationship should be disclosed.
An agent should be cautious when making any referrals and if in doubt, disclose. Some
agents may take the attitude that it is prudent not to make referrals. However, consumers do
expect this as part of the service. Modern real estate practice has become accustomed to
delivering a high level of integrated service to consumers. This includes assisting consumers
to explore a range of products and services relating to finance, conveyancing solicitors,
architects, decorators, designers, building inspectors and property maintenance providers.
The important issue is how this service is provided. If an agent is genuinely assisting a
consumer and making the appropriate disclosures, then all parties benefit.
One final warning comes about an agents legal liability when making referrals, namely,
caution must be exercised when making any form of business or personal referral.
Consumers should be advised to make their own investigations and to seek quotes from a
range of advisers or specialists to satisfy themselves a fair and competitively priced product
or service is being received. If the agent refers a buyer to a person for professional services
and the agent does not have any business or personal relationship with the service provider
and/or is not receiving any benefit, then that part of the PO Form 8 does not need to be
completed.
The buyer must acknowledge and sign the PO Form 8 before a contract can be entered into.
We will study the PO Form 8 in detail later in this unit.
In the sale of a business, it is likely that the seller will be required to produce financial
statements for the business to satisfy the buyer that trade figures are as originally stated.
Buyers are sometimes allowed to attend and operate the business for a certain number of
days before settlement as a method of satisfying themselves that the stated trade figures are
as claimed by the seller and the agent. Such requirement will be a special condition of the
contract, but it is not a statutory requirement of disclosure. It is also quite possible for buyers
of businesses to settle without financials if they are suitably satisfied. Disclosures of this type
are normally satisfied in a period of due diligence and this will be a special condition of the
contract.
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[11.3] Agents duty of full disclosure


Real estate agents are aware of their obligation to disclose any known material property
defects to prospective buyers. For instance, if a real estate agent is aware that a property
has continuing drainage problems, the agent should disclose the condition to potential
buyers. Even though the disclosure may discourage sales, withholding this information opens
the agent to a claim alleging negligence, negligent misrepresentation, or even fraud.
However, sometimes the information learned by an agent is not readily recognisable as
information that a buyer would consider to be material to their decisions about purchasing
property and establishing an offering price.
Its not always easy to decide what to document in conversations with many prospective
buyers. Consider the following:

Did the prospective buyer disclose their intended use for a property?

Did the prospective buyer inquire about the physical condition of the property?

Did the prospective buyer inquire about conditions other than the physical condition of the
property, such as zoning laws or utility access?

Did the agent provide additional information that could be important in evaluating the
future value of the property or costs to develop or improve it?

If the answer to any of these questions is yes, document these conversations in the clients
files. Using a standard format helps ensure that important facts are documented.
Documentation should consistently include:

the date, time and location of the conversation (note if discussion was via telephone)

the names of the participants

the question posed by the prospect

the response provided, noting specifically the agents recommendations for further follow
up by the prospect (e.g. investigate zoning laws, obtain estimates to install utilities)

information the agent volunteered that could be relevant to future value or


development/improvement costs

Professional judgment should be used in determining whether or not this information should
be included in a follow up letter or email to the prospect. If it is agency custom and practice to
follow up with sales prospects by letter or email, it is advantageous to use this
communication to recap what the agent discussed when meeting with the buyer.
When selling property that has a body corporate or common property (community title
schemes) the seller is required to provide to the buyer a Section 206 Disclosure Statement.
This statement is a statutory requirement under the Body Corporate and Community
Management Act (BCCM Act) The disclosure statement must be provided to the buyer by the
seller (or the seller's agent) and signed by the buyer prior to the buyer entering into a
contract. The Section 206 Disclosure Statement will be studied in detail later in this unit.

[11.4] The Law of Contract


A valid contract is an agreement made between two or more parties whereby legal rights and
obligations are created which the law will enforce.

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The terms 'contract' and 'agreement' are often used with the same meaning. While they may
not always be exactly the same, a real estate contract involves elements of agreement.
Section 59 of the Property Law Act 1974 states that no action may be brought upon any
contract for the sale of land, or any interest in land unless the contract is in writing and
signed by the party to be charged, which means the person who is being sued.

[11.5] Deposit monies and the contract of sale


The receipt, holding and payment of money paid as a deposit on the purchase of property
require strict adherence to the requirements of legislation. Handling money belonging to
someone else carries with it the responsibility to account for that money.
In addition, the way a deposit is structured can have serious consequences for sellers.
Agents must be aware of the nature of an instalment contract and the restrictions it places on
the sellers rights to deal with the property.

[11.6] Receiving and holding of deposit monies


The way an agent handles contract deposit monies is set out clearly in the Agents Financial
Administration Act 2014 (AFAA). In the real estate industry, only a licensed agent or licensed
auctioneer may hold deposit money. These monies must be held in a trust account. Trust
account generally means someone elses money and is a serious responsibility.
Section 16 of the AFAA states that an agent or an auctioneer who receives money in respect
of a sale must, immediately on receiving the money must either pay the money into a general
trust account with an approved financial institution; or where the settlement date of the
contract date is more than 60 days after receipt of the money and the money is received with
a direction that it be invested, pay the money in accordance with that direction into a special
trust account for the investment of such money (in accordance with section 17 of the AFAA).

[11.7] Receiving deposits


As soon as the deposit under a contract is received, the deposit holder must issue a trust
account receipt and sign the contract as having received the deposit.
The money should then be deposited forthwith into the agents or auctioneers trust account
or special investment trust account as explained previously. This means it should be banked
on the day it is received.
A breach relating to agents is when a deposit cheque is left pinned to a contract as proof of
deposit during negotiations. A situation that also arises is where a buyer will request that the
agent doesnt bank a cheque until funds have been transferred or until an offer has been
accepted.
An agent should be reminded that under the POA their duty is to their client and under no
circumstances should they take instructions from a customer, to the contrary.
[11.8] Types of deposit
It is becoming more common for agents not to receive cash or cheques as a deposit. Many
buyers now prefer to electronically transfer the money into the agencys trust account.
Agents need to be aware that it can sometimes take a day or more before the money shows
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up in the account and this should be taken in to consideration when nominating the date that
the deposit is to be paid by. A deposit can also be paid by way of a deposit bond or a bank
guarantee.
Certain finance companies that are underwritten by insurance companies will guarantee a
10% deposit in return for a set fee paid by the buyer. This bond represents deposit until
settlement.
[11.9] Release of deposit money
An agent must be careful when paying out a deposit to a buyer or seller. The agent should
ensure written notification is received from both parties that the deposit is to be paid out. On
receipt of such notification the agent should pay the deposit as directed.
If a deposit is paid by way of cheque, the deposit cannot be refunded until the financial
lending institution has cleared the cheque.
When a property settles, agents must not release (disburse) the deposit or any monies to
any party, until written instructions have been received from both the buyer and sellers
solicitors (or if self-representing, from the buyers or sellers themselves)
[11.10] Agents entitlements
Money paid into any trust account must be retained in the trust account until disbursed (paid
out) in accordance with the AFAA. The licensee is authorised to draw an amount from the
transaction fund to pay a transaction expense when the expense becomes payable; and
when the transaction is finalised, to draw an amount from the transaction fund that is equal to
the difference between:

the balance of the transaction fund

the total of the licensees transaction fee and any outstanding transaction expense; to
pay the person entitled to the amount or in accordance with the persons written direction

to draw the licensees transaction fee from the transaction fund when the amount, if any,
has been paid and when the transaction is finalised

An example of when a transaction is finalised is the settlement of a contract for the sale of
property or the termination of the contract.
However, restrictions can apply in respect to drawing of commission in relation to the sale,
particularly where there is a dispute between the parties to the contract.
[11.11] Payments to the seller
The agent or auctioneer is required to pay to the seller within 14 days of a demand in writing
from the seller, or in any event within 42 days of entitlement by the seller, the balance of the
deposit to the seller or as directed in writing by the seller or the sellers solicitor. The agent
must also give a detailed account of all deposit and any other money (e.g. advertising
money) received and payments made from that money.
[11.12] Disputes over deposit money
If the agent receives a notice disputing entitlement to deposit then the agent must continue to
hold the deposit in trust. The agent should then notify both parties that the money will be held
in trust for 30 days pending notification of the commencement of legal proceedings. If no
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notification is received within the 30 days, then the deposit may be paid to the nominated
party.
If the agent receives notification of court proceedings then the money should be paid into the
court.
[11.13] Learning activity 9
Question 1: Before performing a service for a client an agent must have a valid
appointment to act. In a residential sale the agent uses the PO Form 6. Considering the
provisions of section 104 of the POA, what must this appointment form specify?
__________________________________________________________________________
__________________________________________________________________________
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__________________________________________________________________________
__________________________________________________________________________
Question 2: When must an agent provide the buyer a PO Form 8 Disclosure to prospective
buyer? Name the section and the Act which refers to this disclosure.
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__________________________________________________________________________
Question 3: Under the Agents Financial Administration Act who is entitled to hold deposit
monies and in what type of account?
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Question 4: What are the procedures a real estate agent must follow when deposit money
is received?
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Question 5: Explain the circumstances in which deposit money may be withdrawn by a real
estate agent.
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UNIT 12 - AGENTS IN CONJUNCTION


[12.0] Introduction
In real estate transactions, an agency conjunctional relationship may be created by either
from specific instructions received from the seller or buyer to act in conjunction; or where an
agent acting on behalf of a seller or buyer allows another agent to introduce a buyer or seller
or vice versa the agents are said to be acting in conjunction. Such an agreement may
either arise from a simple agreement between agents or in a specific request from a
lessor/seller for certain agents to act in conjunction. Usually in these circumstances the
agents will share a predetermined proportion of the total commission.
The agent (or the sellers) should indicate on the listing authority whether their client instructs
the agent to conjunct, or not to conjunct, by ticking the boxes provided. On the right of the
boxes the agent should indicate the percentage commission split to be apportioned between
the conjuncting agents. It is important that agents should get all conjunctional agreements
confirmed in writing before proceeding with any conjunction. This will assist to alleviate
commission disputes between agents after the property settles.
Agents shall conjunct on properties with other agents except when a client has given written
instructions to the contrary. Conjunctional arrangements shall be evidenced in writing and
specify the amount of commission which would be paid if the property were to be sold at the
listed or reserve price. All dealings concerning property listed solely or exclusively with
another agent for sale or lease, or with buyer or tenant, who are subject to a sole or
exclusive agreement, should be conducted through the clients agent, and not with the client,
except with the consent of the clients agent.
Agents should ensure that agreements regarding real estate transactions are in writing in
clear and understandable language, expressing the specific terms, conditions, obligations
and commitments of the parties to the agreement. A copy of each final agreement shall be
given to each agency upon their signing or initialling, and shall be dealt with in accordance
with the instructions of the parties involved.
A useful saying for all agents to consider is when is it not in the clients best interest to
conjunct?

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[12.1] Learning activity 10


Question 1: Under what circumstances can the listing agent refuse to conduct a
conjunctional sale with another agency?
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_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
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UNIT 13 - BENEFICIAL INTEREST


[13.0] Introduction
Beneficial interest is often described as 'insider trading' in real estate matters. The disclosure
of the buyer's relationship to the agent, agency or employees must be made by the licensee
to the seller, prior to the offer being made and before negotiations commence.
The relationship between a seller and the licensed agent engaged to procure a sale is a
fiduciary relationship. The agent is not permitted to put the duty owed to the client in conflict
with his or her own interests, unless the agent has first fully disclosed the exact nature and
extent of that interest and the client has consented.

[13.1] What is beneficial interest?


In accordance with section 153 of the POA, beneficial interest defines that a licensee, other
than a property developer, is taken to have a beneficial interest in property in each of the
following cases:

The purchase of the property is made for the licensee or an associate of the licensee.

An option to purchase the property is held by the licensee or an associate of the


licensee.

The purchase of the property is made for a corporation (having not more than 100
members) of which the licensee or an associate of the licensee is a member.

An option to purchase the property is held by a corporation (having not more than 100
members) of which the licensee or an associate of the licensee is a member.

The purchase of the property is made for a corporation of which the licensee or an
associate of the licensee is an executive officer.

An option to purchase the property is held by a corporation of which the licensee or


an associate of the licensee is an executive officer.

The purchase of the property is made for a member of a firm or partnership of which
the licensee or an associate of the licensee is also a member.

The purchase of the property is made for a person carrying on a business for profit or
gain and the licensee or an associate of the licensee has, directly or indirectly, a right

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to participate in the income or profits of the persons business or the purchase of the
property.
Also, a registered employee of a licensee, other than a property developer, is taken to have a
beneficial interest in property in each of the following cases:

The purchase of the property is made for the registered employee or an associate of
the employee.

The registered employee or an associate of the employee has an option to purchase


the property.

The purchase of the property is made for a corporation (having not more than 100
members) of which the registered employee or an associate of the employee is a
member.

An option to purchase the property is held by a corporation (having not more than100
members) of which the registered employee or an associate of the employee is a
member.

The purchase of the property is made for a corporation of which the registered
employee or an associate of the employee is an executive officer.

An option to purchase the property is held by a corporation of which the registered


employee or an associate of the employee is an executive officer.

The purchase of the property is made for a member of a firm or partnership of which
the registered employee or an associate of the employee is also a member.

The purchase of the property is made for a person carrying on a business for profit or
gain and the registered employee or an associate of the employee has, directly or
indirectly, a right to participate in the income or profits of the persons business or the
purchase of the property.

The term, beneficial interest, also includes:

the licensee who is a corporation and the purchase of property (or option to purchase) is
made for an executive officer of a corporation

when the purchase of property (or option to purchase) is made for an executive officer of
a corporation of which the registered employee or their associate is an executive officer

[13.2] Associate
The Property Occupations Act defines the term associate as a property agent, who acts, for
a sale of property, in conjunction with a property agent appointed to sell the property; or a
spouse, parent, brother, sister or child of the person; or a child of the persons spouse.
Section 32DA of the Acts Interpretation Act defines de facto as outlined below
Section 32DA Meaning of de facto partner
(1) In an Act, a reference to a de facto partner is a reference to either 1 of 2 persons who are living
together as a couple on a genuine domestic basis but who are not married to each other or related by
family.
(2) In deciding whether 2 persons are living together as a couple on a genuine domestic basis, any of their
circumstances may be taken into account, including, for example, any of the following
circumstances
(a) the nature and extent of their common residence;
(b) the length of their relationship;
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(c) whether or not a sexual relationship exists or existed;


(d) the degree of financial dependence or interdependence, and any arrangement for financial support;
(e) their ownership, use and acquisition of property;
(f) the degree of mutual commitment to a shared life, including the care and support of each other;
(g) the care and support of children;
(h) the performance of household tasks;
(i) the reputation and public aspects of their relationship.
(3) No particular finding in relation to any circumstance is to be regarded as necessary in deciding
whether 2 persons are living together as a couple on a genuine domestic basis.
(4) Two persons are not to be regarded as living together as a couple on a genuine domestic basis only
because they have a common residence.
(5) For subsection (1)

[13.3] Disclosure of beneficial interest to seller


If there is beneficial interest in a real estate transaction, the agent must make a statutory
disclosure to the client. This must be made on the PO Form 7 Disclosure of Beneficial
Interest to the Seller. This disclosure must be given to the client to sign before a contract is
entered into. PO Form 7 will be studied in detail later in this unit.
An agent who purchases a property from a client without disclosing their beneficial interest or
personal, fiduciary or business relationship with the buyer could also be in breach of the
section 18 of the Property Occupations Regulations. An agent must not accept an
appointment of agent, or continue to act, as an agent for a client if doing so will place the
agents duty or interests in conflict with the clients interests.
If there is a beneficial interest in a transaction, the agent should advise the client to either
have a formal valuation conducted on the property, or to appoint another real estate agency
to negotiate the transaction on their behalf. This keeps the negotiations and price fair. Agents
and their salespersons are placed in a position of trust by their sellers. Therefore if an agent
or a salesperson seeks to obtain an interest in the property for sale, they must act fairly,
honestly and ensure the seller makes an informed decision to sell. The Property Occupations
legislation requires that the seller must not be disadvantaged by the transaction.
An agent has the ability to charge their client commission in a beneficially interested
transaction provided they meet the requirements of the POA, namely that;
- Before a contract of sale is entered into, they obtain the clients written
acknowledgement in the approved form that the client:
Is aware that property agent or real estate salesperson is interested in obtaining
a beneficial interest in the property; and
Consents to the property agent or real estate salesperson obtaining the interest;
and
Acts fairly and honestly in relation to the sale and the client is in substantially
as good a position as the client would be if the property were sold at a fair
market value

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[13.4] Learning activity 11


Peter is a salesperson with Black Coast City Real Estate. Peter is contacted by interstate
owners who need to sell their investment house. The owners advise Peter that they are
anxious to sell, as they need the money for impending medical expenses. However, they
have not visited the Black Coast for some time and have no idea of the values in this area.
Unbeknown to the owners, Peter has a son who is looking for a house at the Coast. Peter
knows that similar units in this area have sold for $275,000- $280,000. Peter inspects the
house and calls the owners telling them it is worth around $250,000.
The owners only paid $202,500 for the house 3 years ago and consider that the price is
reasonable. They consequently list the unit for sale with Peter. He then sells it to his son.
Answer the following questions.
Question 1: What offences has Peter committed?
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Question 2: If Peter charges commission what does he need to obtain from the client?
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__________________________________________________________________________
__________________________________________________________________________
Question 3: How can this scenario be avoided?
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UNIT 14 - FEES, CHARGES AND EXPENSES


[14.1] Advertising costs
The agency licensee cannot claim the cost of advertising unless it is expressly authorised
under the Property occupations Form 6.
The provision of rebates, commissions and discounts by entities such as advertisers to
persons placing those advertisements (such as agents) is an accepted part of commercial
dealings, not only in the real estate industry. However, agents should disclose to any
consumer to whom any rebate, commission, benefit, or discount from an advertiser relates,
the source and amount of that rebate, commission, benefit or discount. If, at the time that an
agent makes this disclosure, the agent is unable to provide the advice of the precise amount
of the rebate, commission, benefit or discount, the agent should advise a reasonable
estimate of that amount. Part 8, section 4 of the PO Form 6 provides should outline any
rebates, commissions etc. (if any) provided to the agent.
Agents should comply with the regulatory provisions of POA requiring the full disclosure to
relevant consumers of any significant relationships, connections or affinities between agents
and third party suppliers. Further, all jurisdictions contain criminal laws that prohibit the
receipt of secret commissions.
[14.2] Fees and expenses
The POA provides for specific fees and expenses to be incurred and recovered by the agent.
These can be paid in advance or reimbursed upon receipt of an itemised account and must
be detailed in the PO Form 6.
A fee is the cost of a service that an agent provides. A fee can be charged for a service not
normally considered a part of an agents prescribed activities when selling, managing or
renting properties.
A fee could be charged for the following services (more commonly charged in property
management):

supervising and inspecting major repairs and renovations, lodging building plans, and
overseeing building applications

reading water meters

coordinating advertising consultants, copy writers, photographers, graphic artists and


designers

coordinating a marketing campaign that involves detailed market analysis, project or


development feasibilities

consulting with architects, engineers and designers on behalf of a client

providing written reports that do not involve the sale, management or rental of a property

Agents are not permitted to charge a consumer a fee relating to the preparation of
documents relating to a real estate transaction. This includes tenancy applications, lease
agreements, management agreements, sales contracts, written market appraisals (relating to
the sale or rental of a property) or listing documentation fees. Section 219 of the POA states;
agents cannot charge a fee for a document that they are legally required and obligated to
produce.

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An expense is when agents incur a financial liability on behalf of their clients and could
include:

promotional fees

searches (such as a Title search from Queensland Department of Natural Resources and
Mines

other consultancy fees such as decorators, tradespeople, pest control, building


inspectors, etc.

the appointment of an auctioneer (this may be a fee also)

A fee, charge or expense cannot be charged or recovered unless the client has given
authorisation in writing in the PO Form 6, or otherwise approved in writing. All fees, charges
and expenses must be quoted on the Appointment of agent as GST inclusive. When claiming
from the client the agent must be able to clearly and correctly justify the charge for the
expense undertaken. For example, if the agent undertakes a title search the original receipt
must be produced to justify the invoice or trust account disbursement, as the case may be.
An agent cannot claim for expenses unless authorised in writing from the client and actually
expended by the agent. This has repercussions for agents who may be charging a general
marketing fee without proof of itemised expenditure on behalf of the client.
Section 89 of the Property Occupations Act refers to the restriction on recovery of reward or
expense without proper authorisation. An agent is not entitled to sue for, or recover or retain,
a reward or expense for the performance of an activity as an agent unless, at the time the
activity was performed, the agent held an agents licence; and was authorised under the
persons licence to perform the activity; and had been properly appointed by the client to be
charged with the reward or expense.
An agent should disclose to any consumer (e.g. client or customer) to whom any rebate,
commission, benefit, or discount from an advertiser, relate the source and amount of that
rebate, commission, benefit or discount. If, at the time that the agent makes this disclosure,
the agent is unable to provide the advice of the precise amount of the rebate, commission,
benefit or discount, the agent should advise a reasonable estimate of that amount. The most
common rebates available to agents are from print and electronic media advertising.
Agents should fully disclose in writing to each party to a transaction, the scope of service that
their agency will be providing to them and seek a written acknowledgment from each party.
Agents should also disclose their role to other agents involved in the transaction.
Agents may use the term free and similar terms in their advertising and in other
representations provided that at the same time all terms, governing availability of the offered
product or service, are clearly disclosed or stated to be available. When the true costs are
disguised in the selling price of the property you shall not offer gifts or items as being free.
Agents may also represent their services as free or without cost, even if they expect to
receive compensation from a source other than their client provided that the potential for
them to obtain a benefit from a third party is clearly disclosed at the same time.

[14.3] Commission
Commission can be defined as the amount paid by the person who appointed the agent
(most commonly the seller), normally when the property is sold. It may either be a
presentation of the actual selling price (or rental amount if a property management
appointment), or a set amount agreed by the parties. The commission is negotiable between
agent and the seller. The amount of commission an agent may charge is not regulated in
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Queensland, and agents may charge whatever commission the agent wishes (and the seller
accepts).
The PO Form 6 provide for the agent to be paid commission by the client. The commission
payable is subject to GST where applicable. An agent should always ensure their client is
fully informed of the amount of commission being charged and have this clearly documented
in the PO Form 6.
The POA also has strict guidelines forbidding an agent to charge more for a service than
permitted. However, there is nothing to stop the agent from negotiating a commission on a
sliding scale, provided this is correctly specified in the PO Form 6, e.g. if the property is sold
within 14 days commission payable will be $xxxx.
In summary, the payment of commission depends upon all the following factors:

the agent being licensed for the entire period of the appointment

an appointment, in the proper form (the PO Form 6), signed by the client, being in force
for the period of the services, for which the commission is to be paid, are to be performed

the fulfilment of the obligations under the appointment

as a rule, depending on the conditions of the appointment, the completion of the


transaction

[14.4] Repayment of excess commissions


If an agent is convicted by a court of an offence against sections 88(2), 89(2) or 90(3) of the
POA; and the court convicting the person is satisfied on the balance of probabilities that the
agent, in connection with the offence, has recovered or retained from the client an amount to
which the agent was not entitled, the court must order the person to pay the amount to the
client. The order must be made whether or not any penalty is imposed on the conviction.
The client may file the order in a court having jurisdiction for the recovery of a debt of an
equal amount and the order may be enforced as if it were a judgment of that court.

[14.5] Secret commissions


Case Study
An agent has received money from a customer to negotiate a lower contract price in favour
of the customer. In this case the client was not aware of the money changing hands and
believed that the agent was acting in their best interests.
The property sells for a lot less than the client had intended. The agent receives his agreed
commission from the client and then receives agreed payments or bonuses from the
buyer.
In this case, the agent has breached their fiduciary duty by receiving a secret commission.
A test for determining secret commission is to ask these questions:

Is there a third party offering the agent a gift, money or other form of consideration in
the transaction?

Is this being offered without the knowledge of the agents client?

If the agent accepts this payment will the agents clients rights be adversely affected in
the transaction?

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If the answer is yes to any of these questions, the agent may be in breach of the law and
committing an offence. By law, a secret commission is any fee or other benefit that an agent
receives from a third party whilst acting for a client who is not aware of the arrangement. Any
monies received by an agent from a third party whilst during the period of the appointment
should be passed on to the client.
The agents disclosure, in PO Form 8 should be acknowledged, in writing, prior by the buyer
to any agreement being entered into with a third party. On this form, the agent must tell
buyers what kind, if any, relationship the agent has with anyone the agent refers the buyer to
for professional services, and whether the agent expects to receive any benefits from the
service provider as a result of the referral and how much you expect it to be. Agents, who are
property developers, must additionally disclose if the agent owns at least 15% interest in the
property the agent is selling.

[14.6] Client bonuses


A financial incentive or bonus offered to the agent by the client is not a secret commission
and does not require disclosure.
UNIT 15 DOCUMENTATION REQUIRED PRIOR TO CONTRACT SIGNING
There are several important procedures relating to real estate contracts that must be
followed in specific special circumstances. These procedures directly relate to legislation
regulating the validity of the contract and require a series of disclosures to be made to
consumers before a contract can be enforced.
[15.1] Definition of property
It is important that agents clearly understand the definition of residential property, because
the type of transaction, whether it is residential or non-residential, directs the type of
documentation that must be provided for a contract to be enforceable.
[15.2] Residential property
Section 21 of the POA defines residential property as:

a single parcel of land on which a place of residence is constructed or being constructed

a single parcel of vacant land in a residential area

a lot included in a community titles scheme or proposed community titles scheme. This
includes home units, villas, townhouses and group title house and land subdivisions

[15.3] Non-residential property


Non-residential property is referred to as:

a single parcel of land on which a place of residence is constructed or being constructed


if the property is used substantially for the purpose of industry, and commerce

a single parcel of vacant land if the property is in a non-residential area or is in a


residential area, but only if a local government has approved development in relation to
the property, the development is other than for residential purposes, and the approval is
current

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property used substantially for the purpose of industry and commerce

properties used substantially for the purpose of primary production. However, any sale of
land used for primary production shall be considered residential and have commissions
capped as per the residential schedule of fees and commissions

[15.4] Agency practice issues


The POA places the responsibility on the agent to determine whether the transaction is
residential or non-residential as this will impact directly on the statutory disclosures to be
provided as well as the payable commission.
Areas in which agents should show particular caution are:

home offices and small businesses being run legally or otherwise from a residential
property. The definition makes no reference to whether the use is legal for existing
residences

land where primary production is still occurring at the time of sale. If an application is
made to rezone the land to commercial or industrial, the sale must still be considered
residential

mixed-use complexes with a residential and business component being sold on the one
title

bulk project and land sales. More than three sales must be treated as a residential
transaction (certain projects and subdivisions could previously be treated as a
commercial transaction)

boarding houses and flats that are on land zoned residential

properties that are used for residential purposes but subject to rezoning or development
applications

[15.6] Property Occupations Form 7


Disclosure of beneficial interest to seller by property agent or property auctioneer
As studied previously in Paragraph 14.3, if there is beneficial interest in a real estate
transaction, the agent must make a statutory disclosure to the client. This must be made on
the PO Form 7. This disclosure must be given to the client to sign before a contract is
entered into.
In circumstances where a licensee or a salesperson, has a beneficial interest in the purchase
of real estate property, commission can be charged. An agent has the ability to charge their
client commission in a beneficially interested transaction provided they meet the
requirements of the POA, namely that;
-

Before a contract of sale is entered into, they obtain the clients written acknowledgement
in the approved form that the client:
Is aware that property agent or real estate salesperson is interested in obtaining a
beneficial interest in the property; and
Consents to the property agent or real estate salesperson obtaining the interest; and
Acts fairly and honestly in relation to the sale and the client is in substantially as
good a position as the client would be if the property were sold at a fair market value

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Property Occupations Form 7 disclosure of beneficial interest to the seller by a


property agent or property auctioneer

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[15.7] Property Occupations Form 8 Disclosure to prospective buyer


As studied in previous units, the PO Form 8 applies only to residential property sales. The
PO Form 8 is a statutory form and the agent must provide it in the approved format. The
agent must provide it to the buyer; and have it signed by the buyer, before a contract is
entered into (signed). The detailed instructions on the form will help to determine what must
be disclosed and what does not have to be disclosed to buyers.
These requirements are as required by section 157 of the POA. Please refer to the section
below.
Property Occupations Act 2014
Part 6 Disclosure requirementslicensees, real estate salespersons, property developers and
marketeers
157 Disclosures to prospective buyer
(1) A residential property agent for the sale of residential property must disclose the following to any
prospective buyer of the property
(a) any relationship, and the nature of the relationship (whether personal or commercial), the agent has
with an entity (a referred entity) to whom the agent refers the buyer for professional services
associated with the sale;
Examples of relationships for paragraph (a)

a family relationship

a business relationship, other than a casual business relationship

a fiduciary relationship

a relationship in which 1 person is accustomed, or obliged, to act under the directions, instructions, or
wishes of the other

(b) whether the agent derives or expects to derive a benefit from a referred entity and, if so, the
amount or value of the benefit;
(c) if the agent derives or expects to derive a benefit from a referred entity
(i) for a referred entity who is an individualthe individuals full name; or
(ii) for a referred entity that has a registered business namethe registered business name;
(d) the amount, value or nature of a benefit an entity has received, receives, or expects to receive in
connection with the sale, or for promoting the sale, or for providing a service in connection with
the sale, of the property;
(e) if an entity has received, receives, or expects to receive a benefit in connection with the sale, or for
promoting the sale, or for providing a service in connection with the sale, of the property
(i) for an entity that is an individualthe individuals full name; or
(ii) for an entity that has a registered business namethe registered business name.
Examples for paragraph (c) of persons who may receive a benefit
accountant
finance broker
financial adviser
financier
property valuer
residential property agent
residential property agent
seller
solicitor
Maximum penalty200 penalty units.
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(2) However, subsection (1)(c) does not apply if the benefit is the amount the residential property agent
has received, receives, or expects to receive by way of commission from the seller for the sale.
(3) The disclosure is effective for subsection (1) only if it is
(a) given to the prospective buyer in the approved form before a contract of sale for the property is
entered into; and
(b) acknowledged by the prospective buyer in writing on the approved form before a contract for the
sale of the property is entered into.
(4) In this section
benefit means monetary or other benefit.
residential property includes a proposed home that
(a) is to be erected or constructed under a domestic building contract; and
(b) is being marketed in connection with marketing land.
residential property agent means
(a) a property agent; or
(b) a real estate salesperson acting for a real estate agent; or
(c) a person performing an activity in contravention of section 97(1); or
(d) a person acting as a property agent in contravention of section 97(2); or
(e) a person acting as a real estate salesperson in contravention of section 151(1).

The agent for the sale of residential property must disclose the following to any prospective
buyer of the property of any relationship, and the nature of the relationship (whether personal
or commercial), the agent has with anyone to whom the agent refers the buyer for
professional services associated with the sale; such as:

a family relationship

a business relationship, other than a casual business relationship

a fiduciary relationship

a relationship in which one person is accustomed, or obliged, to act in accordance with


the directions, instructions, or wishes of the other

The agent must also disclose whether the agent derives or expects to derive any benefit from
a person to whom the agent has referred the buyer and, if so, the amount or value of the
benefit; the amount, value or nature of any benefit any person has received, receives, or
expects to receive in connection with the sale, or for promoting the sale, or for providing a
service in connection with the sale of the property. Examples of persons who may receive a
benefit may be:

finance broker

financial adviser

financier

property valuer

residential property agent

seller

solicitor

An agent should be cautious when making any referrals and, if in doubt, disclose. Some
agents may take the attitude that it is prudent not to make referrals but consumers expect
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this as part of the service. Modern real estate practice has become accustomed to delivering
a high level of integrated service to consumers. This includes assisting consumers to explore
a range of products and services relating to finance, conveyancing solicitors, architects,
decorators, designers, building inspectors and property maintenance providers.
The important issue is how this service is provided. If an agent is genuinely assisting a
consumer and making the appropriate disclosures, then all parties benefit.
Consumers should be advised to make their own investigations and to seek quotes from a
range of advisers or specialists to satisfy themselves a fair and competitively priced product
or service is being received. If the agent refers a buyer to a person for professional services
and the agent does not have any business or personal relationship with the service provider
and/or is not receiving any benefit, then that part of the PO Form 8 does not need to be
completed.
Any disclosure document should always be signed by an agent prior to disclosing information
to a consumer.
[15.8] Benefits received by any party associated with the transaction
The intent of the legislation is to reveal to a buyer, details of all parties involved in the
transaction, and to clarify exactly who may benefit directly or indirectly from the transaction.
The agent is required to disclose any benefit that will be received by a person or entity where
the benefit received does not relate to a referral. This includes a benefit received by any
person or company associated with the promotion or sale of the property, or who provides a
service in connection with the sale.
These benefits, persons and companies include:

Financial advisors. If a financial advisor works directly for the seller (usually a marketeer
or developer involved in an investment package), their fees and commissions must also
be disclosed. If the finance is packaged on sellers terms such as developers finance, the
name of the financier must be disclosed, and the amount of remuneration from the
transaction fully revealed to the customer on the PO Form 8 disclosure.

Valuers and investment advisors. If a valuer or investment adviser is associated with


the seller or financier and receives a fee as a result of the transaction, this must also be
disclosed.

Marketing and promotional companies, where a marketing or promotion company will


receive fees or benefits as a result of a sale. This is common with co-ordinating
marketing agents or promoters who receive a negotiated fee from the developer for every
sale transacted regardless of who made the sale and who receives commission.

Promotional companies. Marketing, promotion and advertising costs must be disclosed


where payment or remuneration is contingent on the sale of a property.

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[15.9] Contract Warning Statement

It is a requirement under Section 165 of the Property Occupations Act that a seller must
ensure the proposed relevant contract includes the following conspicuously written words
to like effect;
The contract may be subject to a 5 business day cooling off period. A termination
penalty of 0.25% of the purchase price applies if the buyer terminates the contract during
the statutory cooling off period. It is recommended the buyer obtain an independent
property valuation and independent legal advice about the contract and his or her cooling
off rights, before signing
The seller must ensure the words are written in the contract once, immediately above,
and on the same page as the place in the contract where the buyer signs to indicate the
buyers intention to be bound by the contract.
This cooling off period applies to all residential property transactions other than those
sold under auction terms. A cooling off period will not apply to a contract formed within 2
business days after an auction, if the buyer was registered as a bidder for the auction.
[15.10] Coolingoff period for residential sales
The cooling-off period for residential sales lasts for five business days and ends at 5:00pm
on the fifth business day.
When calculating the five business day cooling off period the agent must ensure to include
the day, if it is a business day, on which the signed contract was given to the buyer, as day
one. For example, if a contract is signed, dated and given to the buyer at 9 pm on Monday,
then the first day of the cooling off period shall be that Monday and it will expire at 5 pm
Friday. If the contract is signed, dated and given to the buyer at 9 pm on Wednesday, the
cooling off period will expire at 5 pm on the following Tuesday (provided there are no public
holidays in the period).
The cooling off period will commence as soon as the seller, or their appointed agent or
solicitor, gives the buyer a copy of the signed and dated residential property contract if that
day is a business day.
The Property Occupations Act recognises that the date of notification, or withdrawal, shall be
the date and time that a faxed transmission has been forwarded, as per the provisions of
Sections 11 and 14 of the Electronic Transactions Act 2001(Qld).
Section 11 Requirement to give information in writing
(1) If, under a State law, a person is required to give information in writing, the requirement is taken to have
been met if the person gives the information by an electronic communication in the circumstances stated
in subsection (2).
(2) The circumstances are that
(a) at the time the information was given, it was reasonable to expect the information would be readily
accessible so as to be useable for subsequent reference; and
(b) the person to whom the information is required to be given consents to the information being given
by an electronic communication.

A buyer, under a relevant contract, who has not waived the cooling-off period for the relevant
contract may terminate the relevant contract at any time before the cooling-off period ends by
giving written notice to the seller indicating that the buyer terminates the relevant contract. If
notice of termination is given the relevant contract is at an end. The seller must, within 14
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days after the relevant contract is terminated, refund any deposit paid under the relevant
contract to the buyer less the amount of the termination penalty. An amount payable to the
buyer is recoverable as a debt.
Termination penalty, in relation to a relevant contract, is defined as an amount equal to
0.25% of the purchase price under the relevant contract. This penalty is intended to
discourage buyers from entering into simultaneous multiple contracts.
It is essential that the agent delivers a copy of the signed and dated contract to the buyer, or
their nominated representative or solicitor, as soon as the contract has been finalised. When
preparing contracts for the sale of residential properties, it is imperative that the date is not
inserted at the top of page one of the contract until all the parties have concluded
negotiations, and signed the contract. The agent then immediately conveys acceptance and
dates the contract.
[15.11] Buyers may waive or shorten the cooling-off period
A buyer who proposes to enter into a relevant contract may waive the cooling-off period for
the relevant contract by giving the seller under the proposed relevant contract written notice.
[15.12] Shortening the cooling-off period
Legislation makes provision for a buyer, under a relevant contract, to shorten the five day
cooling off period for a residential contract by giving the seller, under the contract, written
notice.
The circumstances whereby a buyer may wish to do this are:

where a high demand property may need to be secured by the buyer before another
buyer goes to contract

where a buyer just wants a certain sale and quick finalisation of the sale

to assist the negotiations with the seller

[15.13] Termination of contract during the cooling-off period


A cooling-off period shall end at 5 pm on the fifth business day after the cooling-off period
started. The buyer may terminate the contract at any time up to 5.00 pm on the due date by
giving a written notice to the seller or the sellers agent.
This notice is not a statutory form and there is no legislative requirement to provide any
information other than the date and sufficient details to identify the contract and buyer in
question. This should be done in writing. Once this notice has been given the contract will be
at an end and best practice suggests the agent must refund the deposit immediately (the
Property Occupations Act states within 14 days) upon notification to release the monies by
the seller or their legal representative.
If the deposit is paid by way of cheque, then the agent also has a legal obligation not to
release the deposit until that cheque has been cleared by the appropriate financial institution.
If the buyer has not notified the seller or the sellers agent by the due time, it will be taken
that the buyer will be proceeding with the sale subject to other contract conditions.
Remember, the buyer may be subject to the termination penalty of 0.25% to the seller of the
purchase price if they cool off during the termination penalty.
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APPENDIX A - Learning activity answers


ANSWERS TO LEARNING ACTIVITY 1 [1.3]
Q1: In the concept of agency, who is the
client?

The person upon whose behalf the agent has


been engaged to provide the service.

Q2 What are the two types of duties


imposed on agents, and their staff, to
both the seller and the buyer, as a
consequence of the agency
relationship?

Contractual duties which both parties agree


to perform in terms of their contract; and
oblige the agent to perform the contract of
agency within its terms; and Fiduciary
obligations, which are implied into the agency
contract by common and equity law; and
which arises out of a relationship based on
confidence and trust, such as the contract
between the agent and the client.

Q3 In what circumstances does an agent


have to seek out information required
by the prospective buyer of a
property offered for sale?

Where an agent is asked a question in


relation to a property they are offering for
sale or rental, there is a clear duty for the
agent to seek out the information required by
the customer.

ANSWERS TO LEARNING ACTIVITY 2 [2.6]


Q1. What are the two main forms of
landholding in Queensland?

a. Fee simple, also described as freehold


land
b. An interest in freeholding or perpetual
lease, also described as Crown leasehold
land.

Q2. What are the two types of land title


used in Australia? Indicate which
type is used in Queensland.

a. Torrens Title which is used in Queensland


b. Old System Title

ANSWERS TO LEARNING ACTIVITY 3 [3.6]


Q1. Name six types of information which
can be obtained through a search of
the Titles Register.

A search of the Titles Register can provide


the following information:

The correct names of the owners

The correct Real Property Description


(RPD)

Encumbrances on the title of the property


e.g., easements, caveats, covenants,
mortgages

Registered Dealings over the land e.g.,


demolition notices, heritage listings,
contamination etc.

Whether the land is Freehold or


Leasehold

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Q2. There are a number of issues will


impact negatively on a real estate
transaction. Name four matters that
may affect a persons land title
registration.

a. Encumbrance
b. Easement
c. Covenant
d. Caveat

ANSWERS TO LEARNING ACTIVITY 4 [4.8]

Q1.What relevant state legislation


imposes requirements on the sale
of land in Queensland? Explain
the effects of that legislation.

There are two Acts that impact directly on


the sale of land in Queensland. They are the
Property Law Act 1974 and The Land Sales
Act. The Property Law Act regulates the
conveyancing of land and the formation of
the contract of sale. The Land Sales Act
regulates the sales of land that does not
have separate title issued, e.g. off the plan
sales.

Q2. What is the difference between


chattels and fixtures in a contract
for sale of a residential home?

A chattel is a movable item that is not


considered an improvement in the sale. A
fixture is considered an improvement or part
of an improvement and therefore remains
with the sale unless excluded. A fixture can
be concreted, bolted, screwed, plumbed,
fitted and joined or glued into place.

ANSWERS TO LEARNING ACTIVITY 5 [5.9]


Q1. Name four circumstances where it is
an offence against Section 40a(1) of
the Fair Trading Act 1989 to make
false and misleading statements

Section 40A (1) Fair Trading Act makes it an


offence to make false and misleading
statements about:
The nature of the interest in land
The price payable for the land
The location of the land
The characteristics of the land
The use to which the land is capable of
being put or may lawfully be put
The existence or availability of facilities
associated with the land.

Q2. What are some of the risks


involved in providing specialist
advice to clients?

Before any discussion with a client or


customer, an agent will ensure they are
suitably qualified and licensed.

Q3. What agency systems and processes


should be in place to ensure
compliance with the Privacy Act?

The Privacy Act requires agencies to:


Have a readily available privacy policy
which must contain the following
information;
1. The kinds of information that the
business collects and holds

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2. How the business collects and holds


personal information. This includes
data storage and cloud computing
3. The purposes for which the business
collects, holds, uses and discloses
personal information
4. How an individual may access their
personal information
5. How an individual may seek the
correction of their personal information
6. How an individual may complain about
a breach of the APPs or an applicable
APP Code, and how the business will
deal with the complaint
7. Whether the business is likely to
disclose personal information to
overseas recipients, and if so, the
countries in which such recipients are
located
Ensure the policy is being complied with
Ensure all personal information is stored
securely and destroyed or de-identified
once it is no longer required. security
systems are adequate
Review the types of solicited and
unsolicited personal information gathered
during the course of their business and if
it is really necessary
Assess how this personal information is
used
Recognise when disclosures of privacy
matters must be made to tenants, sellers,
buyers, lessors, consultancy clients,
contractors and agency staff
Regularly review and audit privacy
practices and procedures
Pay particular attention to direct
marketing campaigns
Take care in the way notes of personal
information are recorded
Understand when solicited and unsolicited
personal information should not be
disclosed
Q4. What is the procedure to check if
someone is listed on the Do Not Call
Register?

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Consumers can very easily add their name


and number to the Do Not Call Register,
meaning that they have registered to NOT be
contacted by any telemarketers. Agents will
need to check the register through a
process referred to as list washing. This
CPPDSM4008A Part 1

process will be available 24 hours a day, 7


days a week. The agency will need to set up
a list washing account. There are 2 types of
accounts an administration account and a
washing account. The administration account
is considered best suited to most businesses.
ANSWERS TO LEARNING ACTIVITY 6
Q1. Your client asks you for advice
concerning the best method of selling
the clients property. List six criteria
you should consider before preparing
a response as to the most appropriate
selling method.

Does the property suit one method of


sale?

Can market price be easily established?

Does the property have alternative uses?

Does the property have much


competition?

Is the seller motivated to sell?

Is the seller realistic about price?

Will the seller pay for the marketing


campaign?

Is the timing right for selling?

What are the current levels of results for


each method of sale?

Where is the market heading?

What are buyers current attitudes?


Which methods get the best results?

Which methods best suit buyer habits?

Which methods get unrealistic sellers


quickly conditioned?

ANSWERS TO LEARNING ACTIVITY 7 [8.16]


Q1. What is the meaning of market value The High Court of Australia today recognises
as used in the real estate industry?
market value as:
The price which a property could be
expected to realise if sold by a willing but not
anxious seller to a willing but not anxious
buyer at the date at which the value is
required to be ascertained.
This definition has been interpreted to
include the following provisions:

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There is only one value for all purposes.


That is, the price at which a property will
sell at any given time is determined
between a willing buyer and a willing
seller. It is assumed that these parties are
aware of all the facts relevant to the
current marketplace, and therefore
capable of making a rational decision as
to a fair market price.

The market value of a property for sale or


for rent should always indicate a price that
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the property would achieve if it was


offered for sale or for rent in the open
market, allowing a reasonable time for a
customer to become fully informed of the
attributes of the property and the
prevailing market conditions.
For this reason, market value is often
referred to as the price at which a willing
client would sell or rent and a willing
customer would buy or rent neither party
being subject to any abnormal pressure or
circumstances.
Q2. What is considered to be the market
price of a property for sale?

The market price of a property is the most


likely price that a customer will pay for a
property at a specific point in time.
Determining the market price of a property
involves a high degree of market knowledge,
research, an understanding of pricing
methods and most importantly, a great deal
of common sense. The price that a customer
is willing to pay for a property can be
influenced by:

The price that a valuer working for the


financier thinks the property is worth

The price that the agent thinks the


property is worth

The price that the client thinks their


property is worth.

ANSWERS TO LEARNING ACTIVITY 8 [10.2]


Q1. Name the distinct types of property
listings which a client can enter with
the agent.

(a) Open listing


(b) Sole agency listing
(c) Exclusive agency listing.

Q2. What are the differences between


each type of listing?

An open listing is a written agreement


entered into between a person (seller) and
a real estate agent (selling agent) under
which the seller appoints the selling agent, in
accordance with the terms of the agreement,
to sell stated property. Under the agreement,
the seller retains a right to sell the sellers
property during the term of the agreement; or
to appoint additional real estate agents and
pastoral houses as selling agents to sell the
property on terms similar to those under the
agreement; and the appointed selling agent
is entitled to remuneration only if he or she is
the effective cause of sale. The appointment
of the selling agent can be ended by either
the seller or the selling agent at any time.
The only difference between an exclusive
agency and a sole agency is the extent of

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the entitlement of a selling agent to receive


an agreed commission or other reward on
the sale of particular property. Under an
exclusive agency, a selling agent is entitled,
on the sale of particular property and in
accordance with the terms of an agreement
with the seller of the property, to receive an
agreed commission or other reward, whether
or not the selling agent is the effective cause
of the sale. However, if the sale were subject
to a sole agency, the selling agent would not
be entitled to the commission or other
reward if the seller were the effective cause
of the sale.
ANSWERS TO LEARNING ACTIVITY 9 [11.13]
Q1. Before performing a service for a
client an agent must have a valid
Appointment to Act. In a residential
sale the agent uses a PO Form 6.
Considering the provisions of Section
104 of the POA, what must this
appointment form specify?

Refer to Section 104 of the Property


Occupations Act.

Q2. When must an agent provide the


buyer a PO Form 8 disclosure to
prospective buyer? Name the section
and the Act which refers to this
disclosure.

POA Section 157

Q3. Under the AFAA who is entitled to


hold deposit monies and in what type
of account?

Only licensed real estate agents and


licensed auctioneers who have a current
trust account are entitled to hold deposit
money.

Q4. What are the procedures a real estate


agent must follow when deposit
money is received?
Q5. Explain the circumstances in which
deposit money may be withdrawn by
a real estate agent.

Issue a trust account receipt for the money


and deposit it into the trust account forthwith.
The deposit must be banked by 5.00 pm on
the same or nearest working day.
A real estate agent may withdraw money
from the trust account once the agent
becomes entitled to commission and
expenses. This is when the agent is
authorised by the seller in writing or
instructed by a court.

ANSWERS TO LEARNING ACTIVITY 10 [12.1]


Q1. Under what circumstances can the
listing agent refuse to conduct a
conjunctional sale with another
agency?

CPPDSM4008A Part 1

Only when the client has authorised the


agent in writing not to accept conjunctions;
otherwise, the agent would be acting contrary
to clients instructions and has failed to act in
the clients best interests.

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ANSWERS TO LEARNING ACTIVITY 11 [13.4]


Q1. What offences has Peter committed?

a) s21 CCA applies to all commercial


situations where unconscionable
conduct may arise.
b) s21 CCA prohibits one business dealing
unconscionably with another when
negotiating the purchase or sale of
goods and services. It applies to any
transaction with a private company
valued under $3 million.
c) s18 CCA prohibits misleading and
deceptive conduct
d) s29 of the Act prohibits making false and
misleading representations.
e) s29A CCA focuses on the activities of
any company involved in real estate
transaction, regardless of whether the
company is a real estate agency, seller,
or landlord. It covers sales and property
management transaction, and makes it
an offence to make false and misleading
statements about the price payable for
the land.
f) s29A CCA makes it an offence to make
false and misleading statements about
the price payable for the land.

Ensure that the client is aware that


property agent or real estate salesperson is
interested in obtaining a beneficial interest
in the property; and consents to the
property agent or real estate salesperson
obtaining the interest; and acts fairly and
honestly in relation to the sale and the
client is in substantially as good a position
as the client would be if the property sold at
a fair market value.
(a) Be truthful concerning the sale price of
the house

Q2. If Peter charges commission what


does he need to obtain from the
client?

Q3. How can this scenario be avoided?

(b) Declare beneficial interest as his son is


his associate
(c) Comply with his fiduciary duties to his
client
(d) Do not charge commission

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