What do you do when your property has been listed for sale and your agent refuses, on the basis of the Privacy Act or a privacy policy, to give you the names of prospective buyers introduced to your property?
BY TIM O’DWYER
Clients of mine had listed their home with a local agent who was a member of the Real Estate Institute (REI). Their listing agreement with the agent, unusually, didn’t provide for a sole or exclusive agency. Rather, it was an open listing which meant my clients had the contractual right to try to sell their home themselves. So, while their agent showed mainly foreign buyers through the property, my clients placed their own adverts on the internet and dealt with a number of consequential private enquiries.
When one of these internet buyers – not a foreigner – offered to buy at the right price, a private sale was negotiated subject to the parties’ solicitors finalising formal and binding contracts.
While I was taking instructions on the proposed sale contract, I asked my clients if their property had been listed with an agent. I wanted to ensure that there would be no risk of any agent’s commission claim down the track. The clients told me what they had done and handed me a copy of their open listing agreement.
After showing them the fine print, which stipulated how the agent would legally be entitled to commission if the agent was the “effective cause” of any sale no matter when it occurred, I explained to my clients what this essentially meant: commission would be payable on their private sale if the agent had, in fact, introduced their buyer to the property. Hence I advised that it was important for them to ask the agent to provide them with the names of all prospective buyers introduced by the agent. Hopefully their internet buyer wouldn’t be on the list but, if he was, they would need to renegotiate their sale price to allow for the agent’s likely legal commission entitlement.
“No way will I give you any buyers’ details,” said the agent. The formal rely to his clients’ email was courteous and uncompromising:
I have considered your request for a list of names of prospective buyers who have been shown through your house up until and including today. Unfortunately, according to the company’s Privacy Policy and the confidentiality rights of those said people, I cannot provide you with any names of any of the prospective buyers.
Thank you for your understanding in this matter.
Kindest Regards…
When my clients revisited the documents they’d initialed on listing their property, they discovered this agent-friendly legalistic REI form:
NOTICE OF COLLECTION OF PERSONAL INFORMATION
The agent will only use personal information collected from the client, including personal information included in the sale and purchases appointment form, to:
• act as the client’s agent and to provide the services contemplated under the appointment agreement;
• promote services of the agent to the client;
• service and advise other existing and potential clients (by comparing properties);
The agent may, to the extent necessary to carry out its appointment or as otherwise permitted under the Privacy Act, disclose such information to third parties including potential buyers, newspaper and other media organisations involved in property advertising, persons engaged to evaluate the property, owners’ corporations, government and statutory bodies, and financial institutions.The agent may also disclose certain details about the client’s property listing or sale to other existing and potential clients in order to promote and provide its services to those clients.
The client can gain access to any personal information which the agent holds about the client, by contacting the agent. The agent’s contact details are provided in the appointment form. The agent may refuse access to such information in the limited circumstances provided for in the Privacy Act. The agent may charge the client a reasonable fee to provide the requested access.
The agent will take all reasonable steps to correct any information which the client shows to be inaccurate, incomplete or out-of-date.
Real estate and tax laws require some of the in formation described in the appointment
form to be collected. If certain information isn’t provided, the agent may not be able to act effectively on the client’s behalf or act for the client at all.
Without checking with me, these not-unintelligent and not-inexperienced property sellers realised this document applied only to personal information about themselves and not to details of prospective buyers. So they promptly fired this silver bullet back to their agent:
We have never had a problem with agents in the past providing a full list of names of potential buyers shown through our property. We are not asking for phone numbers or addresses – only their names.
Due to your privacy policy we have no idea who you have shown through our house.
Therefore if we sold our house at a later date ourselves to a person you introduced to our property, how would you be able to make a claim for any potential commission on the basis of having introduced that person in the first instance? You are actually putting yourself at a disadvantage.
Can you please confirm that you will not be making any future claim for any possible commission if we sell ourselves at a later date because your current privacy policy dictates that you are unable to provide names of people you introduced to our property?
Looking forward to your response.
Regards…
Agents everywhere – whether their engagements have been open, sole or exclusive – have a legal duty and a fiduciary duty to disclose to their clients, not only full details of all persons introduced to a property, but also all matters disclosed by prospective buyers. In fact Queensland’s statutory Real Estate Agency Code of Conduct provides very specifically for the protection of buyers:
“A real estate agent must warn a customer, as soon as possible, that any information disclosed to the agent may be disclosed to the agent’s client.”
Tim O’Dwyer is a Queensland solicitor, watchdog@argonautlegal.com.au
API readers – whether you’re a vendor, buyer or real estate agent, tell us what you think!
I think agents should be legally required to disclose names of prospects to their clients (sellers.) If this isn’t provided for in the standard REI listing agreements in various States, then I think sellers’ solicitors should advise their clients to amend the contract accordingly before signing it.
Here’s a hypothetical situation – the agent shows people through a property, but refuses to disclose their names to the client (seller.) The property doesn’t sell during the listing period so the listing agreement expires and is not renewed. Some months later, the buyer sells the property either through another agent or a private sale.
All of a sudden, the original agent appears and demands a commission, claiming they originally introduced the buyer back when they had the listing. The seller now faces the prospect of having to pay two commissions on the same sale.
My view is that agents who refuse to disclose prospects’ names to their clients should forfeit any rights to file a secondary commission claim if the seller later sells to one of these prospects (either privately or through another agent) after the first agent’s listing has expired, even if the first agent did originally introduce the buyer to the property.
Comment by Thomas — June 7, 2010 @ 11:13 am
Two commissions on one sale can be a very real risk for sellers:
http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/06/27/one-sale-two-commissions.aspx
Comment by Tim O'Dwyer — June 7, 2010 @ 12:39 pm
Buyers are already hesistant enough to give their details to agents. Let’s say the neighbour wanted to buy the property & didn’t want the vendor to know he was the interested party? Agents have a fidiciary obligation to both buyers and sellers. It sounds like these people were cagy and had thought of the idea of selling it themselves from the beginning. Not signing an exclusive agreement begs questions. Did these people want to avoid paying the agent?
I am concerned about the advice given to your client.
Effective cause is NOT JUST SIMPLY INTRODUCING A BUYER. WHO has been the effective cause of the sale?
Putting an ad on the internet is one thing but developing a marketing strategy that captures the right buyers (foreign or not), designing + placing advertising (including editorials), establishing the buyers motivation, asking questions to discover what the buyer wants + needs – leading and matching them to property, managing & updating database, handling objections, inspections, negotiating, helping people make decisions in addition to giving advice, time and expertise (or lack of).
We often hear agents being bagged or people questioning what they do for their commission. If you don’t want to use an agent – don’t. If they’re no good you should be able to terminate any agreement – why would anyone want to hold on to an upset or unhappy client…. On the flip side there are soooo many examples of agents achieving exceptional prices for their clients, well and truly covering any commission (particularly using the auction process).
There are only two main reasons why property doesn’t sell, price or marketing. If the marketing has been done correctly than it can only be price – we find so many sellers wanting a price above what the market is prepared to pay and it would make sense that without an agents commission they could achieve this – but could they really? Is the agents role just to find a seller who wants to sell and a buyer that wants to buy and match them up?…
Comment by Kate Lumby — June 7, 2010 @ 1:34 pm
Regarding Kate’s comment (#3)…
“Not signing an exclusive agreement begs questions. Did these people want to avoid paying the agent?”
While agents obviously prefer that vendors sign exclusive listing agreements (to better protect the agents’ own interests, I would argue), I think it’s a bit unfair to suggest that vendors who choose to go with an open listing have shady, unethical motives like trying to avoid paying the agent. There are pros and cons to both exclusive and open listings. Vendors might have perfectly valid reasons to prefer an open listing.
“We often hear agents being bagged or people questioning what they do for their commission. If you don’t want to use an agent – don’t.”
I don’t think suggesting that agents should disclose prospects’ names to their clients is in any way “bagging” agents, or “questioning what they do for their commission.” I can’t see why real estate agents would get defensive about this question.
Yes, it’s true – there may be times when a prospective buyer specifically requests that his details be kept confidential from the seller. If this occurs, then BEFORE the agent shows the prospect through the property, the agent should contact the client and advise him of the situation.
Then the client can instruct the agent on how to respond – either allow the anonymous prospect to inspect the property, or decline the inspection request.
Comment by Thomas — June 7, 2010 @ 2:51 pm
I have just started in the realestate industry. As an agents rep. I have also read the book “Don’t Sign Anything” bu neil Jenman. I have seen the classical conditioning approach in place. This comes about due to greed which is a natural occuring trait in most if not all humans.
I have seen in the short time people who have not wanted to pay the 3%. Or even 2% comission to an agent. We don’t get paid a wage but an advance on commission incorrectly refered to as a retainer. I have seen people wanting more for their property than it is worth, even when shown comparative sales. This comes back to greed.
Problem is vendors want the best price when selling their property. Buyers want the cheapest price when purchasing a property. The agent manages all the middle ground.
As an agents rep any commission we make has to go against the advance we receive.Yet I have seen the view from vendors that believe that we get paid too much.
Like with any business my boss has his overheads and additional costs when running the business.
The new agency I am working at which is a great place is N.R Reid in Hampton Park in victoria.
However the question as to wether we should disclose all the information to the client or not?
If we are required to then so be it. If we are not then we shouldn’t.
In the above scenario The agent should disclose the list of names to the buyer and the buyer should do so as well.
With this being said both parties should approach this in a mature manner. Problem is when it comes to money the paranoia comes into the equation with a vengence. I personally believe that the comms should be set at 3% of the sale price includling GST. That way buyers know what to expext and the only question they need to ask is can this agent deliver the goods? Does this agent have the skill to do the job?.
With the way things are now people seem to think that cheapest is the best agent. This often falls down in practice.
Comment by traolcoladis — June 17, 2010 @ 9:14 pm
From a NZ perspective and I doubt AU privacy law is vastly different.
A casual conversation with an agent concerning a property can lead to a successful claim by that agent in the event such discussion was instrumental in leading to a sale.
The parties to such conversation never gave there consent as required under the Privacy Act. In NZ that requires clearly implied authority. Casual contact, email inquiry, phones calls fail the test as no authority is infered by such communication.
The authors is correct on liability for commissions, the theory of demanding the agent supplies names doesn’t do it.
If I or any other agent speaks to or if anyway introduced someone to a property they/ we do not have the required consent to disclose there details even if they do have them. End of story! To suggest otherwise is ill-informed at best.
A person I leave a message with, send email details to, or otherwise becomes interested due to my instrumentally as an agent HAS NOT given the required consent to disclose details under our privacy act. Nor can I confirm the info or alias used are correct.
Even if a name is supplied it fails to protect the vendor if the purchaser buys under another name.
The best solution although not full proof is a written undertaking from the buyers they were not introduced, consulted or interest initiated by an agent who may have a claim as a result of that contact.
Introduction can be by many methods as the courts have confirmed.
A Hibiscus coast case the salesperson was prosecuted for discussing the wife’s inspection of a property with the live-in current husband of the wife. The salesperson rang home number as supplied and left detailed msg with husband. She was keeping her activities secret.
Insert post from a NZ real estate agents forum:
“There are also some interesting issues of Privacy to contend with. I asked the Office of the Privacy Commissioner about this sometime ago and have an email outlining some of the issues around this. Essentially, if an agent collects names of viewers or potential buyers, they may not pass those on to anyone else without potentially breaching the Privacy of the individual involved. To get around this, they would have to get opt in from each individual that they consented to their details being passed to other individuals or agents. This is absolutely impractical. What if an interested buyer tells an agent that they do not want their information to be passed on? Does that negate the claim to commission? Would the agent have to seek such permission before every single email or phone conversation as well as outlining it at open homes? As xxxx says, just impractical.”
In a case bought by ann duncan realty the agent only left details of a property for sale on an answer phone, those person never spoke with or had other contact with the agent. They went direct to vender whom they knew and bought. Court ruled in full for the agent.
In Heron developments vs Barfoot & Thompson the buyer told agent they were not interested then bought privately, costing owner $82,000 in fees.
The article offered this sentence:
“Can you please confirm that you will not be making any future claim for any possible commission if we sell ourselves at a later date because your current privacy policy dictates that you are unable to provide names of people you introduced to our property?”
While it may be intended to belittle the agent, it fails to address the agents and owner legal positions, the agent can by various acts commenced under the terms of there agency be entitled to a fee should a sale result from that work. The agent can refer you to the terms of the contract you signed. They still stand.
The agent is prohibited by statue law from releasing the names of parties they may have contact with, nor is compliance actually practical. A company SP’s may have personally handed over details to hundreds of potential buyer who are currently digesting such information.
The answer is in getting undertaking from private buyers they haven’t been in contact with the agent on your property.
These matters are decided by the courts, not public misinformed opinion.
Comment by rpm — June 18, 2010 @ 10:25 am
QUESTION – WE HAVE AN OPEN LISTING WITH AN AGENT, SHE SHOWS SOME BUYERS THROUGH, WEEKS LATER WE NEGOTIATE PRICE WITH THESE BUYERS AND WE PREPARE THE CONTRACT DOCUMENTATION ETC, THE AGENT HAS NO FURTHER INVOLVEMENT. DO WE HAVE TO PAY THE AGENT COMMISSION??
Comment by TERRY COOGAN — July 23, 2012 @ 2:14 pm