A licensed salesperson working under a sole agency agreement discovers that the vendor has been showing the property privately to potential buyers without informing the agency. The vendor then sells to one of these private buyers. What is the commission situation?
Correct Answer
B) Full commission is payable under the terms of the sole agency agreement
Under a sole agency agreement, the agent has exclusive rights to sell the property and commission is payable regardless of who finds the buyer, including if the vendor sells privately. This is a key difference from a general agency agreement.
Why This Is the Correct Answer
A sole agency agreement makes commission payable if the property sells during the agency period, whoever finds the buyer, including the vendor. Rule 10.6 requires those conditions to be explained in writing before signing, so a vendor who sells privately during the term still owes the agreed commission.
Why the Other Options Are Wrong
Option A: No commission is payable, because the agency did not find the buyer
That describes a general agency; under a sole agency, commission is payable on a sale during the term whoever finds the buyer.
Option C: Half commission is payable, recognising that the vendor found the buyer
There is no statutory or customary half-commission rule; the agreement decides the amount, and a sole agency gives full commission.
Option D: Commission is payable only if the agency can prove it introduced the buyer
Proving introduction matters under a general agency or after the term ends, not for a sale made during a sole agency.
Deep Analysis of This Agency Practice Question
New Zealand uses two main vendor agency types. Under a general agency the vendor may appoint several agencies and owes commission only to the one that sells, and owes nothing on a private sale. Under a sole agency one agency is appointed and commission is payable on any sale during the term, including one the vendor arranges. That is why the vendor's private sale here still triggers the full commission.
Background Knowledge for Agency Practice
Section 126 of the Real Estate Agents Act 2008 makes commission depend on a written agency agreement signed by the client and the agent. A client may cancel a sole agency by 5 pm on the first working day after receiving a copy (s 130), and either party may cancel a residential sole agency longer than 90 days once 90 days have passed (s 131). Rule 10.6 requires the conditions for commission to be explained and set out in writing before signing.
Memory Technique
Under a sole agency, ask one question: did the sale happen during the term? If yes, commission is payable, whoever found the buyer.
Use it whenever a vendor under a sole agency sells privately or through someone else during the agency period.
Exam Tip for Agency Practice
Identify the agency type first: sole agency pays on any sale during the term; general agency pays only the agency that sells.
Real World Application in Agency Practice
A vendor signs a 90-day sole agency. In week eight a neighbour offers to buy and the vendor accepts without telling the agency. The agency is still entitled to its commission, because the sale happened during the sole agency term.
Common Mistakes to Avoid on Agency Practice Questions
- •Confusing sole agency with general agency commission rules
- •Thinking commission depends on who finds the buyer rather than agreement type
- •Assuming partial commission is legally acceptable in sole agency situations
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
A real estate agent receives two offers on a property at the same time. What is their primary obligation?
Which of the following situations would create a conflict of interest requiring disclosure by a real estate licensee?
Sarah is a licensed salesperson working for ABC Real Estate. When showing a property to buyers, who does she primarily represent?
Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
Which licence allows a person to carry out real estate agency work for an agent, but only under supervision?
- → Under section 126 of the Real Estate Agents Act 2008, what must happen after the client signs an agency agreement for the agent to be entitled to commission?
- → A licensed agent discovers that their salesperson has been providing advice about tax implications of a property investment without appropriate qualifications. What is the agent's responsibility?
- → An agency agreement contains a clause stating that the agent's commission is payable even if the property is sold by the vendor directly to a buyer introduced by the agent during the agency period, but the sale settles after the agency expires. Is this clause enforceable?
- → What must a real estate agent disclose to a potential purchaser when showing a property?
- → Under a sole agency agreement, when is the vendor still liable to pay commission to the agent?
- → Sarah holds a salesperson's licence and works for ABC Real Estate. When presenting an offer to a vendor, who is legally responsible for ensuring all disclosure obligations are met?
- → A real estate agent discovers that a property has a leaky roof after the agency agreement is signed but before any offers are received. What is the agent's obligation?
- → Which of the following allows an agent to end an agency agreement before its expiry date?
- → Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
- → What must a licensee do when they become aware of a material defect in a property they are marketing?
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