What type of agency agreement allows a real estate agent to receive commission even if the property is sold by another agent?
Correct Answer
B) General agency agreement
A general agency agreement (also known as multiple listing) allows the vendor to appoint multiple agents, but whichever agent sells the property receives the commission. This differs from sole or exclusive agreements where only one agent is appointed.
Why This Is the Correct Answer
A general agency agreement allows the vendor to appoint multiple agents to market their property simultaneously. Under this arrangement, whichever agent successfully procures a buyer and completes the sale receives the full commission. This creates a competitive environment where all appointed agents have equal opportunity to earn commission, regardless of which specific agent ultimately sells the property. The Real Estate Agents Act 2008 recognizes this arrangement as a legitimate agency structure that balances vendor choice with agent incentives.
Why the Other Options Are Wrong
Option A: Sole agency agreement
A sole agency agreement appoints only one agent to market the property. While the vendor retains the right to sell privately without paying commission, no other agents can be appointed. Therefore, there's no scenario where 'another agent' could sell the property under this arrangement.
Option C: Exclusive agency agreement
An exclusive agency agreement grants exclusive marketing rights to one agent only. The vendor cannot appoint other agents and typically cannot sell privately without paying commission. This eliminates any possibility of another agent being involved in the sale.
Option D: Open listing agreement
An open listing agreement allows multiple agents to market the property, but each works independently without formal appointment. While multiple agents may be involved, this isn't the specific arrangement described in the question where commission is guaranteed regardless of which agent sells.
Deep Analysis of This Agency Practice Question
This question tests understanding of different agency agreement types in New Zealand real estate practice. The key distinction lies in how commission rights are allocated when multiple agents are involved. Under the Real Estate Agents Act 2008, agents must clearly understand their commission entitlements to avoid disputes and ensure proper disclosure to clients. A general agency agreement creates a competitive environment where multiple agents can market the property simultaneously, but only the successful agent earns commission. This arrangement maximizes market exposure while maintaining performance incentives. Understanding these distinctions is crucial for agents to properly advise vendors on marketing strategies and manage their own business expectations. The concept connects to broader principles of agency law, fiduciary duties, and the practical realities of property marketing in New Zealand's competitive real estate environment.
Background Knowledge for Agency Practice
New Zealand real estate agency agreements are governed by the Real Estate Agents Act 2008 and common law principles. The main types include: sole agency (one agent, vendor can sell privately), exclusive agency (one agent, vendor cannot sell privately), general agency (multiple agents, successful agent gets commission), and open listing (informal multiple agent arrangement). These agreements define commission entitlements, marketing rights, and obligations between vendors and agents. Understanding these distinctions is essential for NZQA qualification requirements and practical agency work, as they affect marketing strategies, commission calculations, and legal obligations under the Act.
Memory Technique
Remember SEGO: Sole (one agent, vendor can sell), Exclusive (one agent, vendor cannot sell), General (multiple agents, winner takes all), Open (multiple agents, informal). Think of it like a race: General agency is where multiple runners compete but only the winner gets the prize.
When you see agency agreement questions, immediately think SEGO and identify whether the scenario involves one agent or multiple agents, and whether commission is guaranteed or competitive. This helps eliminate wrong answers quickly.
Exam Tip for Agency Practice
Look for keywords: 'multiple agents' or 'another agent' usually points to general agency or open listing. If commission is guaranteed to any successful agent among multiple agents, it's general agency.
Real World Application in Agency Practice
A vendor wants maximum market exposure for their $800,000 Auckland property. They sign general agency agreements with three different real estate companies. All three agents actively market the property through their networks and websites. After two weeks, Agent A from Company X finds a buyer who purchases at the asking price. Even though Agents B and C also worked on marketing the property, only Agent A receives the agreed commission because they were the procuring cause of the sale. The other agents receive nothing despite their marketing efforts.
Common Mistakes to Avoid on Agency Practice Questions
- •Confusing general agency with open listing arrangements
- •Thinking sole agency allows multiple agents
- •Assuming all agents get commission in general agency agreements
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
Which licence category is required for a person to sign agency agreements on behalf of a real estate agency?
When must a real estate licensee disclose any personal interest in a property transaction?
Sarah, a licensed salesperson, discovers that a property she is marketing has a significant building defect that the vendor has not disclosed. What should she do?
Under a sole agency agreement, in which circumstance would the agent NOT be entitled to commission?
- → 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?
- → A branch manager discovers that one of their salespersons has been providing incomplete information to potential purchasers about a property's title restrictions. What is the branch manager's primary responsibility?
- → An agent has an exclusive agency agreement that expires in two days, but the vendor wants to extend it for another month with a different agent. The original agent claims they introduced a purchaser who is still negotiating. What determines the original agent's entitlement to commission?
- → Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
- → Which licence category allows a person to carry out real estate agency work on behalf of a licensed agent?
- → What must be included in every agency agreement under the Real Estate Agents Act 2008?
- → When must a real estate agent disclose that they have a personal interest in a property transaction?
- → Sarah, a licensed salesperson, discovers that her vendor client has not disclosed a known leaky roof issue. What should Sarah do?
- → A real estate agent receives two offers on the same property at the same time. What is the agent's obligation?
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