Which type of agency agreement allows a real estate agent to earn commission even if the property is sold by another agent?
Correct Answer
B) General agency agreement
A general agency agreement means the agent earns commission regardless of who sells the property, including other agents. This provides the agent with the greatest protection for commission entitlement.
Why This Is the Correct Answer
A general agency agreement guarantees the agent commission regardless of who sells the property - whether it's the listing agent, another agent, or even the owner directly. This type of agreement provides maximum commission protection for the agent. Under New Zealand real estate practice, this arrangement ensures the agent receives compensation for their marketing efforts and property exposure, even if another party completes the actual sale. The 'general' nature means the commission entitlement is not contingent on the specific agent making the sale.
Why the Other Options Are Wrong
Option C: Open listing agreement
An open listing agreement typically allows multiple agents to market the property simultaneously, but usually only the agent who actually sells the property earns commission. If another agent sells the property, the original listing agent generally doesn't receive commission, making this less protective for agent commission entitlement than a general agency agreement.
Option D: Exclusive agency agreement
An exclusive agency agreement typically gives one agent the exclusive right to market and sell the property, but if the property is sold by another agent (which shouldn't happen under exclusive arrangements) or by the owner directly, the original agent may not receive commission. This doesn't provide the same broad commission protection as a general agency agreement.
Deep Analysis of This Agency Practice Question
This question tests understanding of different agency agreement types and their commission structures under New Zealand real estate law. Agency agreements define the relationship between property owners and real estate agents, particularly regarding commission entitlements. The distinction between agreement types is crucial as it determines when and how agents earn commission, affecting both agent motivation and client obligations. General agency agreements provide the broadest commission protection for agents, as they guarantee payment regardless of who ultimately sells the property. This contrasts with more restrictive agreements that limit commission to specific circumstances. Understanding these differences is essential for both agents and clients to make informed decisions about representation arrangements and commission structures.
Background Knowledge for Agency Practice
Agency agreements in New Zealand real estate are governed by the Real Estate Agents Act 2008 and establish the legal relationship between agents and clients. Key types include: sole agency (one agent, commission only if they sell), exclusive agency (one agent has exclusive marketing rights), open listing (multiple agents can market, typically only selling agent gets commission), and general agency (agent gets commission regardless of who sells). These agreements must be in writing and clearly specify commission terms, duration, and conditions. Understanding commission structures is vital for both agents and vendors to ensure clear expectations and legal compliance.
Memory Technique
Remember GOES: General = Guaranteed commission (most protective), Open = Only selling agent gets paid, Exclusive = Exclusive to one agent, Sole = Solo agent earns only if they sell. Think of General as 'Generally gets paid' - the most generous to the agent.
When you see agency agreement questions, think GOES and match the level of commission protection. General agency = highest protection (always gets paid), while others have conditions. Look for keywords like 'regardless of who sells' to identify general agency scenarios.
Exam Tip for Agency Practice
Look for key phrases like 'regardless of who sells' or 'even if another agent sells' - these typically indicate general agency agreements. Focus on the commission protection level rather than marketing exclusivity when determining agreement types.
Real World Application in Agency Practice
Sarah lists her Auckland property under a general agency agreement with ABC Realty. ABC markets the property extensively but after two months, XYZ Realty brings a buyer who purchases the property. Despite XYZ Realty completing the sale, ABC Realty still receives their agreed commission because the general agency agreement guarantees payment regardless of which agent sells the property. This protects ABC's investment in marketing and ensures they're compensated for generating market interest, even though another agent closed the deal.
Common Mistakes to Avoid on Agency Practice Questions
- •Confusing 'general agency' with 'open listing' - both involve multiple potential sellers but have different commission structures
- •Thinking 'exclusive' means guaranteed commission - exclusivity relates to marketing rights, not commission guarantees
- •Assuming only the selling agent gets commission in all agreement types - general agency is the exception
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?
What type of agency agreement allows a real estate agent to receive commission even if the property is sold by another agent?
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?
People Also Study
Property Law & Legislation
130 questions
Sale & Purchase Process
130 questions
Professional Conduct & Ethics
110 questions
Property Management
90 questions