A licensee buys a client's property. The client agreed the valuation could follow within 14 days, and Form 2 records a provisional valuation of $610,000 (an invented figure). The independent valuation comes back at $645,000. What can the client do?
Correct Answer
D) Avoid the contract, because the valuation exceeds the provisional figure.
Section 135(3)(b) allows the valuation to be given within 14 days after consent if the client agrees, and Form 2 then records a provisional valuation. Under s 135(5) the contract is voidable at the client's option if the valuation, when supplied, is greater than the provisional valuation. REA notes the client may also choose to renegotiate or continue.
Why This Is the Correct Answer
Under s 135(5), a valuation above the provisional figure makes the contract voidable by the client.
Why the Other Options Are Wrong
Option A: Nothing, because the client already consented on Form 2 before the valuation was received.
Section 135(5) makes the contract voidable where a later valuation exceeds the provisional one.
Option B: Require the licensee to pay the difference while the sale proceeds.
The Act gives the client the option to avoid the contract, not a statutory top-up payment.
Option C: Avoid the contract only if the valuation is more than 10% above the provisional figure.
Section 135(5) has no 10% threshold; any valuation greater than the provisional one is enough.
Background Knowledge for Agency Practice
Source: https://www.legislation.govt.nz/act/public/2008/0066/latest/whole.html
Exam Tip for Agency Practice
Late valuation higher than provisional value: the client may avoid the contract.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking consent on Form 2 locks the client in whatever the valuation shows.
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?
People Also Study
Property Law & Legislation
56 questions
Sale & Purchase Process
63 questions
Professional Conduct & Ethics
46 questions
Property Management
85 questions
Related Study Resources
Previous Question
A homeowner signed a 150-day sole agency agreement for her house 95 days ago. The house has not sold and she wants to move to another agency. What does s 131 of the Real Estate Agents Act 2008 allow?
Next Question
A licensee is appraising an unusual converted church, and there are no directly comparable or semi-comparable recent sales in the area. What does rule 10.3 of the Client Care Rules require?