Before a vendor signs, a salesperson's agency agreement says only that commission is '3.95% of the sale price plus GST'. What else does rule 10.6(a) of the Client Care Rules require?
Correct Answer
B) An estimated commission as an actual dollar amount, based on the written appraisal.
Rule 10.6(a) requires the licensee, before the agency agreement is signed, to explain and set out in writing the conditions under which commission is payable, how it is calculated, and an estimated cost as an actual dollar amount based on the rule 10.2 appraisal. REA advises making clear whether figures include GST.
Why This Is the Correct Answer
Rule 10.6(a) requires a dollar estimate based on the appraisal, not just a percentage.
Why the Other Options Are Wrong
Option A: A copy of the agency's commission scale for every price band it currently charges.
Rule 10.6(a) requires an estimate in actual dollars for this client, based on the rule 10.2 appraisal.
Option C: Nothing, because a percentage rate is enough information for a vendor to work out the cost.
Rule 10.6(a) expressly requires an estimated cost as an actual dollar amount.
Option D: A signed statement that commission is negotiable, confirmed in writing by the branch manager.
Rule 10.6(a) is about how commission is calculated and an actual dollar estimate, not negotiability.
Background Knowledge for Agency Practice
Source: https://www.rea.govt.nz/real-estate-professionals/obligations/the-code-of-conduct/real-estate-agents-act-professional-conduct-and-client-care-rules-2012/
Exam Tip for Agency Practice
Percentage plus a dollar estimate tied to the appraisal, before signing.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking a percentage rate alone meets the commission disclosure rule.
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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