What laws do real estate agents have to abide by?

I hear many stories where some buyers have been gazumped and others who struggle to obtain the right information from the agent to submit an offer.law-school

We even have sellers who don’t trust their own real estate agent.

All of these things and many other grey areas do not lead to the best result for the buyers and especially the sellers.

The problem lies in buyers and sellers not understanding the legal frameworks the agents are bound within.

In this article I want to dispel the myths and the grey areas of common problems that buyers and sellers have with real estate agents.

By the end of this article you should be armed with the right knowledge to help your property transaction go through smoothly as possible.

How strict are the authorities?

Some people think the real estate agents can get away with murder.

This is far from the truth as the perception of the industry is somewhat of a low one.

Some surveys reveal that people trust a local sex worker more than their real estate agent. 

This perception has made us one of the most heavily regulated industries in Australia.

Real estate agents are constantly audited by the ATO, covertly spied on by Fair trading at auctions, taken to CTTT tribunals by tenants/landlords, disciplined by The REI, fined by Australian Securities and Investments Commission about advertising and not to mention being sued!

As you can imagine this is a hazardous industry for a business owner with so many governing bodies keeping it in line.

As such, the insurances go through the roof to own and run a real estate agency.

Because of this and Australia’s love for property, real estate agents are a target for governing bodies and journalists, as everybody wants to catch a real estate agent doing the wrong thing.

The truth is governing bodies love to make examples of real estate agents as it gets them a lot of publicity, it shows the public that they’re doing their job.

This leads into my next subject;

 What are agents constantly apprehensive of?

Most agents just want to do their job to the best of their ability without being sued, fined, and or disciplined.

This is the underlying tone of the industry but nobody really discusses it.

With every new tightening rule, law and regulation comes more paperwork and administration.

We find ourselves using emails, text messages and data basing of diary notes just to cover our rear ends.Discussion with a real estate agent

This comes as a double edge sword for buyers and sellers as they want everything done cheaper, faster and better.

Sometimes this is impossible because buyers, sellers and lawyers like to target real estate agents and inadvertently add to the red tape/cost of running
an agency.

This has forced real estate agents to hold the ground on their fees or risk taking shortcuts.

I see this many times, for example where agents will show me (not knowing that I’m an agent) a property they have for sale that they do not have a contract of yet.

It’s illegal for an agent to advertise a property for which they do not have a contract of sale.


Gazumping refers to when you have a verbal agreement with an agent or seller to purchase a property at an agreed price but the property is not sold to you in the end.19383767 - house outline dollar

Gazumping is a very real problem but it’s usually the lack of buyers’ understanding of the law and how contract signing works that gets them in trouble.

The buyers in turn blame the agent.

This is where our databasing of diary notes and emails comes in handy.

We find especially in a hot market, we have to repeat ourselves at least three times in three different ways for people to put in their best and final offer so they don’t feel like we have done the wrong thing by them.

Yet people still complain that they would’ve offered higher.

In my observation, it’s easy to say this when things have cooled off and people are just annoyed that they have missed out.

The key to understanding this is not to crack open the champagne until the owner has signed the contract and it is dated.

Without a date the contract is invalid.Couple meeting real-estate agent to buy property meeting

You signing a check with your 10% does not mean you have purchased a property.

There are some sales strategies out there in which the agents get three signed contracts and then show the vendors from lowest to highest to get the vendors to agree to a price.

The best way to get your contract signed is to make your offer the most attractive you can and this may not just be money but other things such as settlement and rent back options.

To avoid not being called back and missing out on an opportunity to raise your offer, I recommend to stay in constant contact with the agent .

You have already indicated your interest, so it doesn’t hurt your negotiation by constantly calling them. In fact it can work in your favour if the agent slips up and gives you more information.

Not knowing where you stand when it comes to your offer

My friends and I have invested in a lot of property so I know all too well the feeling of not knowing where you stand when it comes to submitting an offer.

My observation of being on both sides of the fence is that it is mainly the lack of trust you have in the agent that is selling to you that creates this feeling.

I found a good way to combat this is to call their bluff on their creating a Dutch option which is illegal.

Agents may get offended or annoyed but this is a valid question that I put to them during negotiation and keeps them in line, telling them that it is illegal for them to disclose my offers to other buyers.

Sellers lose money not trusting their agent

When selling you don’t need to like your real estate agent but not to trust them can cost you thousands of dollars.house sale seller owner sold property

When you sign an agency agreement with certified real estate agent they are in a legal binding contract to work in your best interest to get you the best price for your property.

Agents have a fiduciary requirement to work in your best interest.

It is illegal for them to work against you.

This is in the back of the mind of every selling agent.

They are in the middle doing their best to maintain their relationship with the buyer but also trying to achieve the highest possible price the your property.

Agents have their agency agreements audited all the time to see if there is any discrepancies that show collusion with buyers, nondisclosure, secret commissions, or getting the value of your property wrong.

They can be caught out very easily.property mortgage finance money

This is why you don’t need to like your agent to trust them because they have no choice but to work in your best interest.

I will give you an example that I see happens every week in real estate that cost sellers at least $10-$20,000 on a selling price.

The seller normally thinks that their property is the best in the world and that’s fair enough if you have grown up in the area and have created memories in your home.

However, this emotional attachment makes sellers think that we under-price the value of their home and that people would actually be prepared to pay more than the market price.

This is entirely not true and I see seller’s market high prices for their home, killing enquiry levels and interest in the most important first week of advertising.

You will always get a peak of interest in the first week. 

In fact more enquiry drives the price up and what usually drives enquiry is a low advertised price.house

Note; The advertised price is not your asking price it is just advertising (backed up by comparable sales of course).

Your selling price is completely different.

Many sellers do not trust agents when they explain this and that is understandable with all the emotions around property and money.

But you really need to see it from a buyer’s perspective before you look at it from a seller’s perspective.

This concept can help you achieve above market price for your property, as agents are in the market every day.

Remember the sale is not based on the advertised price but what others are prepared to pay when competing against one another, this is normally call a “market price”.


I challenge you to look up the rules, laws and regulations agents have to work within.

This will help you have more confidence in your property transaction and dealing with agents.

Here are some resources I suggest:




Want more of this type of information?

Jhai Mitchell


Jhai is the Internet Marketing Business Development Manager for Elders Toongabbie and Kings Langley. He has been consistently quoted in the Sydney Morning Herald and Real Estate Business online. Visit his blog at www.realestatesevenhillsnews.com.au

'What laws do real estate agents have to abide by?' have 7 comments

  1. March 5, 2015 @ 9:01 am John O'Grady

    Am I correct in presuming that your reference to a ‘Dutch option’ is an error and should read ‘Dutch Auction’ ?

    Why do you say that it is illegal? What part of which act, regulation, whatever is contravened by revealing the nature of a prospective purchasers offer to another party?


  2. May 13, 2015 @ 1:28 pm Bee

    how can a reale state agent tell a buyer that whoever signs first with offer is the one who can buy the house, buyer asked if it was negotiable and told no this is the price they want so the buyer said they will buy at the price the sellar was selling. the real estate agent could not let them sign the papers until later the next day and then ask them if they could go higher than the asking price, ass he has a another buyer to see, now if your told first in best dressed that you will have the house how come the agent is holding its only auction (that’s what it appears to be) so the agent went back to the other purchaser ??? (if there was one) is this legal, as how on earth are you expected buy a house at a price you can just afford and then ask for more than the asking price by the agent??????????????????


  3. January 17, 2016 @ 7:11 am Jo

    Real Estate agent. Signed exclusive agency agreement late Oct, Offer accepted within 2 weeks (Buyer from data base) property not advertised publicly. Property put on agent website only. First contact conditions discussed, end Nov, Buyer wanted an unacceptable clause that put me (seller) at a disadvantage, my solicitor advised against having this clause . Agent said buyer would agree to sign without clause on or before Dec 10. Nothing signed by Dec 22, Asked agent to start advertising my property, Agent said ‘No’ He had given buyer until Jan 15 to sign. Buyer has not signed my home is not properly advertised and it has not been advertised on any of the popular web sites or papers (as per agreement) I am stuck in the exclusive agency period until 31 Jan, and have to give 30 days written notice. How can I sell my property if it is not being advertised? If I give 30 days and he starts advertising and then I sign with another agent can he come back wanting commission? if I do sign with another agent I will not sell to his introduced buyer. This will cost me double commission. All I see is missed opportunities for sales a lot of similar properties in my area have sold while the agent has been holding mine for this buyer (turns out to be his friend) Wher Do I stand in this case???


  4. July 13, 2016 @ 3:08 pm Candice

    I would like to know if an agent advertises a property for an amount or neg over… and they know it’s a lie and they only change it due to lack of interest is that legal?


    • July 13, 2016 @ 5:55 pm Michael Yardney

      Candice – estate agents are not allowed to lie at any time – in every state laws are being introduced to protect consumers – the problem is they’re hard to enforce


      • July 13, 2016 @ 6:04 pm Candice

        Thank you Michael. The problem is the house was advertised as one price and then there was obviously no interest, and the price was decreased drastically – got the huge sales pitch that the owners are desperate to sell and they will accept any good offer. So we put an offer in and then the agent comes back and says the owner will only accept a little less than the original sale price.


        • July 13, 2016 @ 10:25 pm Michael Yardney

          That’s very frustrating. Remember the owner can choose what price to accept whether it is realistic or not, and the agent only gets paid for makes a sale. It will be his job to educate his vendor as to a realistic market price, so there’s nothing wrong with you having put in a low price, but don’t expect your first offer to be accepted. That’s part of the negotiating game.


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