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Clarification – Vendor's selling price and the reserve

4 Dec 13

There seems to be some confusion among real estate practitioners about the vendor’s acceptable price in the sales agency agreement and the nexus between that and the reserve price in the upcoming legislative changes commencing on 1 January 2014.

REISA has consulted with CBS and is able to provide you with the following clarification that is entirely consistent with the training that REISA is currently providing on the legislative changes.

In a sales agency agreement for the sale of residential land by auction, the vendor is not able to vary the agreement to increase their acceptable selling price. They are able to vary the agreement to decrease their price at any time but then that new price cannot subsequently be increased.

For example, if a vendor has $400,000 as their acceptable price, they cannot vary the sales agency agreement to increase their $400,000 price. However, they can vary the sales agency agreement to decrease their price to say, $350,000. Once the price is lowered, the vendor would then not be able to vary the agreement to increase their price above $350,000.

The reserve can be no more than 110% of the vendor’s acceptable price as stated in the sales agency agreement. The reserve can be lower than 110% of the vendor’s acceptable price.

For example, if a vendor has $400,000 as their acceptable price, the reserve can be no more than $440,000. It can be less. If the vendor chooses to vary their acceptable price to $350,000, then the reserve can be no more than $385,000. It can be less.

REISA trusts that this information clarifies any concerns that real estate practitioners may have about these provisions.

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