Can you take a buyer through a property without a contract for sale ready?

In most States and Territories this is possible but it is very difficult in New South Wales.

Section 63(2) of the Property Stock & Business Agents Act 2002 (the Act) states that:

A real estate agent must not offer residential property for sale unless the required documents are all available for inspection at the realestate agent’s registered office by a prospective purchaser or agent for a prospective purchaser at all times at which an offer to purchase the property may be made (or at such other place or at such other times as may be prescribed by the regulations).

The “required documents” means copy of the proposed contract for the sale of the property including all of the “prescribed documents” i.e. zoning certificates, sewerage diagrams etc.

Further, the term “offer residential property for sale” is defined to include “showing the property to a prospective purchaser or giving the address of the property to a prospective purchaser”.

This would appear to be fairly ‘black and white’.

The only potential room to manoeuvre may be to look at the words in s.63(2), which require a contract to be made available:

at all times at which an offer to purchase the property maybe made

and stipulate clearly to the prospective purchaser (ideally in writing) that an offer cannot be made until the contract for sale has been available.  

The problem with this approach is that, even if the Department of Fair Trading accepted that you could show a property to a purchaser without a contract ready provided an offer is not made, it would make genuine conversations with the purchaser very difficult.

Further, what would happen if despite the agent insisting an offer cannot be made prior to a contract being issued, the purchaser does so anyway?

Another possibility may be to show the property to a purchaser prior to signing an agency agreement and argue that the requirements of s.63 only get activated once a mandate is formally in place. The problem with that (apart from the fact that it may not be correct!) is that the agent would not be entitled to any commission if the purchaser does end up buying the property and the vendor does not agree to signing an agency agreement.

The final possibility may be to involve a buyers agent and rely on the exception to s.63(2) which states that:‍

This section does not apply to anything done by a real estate agent when acting on behalf of a prospective purchaser of residential property.

This would probably require a genuine mandate by the purchaser of a buyers agent (which may not be something they want to do). Further, the vendor’s agent would have to demonstrate that the buyers agent is the one showing the property to the purchaser and not the one being shown.

‍Conclusion

Although it may be tempting to take a purchaser through a property without a contract, the better view is that it’s probably not possible without breaching the Act and potentially incurring a $11,000 fine.

For that reason, agents should have good relationships with efficient conveyancers who can speedily prepare contracts for sale and try and pre-empt when they might urgently needed to show a property.