The "Fair Deal Negotiation Process"
It is impossible for one person to represent both parties in real estate negotiations. When a negotiator attempts to act for
both parties he inevitably ends up acting for himself, to the detriment of the parties he is supposed to be assisting (See
conflict of interests).
This is why there is no place for
estate agents in the "Fair Deal Negotiation Process".
Introduction
Some
estate agents
act for the purchaser by preparing the purchaser's offer, and then acts for the vendor by responding to the offer on the vendor's behalf. This process usually
takes place in the privacy of the
estate agent's
office, with neither the purchaser nor the vendor having the opportunity to obtain the
legal advice
they require.
We have developed a fair, open and
transparent
negotiation process that replaces the improper sales practices experienced by some real estate consumers.
We have called this process the "Fair Deal Negotiation Process".
The Stages of the Negotiation Process
The "Fair Deal Negotiation Process" is best explained by reference to a series of stages. While the following gives an outline of the stages of the negotiation process, it must be noted that each stage
can involve complex negotiations on matters of law and issues specific to either party.
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Establishing a Starting Point
Price is usually the first matter to be negotiated, therefore a pricing reference point needs to be established. This is achieved
by determining a price range, based on formal valuation. All properties sold through Lawyers Real Estate have been valued by an accredited valuer.
The valuation establishes a pivot point for the price range, from 5% below the
valuation (rounded up to the nearest $5K) to 5% above (rounded down to the
nearest $5K), and purchasers are requested to commence the negotiation process
by making an offer within the range.
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Making of the Offer
The purchaser makes a formal offer by submitting a completed and signed Contract of Sale of Real Estate.
The purchaser will have been advised to obtain legal advice
prior to signing the contract, and will have prepared her offer on her own terms and according to her own requirements.
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Submission of the Offer
The offer is received from the purchaser or the purchaser's lawyers, and is checked by the vendor's lawyer. Legal advice
is provided to the vendor regarding any terms and conditions added to the contract
by the purchaser, and the vendor provides instructions as to whether or not the purchaser's offer is acceptable.
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Acceptance of the Offer
If the offer is acceptable to the vendor, the vendor will formally accept the offer by signing it. The vendor's lawyer
will then communicate acceptance to the purchaser's lawyers to complete the sale. The respective lawyers
then commence the conveyancing stage. However, if the offer is not acceptable, the matter will proceed to the next stage in the negotiation process.
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Vendor's Counter-Offer
If the purchaser's offer is not acceptable to the vendor, the vendor will probably make a counter-offer. The vendor will be given advice and assistance by her lawyer
and the contract will be changed according to the requirements of the vendor. It will then be returned to the purchaser's lawyer for consideration by the purchaser. |
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Acceptance by the Purchaser
If the vendor's counter-offer is acceptable to the purchaser, the
purchaser will accept the offer. The purchaser's lawyer will ensure that the purchaser's interests are protected, and
will make any further changes the purchaser may require prior to acceptance. After the contract has been counter-signed by
the purchaser, it will be forwarded to the vendor's lawyer
by way of formal acceptance. Of course, if the vendor's counter-offer is not acceptable, the
negotiation process will continue.
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Further Negotiations
Negotiations will continue until a deal is struck and formalised, or until the parties
realise that the negotiation process has been exhausted. Of course, the decision as to whether or not
negotiations will continue always rests with the vendor and the purchaser. |
Proper Representation
Sale negotiation is a legal procedure, since the result will be a legally binding contract to sell or purchase real estate. It is
most important that both parties to a sale transaction should have proper legal representation, and that their legal representatives do
not have any financial interest in the outcome of the negotiations. Impartiality is ensured, because the
lawyer
represents the vendor on a
fee-for-service
basis. This is same for the purchaser who has his own legal representation.
Problems arise, however, where
estate agents,
buyer's agents, or
conveyancers become involved in sale negotiations, as none of
these have the qualifications or expertise to provide
legal advice
or to act on behalf of a client in a true
agency
capacity during real
estate negotiations.
Transparency of the Negotiation Process
As the term implies, the parties should be able to "see through" the negotiations and know what is actually going
on throughout the process.
All decisions should be made by the parties themselves, with the benefit of
legal advice.
Where possible, negotiations should be conducted in writing. This ensures that a "paper trail" is left, to enable the client to confirm
what instructions were given, what matters were put to the other party, and how the other party responded.
Transparency eliminates the
estate agent
from the negotiation process, as no
estate agents
can provide true legal representation. Even if a party decides not to have legal representation, the process remains
transparent so long as the person representing one party does not also represent the other.
Dealing with Buyer's Agents
Buyer's agents are simply
estate agents
who attempt to have the purchaser pay a commission. While there may be some benefit in engaging a
buyer's agent
for the purposes of locating a suitable property, a
buyer's agent
simply does not have the qualifications or expertise to negotiate properly on behalf of a purchaser. This is because the
buyer's agent
is unable to deal with the legal issues involved in real estate negotiations.
Any
buyer's agent
who drafts special conditions, provides legal advice, or otherwise involves himself with the
legal work associated with real estate negotiations commits a criminal offence. This severely hampers the ability of
the
buyer's agent to make any meaningful contribution to the negotiation process.
A
buyer's agent's
confidence is quickly destroyed by the mere mention of Section 314 of the
Legal Practice Act and the penalty of
2 years' imprisonment for engaging in unqualified legal practice. The bluff and bluster tactics of the
buyer's agent have no place in the "Fair Deal Negotiation Process".
The Unrepresented Purchaser
All purchasers are strongly advised to obtain
legal advice
from a qualified lawyer before signing a contract to purchase real estate. This is a standard practice, and there are good
reasons for it:
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A purchaser will feel more confident in making a firm decision if that decision has been made with the benefit of legal advice. |
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A properly advised purchaser is less likely to have a change of heart later, and the likelihood of disputes is therefore greatly reduced. |
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There is no "cooling off
" period when a purchaser has received legal advice before signing a contract. No "cooling off
" rights are needed, as the purchaser's decision will be well-informed and not impulsive. |
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Because there is no "cooling off
" period of 3 days, both parties can have the certainty of an immediate and unconditional contract. |
Negotiations tend to proceed more comfortably when each party is properly represented, as decisions are well-informed and proposals are
articulated in writing and with precision. The paper-trail created by written negotiations allows each party to know exactly where they stand at any given
stage of the negotiation process, and greatly reduces the possibility of misunderstandings.
If a purchaser wants to remain unrepresented, then her right to do so will be respected. In order to ensure that
an unrepresented purchaser is not disadvantaged, the
lawyer
may take steps to ensure that she fully understands the significance of a particular stage or event. Of course, this would be done only after the vendor has been advised, and
firm instructions obtained.
The
lawyer
always remains aware of the fact that the vendor client's interests are often best served by ensuring that the unrepresented purchaser
is properly accommodated during sale negotiations.
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Conveyancing Section for real estate consumer information, and to our
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