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Selling Advice
Buying or Selling a Home can be a Complex, Time-Consuming and often Daunting and Stressful Process
Even before you make the ‘big decisions’ about such things as when to sell and which real estate agent you engage to sell your home, there are many other important decisions you will need to make. Marquette Turner detail below some comprehensive advice to help answer your questions in assist you with making important decisions.
Doing some homework can help you avoid potentially expensive mistakes. You are more likely to make the right choices if you know what you want; are well informed about your options; shop around for the best price and service or product that meets your needs; refuse to be hurried into a decision; take your time; read everything before you sign it; and ask questions.
Be Informed
Learn as much as possible about all aspects of the property buying and selling process. Find out all you can about the market value of your property by searching the internet, attending auctions, speaking with a variety of estate agents, and reading newspapers for sales results and prices of properties currently listed for sale.
Shop Around
Apart from being informed about current market values and what you need and want, you will also need to be informed about the products and services offered by estate agents, solicitors and conveyancers, removalists, tradesmen and loan providers. Shopping around is the only way of really knowing that you are getting value for money and that your needs are being met as fully as possible. Agency websites are an excellent source of information on their services.
Don't Hurry
Never rush or be pressured into making hasty decisions. There is a lot of money at stake – a lot of years have been spent paying off your mortgage and you do not want to lose any potential profit. If you take your time and do your homework, you will feel more confident that you have found the right agent at the right time.
Read Before you Sign
During the selling process you may come across several types of contracts such as Authorities to Sell (in Victoria) or Agency Agreements (in New South Wales), contract notes and contracts of sale of real estate. A good and safe general rule is not to sign any document without reading and fully understanding its contents including all terms, conditions and fine print.
Make sure that anything which has been agreed to verbally is put in writing. You will therefore know exactly what you are committing yourself to. If something is unclear, ask for an explanation. If you are still uncertain, it is better to wait and seek additional professional advice before signing.
Negotiate
Many terms and conditions are negotiable between the parties. Estate agents, loan providers, removalists, solicitors and conveyancers, as well as buyers want your custom.
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Dealing with Real Estate Agents
There are laws that govern the licensing and conduct of real estate agents. These laws prohibit unethical practices like under-quoting, over-quoting and dummy bidding.
A property transaction can in principal be undertaken directly between buyer and seller, without the services of an estate agent. This is, however, uncommon and generally not the best approach – after all you wouldn’t operate on yourself rather than use the services of a surgeon! Thus, most people choose to deal with a real estate agent when selling property. In doing so, there are several important things to know about their roles and responsibilities and the rules that govern their
conduct.
Licensing of Agents
Anyone who is in the business of buying, selling, leasing or otherwise dealing with property on behalf of any other person, must hold an estate agent’s licence or be employed by a licensed estate agent as an agent’s representative. An agent’s representative needs written authority to act on behalf of his or her employer before commencing work (in Victoria) or hold a real estate certificate (in New South Wales) and the licensed real estate agent is responsible for the employee’s professional conduct.
Therefore, you should only deal with a licensed estate agent or an agent’s representative. You can check if someone is a licensed estate agent or agent’s representative by searching the public registers of real estate agents.
In New South Wales: contact the Office of Fair Trading on 13 32 20 or visit the link at the bottom of this page.
In Victoria: contact Victoria’s Business Licensing Authority on 1300 13 54 52 or visit the link at the bottom of this page.
Laws Governing Agents
By law, real estate agents must:
• advise a client that all commissions and other outgoings are negotiable
• communicate all offers to buy (unless you advise the agent otherwise in writing)
• state an estimated selling price
By law, real estate agents must not:
• use under-quoting, over-quoting or dummy bidding
• retain advertising or other rebates (in Victoria) or fail to state what rebates the agent receives from third parties (in New South Wales)
• charge a client more for outgoings than was paid by the agent (eg. Advertising)
• charge more than was authorized by the seller in writing.
The Agent-Principal Relationship
The relationship a seller has with a real estate agent is different to that of a buyer. Real estate agents are obliged to act responsibly and ethically when dealing with both buyers and sellers. The agent’s responsibility, however, is to ultimately act for the seller.
The Agents' Responsibility to the Vendor
Sellers who engage or list with an agent are employing the agent’s services to help sell their property. The agent is bound by professional conduct regulations to always act in the best interests of the seller and to engage in good estate agency practices.
The agent will charge a fee for this service, usually in the form of a commission, which can be a percentage or a negotiated fixed fee. A seller can expect the agent to give an estimated selling price of the property and to communicate all offers to buy.
A seller can generally expect the agent to:
• advise on a method of sale
• advertise and market the property, and provide a marketing plan
• organise and attend open house and other inspections
• attract prospective buyers
• organise and conduct an auction
• arrange the signing of the contract
• collect and hold the full deposit in a trust account.
Image: Cathedral Square, Sydney NSW
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Selecting An Agency
For the seller, choosing an agency is a vitally important part of the selling process.
There are several ways to help you make this decision
• Check the internet and local papers o find agencies, the services they ofer and sale price information.
• Friends and acquaintances can be an excellent source of information.
• Read promotional material from a range of agencies. Don’t be fooled in thinking that local agents are the best option as they will frequently be limited as to the potential buyers they meet.
• Ring and talk to several agents and arrange to meet them.
Points to Discuss
When talking to agents, important points to discuss are:
• their knowledge of the market in the area
• comparable sales in the area
• their marketing plan for the property and how they intend to attract buyers
• their estimated selling price of the property
• their commission, or how much they will charge
• the cost of advertising and other outgoings
An agent can be asked to provide any quotes in writing. Do not sign anything, including an authority or agency agreement unless you are prepared to engage the services of that agent.
Marketing Your Property
One of the most important deciding factors when choosing an agency is how they plan to market your property. Sellers should ask for a comprehensive written marketing plan. This will be based on the agent’s experience, the nature of the property and any specific wishes of the seller.
The marketing plan should include advertising methods and costs, and the price or range at which the property will be advertised.
The Estimated Selling Price
This is the price the estate agent estimates a property is likely to attract, based on his or her experience and knowledge of the market. It must be recorded in the authority or agency agreement as either a single amount or a price range.
If recorded as a range, the difference between the top and the bottom figures must not exceed 10% of the bottom figure. For example, a quoted range of $400,000–$440,000 = ($400,000 + 10%). Please note that this price is not a sworn valuation (in Australia, real estate agents are generally not licensed valuers) or a guaranteed selling price.
Over-Quoting & Under-QuotingMarquette
The practice of deliberately overstating the estimated selling price to encourage a seller to engage the services of an agent is known as over-quoting. It is illegal for an agent to mislead a seller or prospective seller about the estimated selling price of a property. It is also illegal for an agent to
advertise or advise a prospective buyer of a price that is less than the estimated selling price (or the lowest figure in the range). This is known as under-quoting.
Commissions
Most agents obtain their fee from the seller in the form of a commission/fee for service upon completion of the sale. An agent cannot obtain a commission without an authority to sell or agency agreement signed by the seller.
There is no set amount for a commission; it is essentially negotiable between the seller and the agent, and can be set at whatever amount both parties agree on. It is often a false economy to select the agent that offers the lowest fee as this will often lead to the sale of your property not achieving its maximum potential.
The commission can be paid as either a flat rate or as a percentage of the sale price. The agreed commission, whether a flat rate or fee, must be recorded on the authority to sell or agency agreement. If it is recorded as a percentage (%), it must also be shown as a figure in dollar terms. Please note that GST is payable on the commission fee.
Commission Sharing
The agent is required by law to advise the seller in writing if they will be sharing the commission with someone outside their own agency. A statement must be made listing the people with whom the commission is to be shared, prior to the seller signing the authority to sell, such as a solicitor, conveyancer or another estate agent.
Advertising and Other Outgoings
There may be costs associated with marketing and advertising a property that are on top of the real estate agent’s commission.
Even if the property fails to sell, the seller will have to cover marketing and advertising costs if he or she authorized it. The agent can be asked to provide a written schedule outlining advertising and other outgoings to clarify what is being paid for. All expenses, including advertising and other outgoings, are negotiable and must be recorded.
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The Sales Agreement
Once an agent is chosen, the seller will be asked to sign a written Sales Authority (in Victoria) or Agency Agreement (in New South Wales) appointing that agent. These are legally binding contracts, which fully sets out the details of the seller’s agreement with the agent, including:
• the estimated selling price
• the negotiated commission
• the negotiated marketing expenses
• the circumstances under which commission is payable.
Types of Agreement
The most common type of sales agreements are ‘exclusive’, which means that the sellers appoint a single agency to market their property exclusively. Under an exclusive agreement the agent is entitled to commission when the property is sold. Sellers should not sign more than one exclusive agreement, as in certain circumstances more than one commission may have to be paid. An agent can claim commission under an exclusive agreement even if the sellers end up selling their own property themselves. It is less common to use a ‘general’ agreement. With a general agreement sellers can list with more than one agency, and only pay commission to the agency that sells the property. But of course, if you do not give an agent 100% of your confidence, you cannot expect them to devote 100% of their efforts.
What can be Negotiated?
Many aspects of the agreement to sell are negotiable between the seller and the agent. Sellers should discuss these with the agent and make sure that all details fit their requirements before
signing. The following aspects of the sales agreement can be negotiated.
The Method of Sale
There are two main ways of selling a property: by auction or private sale. Each of these methods of sale has advantages and disadvantages. An agent will be able to recommend the best method of sale for the seller’s particular circumstances.
The Period of the Agreement
This is the period of time in which the agreement is in force. It is negotiable and the length of time should be carefully considered. Once sellers sign the agreement they will not be able to cancel it during this period, unless the agent agrees.
The Commission
The commission or agent’s fee is completely negotiable.
Advertising and Other Outgoings
There will generally be costs associated with marketing and advertising a property, as well as the estate agent’s commission. The amount spent on these outgoings is negotiable between the seller and the agent.
Other Terms and Conditions
Read all pages of the authority carefully and make sure all terms and conditions are understood and agreed upon before signing. These conditions are negotiable. Any changes, whether deletions, amendments or additions, must be made on the authority and initialled by both parties. All verbal agreements should be confirmed in writing and signed by both parties.
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Solicitors & Conveyancers
All sellers and buyers must employ the services of a solicitor or conveyancer to ensure that all parties are legally protected during the entire sales process.
Solicitors
A solicitor must hold a current practising certificate and have professional indemnity insurance.
They can perform general legal work and provide legal advice to their client. Some solicitors specialise in conveyancing and property law. A solicitor can be engaged by a seller to prepare all the required documentation (contracts etc). They can also be engaged by a buyer to conduct relevant searches, make requisitions and ensure that the transfer of title is done correctly. A solicitor can also advise a prospective buyer on how different types of title may affect their ownership rights and
responsibilities.
Conveyancers
A conveyancer is not required to have any formal legal qualifications.
They will often, however, have undertaken some form of training in conveyancing. They currently do not have to be licensed, or have professional indemnity insurance, although many do take this out. Some conveyancers are members of the Australian Institute of Conveyancers.
They may also have met the Institute’s criteria to be recognised as Certified Practising Conveyancers.
Conveyancers specialise in conveyancing and must not undertake any legal work or give legal advice.
Conveyancers can be engaged by a seller to prepare the vendor's statement but not other legal documentation such as the contract of sale. They can also be engaged by a buyer to conduct searches on title. Conveyancers must advise a prospective client in writing whether or not they have insurance and if so the amount of cover they have. They must also notify the client if they will engage a legal practitioner and if not, that the conveyancer is not authorized to perform legal work.
It is advisable to obtain written quotes before choosing a solicitor or conveyancer.
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Contract of Sale of Real Estate
A contract of sale of real estate is a detailed legal document usually prepared by a seller in consultation with a solicitor.
GST
Generally GST only applies to the purchase of new homes but not to established homes. Do not sign the contract without checking whether GST applies. If uncertain, seek professional legal advice. If GST applies to a sale, it must be clearly specified in the contract whether the price is inclusive or exclusive of GST and how the GST will be calculated.
Settlement Period
Settlement is the date on which the balance of the purchase price is paid to the seller, and the title of the property is handed over to the buyer. The seller sets the date of settlement in the contract. The settlement period is usually between 30 to 90 days but a buyer may be able to negotiate an alternative settlement period with the seller prior to signing the contract.
Cooling-Off Period
A cooling-off period of three clear business days applies to non-auctioned residential property sales regardless of price. The cooling-off period allows the prospective buyer time to consider the offer, and begins from the date the buyer signs the contract, not from the date the seller signs it. To end the contract within that period, the buyer must provide written notification to the seller or the seller’s agent.
When is the Property Sold?
When both parties have signed the contract the property is sold. The sale is finalised at settlement when all checks have been made, the title and transfer documents exchanged, and the balance of the purchase price has been paid.
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After the Sale
After the sale there are several steps before the buyer can take possession of the property. The solicitor or conveyancer usually undertakes these steps if acting on the buyer’s behalf.
Before Taking Possession
The Deposit
The deposit is paid by the buyer to the seller upon the exchange of contracts. It is held by the seller’s estate agent or solicitor in a trust account or interest bearing deposit account until the settlement date. In certain circumstances the seller may ask the buyer to release the deposit
money earlier than the settlement date. This release requires written authorization to be given by the buyer.
Pre-Settlement Inspection
Buyers are entitled to make an inspection at any reasonable time one week before settlement. The contract of sale outlines that the seller has an obligation to hand over the property in the same condition as when it was sold.
Taking Possession
Once settlement is completed, the buyer can take possession of the property.
Stamp Duty
Stamp Duty is payable under Victorian & New South Wales legislation and is paid by the buyer on settlement.
Settlement
The settlement date is the date on which the balance of the purchase price is paid to the seller in exchange for the title to the property. This is an official process conducted between legal and financial representatives of the buyer and seller. The settlement date is also the date on which the buyer can take possession of the property, unless otherwise arranged.
At settlement all outgoings such as rates and other charges will be adjusted between the seller and the buyer. The seller is responsible for rates up until and including the day of settlement. The buyer is liable from the day after settlement.
Transfer of Land
This is the document that transfers the land from the seller to the buyer. It is lodged with the Land Registry office and describes how the land is to be held if purchased by more than one person.
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Methods of Sale
The decision to sell by auction or private sale will depend on many factors including the type of property and location, as well as the seller’s available time frame and personal preference.
There are two main ways that real estate can be bought and sold.
Private Treaty/Sale
In New South Wales, this method is known as Private Treaty.
In Victoria the process is termed Private Sale.
This method involves the sale of the property being advertised and whereby offers are invited from prospective buyers. The sale is
negotiated between the buyer and seller, usually with the assistance of an agent.
Public Auction
An auction is a public sale, usually conducted by a real estate agent acting as auctioneer. It is advertised for a specific place, time and date. Prospective buyers bid and the property is sold to the highest bidder, provided the seller accepts the bid.
Will there be vendor's bids at the auction?
Vendors are permitted at auctions in two circumstances. A bid may be made by the auctioneer on behalf of the vendor (seller) because the seller is not satisfied with the amount of the last bid. This is known as a ‘vendor bid’ and will be clearly announced by the auctioneer at the
time the bid is made. Only the auctioneer can make such a bid.
The arrangements for making vendor bids must be set out in the rules displayed before the auction starts, and announced by the auctioneer at the start of the auction.
Dummy Bidding
All other bids by or on behalf of the seller or any dummy bids are illegal. A dummy bid is a false bid, made up by the auctioneer or accepted by the auctioneer from a non-genuine bidder from the crowd. The requirement for all bidders to have registered prior assists in ensuring the integrity of the auction process.
For Sale by Private Treaty/Private Sale and Public Auction: A Comparison
Private
• The seller and buyer agree on a sale price through negotiation.
• The contract can be conditional. With the seller’s approval this means the buyer can make the
sale subject to the availability of finance, a satisfactory condition report, or other conditions.
• For residential properties the buyer can have a cooling-off period (unless agreed otherwise. In New South Wales a “66W” available from your solicitor can waive the cooling-off period).
Auction
• Price is determined by competitive bidding, and the property is sold to the highest bidder acceptable to the seller.
• The contract is unconditional, that is, the buyer cannot make it subject to finance, inspection and the like.
• There is no cooling-off period.
Deciding on a Method of Sale
The agent will recommend a method of sale based on the type and location mof the property, the nature of the market and the seller’s available time frame and personal preference. They should also back up their recommendation with recent sales ata. The seller should understand all the pros and cons before deciding on a method of sale. The agent’s commission is generally the same whether the property is sold privately or at auction. There are, however, often additional costs involved in selling by auction and you should speak with your agent regarding this.
Although it is best not to be in a hurry to sell, sometimes there is no choice. If a property must be sold quickly, an auction may provide a better opportunity to sell by a specified date. There is, however, no guarantee that by doing this the property will be sold, or that the best price will be achieved.
The Reserve Price
The lowest price at which a seller is prepared to sell his or her property is called the reserve price or the vendor’s asking price. It is not easy to put a price on something as personal as the family home. No matter what anyone says, your house will seem much more to you than just bricks and mortar.
To help you decide on the reserve price for your home, you should:
• use the agent’s estimated selling price as a guide
• research and get to know sale prices in your area
• consider paying for a valuation by an independent sworn valuer
• not allow emotion to cloud anyjudgments
• be realistic.
This will help you avoid both disappointment and the risk of purchasing another property based on unrealistic expectations of the sales value of your own home.
Image: The Yarra Valley VIC
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The Sales Campaign
The aim of a sales campaign is to attract prospective buyers and encourage them to inspect a property. There are two main ways of doing this.
Advertising
This is the main way of attracting prospective buyers to a property. The nature of the advertising depends on the type and location of the property and the amount of money spent. Advertising notifies prospective buyers that the property is for sale and may list the inspection dates and times. It also includes names and contact details of the agents who are handling the sale.
Direct Notification
The agent may have a list of prospective buyers who can be contacted when suitable properties become available. These are people who have previously registered their interest with the agency. Be wary of agents that refer to their "database" and its size - this should not be used INSTEAD OF advertising, and neither should an agent be selected by such claims.
The Advertised Price
When marketing a property it is illegal for an agent to quote or advertise a figure that is less than the estimated selling price or range stated in the authority to sell. Under-quoting is unfair to buyers who may waste time and money inspecting a property that they cannot realistically afford. It is also unfair to the seller who is expecting the agent to generate genuine interest from prospective buyers prepared to pay a fair price.
Image: The Rocks, Sydney NSW
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Whilst every effort has been made to ensure that the information contained on this page is accurate and reliable, Marquette Turner strongly advises that you seek professional and legal advise when making decisions. We accept no liability for any advice that we provide unless it is given during the legal engagement with a principal.
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