This information has been gathered from various industry resources including REINSW, Australian Property Monitors, Local Community Councils and City of Sydney websites to assist you in your knowledge about the property market. The content is provided as a general overview for information purposes only and is not legal advice
Should you Sell ?
Whatdo Agents Do?
What is an Exclusive Agency Agreement? What are my obligations regarding the payment of commission to the agent?
How much commission should I pay?
How do I know what is my property worth?
What should I do to prepare my property for sale ?
Should I sell at auction ?
How do I choose an Auctioneer ?
What does an “Agency Auction Agreement” do?
What is the “Reserve Price”?
What are the possible outcomes of an Auction?
What does “Closing the Deal” mean in an Auction?
What happens at Settlement in an Auction scenario?
Should you Sell?
Sometimes it is tempting to convert your 'bricks and mortar' investment into cash, a liquid asset, and spend it on the 'trip of a lifetime'. Of course, there's no point in making money if you can't spend it at some stage. But be aware of the impact that eating into your capital investment may have on your future quality of life. Will you have enough for a comfortable, self-funded retirement?
Consider also the following costs in selling your property:
- Agent's fees
- Lawyer's fees
- Capital gains tax
- Loss of rent during the time it takes to sell your property
If you intend to reinvest some of that money in a different property, remember that you will face
- More lawyer's fees
- Capital gains tax
- Stamp duty costs
Have you considered keeping your present investment property, and borrowing money to buy another investment property? Many financial advisers suggest that this kind of 'good debt' is the quickest way to a wealthy retirement.
What Do Agents Do?
The basic job of a real estate agent is to sell your home for the best price possible, as quickly as possible. Agents act in your own interests, delivering a range of crucial services from the early stages to the final settlement. These services include:
- advising you on how much you can expect to receive for your property, and whether you should sell by private treaty or at auction.
- advertising your property
- bringing your home before potential buyers
- negotiating the selling price between you and the potential buyers
- facilitating the actual sale of your property and the final exchange of contracts.
What is an Exclusive Agency Agreement? What are my obligations regarding the payment of commission to the agent?
(a) An Exclusive Agency is where a Principal (vendor) grants an Agent exclusive selling rights for a period of time specifying a start and finish date or
(b) Where there is no finish date, with a method of terminating the agreement
The selling fee (commission) is due and payable if during the agency period the…
1. Agent effectively introduces a buyer to the property or to the principal (vendor) or
2. Another agent effectively introduces a buyer to the property or to the principal or
3. The principal sells the property privately and the sale is completed and finalised.
The agent is entitled to his commission if during the agency period, the agent effectively introduces a purchaser who enters into a binding contract.
The selling fee is due and payable on completion of the sale (settlement), as provided in the agreement. In some circumstances this may vary such as in cases of project marketing where the agent may be paid a proportion of the fee on exchange of contracts and the balance on completion. In all cases however, the selling agency agreement will stipulate the terms and conditions. The agreement may also provide that the fee is due and payable upon demand if the sale is not completed owing to the default of the principal after the parties have entered into a binding contract ie exchanged contracts.
How much commission should I pay?
Agents' fees are deregulated, so it is a matter of negotiating the fee with the agent. This may mean that before making a decision you shop around and compare fees and services offered.
- Agents are obliged to display their schedule of fees and commissions
- On the selection and appointment of a particular agent, the agent will write into the agreement the agreed fees (commission) and any other fees that may be payable such as for marketing etc.
- The fees stated should be GST inclusive.
How do I know what is my property worth?
One of the most important decisions you will make in the course of selling your home is to decide on its asking price, or if selling at auction, its reserve. If selling privately, your asking price will usually be treated by potential buyers as a starting point for negotiations, and you may end up accepting an offer significantly lower.
It is important to set a price that reflects the full market value of your property, yet is realistic and remains attractive to buyers. To determine how much your property is worth, you must take into account all its important features, including:
- location
- size
- age
- extras
The next step is to find homes with features similar to yours and check how much they have sold for. Check the auction results in your metropolitan newspaper and the comprehensive real estate pricing records on the internet. Looking in real estate agents' windows, or searching the Property Market View database will give you a good indication of how much other home owners are asking for their properties in your area. But remember, these prices may not accurately reflect the price at which the homes are eventually sold.
Remember that changes in the state of the economy and the property market may affect the value of your home. Ask your real estate agent how the sale of your home may be affected by
- fluctuations in interest rates
- property availability
- buyer demand
What should I do to prepare my property for sale?
First impressions count
The following are some suggestions for some relatively low cost improvements and repairs you might consider, inside and outside your home when preparing to sell.
Inside your home:
- Do a complete spring clean, removing all the junk from your house! Store it in a friend's house, or give it to a charity shop.
- A fresh coat of paint can make a big difference: choose light colours to brighten up dingy rooms. Also, clean up dirty or damaged wallpaper, tiles, ceilings and so on.
- Make sure all the fixtures and fittings are in good working order, and clean. That means chipped door handles, torn flyscreens, broken window latches, dirty light switches, dripping taps, and so on.
- Do doors and windows open and shut with ease?
- Polish your wooden and tiled floors and have your carpets professionally cleaned.
- Make sure your bathroom, laundry and kitchen are spotless.
- Repair your heating, air-conditioning and plumbing, or any other appliances that are to be included in the sale.
In the front and back yard:
- You want to give the impression of a healthy, luxuriant, colourful garden. If there is time, plant some flowers and reseed the lawn. If not, consider hiring or borrowing flowers and shrubs, especially for the entrance to your home.
- Make sure the plants you do have are kept healthy and neat. Put down fertilizer and mulch, weed your garden beds, and prune the shrubs and trees. Make sure the whole garden is generously watered.
- Keep your lawn mown and raked, and make sure your driveway and paths are swept (including the footpath outside your home).
- Thoroughly clean the outside of the house, including its guttering and windows.
- Clean up your garage and garden shed (if this is impossible, keep it safely locked!)
And at the last minute ...
On the day of the inspection, consider the following tips:
- Have you cleaned up everywhere? That means inside cupboards, under beds and so on.
- A few finishing touches to the garden can also make a difference, so rake up those fallen leaves and branches. You might put the sprinklers on to give the lawn a wet, healthy appearance.
- Buyers are often concerned with how much light a home receives. Open all curtains and blinds, and consider using some artificial lighting in very dark rooms.
- Make sure your home feels comfortable. If it's cold, heat the rooms, especially if you have an open fire. If it's hot, make sure your home is cool: if you only have fans, consider borrowing an air-conditioner.
- Put out flowers in vases, particularly near the front door where first impressions are made. But don't clutter the place with decorations. Each of us has different tastes, and it is harder for a prospective buyer to imagine what the home might be like if it is filled with your own idiosyncratic style (this may mean storing away that collection of hubcaps!)
- A home which smells beautiful will seem much more attractive to buyers. Make sure your home is properly aired. Put out potpourri, or even bake something in the oven the morning of the inspection. Avoid incense and other strong aromas.
- Have you removed all your valuables?
Should I sell at auction?
One way to sell a property is simply to set a price and wait for a buyer who is prepared to pay it: this is known as a sale by private treaty. The other option is to arrange for potential buyers to bid against each other at an auction. The seller of the property sets the reserve price, the lowest sum they are willing to accept. Some of the advantages of selling your property at auction include:
- competitive bidding, which means there is no price barrier. This makes an auction especially good for unusual or desirable properties which are difficult to put a price on.
- a definite sale made under the hammer, assuming the reserve price is reached
- controlled open house inspections
- maximum exposure for maximum market impact
- protection for trustees, executors and mortgagees
- a set date of sale encourages potential buyers to act quickly
- identifies most likely buyer to negotiate with, if not sold on fall of the hammer
How do I choose an Auctioneer?
The first step in selecting the right auctioneer is to choose someone with a proven track record in auctions and an excellent knowledge of the local area.
All auctioneers must be licensed under the Property, Stock and Business Agents Act. When your auctioneer is a member of the Real Estate Institute of New South Wales know you are dealing with someone who is bound by high ethical standards.
What does an “Agency Auction Agreement” do?
The law requires that a written contract must be signed between the seller and the auctioneer. This 'Agency Auction Agreement' sets the reserve price for your property, how much commission you'll pay, and usually gives the agent exclusive rights to sell your property for a period after the auction in the event tht post auction negotiations or advertising are necessary.
What is the “Reserve Price”?
You have the right to set the reserve price, below which the auctioneer is not permitted to sell. Consult with your auctioneer and agent when setting your reserve price as they will be familiar with recent sales of similar property in the area. Remember to be realistic when setting the reserve price, bearing in mind supply and demand in the area as well as other general market considerations. Do not disclose or discuss your reserve price with anyone except your agent/auctioneer. Advertising material should not refer to the reserve price.
What are the possible outcomes of an Auction?
- If the highest bidder reaches or exceeds the reserve price, the property is sold and the auctioneer will conclude a binding contract between the buyer and seller, with the buyer paying a deposit (usually 10%). The auctioneer may sign the contract on behalf of either or both parties if instructed to do so.
- If the highest bid has not reached the reserve price, the auctioneer will usually ask for the seller's instructions before passing the property in. This means the seller has the opportunity to accept the last bid, by placing the property on the market so that it may definitely be sold under the hammer. This factor often encourages further bidding and a higher price may be achieved.
- If the highest bid does not reach the reserve price and the property is passed in, the highest bidder is informed of the reserve price and is then generally given the opportunity to purchase. Failing this the property is placed on the market for sale by private treaty, at which time anyone present may negotiate with the auctioneer.
- It is possible an offer will be made for the property before the auction. In such a case the auctioneer will discuss it with the seller. If the seller agrees, contracts must be exchanged before the time is set for the auction.
What does “Closing the Deal” mean in an Auction?
When the hammer falls at an auction, you or the auctioneer will be required to sign the Agreement for Sale . Normally, the auctioneer arranges an immediate exchange of contracts, which means you'll be bound to proceed with your sale.
What happens at Settlement in an Auction scenario?
If the property is sold at the auction, the buyer's solicitor will conduct a number of searches and enquiries to verify that all is in order with the legal title of the property. At the same time, the buyer will finalise finance with their lending institution. This process will usually take four to six weeks.
Then, solicitors for both parties will make arrangements for settlement to take place. At settlement, the balance of the purchase price is paid by the buyer, certain adjustments for water and council rates made, any outstanding mortgages attended to and the buyer becomes the legal owner of the property.