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More than 100,000 Victorians who sold their homes last year can tell you that the process is complex, and can involve elements of stress.
With so many variables to consider – including choosing the right agent, targeting your market and negotiating with interested parties – selling real estate is a finely tuned science, and one which often infuriates prospective buyers, forced to pay more than they wanted.
We talk to the experts about the sale process, what it costs and what you should expect in return:
Appoint an Agent
Attending inspections and auctions in the months prior to putting your home on the market, is the best way to familiarise yourself with real estate agents and auctioneers in your area. It also allows you to experience the kind of service prospective buyers of your home will receive, should you employ that agent to sell it.
The Real Estate Institute of Victoria recommends vendors interview at least three real estate agents before officially ‘listing’ with one. “Three interviews should give a vendor a good indication as to what kind of service you can expect from them for their fee,” said REIV chief executive Enzo Raimondo.
Once you have chosen an agent, you will sign one of three legally binding contracts which officially ‘appoints’ them to sell your home:
• Exclusive Sale Authority: Gives an agent the exclusive right to sell your property as a Private Sale, for a given time period usually of eight weeks;
• Exclusive Auction Authority: Gives an agent the exclusive right to sell your property via an auction campaign;
• General Sale Authority: Typically used when a vendor lists their property with more than one real estate agent. Only the agent who sells the property will be paid.
Agents may ask you to sign their own version of these contracts, however those prepared by the REIV are considered the most comprehensive for vendors, as they include details regarding an agent’s commission, insurance and how to make a complaint.
“We are of the belief that the more information people have, the more comfortable they are with the sale process,” said Mr Raimondo.
Costs
Most real estate agencies will not charge a fee, until after your property has sold. It will wear expenses associated with marketing the property (including the cost of advertising), then deduct this amount when a deposit is received from a buyer, or once the sale settles, which could be up to four months later.
Marketing costs can range from a thousand dollars for a basic campaign, to tens of thousands of dollars for more comprehensive campaigns incorporating a ‘For Sale board’, print and electronic media. As a rule of thumb according to agents, vendors spend between $3000 and $8,000 advertising their property.
The commission a real estate agency will charge for selling your home varies according to its value and location, and can be quite complex to understand.
Most agents adopt a ‘straight percentage commission’ of between 2% and 3% of your home’s sale price. If you live in a suburb where many real estate agencies are competing for your business, you may be able to negotiate a lower commission.
As well as the straight commission, some agents may also ask for a ‘variable percentage commission’. This is a bonus paid to the agent for any amount the property sells above an agreed amount.
If your property is estimated to be worth half a million for example, an agent may negotiate a commission of 2.5% of the sale price up to that amount, then 5% of anything it fetches over $500,000.
Assuming your property sells for $530,000, the agent will receive a $13,250 straight commission, and a $1500 variable commission.
Legal costs usually add another $1000 to the cost of selling a home. This covers costs associated with preparing the Vendor Statement, an Auction Contract, and changing your title.
If the property is mortgaged, most banks or lending institutions will charge an early discharge fee, usually of around $500.
The Government will not charge Capital Gains tax on a property if it was your main place of residence.
Preparing for a Campaign Start
A campaign typically starts about 10 days after a property is listed with an agent.
During this period your agent will arrange for photographs to be taken of your home, and write up a blurb for print and online advertising, the For Sale board and if applicable, a web-site.
With the advent of portable mp3 players, mobile phones and Global Position Systems (GPS), there are a range of new advertising options you can use to market your property, which are also arranged in this time.
Vendors need to employ a solicitor to prepare legal documentation including the Vendor Statement (also known as the Section 32), and, if the property is being sold at auction, an Auction Contract.
Victorian legislation prevents a property being sold without a Vendor Statement. As these can sometimes take weeks to prepare, agents recommend getting onto this document once you start shopping for an agent.
Campaign Launch
A campaign launch usually coincides with a Wednesday or Saturday newspaper advertisement, and an online listing. Auction campaigns typically run for about a month, during which time it’s expected your home will be open for at least four public inspections (usually on weekends, but with at least one mid-week, after-hours inspection).
In Melbourne, auctions are predominantly carried out on Saturdays and Sundays, while properties sold by ‘set date’ commonly close on Tuesdays.
Private sales, the other popular choice for the sale of property, end once a vendor and purchaser agree on a price they are happy with. These campaigns can sometimes run for many months, as homes compete with other properties which are being sold by auction.
The Early Weeks
“From an agents perspective, the first ten days is where we’ll generate the most inquiry in any campaign,” says Cameron Way, director of Woodards Blackburn. “Buyers can expect the level of inquiry to be quite good but shouldn’t be overwhelmed, as people can drop off in the third of fourth weeks.”
“An agent will usually communicate with the vendor about five or six times a week during the campaign, be it by Email or telephone, or with formal written reports,” says Mr Way.
Agents usually contact potential purchasers in the week following any inspection, to see whether they need any further information, and to track that buyer’s level of interest.
Interested parties may request several private inspections of your property before they will make an offer.
The REIV produces a detailed Vendor Checklist, covering the technical aspects of a home (such as wiring and contamination), which an agent should complete with you at the time of listing. Agents will refer to this throughout the campaign when answering questions from potential buyers.
Prospective purchasers rely on real estate agents to provide documentation to them such as the Vendor Statement and a Building Inspection.
The Second Half of the Campaign
“Agents use the second half of an auction campaign to identify who they think the most likely buyers are, and to formulate a picture of who might be the ultimate buyer,” says Mr Way.
It’s in the second half of the campaign that the agent and vendor also formalise a Reserve price for the property. The Reserve is not allowed to be ‘unreasonably’ higher than the agent’s ‘Estimated Price Range’, or the agent risks being fined for underquoting.
The Auction
Contrary to popular belief, agents say the vendor and not the purchaser, is the most anxious person at an auction! This is especially true in cases where the vendor has purchased another home and needs to sell.
On auction day your agent should attach flags to the For Sale board, and put up signs alerting prospective buyers, and neighbours, to your home.
Formal documentation including the Vendor Statement must be available for buyers to inspect on auction day.
Auctions can range from five minutes to an hour depending on how quickly it gathers momentum. Bidding usually intensifies once the property has reached reserve, and is ‘on the market.’
Should a property not reach its reserve, the vendor, agent and highest bidder will immediately negotiate for a higher price. If this cannot be achieved, the real estate agent will contact other parties who showed an interest in the property, or list the property for private sale.
Case Study: Robin Wintle
Spending a little time and money on your home before it hits the market, is one of the smartest things you can do to your home before sale, according to agents.
A clean garden and a spring clean, which should include a paint job, can add up to tens of thousands of dollars to a property’s end value, as prospective buyers – particularly families - don’t want to buy headaches of an older home.
Robin Wintle can vouch for this, having modernised a family home at 1 The Boulevard in Glen Waverley which goes to auction this month.
Robin approached five agents for a market appraisal of the property, and followed up with three of them for an interview, before listing it with one agent.
“In the initial interview Jellis Craig offered the most helpful advice on how to maximise the value of the house, plus they came recommended by a local town planner,” said Robin. “I was impressed that the selling agent knew the name of the builder that built the home 30 years ago and wasn’t too pushy.”
“I appointed Green Machine to clear undergrowth in the front and back garden and this made a huge difference to the exterior of the home,” said Robin. “I also had the place painted to brighten up the living area and do justice to the views the house has to the Dandenongs”.
New light fittings, blinds, curtains, floor coverings and guttering were also added before the campaign begun, which agents say all create a strong first impression to prospective purchasers.
REIV Comment:
Vendors are more confident to put their homes up for sale, than they have been for some years.
The Real Estate Institute of Victoria is tipping that, despite two interest rate rises, the number of people who sold their homes in metropolitan Melbourne last year reached 100,000. This compares to 95,540 sellers in 2005, and 91,218 sellers in 2004.
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The biggest year on recent record not surprisingly was 2001 – at the peak of Melbourne’s real estate market boom. Figures from the Real Estate Institute of Victoria showed Melbourne’s median house price ballooned by 30% in one year! It’s no surprise then that just over 110,000 vendors sold their homes.
Agents said the September 11 terrorist attacks ‘decelerated’ the market from a real estate bust. The number of sellers dropped by more than 10% in 2002.
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