For many people, the home buying process is complex and stressful.
Appointing and trusting an agent.
Choosing a sales method.
Then the negotiating…
With the real estate market getting into full swing we break down some of what to expect:
APPOINTING AN AGENT:
Attending inspections and auctions as a buyer in the months before listing your home is the best way to familiarise yourself with the sincerity and professionalism of a real estate agent.
It is recommended to interview at least three brokers – not only to gauge their personalities but also to get a guide of price expectation.
You will sign one of three contracts to appoint them:
• Exclusive Sale Authority: gives an agent the exclusive right to sell your property privately for a given time – usually between four and eight weeks;
• Exclusive Auction Authority: provides the broker exclusive right to auction your property;
• General Sale Authority: typically used when a vendor lists a property with more than one agent. The one which sells the property gets the commission.
Agents may have their own contracts – if so, be sure to clarify what is different and why.
Documents should include details of an agent’s commission, insurance and how to make a complaint.
Other than advertising costs, real estate agencies shouldn’t charge commission until after a property has sold.
Their commission usually comes out of the deposit.
Marketing costs start at $500 for a basic campaign – which will get the property online – to tens of thousands of dollars for campaigns incorporating a “for sale” board, or electronic media.
Print is out
Print is both the priciest advertising cost and least effective.
It is still utilised in the name of having a complete campaign – though this is decreasing.
Many agents don’t propose it anymore but if one does while you’re interviewing them, ask for recent examples of how it has increased your property (not their brand) value.
What to budget for
As a rule of thumb, vendors generally spend between $3000-$8000 on promotion during a campaign.
An agent’s commission varies according to the home’s value and location.
Most brokers take a “straight percentage commission” of between two and three per cent of the sale price.
If you live in a suburb where there are many agencies, this rate could be lower.
Some firms will propose a ‘variable percentage commission’ – a bonus if the price goes over an agreed amount.
Conveyancing and/or legal costs usually add another $1000 – but this covers costs associated with essential paperwork including preparing a vendor statement and Section 32.
If your home is mortgaged, banks or lending institutions may charge an early discharge fee, usually about $500.
The government won’t charge capital gains tax if the home was your main place of residence.
A campaign typically starts about 10 days after an agent is appointed.
It should be during this time an agent arranges photos, creates an inspection schedule and marketing material and organises copy and a board.
With the increasing use of mobile phones for news and classifieds – coupled with technologies such as Google Maps – there are many effective new digital options.
There is no best day to launch a campaign, but having an inspection within a couple of days of it, is ideal.
For homes going to auction, properties are usually on the market for a month to five weeks.
Agents should open it every weekend at least one weekday, every week.
The event is typically on a Saturday – though midweek, twilight and Sunday auctions are all fine to consider.
For sale by set date campaigns – a common close day is Tuesday.
Private sales end once a vendor and purchaser agree on a price they are happy with.
Such campaigns can sometimes run for months, as homes compete with properties that are for sale by auction.
THE EARLY WEEKS:
“From an agent’s perspective, the first 10 days is where we’ll generate the most inquiry in any campaign,” Cameron Way, director of agency Woodards Blackburn, said.
“Buyers can expect the level of inquiry to be quite good but shouldn’t be overwhelmed, as people can drop off in the third or 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,” he added.
Brokers usually contact potential purchasers throughout the week and should organise private inspections.
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,” according to Mr Way.
It is in this period, in most cases, the agent and vendor formalise a reserve (which many experts say contributes to under-quoting, and that instead the reserve should be set, binding and recorded by a third party, upon listing).
Contrary to popular belief, agents say, the vendor rather than the purchaser is the most anxious person at an auction.
This is especially true if the seller has bought another home.
On the day, your agent should attach flags to the “for sale” board.
They will also attach boards with their own company branding around the area.
Documentation including the vendor statement must be out for buyers on auction day.
Auctions can range from less than a minute to an hour depending on how quickly it gathers momentum (which is as a prospective purchaser, something you shouldn’t want to see happening).
Bidding usually intensifies once the reserve is met and an agent calls it “on the market”.
Should a property not reach that minimum, the vendor, agent and highest bidder have first right of refusal to negotiate a higher offer.
In practice, agents will stand with any under-bidder, too, in case talks with the first buyer fall through.
Homes which pass in at auction and are not withdrawn – are often relisted as a private sale at or above reserve.