APPOINTING AN AGENT:
Attending inspections and auctions in the months before 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 them.
It’s recommended vendors interview at least three real estate agents to get an idea of what kind of service one can expect for their fee.
Once you have chosen an agent, you will sign one of three legally binding contracts to officially appoint them:
• Exclusive sale authority: Gives an agent the exclusive right to sell your property privately for a given time – usually eight weeks;
• Exclusive auction authority: Gives an agent the exclusive right to sell your property by auction;
• General sale authority: Typically used when a vendor lists a property with more than one agent. Only the agent who sells it will be paid.
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.
Most real estate agencies will not charge a fee until after your property has been sold.
The agency will typically cover expenses associated with marketing the property, including advertising, then deduct them when a deposit is received from a buyer, or once the sale is settled, which could be several months later.
Marketing costs can range from $1000 for a basic campaign, to tens of thousands of dollars for campaigns incorporating a “for sale” board, print and electronic media. As a rule of thumb, according to agents, vendors spend between $3000 and $8000 on advertising a property.
The commission a real estate agency will charge varies according to the home’s value and location.
The commission structure can be complex. Most agents take a “straight percentage commission” of between 2 and 3 per cent of the 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 if the price goes beyond an agreed amount.
If your property is estimated to be worth $500,000, for example, an agent may negotiate a commission of 2.5 per cent of the sale price up to that sum, then 5 per cent of anything it fetches over $500,000.
Assuming your property sells for $530,000, the agent would 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 about $500.
The Government will not charge capital gains tax on a property if it was your main place of residence.
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, and for the writing of print and online advertisements and copy for the “for sale” board.
With the advent of portable MP3 players, mobile phones and global position systems, there are many new advertising options.
The vendor needs to employ a solicitor to prepare legal documentation including the vendor statement (also known as the Section 32) and, if necessary, an auction contract. Victorian legislation prevents a property being sold without a vendor statement. As these can sometimes take weeks to prepare, agents recommend organising this document once you start shopping for an agent.
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 held on weekends.
In Melbourne, most auctions are on Saturdays and Sundays, while properties sold by “set date” commonly close on Tuesdays.
Private sales end once a vendor and purchaser agree on a price they are happy with.
Such campaigns can sometimes run for many 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,” says Cameron Way, director of agency 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 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,” says Mr Way.
Agents usually contact potential purchasers in the week after an inspection, to see whether they need any more information, and to determine their level of interest.
Interested parties may request several private inspections of your property before they make an offer.
Prospective buyers rely on real estate agents to provide documentation such as the vendor statement and a building inspection. The REIV produces a detailed vendor checklist, covering matters such as wiring and contamination, which an agent should complete with you at the time of listing. Agents will refer to it when answering questions from buyers.
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. If the reserve is “unreasonably” higher than the agent’s estimated price range, they risk a fine for underquoting.
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 vendor has bought 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.
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 the reserve price and is “on the market”.
Should a property not reach its reserve, the vendor, agent and highest bidder will immediately try to negotiate 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 it for private sale.