It's worth spending a little time thinking about some of the legal aspects of selling your house before you launch into the sale. Some of the issues you should think about are listed below. And to make it easier for you, have a look at our Seller's Checklist.
Private sale or auction?
Good question. This will depend on a whole lot of factors, including the state of the market, the interest or potential interest in your property, whether you are in a rush to sell and so on.
If you are unsure, get advice. The best way is to ask a number of agents in your area, or friends who have sold a home in the area.
Features of auctions
Some of the features, which may influence your decision, include:
- competitive bidding;
- sale is made once the hammer falls;
- certainty of a set date for the sale, assuming the reserve is reached;
- allows for further negotiation with unsuccessful bidders if the reserve is not reached;
- may suit properties in highly desirable areas where competition between buyers is high.
Buyers look to undertake many types of strategies when bidding for a house at auction. Don't be afraid to ask the agent how the auction will unfold.
Remember, selling a house at auction is likely to make you very anxious. The auction process is fast-paced, ruthless and anxiety ridden for most people (buyer and seller).
Features of private sale
Some of the features, which may influence your decision, include:
plenty of time to look at each potential buyer;extended period for sale;buyer doesn't know what the seller believes is the right price;no auction costs.
The sale price
What will be your magic figure? There are a number of ways you can try and get a feel for your top and bottom figures:
- Follow the sale prices in your area and get a sense of how marketable your property will be.
- Visit other auctions of comparable properties.
- Ask a number of agents for an assessment (see the next sub-topic regarding quoting prices).
- Get a formal valuation from a qualified valuer - this costs money!
- Make sure that your sale price covers the pay-out of your mortgage and any other costs - agent's fees, legal fees, etc.
Setting a price
At the bottom line, despite the advice you take, you will have to decide what price (or auction reserve) will apply to your property. In general the price is determined by a combination of:
- size of property;
- the age of the premises;
- state of the premises;
- the style;
- interest rates;
- property availability;
- buyer demand;
Most potential sellers study the local market and auction results to get an idea of a suitable price. These are available in the newspapers. Of course an estate agent will be prepared to offer guidance, with no obligation to engage the agent. You can also seek other views. It is also possible to employ a registered valuer, but this attracts a fee.
Researching on the internet
Everyone takes out the magnifying glass and rifles through the newspaper auction results, but it is also well worth taking a tour through one or more of the many internet real estate sites.
Some have complex database information sales and median house prices.This is also often true of the State real estate institutes sites. Some offer a "property report" for a negligible sum, some offer a free valuation by suburb, but you may have to register your details.
It's not possible to determine the accuracy of the sites, you must satisfy yourself whether they are of any real assistance.
What is included?
Many buyers take it for granted that everything they see in the property will be included in the sale. This is not necessarily true.
It is up to you to decide what will be specifically excluded in the contract. Buyers will usually assume (but it is subject to the contract) that an attachment like a burglar alarm or curtains is part of the property and be included in the sale price.
The contrary is also usually true, so if it's not attached it is more likely not to be included. In that case you will want to ensure that the item is specifically included in the contract as part of the sale.
If there is any doubt about an item, attached or not, make it certain! Some considerations include the:
- burglar alarm;
- washing machine, refrigerator and other white goods;
- light fittings;
- television aerial;
- clothes line;
- above ground pool and equipment etc.
At some stage you will need to decide who will do your conveyancing. We talk about the options in our "Conveyancing – what to do?" fact sheet.
It's well worthwhile making this decision early as there are a number of preliminary services you could ask for that can make this entire process easier and possibly cheaper.
- Advice about the authority you will be asked to sign by the agent. This may result in negotiating terms with the agent that could save you down the track.
- Advice about what is needed to prepare a draft contract, ie, the warranties and disclosure documents that must be provided.
- Advice about potential problems if you have done work to the property, e.g. renovations.Checking with your bank about any early repayment fees.
Who does the selling?
Once you decide to sell your house, you need to decide who will do the selling.
You can do it yourself, but this may not be time effective. You will need to allow for preparing advertisements, placing these in newspapers, organising a billboard, showing interested buyers through the house and preparing initial documents.
It is also possible to hire an auctioneer for auction day.
Choosing an agent
Amongst others, there are a number of factors you should consider when choosing an agent:
- What is their track record in your area?
- What is the advertising strategy – have they had any properties in the special classified sections of the newspapers?
- What are their advertising costs?
- Check out their website. If you are selling by auction - see what their auctioneers are like - go to some auctions and check out their style.
- Will they negotiate fees?
- What is their commission rate?
- Is it negotiable?
- What other conditions will they negotiate?
- What's your "impression" – would you buy a property from this person?
- Do they understand your property and your needs?
- Are they subject to a professional Code of Ethics and in what way is the agent accountable for the conduct?
- What is their strategy to obtain the best price for your home.
- How long is the intended listing?
- Remember you can appoint more than one agent.
Some commentators suggest it is worthwhile to "interview" a local agent by presenting yourself as a potential buyer to test their presentation skills.
Using an agent
If you decide to use an agent, you will be asked to sign a contract/authority. The types of contract/authority are different in each State/Territory.
Keep in mind that these agreements may not be drafted in your favour. Make sure you read the documents and if you don't understand them, get legal advice.
Agents' fees are not regulated by any law - so feel free to negotiate.
Make sure you ask about advertising costs. The agent may get a discount for news classifieds and you may be able to negotiate to have this discount passed onto you (in some States an agent is not allowed to keep an advertising rebate).
Be careful to ensure you understand what you are getting for your fee. For example, does it include advertising costs, or some aspect of the advertising? What about other types of promotion? Does it include open house inspections?
Remember, if you don't know what is included in the fee you may not be in a position to determine what is the best service and commensurate fee. In other words, ensure that you are comparing "apples with apples".
What's in the agency agreement?
Depending on your local laws, the agency agreement may include:
- the agent's authority to act for you and its scope e.g. can the agent exchange a sale contract on your behalf?;
- what types of services you will receive from the agent;
- the sums of fees or commission you agree to pay – remember your right to negotiate;
- the timing and rights of the agent to receive payments of fees and commissions;
- when payment can be received e.g. can the agent deduct their commission from the deposit money paid by the buyer?;
- an estimated selling price or price range.
Generally the agreement will be for a fixed term, or if not, will explain how it can be terminated.
Types of agreements
In general there are several ways you can engage an agent – make sure you understand which is relevant to your agreement, and whether it reflects what you want:
- "Exclusive agreement" – one agent has the right to offer the property for sale.
- "Sole agreement" – this may permit you to find a buyer on your own, as well as the agent.
- "General listing" (Open agency agreement) – you may list the property with a number of agencies and pay the commission to the one who finds a buyer.
- "Multiple listing" – generally where an agent is part of a network of agents who work together.
The legal side of your relationship
You have a different type of relationship with the agent than does the buyer – remember, the agent works for you! The agent must act in your best interests.
Be aware that in some States it is illegal for the agent to "overquote" to you the potential price of the property in an effort to get your business. Check with your agent the basis for their quote, and what laws they must observe in making the quote.
Checking the title
It is your duty to give "good title" at the time the property is sold.
- that you must see that there is nothing preventing the buyer's purchase of the property; and
- that the buyer has all the documents necessary to be registered as the owner.
The title will list any person who has an interest in the property. For instance, it will name the registered mortgagee (usually a bank or similar). It will also list any caveats - a caveat is an alert that someone else claims a financial interest in the property.
Neither of these things mean the property cannot be sold, but they (especially a caveat) will need to be discharged before or at settlement.
Make sure you have either the original title or a copy of the title before you get the ball rolling. The title is the starting point for the Vendors' Statement.
- Caveat - a warning that someone has a financial interest in the property.
- Land Titles Office - the office where all duplicate titles are lodged and kept.
- Mortgagee - the bank/finance company which lends money.
- Mortgagor - the person who borrows money.
- Purchaser - buyer.
- Strata title - this type of title is often used in units. There are slightly different requirements when you sell a strata title.
- Vendor - seller.