Selling a house is an important step and one that needs careful consideration. The rules, regulations and legal protection in this area are worth understanding before any real estate venture. In the lead-up to the sale of your home, it pays to do some research on the likely market value of your property and the process of selling property. In this section of the Alex Scott & Staff website you will find answers to many of your questions when it comes to selling.
The relationship a seller has with an estate agent is different to that of a buyer. Estate agents are obliged to act responsibly and ethically when dealing with both buyers and sellers. However, the agent’s responsibility is to the seller, unless they are acting as a buyer’s advocate also known as a buyer’s agent. It is important for a buyer to be aware of this whenever he or she is dealing with an agent. Sellers who engage or list with an agent are employing the agent’s services to help sell their property. The agent is bound by professional conduct regulations to always act in the best interests of the seller and to engage in good estate agency practices. The agent will charge a fee for this service, usually in the form of a commission, which can be a percentage or a negotiated fixed fee. A seller can expect the agent to give an estimated selling price of the property and to communicate all offers to buy. A seller can generally expect the agent to:
Most agents obtain their fee from the seller in the form of a commission upon completion of the sale. An agent cannot obtain a commission without an authority to sell signed by the seller. An agent is required by law to advise the seller that the commission is negotiable, prior to the seller signing the authority to sell. There is no set amount for a commission; it is negotiable between the seller and the agent, and can be set at whatever amount both parties agree on. The commission can be paid as either a flat rate or as a percentage of the sale price. The agreed commission, whether a flat rate or fee, must be recorded on the authority to sell. If it is recorded as a percentage (%), it must also be shown as a figure in dollar terms. If the agent is using a commission scale, ensure that it clearly and accurately outlines how much could be paid. For example, the agent’s commission may be 3% on a scale up to $500,000 and 3.5% if the price goes above $500,000. The seller may interpret this as meaning that only the amount above $500,000 has a 3.5% commission, but the agent’s interpretation may be that if the sale price exceeds $500,000, the entire sale price has a 3.5% commission. GST is payable on the commission fee.
The most common type of sales authority is the ‘exclusive authority’, which means that the sellers appoint a single agency to market their property exclusively. Under an exclusive authority the agent is entitled to commission when the property is sold. Sellers should not sign more than one authority, as in certain circumstances more than one commission may have to be paid. An agent can claim commission under an exclusive authority even if the sellers end up selling their own property themselves. It is less common to use a ‘general authority’. With a general authority sellers can list with more than one agency, and only pay commission to the agency that sells the property.
Do not choose an agent just because he or she gives you the highest estimated selling price. Have several agents appraise your property and give you an estimated selling price. Ask them to justify their price by showing you, for example, similar properties sold at similar prices in the area. Take into account the agent’s overall marketing plan when making your decision.
Clarify with the agent the exact circumstances under which the commission must be paid, before signing the authority. do not sign without carefully reading and understanding the authority to sell. If you are unsure of anything, ask for clarification from the agent, contact the Estate Agents Resolution Service or seek professional legal advice. By law the agent is obliged to provide a copy of the authority to the seller at the time of signing. Retain this as proof of what was agreed with the agent.
If you want to make any changes after the authority has been signed, they must be made in writing on all copies of the authority to sell and initialled by both you and the agent.
The decision to sell by auction or private sale will depend on many factors including the type of property and location, as well as the seller’s available time frame and personal preference. There are two main ways that real estate can be bought and sold:
In a private sale the property is advertised and offers are invited from prospective buyers. The sale is negotiated between the buyer and seller, usually with the assistance of an agent.
An Auction is a public sale, usually conducted by an estate agent acting as auctioneer. It is advertised for a specific place, time and date. Prospective buyers bid and the property is sold to the highest bidder, provided the seller accepts the bid.
Advantages of Auctioning your property, being:
Some handy presentation hints for preparing your property for sale
Sometimes, reading real estate advertisements can feel like wading through words written in a foreign language. We’re not living in the 1800’s, so why are some properties advertised as ‘for sale by private treaty’? And what’s the point of selling a property by expression of interest – why not just tell the prospective buyer the asking price, and take all the guess work out of it?
Stands for ‘Expression of Interest”.
If a property is for sale by EOI, it means the seller is asking the potential purchaser to submit a written offer to purchase by a set date and time. The offer should include all details such as the price, deposit, preferred settlement date and any conditions the potential purchaser places on the offer.
Immediately after the closing date and time for EOI applications, the agent will present all written offers received to the vendors. The vendors will then decide which of the offers received are most attractive to them, and if they are willing to accept any of the offers.
If an offer is accepted the purchaser will then be asked to sign a contract of sale and pay the deposit as soon as possible. The other potential purchasers will be informed that the property has been sold, without any opportunity to submit further offers. The agent may not disclose to any buyer the details of any offer submitted by other potential buyers, or attempt to induce that buyer to increase or change their offer after the closing date.
However, should the vendors not receive an offer they will accept, the agent will probably be instructed to go back to all parties who submitted offers and advise them of the price at which the vendor is willing to sell. For this reason, a potential purchaser should always submit the best offer to purchase at the closing date.
Vendors choose to sell their property by EOI as it is a method of sale that does not put a fixed price on the property and provides an opportunity for purchasers to submit their highest and best price for the property, without the pressure and intense scrutiny that an auction creates. EOI is also a method of sale that allows some flexibility, as offers can be submitted subject to finance (unlike an auction) or other conditions. In the case of multi-lot properties it also allows purchasers the flexibility to submit offers on multi combinations of lots.
Stands for ‘Statement of Information’.
In Victoria agents are requited to prepare an SOI for every residential property they offer for sale (whatever the method of sale). Farming properties and commercial property do not require a statement of information to be provided.
The SOI must contain certain details:
· An indicative selling price for the property. This may be a single price or a price range of up to 10%. It must not be less than:
· The agent’s estimated selling price
· The seller’s asking price
· A price in a written offer that has already been rejected by the seller
· Details of the three most comparable properties, including the address, date of sale and sale price, or, if you did not take into account three comparable properties when setting the estimated selling price, a statement outlining that you reasonably believe there are less than three comparable sales within the prescribed period.
· The median house or unit price for the suburb. This may be for a period of between 3 and 12 months, and must not be more than 6 months old.
Walk in Walk Out
Describes a sale in which the vendor has ‘walked out’ and left all livestock, plant and machinery on the property, and the purchaser ‘walks in’ and takes over the operation of the enterprise with a all these resources already available from the previous owner.
The sale price will include the value of the land and buildings and also the livestock and any plant, machinery, fodder and other consumables.
In practical terms, if a property is advertised as WIWO this is often taken to mean that some combination of livestock, machinery and fodder is available for purchase with the farm, but not necessarily all of the above.
For Sale By Private Treaty
Another way of saying ‘private sale’. In other words, it is a sale by negotiation.
The vendor will typically have an asking price and the purchaser is invited to ‘treat with them’ in the old parlance, meaning to negotiate.
This means a vendor has accepted and offer to purchase the property. If the contract has been signed and is subject to finance, the sale will not be unconditional until the purchaser has received approval for their finance. Alternatively, the contract of sale may not yet have been completed because lawyers are preparing or altering the contract in readiness for it to be signed and exchanged between parties.
Disclaimer: Consumer Affairs Victoria produces a guide as a summary for buyers and sellers, of which the majority of information found following was taken, with permission from Consumer Affairs Victoria. It should not be used as a substitute for the Estate Agents or Sale of Land Acts, or professional legal advice. To obtain a copy of the guide for buyers and sellers contact your nearest Alex Scott office or:
Consumer Affairs Victoria
Estate Agents Resolution Service
452 Flinders Street
Melbourne Victoria 3000
Phone: 1300 73 70 30 (local call charge)
Email: [email protected]