When selling property, most people will deal with an estate agent. There are laws governing the licensing and conduct of estate agents. Anyone in the business of buying, selling or leasing property on behalf of another person must hold an estate agent’s licence or be employed by a licensed estate agent as an agent’s representative.
The relationship a seller has with an estate agent is different to the relationship the estate agent has with 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).
A seller who lists their property with an agent is engaging the agent to help sell their property. The agent is bound by professional conduct regulations to always act in the best interests of the seller, to follow the seller’s lawful instructions and to engage in good estate agency practice. The agent will charge a fee for this service, usually in the form of a commission. The commission is negotiable and can either be a percentage, a fixed fee or a combination of both.
During the selling process you can generally expect an agent to:
When meeting with real estate agents, important points to discuss are:
There are generally two ways that real estate can be bought and sold.
Private sale
In a private sale the property is advertised and offers are invited from prospective buyers. The sale is negotiated between the buyer and seller with the assistance of an agent.
Public auction
An auction is a public sale conducted by an estate agent acting as auctioneer. The auction is advertised for a specific place, time and date. Prospective buyers bid and the property is offered to the highest bidder.
The agent will recommend a method of sale based on the type and location of the property, the nature of the market and the seller’s available time frame and personal preference. They should also back up their recommendation with recent sales data.
The aim of a marketing campaign is to attract prospective buyers and encourage them to inspect a property. There are two main ways of doing this.
Advertising
This is the main way of attracting prospective buyers to a property. The nature of the advertising depends on the type and location of the property and the amount of money spent. Advertising notifies prospective buyers that the property is for sale and may list the inspection dates and times. The main forms of advertising are the internet, newspaper, magazines, signs and agents window displays.
Direct notification
The agent may have a list of prospective buyers who can be contacted when suitable properties become available. These are people who have previously registered their interest with the agency.
First impressions are extremely important when selling your property. The main items that should be attended to when preparing your property for sale are:
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This is the price the estate agent estimates a property is likely to attract, based on their experience and knowledge of the market. It must be recorded in the authority to sell as either a single amount or a price range. If recorded as a range, the difference between the top and the bottom figures must not exceed 10 per cent of the bottom figure. For example, a quoted range of $400,000 to $440,000 is $400,000 plus 10 per cent. This price is not a sworn valuation or a guaranteed selling price.
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. The agent is required by law to advise the seller 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 fixed fee or a percentage of the sale price. The agreed commission must be recorded on the authority to sell. If it is recorded as a percentage (per cent), it must also be shown as a figure in dollar terms. If the agent is using a commission scale, ensure it clearly and accurately outlines how much could be paid.
The most common type of sales authority is the exclusive authority which means the seller appoints a single agency to exclusively market their property. Under an exclusive authority the agent is entitled to commission when the property is sold. An agent can claim commission under an exclusive authority even if the seller sells their own property without the agent. Sellers should not sign more than one exclusive authority, as in certain circumstances more than one commission may have to be paid.
It is less common but a seller can also use a general authority. This allows them to list with more than one agency but only pay commission to the agency that sells their property.
Before a property is sold, the seller is required by law to provide the buyer with a Vendor’s Statement under the Sale of Land Act. The Vendor’s Statement (often called a Section 32 Statement) is usually prepared by the seller’s solicitor or conveyancer. It is then signed by the seller and made available to prospective buyers via the agent before the sale or auction.
The vendor’s statement contains information about the property’s title, including mortgages, covenants, easements, zoning and outgoings such as rates. It does not include any information about the condition of buildings, whether they comply with building regulations or if measurements on the title are accurate. The responsibility is on the buyer to find out about anything that is not covered in the vendor’s statement.
It is recommended the seller instruct their solicitor to prepare a Section 32 Statement as soon as they list their property for sale.
The deposit is generally paid by the buyer to the seller’s agent either when the buyer makes their offer or by the date stated in the contract of sale. It is held by the seller’s estate agent in a trust account until the settlement date. Most deposits are 10 per cent of the purchase price.
Under Section 27 of the Sale of Land Act the buyer may release the deposit money to the seller earlier than the settlement date. For the early release of the deposit the contract must be unconditional and the buyer must be satisfied with the proof of debts information provided by the seller. Where this occurs, the deposit can be released no earlier than, 28 days after the date the contract was signed.
Some buyers use a deposit bond for the deposit. A deposit bond, or guarantee, is an alternative to providing a deposit upon signing the contract of sale. The use of a deposit bond requires the specific approval of the seller and needs to be written into the contract of sale.
Once an offer has been accepted, the agent will obtain the buyers details to enable the preparation of contracts. A buyer may be required to put their offer in writing before the vendor will consider it. The contract document outlines the terms and conditions of the sale and contains provision for:
It is important to read and understand any legal document before you sign it.
Stamp Duty is a Victorian State Government tax based on the sale price of a property. It is paid by the buyer when property ownership is transferred.
Pre-settlement inspection
Buyers are entitled to make a final inspection at any reasonable time one week before settlement. The contract of sale outlines the seller’s obligation to hand over the property in the same condition as when it was sold.
The transfer of ownership of land from the seller to the buyer is called a conveyance of land. This process is usually undertaken with the assistance of a solicitor or conveyancer.
Sellers should engage their own solicitor or conveyancer to prepare the vendor’s statement and the contract of sale, and ensure that the transfer of title is done correctly. They can also conduct title searches, advise about terms and conditions that need to be included in a contract.
A list of local Solicitors & Conveyancers can be viewed on our website by clicking here.
Further information about selling a property can be found on the Consumer Affairs Victoria website.