Selling
Investor
A guide to selling your property
05-Aug-2019
How to choose the right real estate agent to get you the best price.
What's your home really worth?
Nothing personal, but many real estate agents will want to sell your property as quickly as possible and pocket the commission.
At an average of two to three per cent of the selling price ($10,000 - $15,000 on a $500,000 sale), commissions are a powerful incentive to close the deal.
Which is why a seller has two big worries:
• An agent may overvalue your property just to land your businesses.
• An agent may undervalue your property so it sells fast.
So how do you find a trustworthy real estate agent, and who should you trust to assess the value of your home?
Do your homework
• Keep a close watch on recent auction and sales results in your area.
• Consider hiring an independent valuer to determine the worth of your home.
• Visit properties for sale in your area so you can determine whether an agent is overestimating or underestimating the value of your property.
• Pay attention to how agents answer questions such as "why is the owner selling?", "how negotiable are they on price?" and "how long has the property been on the market?" This will give you a sense of how agents might field these tricky questions regarding your property.
Agent checklist
When choosing an agent, look for the following:
• Proof that they're licensed in your state.
• Are they merely a salesperson under the agent's authority with less training and qualifications?
• Evidence of success in your area.
• A market value assessment that appears accurate based on your research.
• A signed market value estimate or even a price guarantee.
• A marketing plan.
• Advice about steps you can take to make your property more attractive to buyers.
• A commitment to provide you with regular reports and updates.
• Don't rush into making a decision about which agent to go with and see at least three agents.
• Many people engage the first agent they visit and get stuck in a sole or exclusive agency for a set period, even if they're not happy with the agent.
Beware inflated valuations
Going with the agent who promises the highest selling price could be a mistake.
Although the Real Estate Institute of Australia (REIA) says it's deceptive conduct, agents we spoke to said the practice of exaggerating property values to sellers is ingrained in the industry.
One former owner of real state agency told us, "there's an old saying in this industry that the biggest liar gets the job. The number one reason that agents give high valuations is to avoid losing business. The best way to protect yourself from the quote trap is to have the agent sign a quotation guarantee. This means getting the quote in writing, and signing an agreement stating that the agent won't be paid unless that price is achieved."
What's their take?
The two to three per cent commission usually doesn't include advertising costs, which can range from several hundred to thousands of dollars, depending on rates and where the ads are placed.
Agents' fees can be structured in different ways:
• Some agents charge a higher commission – up to five per cent – which includes some advertising.
• Some charge on a 'no sale, no fee' basis.
• Some agents chart signage and advertising costs regardless of whether your property sells.
• Some agents have low flat fees, but be sure you'll also get a good price and their focus isn't just a cheap, quick sale.
• A scale of commissions may be charged, particularly for more expensive properties. For example, you might be quoted 2.5% on the first $850,000, and 10% after that. This provides a further incentive for the agent to achieve a higher price.
• You may be charged a lower commission if you share marketing and promotion costs.
And bear in mind
• Don't pay an upfront fee – only pay your agent after the sale is completed.
• Some states require that all fees, including advertising, are set out in the agency agreement.
• All commissions and fees are negotiable, though this might not be obvious from your interactions with the agent.
•Any fees should be based on the service you receive. If you're paying top dollar, for instance, you should get a full marketing plan.
Signing an agency agreement
There are three main types of agency agreement:
1. Open listing or general authority. Sellers can list with more than one agency, only paying commission to the agent that sells the property. While you may get more market coverage than with a sole agency, the sale of your property may not be as high a priority for the agents. There's also a risk that you won't achieve the best price if various agents are competing for a quick sale.
2. Exclusive authority/agency. The agent gets paid when the property sells, even if the sale is done by a different agent or by the seller. In this scenario, avoid getting locked into a lengthy contract. A month is long enough to see if it's working.
3. Sole agency. Similar to exclusive agency, except the agent may not be entitled to a commission if you sell the property yourself.
And remember
• Some states have a cooling-off period for agency agreements. Some also place limitations on how long an exclusive or sole agency can run.
• You don't have to accept the contract agreement an agent presents – you're strongly advised to have it checked by a lawyer and changed if necessary.
Private sale or auction?
Some agents think the best price will be achieved at auction, where high emotion, pressure and competition among buyers can lead to higher prices.
Others say private sales are the way to go.
Ask different agents to explain the pros and cons of each approach for your situation.
There are no fixed rules about which types of property would be more suited to an auction or private sale, but each offers different advantages for the seller.
Auction advantages for sellers
• Competitive bidding, which means there's no price limit. This can be good for unusual or particularly desirable properties that are hard to price.
• A definite sale, assuming the reserve price is reached.
• A set date for sale encourages potential buyers to act quickly.
• Auctions can identify the most suitable buyers to negotiate with if a sale isn't completed at auction.
Private sale advantages for sellers
• More time to consider buyers' offers.
• Potential buyers make offers 'blind', without knowing what others are prepared to pay.
• Advertising expenses can be cheaper than for auctions.
• No auctioneering fees.
Under-quoting
There have been recent moves by state consumer protection agencies to put an end to under-quoting, in which real estate agents advertise a property for less than its estimated selling price or what the seller will accept in an effort to drive interest.
SOURCE: Choice
What's your home really worth?
Nothing personal, but many real estate agents will want to sell your property as quickly as possible and pocket the commission.
At an average of two to three per cent of the selling price ($10,000 - $15,000 on a $500,000 sale), commissions are a powerful incentive to close the deal.
Which is why a seller has two big worries:
• An agent may overvalue your property just to land your businesses.
• An agent may undervalue your property so it sells fast.
So how do you find a trustworthy real estate agent, and who should you trust to assess the value of your home?
Do your homework
• Keep a close watch on recent auction and sales results in your area.
• Consider hiring an independent valuer to determine the worth of your home.
• Visit properties for sale in your area so you can determine whether an agent is overestimating or underestimating the value of your property.
• Pay attention to how agents answer questions such as "why is the owner selling?", "how negotiable are they on price?" and "how long has the property been on the market?" This will give you a sense of how agents might field these tricky questions regarding your property.
Agent checklist
When choosing an agent, look for the following:
• Proof that they're licensed in your state.
• Are they merely a salesperson under the agent's authority with less training and qualifications?
• Evidence of success in your area.
• A market value assessment that appears accurate based on your research.
• A signed market value estimate or even a price guarantee.
• A marketing plan.
• Advice about steps you can take to make your property more attractive to buyers.
• A commitment to provide you with regular reports and updates.
• Don't rush into making a decision about which agent to go with and see at least three agents.
• Many people engage the first agent they visit and get stuck in a sole or exclusive agency for a set period, even if they're not happy with the agent.
Beware inflated valuations
Going with the agent who promises the highest selling price could be a mistake.
Although the Real Estate Institute of Australia (REIA) says it's deceptive conduct, agents we spoke to said the practice of exaggerating property values to sellers is ingrained in the industry.
One former owner of real state agency told us, "there's an old saying in this industry that the biggest liar gets the job. The number one reason that agents give high valuations is to avoid losing business. The best way to protect yourself from the quote trap is to have the agent sign a quotation guarantee. This means getting the quote in writing, and signing an agreement stating that the agent won't be paid unless that price is achieved."
What's their take?
The two to three per cent commission usually doesn't include advertising costs, which can range from several hundred to thousands of dollars, depending on rates and where the ads are placed.
Agents' fees can be structured in different ways:
• Some agents charge a higher commission – up to five per cent – which includes some advertising.
• Some charge on a 'no sale, no fee' basis.
• Some agents chart signage and advertising costs regardless of whether your property sells.
• Some agents have low flat fees, but be sure you'll also get a good price and their focus isn't just a cheap, quick sale.
• A scale of commissions may be charged, particularly for more expensive properties. For example, you might be quoted 2.5% on the first $850,000, and 10% after that. This provides a further incentive for the agent to achieve a higher price.
• You may be charged a lower commission if you share marketing and promotion costs.
And bear in mind
• Don't pay an upfront fee – only pay your agent after the sale is completed.
• Some states require that all fees, including advertising, are set out in the agency agreement.
• All commissions and fees are negotiable, though this might not be obvious from your interactions with the agent.
•Any fees should be based on the service you receive. If you're paying top dollar, for instance, you should get a full marketing plan.
Signing an agency agreement
There are three main types of agency agreement:
1. Open listing or general authority. Sellers can list with more than one agency, only paying commission to the agent that sells the property. While you may get more market coverage than with a sole agency, the sale of your property may not be as high a priority for the agents. There's also a risk that you won't achieve the best price if various agents are competing for a quick sale.
2. Exclusive authority/agency. The agent gets paid when the property sells, even if the sale is done by a different agent or by the seller. In this scenario, avoid getting locked into a lengthy contract. A month is long enough to see if it's working.
3. Sole agency. Similar to exclusive agency, except the agent may not be entitled to a commission if you sell the property yourself.
And remember
• Some states have a cooling-off period for agency agreements. Some also place limitations on how long an exclusive or sole agency can run.
• You don't have to accept the contract agreement an agent presents – you're strongly advised to have it checked by a lawyer and changed if necessary.
Private sale or auction?
Some agents think the best price will be achieved at auction, where high emotion, pressure and competition among buyers can lead to higher prices.
Others say private sales are the way to go.
Ask different agents to explain the pros and cons of each approach for your situation.
There are no fixed rules about which types of property would be more suited to an auction or private sale, but each offers different advantages for the seller.
Auction advantages for sellers
• Competitive bidding, which means there's no price limit. This can be good for unusual or particularly desirable properties that are hard to price.
• A definite sale, assuming the reserve price is reached.
• A set date for sale encourages potential buyers to act quickly.
• Auctions can identify the most suitable buyers to negotiate with if a sale isn't completed at auction.
Private sale advantages for sellers
• More time to consider buyers' offers.
• Potential buyers make offers 'blind', without knowing what others are prepared to pay.
• Advertising expenses can be cheaper than for auctions.
• No auctioneering fees.
Under-quoting
There have been recent moves by state consumer protection agencies to put an end to under-quoting, in which real estate agents advertise a property for less than its estimated selling price or what the seller will accept in an effort to drive interest.
SOURCE: Choice