If you are planning to sell your property, thorough preparation can not only significantly boost the property sale value but can also transform what is often a stressful process into a smooth and manageable experience.
1. Preparation
Carefully consider what your aims are in selling.
What are your priorities? What do you want to avoid?
Make sure that you can achieve what you are aiming for by selling. Some key things to consider include:
- Finance – If you are looking to buy another property, is the equity in your current property (the value of the property after repaying any money owed) enough to cover the cost of buying the next property? It may be prudent to speak with your bank or mortgage broker early to discuss your financial options.
- Tax & Income – Selling your property may have tax implications, or may affect your income if, for example, you receive Centrelink payments. You should speak with your accountant or financial advisor before selling your property.
- Location – By selling, are you compromising on your ability to live or work in the area? Although you may be able to sell your property, consider whether in the location that you want to buy your new property there are affordable properties on the market.
- Your Will – If you sell your home, does it impact your estate planning? If you have gifted your property in your Will, does selling it see your loved ones unintentionally impacted? Careful consideration and proper legal advice is very important to avoid serious unintended consequences – please contact us to discuss if you have any questions.
2. Engage a Solicitor & Real Estate Agent
Once you have decided to sell, putting the right people around you can ensure you have an informed strategy and facilitate the smooth and timely sale of your property.
Engage Your Solicitor – Contact us to discuss and advise on the process of selling. We can prepare the listing contract ready for the property to go on the market. If renovations or repairs are required before going to market, we can ensure that, once the property is ready, the legal paperwork is all set.
Real Estate Agents – While you don’t need to engage an agent, speaking with one or more real estate agents can be helpful for a number of reasons. The agents should be able to assist you with the following:
- Improvements – What improvements to the property (if any) should be done to achieve your target sale outcome?
- Sale Price – What price or price range can you expect to achieve in the current market?
- What Does the Agent Charge – Typically agents will charge a percentage of the sale price. Keep in mind that even a small percentage increase can substantially impact the cost when a property is being sold for hundreds of thousands of dollars. On the other hand, be careful deciding based purely on the cost as a more expensive agent may be better placed to achieve your target outcome (whether that be a price target or timing target).
- Marketing Costs – How much do you need to pay for marketing? Does the marketing need to be paid up front? Are there lending arrangements for marketing costs? Can any lending arrangements also cover property improvement costs?
A Word of Caution – Be careful when signing agency agreements. Carefully consider the full terms of the agency agreement before you sign it and ensure you fully understand how, and when, an agreement will end. Knowing how it will end is probably more important than knowing how it will start. You should particularly take care to avoid situations where two agents are legally entitled to claim commission on the sale of your property, a situation where you need to pay commission twice!
3. List the Property for Sale
Listing Contract – Before the agent can market the property or show people through the property, they are generally required to have a listing contract. We prepare the listing contract for you and provide this to your agent once you are ready to put the property on the market.
Styling & Open Homes – Speak with your agent to arrange timing of open homes and the styling of your property.
4. Offer Made & Accepted
Once your property is listed, prospective buyers may begin submitting offers which, once accepted, will form the basis of the formal legal contract to sell your property. It is prudent that both you and the purchaser take certain steps before entering a legally binding contract.
Receiving Offers – Generally purchasers will make offers to purchase your property (typically in writing via the agent). Generally, you and the buyer should come to an agreement on:
- The price
- The settlement period – the time between when the contract starts and is complete, commonly 6 weeks in NSW and 28 days in the ACT
- The standard 10% deposit or a reduced 5% deposit – please contact us to discuss before accepting a reduced deposit.
- Whether a cooling off period applies – if a 5-business-day cooling off period applies then the buyer can withdraw from the contract within 5-business days for a modest fee – we would typically require the cooling off period be waived. While there are certainly circumstances where a cooling off period is appropriate, we recommend you contact us to discuss before agreeing to a cooling off period.
Sales Advice – The agent compiles the sales advice, a short document which summarises the key agreed terms including:
- The agreed price, settlement period and other agreed terms
- The purchaser and seller’s details
- Each parties’ legal representatives
Contract Updated & Signed – We will update the contract with the agreed price and conditions, and provide the updated contract to the buyer’s solicitor. We then arrange for you to sign the contract ready for exchange (the point where contracts become legally binding).
Buyer’s Preparation – The buyers will typically have a few things to do once their offer is accepted, including:
- Getting advice from their solicitor on the contract.
- Progressing their finance arrangements with their bank or mortgage broker.
- Conducting property enquiries such as a Strata or Building & Pest Report – the agent will typically assist in facilitating access to the property as required.
5. Exchange – The Deal is Locked In
Generally, once the purchaser’s finance is ready and their property enquiries are complete, the parties can proceed to exchange contracts.
Payment of Deposit – Typically once the buyer’s finance and property enquiries are completed, the buyer pays the agreed deposit into the agent’s trust account, if you require the release of the deposit to purchase another property, please let us know before exchange so we may request this with the purchaser’s solicitor.
Contracts Exchanged – Both parties’ signed contracts are dated and exchanged, making the agreement legally binding. Commonly any cooling-off rights are waived by the purchaser.
6. Cooling-Off Period
Cooling-Off – The buyer can withdraw from the contract within 5 days business, paying 0.25% of the price to the seller, unless waived or not applicable (for example if the property was sold at auction).
7. Preparation for Settlement
After contracts have exchanged, there are important tasks to complete to ensure the property is transferred to the purchaser on settlement. Careful preparation is important in order to avoid unnecessary delays, protect your interests, and ensure you do everything legally required before the property changes hands.
- Discharge of Mortgage – Once contracts have been exchanged, you will need to arrange the discharge of any mortgage on the property with your lender. Your solicitor can assist you with this if required, and you should provide a copy of the completed discharge authority to your solicitor once completed.
- Insurance – Do not cancel your insurance or schedule for it to be cancelled until settlement is complete and your solicitor has confirmed it is appropriate to cancel. If settlement is delayed, you do not want to be left uninsured.
- Arrange Utilities & Services – You should arrange for utilities and services to be cancelled following settlement. Generally it is not recommended to cancel electricity or water prior to settlement as this may cause problems for a buyer when they do their final inspection of the property – they will be unable to ascertain whether or not facilities remain in the same condition as at exchange.
- Arrange Removal of Your Items – Unless exceptions apply (such as selling a property with a tenant) you will generally be required to provide vacant possession when you settle, meaning you and your belongings need to be out of the property before settlement. Ensure you make necessary arrangements to remove your things to avoid delaying settlement.
- Account Details – Contact the agent in the days leading up to settlement and where you want them to transfer the balance of the deposit, less their commission and any outstanding marketing expenses, following settlement.
- Final Inspection – The purchaser is entitled to have a final inspection of the property, which typically occurs on or close to the day of settlement. It is important that, at the time of the final inspection, you have left at the property all the items which you are legally required to leave, and you have removed all the things you are required to take. Failure to do this can cause unnecessary complexity, delays and costs.
8. Settlement
Settlement day marks the official transfer of ownership from you to the purchaser and the day when you receive the sale proceeds.
- Settlement Time – While settlement can take place at any time during business hours, typically banks require settlement to take place between 12- 3pm on the settlement day.
- What Happens at Settlement – The balance of the purchase price is paid to you, and the ownership is transferred to the buyer.
- When Will I Know? Unless there is a delay (usually caused by one of the banks), you should hear from your solicitor as soon as settlement has gone through – usually 20-30 minutes after the scheduled settlement time.
- Release of the Deposit – Once the property has settled the agent will be authorised by the purchaser’s solicitor to release the balance of deposit, less the agent’s commission, to you. Time to celebrate!
Jemma Jones
Jemma performs a legal support role at Highlander Law.
Jemma is in her third year studying Law and Business at Western Sydney University.
Performing a diverse role in the Highlander Law team, Jemma works collaboratively with the team on legal drafting and document preparation.
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