Selling your house privately could save you thousands of dollars by not having to pay a real estate agent a commission.
If you’ve decided that this is right for you then you’ll need to know what’s involved.
Here are some tips on how to make each step of the sale journey as smooth as possible.
Step 1: Do your research
Research the market by looking at recent sales histories in your suburb and find out what similar properties have sold for. It is also worthwhile to get an independent valuation of your house so that you know that the price you’re asking for is realistic and you can back up your negotiations with a valuation report.
Step 2: Prepare the property for listing
You’ll want to sell for as much as possible so you’ll need to present the property at its best. Think about cleaning and removing clutter, attending to any outstanding repairs or even some staging.
The statistics say that about 90% of all property inquiries are sourced through the internet. But you won’t have long to catch the attention of an online buyer who will be scrolling through properties and may only look at the first picture on your online listing. Getting some professional photographs is a really good idea to make your house stand out from the crowd. You’ll also need to write a property description so make sure it’s something worth reading and sells the lifestyle benefits.
There are now platforms that help manage the private sale process, giving sellers access to advertise on the major property websites and the tools and resources needed for a successful listing and sale.
Step 3: Listing contract
In New South Wales the law requires you to have a listing contract prepared before you advertise your property. A listing contract must be in a legally compliant form with prescribed documents attached (such as title and council certificates).
In other states and territories, it is also a good idea to have a listing contract prepared before you advertise for sale so that you can secure your sale as soon as you agree to an offer. Most states and territories have some form of seller disclosure depending on the property type.
Victoria, South Australia and the ACT have robust seller disclosure regimes and depending on the council, it can sometimes take up to 2 weeks for all the property certificates needed for contract disclosure to be returned by the authorities. And it’s common in those states for buyers to ask for a copy of the seller disclosure documents before they will submit an offer.
Whilst Queensland and Western Australia have less seller disclosure requirements, some property types like units and townhouses (i.e. strata titled properties) require disclosures from the body corporate management company which can take several days.
Well organized sellers wanting to secure quick sales have listing contracts prepared by their conveyancing lawyer before they list their properties to avoid disappointment.
Step 4: Open homes, offers and negotiations
Once your listing has gone ‘live’ and is being advertised, you’ll want to schedule some open homes. These are usually done on the weekends because more buyers will be available then. The open home is a chance for prospective buyers to inspect the property so make sure it is presented at its best. Be prepared to answer questions about the property, such as why are you selling or what are the neighbours are like?
You should ask each person at the open home for their contact details so you can follow them up afterwards to ask for their feedback and gauge their interest. Decide how you want to manage the offer and negotiation process in advance, for example, do you want offers to be submitted by phone or email, or by a filled in and signed contract, or through an online selling platform that you’ve chosen to use?
An offer should consist of more than just the price, it should also include keys terms such as the amount of the deposit and when the deposit is payable, the settlement period, and whether the offer is subject to any conditions such as finance or a building and pest inspection.
An agreement for the sale of land must be in writing and signed by both parties to be enforceable. When you’re ready to accept an offer, record the key terms in a sales advice and send these to your conveyancing lawyer to complete the contract and secure the sale.
Step 5: Contract exchange
Make sure you’ve appointed a conveyancing lawyer who can act quickly when you’re ready to accept an offer and ask them if they have the tools to have contracts signed electronically. Signing electronically significantly speeds up contract exchanges and improves the likelihood of securing your sale.
A contract is ‘exchanged’ when both parties have signed the same contract (or counterpart copy of the same contract) and it becomes legally binding. The contract is dated on the day the last party signs the contract (which is usually but not always the seller).
When the buyer signs the contract, they should also pay a deposit. The deposit amount is negotiable and is usually an amount up to 10% of the purchase price but this varies in practice between states. Ideally you should ask the buyer to pay a 10% deposit or as much as possible as a sign of their commitment to purchase the property. If the Buyer is in default of the contract at a later date (e.g. by not being able to settle) you may be entitled to terminate the contract and keep the deposit.
If the buyer is unable to pay a 10% deposit on signing the contract, then you should ask them to pay an initial deposit upfront and the balance at a later date (e.g. after cooling off or when finance is approved). The deposit is usually paid to your conveyancing lawyer’s trust account to hold until settlement.
The buyer may be entitled to a cooling off period which means they can cancel the contract without any reason before the cooling off period expires. The cooling off periods vary between states (and WA has no cooling off) and does not apply in some circumstances (e.g. sales by auction).
If the contract is subject to a building and pest condition and the report identifies defects, the buyer may be able to terminate the contract or you may be able to negotiate with the buyer to either rectify the defects before settlement or reduce the price to factor in the costs of rectification.
Step 6: Preparing for Settlement
The usual settlement period in Australia is between 30 to 60 days but you can negotiate a shorter or longer period if required. If the buyer hasn’t already obtained finance, keep in mind that their lender may take at least 2 to 3 weeks to approve finance and then a further 1 to 2 weeks to complete loan documents and be in a position to settle. You’ll also need time to pack up and find another home (if you haven’t already).
If there is a mortgage over your property then you should contact your bank as soon as possible to let them know that you have sold the property. They may ask you to sign a discharge authority so they can prepare a discharge of mortgage and liaise with your conveyancing lawyer to organize settlement. You should also advise them which bank account you would like any surplus funds to be paid into.
Unless the property is sold subject to a tenancy, you should vacate the property by at least the day before settlement. Make sure you’ve removed all your personal belongings and have left the property in a tidy condition. The keys need to be handed to your conveyancing lawyer for the buyer to collect after settlement or you can make other arrangements directly with the buyer. The buyer is entitled to inspect the property prior to settlement and will usually do so the day before or on the morning of settlement. This gives the buyer an opportunity to make sure that the property is in the same condition as at the contract date and that any goods included in the sale are left at the property.
Step 7: Settlement
Settlement is the process in which the buyer pays the balance of the price and you transfer title to the property and it needs to happen at the same time. This has traditionally been done in person, known as a paper settlement, where usually 4 people (each one representing the buyer, seller, incoming and outgoing banks) arrive at a settlement venue to swap bank cheques for transfer documents.
Settlements can now occur electronically using an electronic settlements platform. Property Exchange Australia (PEXA) is currently the only electronic settlement platform but others are expected to enter the market. Electronic settlements have been mandated in Victoria and Western Australia and will be mandated in New South Wales from 1 July 2019. You can also settle electronically in Queensland and South Australia.
By settling electronically there is greater certainty that your settlement will happen on time (as it reduces the logistical risks of paper settlements), you’ll receive your balance of settlement funds within hours instead of waiting days for bank cheques to clear and you won’t need to sign and return paper transfer documents.
After settlement the transfer of title and any discharge of mortgage will be registered with the land titles office. The local authorities also get notified of the change of ownership.
The process of selling a property privately can seem daunting but you can make the journey easier by appointing the right conveyancing lawyer and private property sales platform.
lawlab Pty Limited