There can be many reasons to sell a property. Perhaps you are upsizing or downsizing. Maybe you are going through a divorce or some other relationship strife. Possibly you are just pursuing a job opportunity in a different location. Regardless, if you are thinking about selling your property, you need to be ready for the conveyancing process.
This article is designed to give you a step-by-step process for selling your property, from hiring an agent to finalising your settlement and beyond.
Step 1: Engaging a Real Estate Agent
Engaging a real estate agent is the first step you will take on your journey to sell your property. Your agent will be responsible for advising you factors such as resale price, marketing the property to potential buyers and helping you get the best offer possible. At Gavel & Page, we have a list of agents we trust and love to work with, so feel free to ask us for a recommendation if you need one.
When engaging an agent, make sure to consider things such as:
How many properties the agent has sold in the area
Your rapport with the agent (Do you feel comfortable with the agent?)
The agent’s commission
The terms of the agency agreement (Are you granting the agent an exclusive agency period? Who will be covering fees to market the property? Etc.)
The agent should also provide tips for how you can prepare the property for both showing and inspections.
Step 2: Assess the need for repairs
As a seller, you probably don’t want to spend much money on improving a property that, with any luck, won’t be yours for much longer. However, it could be that the condition of your property will impact the sale price and overall desirability of the listing. Repairs or improvements, while an investment, can solve safety issues, improve kerb appeal, boost likely sale price and significantly shorten the timeline of your sale. Ask your real estate agent if you should be doing any improvements before listing your property.
Step 3: Consider tax implications
Before selling a property, it’s always advisable to consider tax implications that may stem from the transaction. You should contact your accountant to determine whether:
- Is the sale of the property a taxable supply?
- If GST will apply to the sale, will you be applying the margin scheme?
- Are you liable to Capital Gains Tax as a result of the sale of the property?
- Are you liable to any other taxes as a result of the sale of the property?
Discussing these factors will help you assess the financial feasibility of selling the property.
Step 4: Choose a solicitor
You will need either a property solicitor or a conveyancer to help you navigate the conveyancing process for your property transaction. Conveyancers try to be a one stop shop, but solicitors can offer a wider array of legal services and advice. Simply put, solicitors offer a great deal more value for their clients because they can do more.
Step 5: Have your solicitor prepare a contract for sale
Once you have hired your solicitor, ask them to start preparing a contract for the sale of your property. What many sellers fail to realise is that their agents cannot list or market a property for sale until a contract for sale is available for that property. For your solicitor to begin preparing the contract for sale, meanwhile, you will need to provide them with the following information:
The name of your real estate agent
When you wish to settle on the property (i.e., how long after the contract is signed)
Whether there is a swimming pool at the property
Whether anyone is currently living at the property
The construction date of the property (specifically, whether it was built in the last seven years)
Any building renovations carried out in the last seven years and the names of the people/businesses that carried out those renovations
Whether the property is your primary place of residence
What inclusions you are selling along with the property (such as washer/dryer, if you plan to leave them)
What exclusions you are not including with the sale of the property (such as washer/dryer, if you plan to take them with you)
Whether the sale is a taxable supply (and whether the margin scheme will be applied)
Whether there are recent surveys or building reports available for the property
Whether any other person or entity has a right of way or similar interest in the property
You should also tell your solicitor if you plan to be away at any time during the settlement process.
These considerations are crucial, as the contract will outline virtually all the important information about your property. This document will include the address and type of the property, items included in or excluded from the sale, details about bushfire or flood activities, information about recent renovations and more. The buyer is entitled to know these things, so investigating thoroughly to find the answers—and disclose them—is a crucial part of a solicitor’s job. This contract can be negotiated and changed later at the request of the buyer, but it is still important to make sure the initial contract for sale reflects an honest and detailed portrayal of the property in question.
Contracts typically follow this basic step-by-step process:
The solicitor prepares a written contract, governing the sale/purchase of the property.
When the buyer and seller reach a verbal agreement on price and contract terms, they ‘exchange’ the contract, with each party signing and dating the document.
A ‘cooling off’ period occurs, where the buyer is entitled to change his or her mind. This period lasts for five days, starting the first business day after the date on the contract.
The buyer decides whether or not to proceed with the purchase and pays the deposit.
During the cooling off period, the property is still off the market and under contract—even though the purchaser might decide not to proceed to settlement. Sellers sometimes ask buyers to waive their cooling off rights, in which case the exchanged contract becomes legally binding. Purchasers who don’t waive these rights must pay a 0.25 percent deposit, which they will lose if they decide not to buy the property.
In most cases, the buyer will use the cooling off period to gain information that might impact their desire or ability to purchase the property. Financial approvals, pest inspections and building inspections all tend to occur in this five-day window. If an inspection or survey identifies a problem with the property, the buyer can get out of the contract, even if the cooling off period has lapsed.
As a seller, you do not have a cooling off period. You are legally bound to sell your property once the contract has been exchanged.
Step 6: Consider whether you need the deposit money released
Usually, when a deposit is paid under a Contract for Sale of Land, it is held by either the seller’s agent or solicitor until settlement. However, in some cases, the buyer may require the deposit to be released before settlement. The seller might then use this money to pay a deposit, stamp duty or some other expense.
Buyers are sometimes hesitant to allow the release of the deposit, just in case the transaction doesn’t proceed to settlement. It is possible to allow the buyer a charge over the land in the contract for sale, going into effect as soon as the deposit is released. That way, the buyer has at least some recourse to get their money back if the deal falls apart. Still, buyers typically prefer deposit money to remain unreleased until settlement. If you don’t need that money, though, you can streamline the conveyancing process by not asking to have the deposit released.
Step 7: Contact your bank
Always contact your bank ahead of time to inform them that you are selling your home and will soon be discharging your mortgage. Once your contract for sale has been exchanged, you will sign a Discharge of Mortgage Authority form, which your solicitor will send to the bank. Banks typically need at least 28 days to prepare the relevant discharge documents, so plan for this step.
If you don’t have a mortgage, you need to locate the title or certificate of ownership for your property. Advise your solicitor immediately if you cannot find this document, to avoid costly settlement delays.
Step 8: Get ready for settlement
The settlement will usually occur about six weeks after the contract exchange. In the meantime, you should go through this checklist with your solicitor and/or real estate agent:
Understand your obligations for land, water and council rates: These rates are all adjusted at the time of settlement, which means you will pay from the beginning of the rate period up to settlement, while the buyer will pay the rates until the end of the period. Your solicitor will prepare your rate adjustments for you.
Don’t cancel your home insurance policy: You need your policy to be active until the moment of settlement. Otherwise, you could be left paying for costly damage.
Review your obligations under the contract: Make sure you are doing anything the buyer required of you as part of the contract terms, including specified repairs or things you are supposed to remove from the property.
Make arrangements to vacate the property: You should be out of your home or property at least one day before settlement, to ensure a smooth transition. Make sure to clean up rubbish and debris.
Give your keys to the agent: Your agent will turn the keys over to the buyer after settlement.
Disconnect or discontinue services: You don’t want to pay for phone lines, TV cable service or gas service you aren’t using.
Step 9: Pay the agent’s commission
This part should happen automatically, without your involvement. The agent’s commission is deducted from the deposit, which is usually held by the agent. Once the settlement has occurred, the agent should deduct their commission.
Step 10: Keep an eye out for relevant mail!
After the settlement, you should expect to receive several important pieces of mail, including cheques for surplus money and a letter from your solicitor. The letter should include a copy of your Settlement Adjustment Sheet, cheque directions for tax records and more.
Do You Need to Make Any Essential Repairs to the Property?
You may not wish to spend any more money on the property now that you have decided to sell it.
However, some essential repairs may need to be made to the property particularly where the condition of the property is unsafe or will significantly impact on the selling price. Discuss this with your agent.
Sometimes and depending on the circumstances, it is worthwhile spending a little money in order to secure a far greater sale price and make the prospect to buyers all that more attractive.
What Taxes Will You Pay?
It is very important when choosing to sell a property that you properly consider whether there will be any tax implications as a result.
We are not qualified to give accounting or tax advice as such, so it is best that you determine this by speaking with your accountant.
You may ask the following questions, among others to gain greater clarity on this issue, as it may influence decision you have to make in connection with the sale:
Have You Chosen A Solicitor?
Often times the primary choice in choosing a solicitor is price.
To some extent this consideration is important. However, it is also very important that you choose a solicitor/conveyancer based on the quality of service and advice that is offered.
You want to make sure that no corners are being cut by the conveyancers to make up for their competitive prices. While you might save one or two hundred dollars on your conveyancing fees by choosing the cheaper option, these types of shortcuts can often end up causing mistakes that cost you thousands. After all, the value of your investment (and likely purchase of another property once the sale is complete) is generally many hundreds of thousands of dollars and such an investment should be protected. This is an important decision and one that should be thought about before moving ahead.
Once your solicitor has been engaged, instruct them to prepare a contract for the sale of the property.
It is important to note that the agent you have selected cannot commence marketing the property (or listing it for sale) until a contract for the sale of the property is available.
You will need to have considered the following in order to provide your solicitor with the instructions that they will need to prepare the contract and of course, your solicitor should always talk you through and explain all aspects and steps of the process in any event to ensure you are clear and are able to make informed decisions:
- Who is your agent?
- How long after the contract is exchanged do you wish to settle?
- If there is a swimming pool at the property?
- If the property is tenanted?
- If the property was built in the last 7 years?
- If any building works including alterations and renovations been carried out at the property in the last 7 years and the value of those works?
- If so, when and by whom were they carried out?
- If the property is your principal place of residence?
- What are the inclusions that form part of the sale?
- What the exclusions are that do not form part of the sale?
- Whether the sale is a taxable supply. If so, whether the margin scheme will be applied?
- If there is a recent survey report available in relation to the property?
- If there is a recent building report available in relation to the property?
- Whether anyone has a right of way or any other interest in the property
Always notify your solicitor if you are planning to be away during the settlement period at any stage.
The significance and implications of many of the above comments, along with an explanation of some of the relevant terminology involved with this process, is explained in our next article, when we continue our complete vendor conveyancing guide series.
Getting Legal Advice for Your Property Conveyance in Sydney
It is important for buyers to seek out timely and meaningful advice as to the various terms, risks and pitfalls associated with purchasing off-the-plan. Visit our comprehensive Conveyancing Price Guide For Sydney to find out more information