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Dan: When it comes to selling your property, there can be plenty of questions that can emerge and it can be helpful to slow down and consider it all as a process that is made up of various steps. In this part one of a two part series we discuss the first aspect of the process, the appointment of the agent. And to discuss those steps I’m with Sylvia Lopez, a partner at Big Law. Sylvia, there can be lots of moving parts to all this.
Sylvia Lopez: There certainly are, Dan. And look, it can be a very exciting time for people when they decide that they’re either upgrading a home or downgrading, whatever the change is that’s leading to them to list their property, but it can also be very daunting. People may only do this once or twice in their lifetime. So there’s lots of things to be aware of, lots of pitfalls, but it can be a really rewarding experience when you finally sell your property and you move on to the next chapter of your life.
Dan: Because it is one of life’s biggest assets, isn’t it? And you’ve just got to get it right.
Sylvia Lopez: Absolutely. The consequences if you don’t get this right can be quite horrific for people. So we tried to make it as smooth a process as possible and we’re happy to be involved with people from the very start, from when they first decide that they’re going to sell the property. And the very first step, once that decision is made, is looking at appointing an agent, who am I going to get to come in here, work with me and sell, you’re right, my biggest asset by far at this point in time.
Dan: So let’s talk about that. So, okay, a person has decided to sell their property. Obviously they think, “Okay, I’ve got to get onto realestate.com or whatever the case might be. And try and locate an an agent that’s in my demographic or in my a geographical reach.” What happens next? What do they do?
Sylvia Lopez: All right, so the next step that most people will take, they’ll actually contact two or three agents that they may have seen around the area or have been recommended to them. And they’ll meet with them to then discuss what that agent brings to the table in terms of the selling process. So you might go through and you might say, “Okay, my friend sold this property, their home, with this particular agent. I’ll give them a call.” And you’ll end up organising two or three appointments with agents that can come and have a look at the property for you, explain what services they can provide to you, in terms of marketing campaign and and so forth, and also to discuss the actual appointment itself. Okay, so the terms that apply around that agent acting on your behalf in the sale of the property. So that will be the first step. People need to do some due diligence and some inquiries around, “okay, who do I want to meet with initially to help me along this process?”
Dan: Now quite apart from, I assume, the personality of that agent and being able to connect and feel that you’ve got a great transparent, potentially effective relationship with this agent. The next step, I suppose, is around understanding how the commissions are calculated, is it going to be an open listing, sole agency? What about all those things?
Sylvia Lopez: That’s correct. Dan. So when you meet with the agents, most agents will give you an estimate as to how much the asking price for the home should be. Once you’ve settled on that, you’ve then got to look at what appointment you are going to put the agent on. So in terms of that, that will then determine the commission that you pay or when it’s payable. So typically there are three types of agencies that a person can choose when selling their home. So the first one’s an open listing. So in that particular open listing, you can list whatever agents you like to sell your property. So in that instance, you can appoint more than one agent if you choose to do so. Okay? The next type of agency that you can have is a sole agency appointment. And as the name implies, you are choosing to appoint just one agent to come in and sell your home.
Sylvia Lopez: The last type of appointment is an exclusive agency, where you allow that one agent to sell your property. And if they sell it, then that triggers the payment of the commission. So going back to each of those. An open listing, you will only pay commission to the agent that actually effects the sale on your behalf. So if you have three agents and only one of them manages to sell your property, you only pay the one commission. If you sell your own property yourself without the aid of any of these three agents, then you don’t pay commission to any of them. With the sole agency, you will pay the agent that, again, is successful with selling your property that commission. [crosstalk 00:05:06]
Dan: So, sorry Sylvia, but how do they actually calculate commission, these real estate agents? How is that done?
Sylvia Lopez: Yeah, so the act actually prescribes the maximum commission that is payable to an agent. So the legislation around this says that the agent can charge 5% for the initial $18,000 that they sell your property for and then two and a half percent thereafter. But that’s the maximum commission that an agent can charge. So most agents will give you their estimate of what their commission will be. But effectively, you can negotiate your commission, it just can’t exceed those prescribed demands, set out in the legislation.
Dan: Now what about other expenses that might be incurred, like marketing, for example? Because there is always that sort of package that sits on the side, doesn’t there? Where, “Look we can advertise on on this particular online website or we can advertise in the local publication or newspaper.” How are those costs calculated?
Sylvia Lopez: Sure. So when you appoint the agent, the form that they will give you will have a space in there for you to agree with the agent as to the advertising and marketing campaigns. Now, depending on how you want your property marketed, that will then dictate the upcharges around that. Every agent’s different with respect to that, so you do need to ask the question of, “Okay, if I choose to go down this path, in terms of marketing my property, how much will that cost?” If I want the property listed on realestate.com.au, there’s obviously an outlay for the agent to do that. How much will you then be charged for that if there’s a signage that goes out the front of your property? So that’s a discussion to be had with the agents so that you’re very clear when you sign the appointment as to how much those costs are going to be.
Sylvia Lopez: The other thing that the agency appointment allows for is if the agent makes suggestion as to repairs and maintenance to your property before you sell it, they can often organise for those repairs and maintenance to be undertaken on your behalf. And there’s, again, a space for an agreed amount for that to be agreed to at the time that you appoint the agent to sell the property.
Dan: You mentioned that the outset, Sylvia, that Big Law can be involved from the very start. Is that all included within the cost of the combined team to sell the property?
Sylvia Lopez: Yeah, absolutely, Dan. So that’s part of the service we offer our clients. So if you decide that you want to sell your property and you want to have a chat to myself or to any of the other solicitors here, then we’re more than happy to do that. We’re happy to review the agency appointment as well, in case you have any questions around the commission and the fees and charges that you have to pay the agents.
Dan: Sylvia, thanks for joining me.
Sylvia Lopez: Thanks Dan.