Sometimes an agent does not need to be involved
If you are thinking of selling your property, and know of someone who is interested in purchasing it, for example, a tenant or a neighbour, provided you have satisfied yourself that you are selling the property for market value, there is no need for you to use an agent to organize the sale process.
Equally, if you are thinking of buying a particular property, you don’t have to wait for a property to go on the market or appear in the real estate section of the newspaper in order to make an offer to purchase it. There is nothing stopping you from approaching the owner directly and asking if they are prepared to sell their property if the price is right.
It may be possible to save the cost of an agent
Agents, of course, will charge as much as 2.5% plus GST as commission on the sale of the property which, depending on the price, can be a significant sum. However, if you have done your homework, whether you are the buyer or seller (we call them “purchaser” or “vendor”), it is possible to cut a fair deal, and to have all the documents prepared properly and legally, without the cost involved in having a real estate agent.
The top 10 things to know when buying or selling property privately
Looking at things from the perspective of the vendor and the purchaser, we’ve come up with the top 10 things you need to know when buying or selling land – without an agent.
If you’re a vendor:
- Engage the services of a conveyancer or, better yet, a lawyer with experience and expertise in property matters. Through your conveyancer or lawyer, you will be able to order Government searches in relation to your property, which are needed to complete the necessary sale and transfer documents when you find yourself a purchaser.
- Have a pre-prepared contract and Form 1 statement at the ready, to be signed when you find yourself a buyer who is prepared to pay you the right price. You must remember that on most occasions purchasers have a right to “cool off” on a contract that they have just signed which they can exercise at any time and for any reason within 2 clear business days of signing the contract. It is therefore critical that you strike while the iron is hot.
- The first obligation of a vendor to the purchaser is to make sure they can provide clear title to the purchaser, in other words, ensure your property can be freed of any encumbrances or orders or conditions at settlement so that the purchaser has clear title to the property. Your lawyer or conveyancer can assist you with this but the obligation is on you so make sure these matters are worked out before you start signing contracts.
- Avoid long settlements. It may be that the purchaser wants a long settlement, say 6 or 12 months instead of the usual 30 or 45 days. However, the longer the settlement, the greater the possibility that something will go wrong.
- Agents are generally pretty good at protecting their clients’ position. They also have a vested interest in ensuring that settlement proceeds without delay so that they can get paid their commission. Without an agent, and in particular without a lawyer or conveyancer involved in the negotiation process, vendors and purchasers can sometimes commit to terms and conditions that are unworkable, ill-advised and even unlawful. For example, vendor finance clauses, rent-to-buy conditions, options and the like are very complicated even for seasoned investors. Getting conveyancing and in particular legal advice and assistance is the key.
If you’re a purchaser:
- The first thing you must do when you have signed a contract to buy a property, especially where there are professionals involved in representing the interests of either party, is to lodge a caveat to protect your interest in the property until settlement. A caveat will stop the vendor from selling to someone else or encumbering the property without notice to you.
- Before you sign a contract, you must do your due diligence on the property: for example, get a building inspection report, talk to neighbours, make enquiries from the local Council about any building or other restrictions on the property.
- Even if you feel that you are an experienced purchaser, make sure that you have a lawyer or conveyancer check through the contract and the form 1. Do NOT agree to the vendor’s conveyancer being your conveyancer, even though the law in South Australia allows for dual representation.
- Make sure that your finance is in order and that you are buying the property at or less than market value. If necessary obtain a formal valuation of the property.
- Make sure the deposit is held by the conveyancer of the vendor, not the vendor if unrepresented. A conveyancer has professional obligations with respect to the retaining of deposits which are effectively held on trust for both parties in a transaction pending completion of its terms. A lay vendor has no such professional obligations, although they of course have legal obligations but those obligations can often only be “policed” in Court.
Buying a property without an agent can present excellent opportunities to make or save money on the sale or purchase of property.
However, it is critical that you get the advice and call on the assistance of a professional such as a conveyancer or property lawyer to guide you through what you can and should do in the circumstances. Documentation and timing are key elements in any transaction, and ignorance of the law is no excuse.
For property law and conveyancing advice, please send us an email at email@example.com or call us on 8276 7955.