Masterclass: How much does it cost to sell a property?
Marina’s customer-first approach comes from 20 years in leadership roles in multinational companies, and buying and selling many properties herself. Marina could write a book about the do’s and don’ts of property sales, something she hasn’t ruled out.
What I want you to learn from this class
Introduction
The main categories of costs
- Conveyancing costs
- Marketing costs
- Agent or commission costs
How these costs vary across Australia
What I can’t teach you here
One last thing
Introduction
We are discussing residential property sales in this class. Whilst the optimum result is always my main focus (=bottom line in my clients’ bank account after the sale), the initial costs and outlays are important to consider, especially if cashflow is an issue or if funds are required for another transaction or purpose.
“Do your research, do it right, have no regrets.”
The main categories of costs
You will have three main categories to consider, possibly a fourth, so here it goes.
1. Conveyancing costs
Costs can vary slightly – budget roughly $1000.
To facilitate a property sale, you will always require a contract of sale and vendor statement S32 (VIC) to make that happen. Not only is the contract/S32 a legislative requirement for the transaction, it also forms part of the prospective purchasers’ due diligence process. It is advisable to have the contract ready before commencement of the sale campaign. You can request a quote from any conveyancer or solicitor in your state. Alternatively, you can ask your agent to recommend a trusted (preferably local) conveyancer/solicitor. Efficiency, responsiveness, and attention to detail are the key traits you are looking for in conveyancing.
2. Marketing costs
Costs will vary greatly depending on the choices you make, the area you are selling in and the marketing strategy for your property – budget at least $3,000 but could run as high as $10,000, sometimes even more (e.g. prestige properties).
Just to be clear, your agent doesn’t make any commission from marketing (this is the law), so the advice you get is only about the marketing plan that will get the best outcome for you.
A selling agent may potentially suggest an “off-market” strategy, without any marketing costs applicable. Sounds like a great idea; who doesn’t want to save a few thousand dollars? However, unless the agent is dominant in your area, with an extensive database of qualified buyers in your price range, this strategy may backfire. Unless your selling plans are a top-secret affair, your property’s exposure on the internet is vital – and I’m not talking about the agent’s personal Instagram account. By listing your property online, you will not only reach 25 million people in Australia, but also any overseas/expat buyers. In other words, you can showcase your property to anyone in the world that has access to the internet.
Some agents today are recommending a two-phase approach, first off-market (or pre-market) to test demand for the property before moving to advertise on the portals, if they feel a better outcome may be possible. This approach suits some vendors – e.g. those in high demand areas, those not in a rush to sell – but not all.
In addition to the major Australian online portals (i.e. realestate.com.au and domain.com.au) the agent may recommend other sites, social media, printed materials, newspaper etc. based on your local area’s profile. Professional photography & video production, floorplans, copywriting, and a signboard should be part of any successful marketing strategy. Ask your agent about the DIY digital tools available which can help with taking your property to market during Covid-19 restrictions. Your agent should be able to provide you with an itemised marketing schedule and discuss the benefits of each item.
You will achieve the best sales price the more buyers you have competing for your property. Think about the marketing components as casting a wide net to catch tons of fish, rather than catching one fish with a rod.
3. Agent or commission costs
Budget between 0% (DIY) and 2.5% of the final sale price.
Ahh, my favourite topic…
Yes, you can sell your property yourself without any agent and without paying commissions. If you are comfortable with that, just give it a shot! As long as you don’t underestimate the time, effort, and skillset it takes to sell a property, it may well work out.
If DIY is not for you and you already know an agent who works in the local area and you trust them based on your prior experience, I recommend you engage them again. Great agents are hard to come by and if you found one, stick with them.
If you don’t have any prior experience with agents in your area, it can be difficult to choose the right one. Many vendors in that situation will interview three agents and simply choose the cheapest. Should be good enough, they are all the same anyway, right?
Let’s use an example:
Agent A quotes 1% commission, agent B quotes 2%, and the property is valued at $1mil. The difference is effectively $10,000 less commission for Agent A. So, we just choose Agent A, right??
After further research, reading case studies, client testimonials on RateMyAgent and potentially even speaking with past vendors ourselves, we discover that Agent B consistently exceeds their clients’ expectations by 20, 30, or even 50K. We also learn that Agent B successfully sold numerous properties during a global pandemic, while other agents had low sales and listings withdrawn – even during normal market conditions.
Agent B delivers exceptional results and their “expensive” commission now seems to be peanuts compared with the outcomes achieved for their clients who are tens of thousands of dollars better off.
This may sound a little harsh, but the desperate agent who can’t negotiate their fees well enough will also not be able to negotiate the best price for your property.
Allow me to stress, I’m not suggesting picking the most expensive agent. If you don’t need to achieve top dollar for your property and you have an unlimited time-frame, you may as well choose the cheapest agent you are happy to work with and disregard the other facts.
The point is: Please do your research extensively, as cheap choices often end up costing the most.
Let me sneak this one in:
The possible fourth cost is maintenance and presentation. This can sometimes be a difficult conversation, because of the memories or sentimental value that the home may have, but it is important. Anything you can do to showcase your property in a better light, please consider it. This can include fixing a leaking shower, decluttering, a fresh coat of paint, or professional styling. Have an open mind and a frank conversation with your agent who should be able to help with setting a budget. Remember, you want to appeal to tons of fish, not just the one.
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How these costs vary across Australia
Costs may vary across states and between metro / regional areas and they should be confirmed to you in writing prior to the sale. Most importantly, there are differences in regulations governing the process in each state which you must watch out for. For property transactions in other states, it is best to contact a local agent / conveyancer to confirm all costs and legislative requirements in their respective areas. For any transactions in Victoria, feel free to get in touch.
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What I can’t teach you here
Your return on investment will be both monetary and emotional.
After the sale is completed you will have a net-result, which is the ultimate sale price achieved minus the costs incurred. The costs involved for a successful sale are preferably seen as investments, rather than liabilities.
The other thing you will have after the sale is the experience. The sales agent you choose is likely to be the most important factor in determining your monetary return, but also how stress free and easy they made it for you.
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One last thing
You will sell that property only once, there is no second attempt. Do your research, do it right, have no regrets.
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