Buying and selling

Real estate agents can sell your property for you without a written agreement but a written appointment protects both vendor and agent. Selling by auction involves more expense than selling by private treaty. Compare different agents’ costs. Buyers must be aware stamp duty is an additional cost. Building inspections cost about $400-600. Check that boundaries match the title measurements. Buyers should also check the vendor’s statement for easements, covenants, planning information and other restrictions.

Appointing an estate agent

You can sell your own home without engaging an estate agent, although you will need to employ an agent to conduct a formal auction, if you want to hold one. There is a great deal of work in arranging advertising, finding a buyer and handling the paper work and most people prefer to employ an estate agent to do this for them.

People who act as real estate agents must be licensed. The licensing body is the Business Licensing Authority (BLA) (seeContacts”).

The BLA, together with the Estate Agents Council, regulates estate agents’ activities and trust accounts, administers the estate agents’ guarantee fund (which repays clients when agents or their staff steal money held in trust), and investigates complaints.

The Real Estate Institute of Victoria (REIV) is the representative body of agents and most practising agents are members.

An agent can market a property without being appointed as agent in writing, but a written appointment protects both you and the agent. The agent is not entitled to take commission without your permission or a written “appointment”, which is usually made by signing a standard form prepared by the REIV or a similar form.

There are the following types of appointment:

general sale authority: this makes the fees payable only if the agent is the effective cause of the sale;

exclusive sale authority: this makes the fees payable if the property is sold by the agent, or by any other person including the vendor, to a person who was introduced to the property during the authority period, or up to 120 days after the end of the period, and who buys as a result of the introduction; and

exclusive auction authority: this makes fees payable on the same basis as the exclusive sale authority.

The authority must contain specific information about the agent’s fee, a statement identifying discounts and rebates, etc., and a statement about where complaints can be made.

The right of the agent to sell under a general and an exclusive sale authority lasts for 60 days and under an exclusive auction authority for 30 days, unless another period is specified in the agreement.

Vendors may negotiate fees, advertising costs and each of the terms (including the agreed conditions on the reverse of the document) with the agent.

You can appoint two or more agents, either through the Multiple Listing Bureau, or as conjunctional agents (so that the agents share the fees), or by giving each one a general sale authority (which entitles only the selling agent to commission). Most residential properties are sold through exclusive sale authorities because these give the agent the greatest incentive to earn the fees.

Sale by private treaty or auction?

You need to decide whether to sell by private treaty or auction. The selling practices in Melbourne vary from area to area, but private treaty sales still account for many transactions.

Sale by auction is popular, but you should only choose an auction if you are prepared to pay the extra expenses, if you understand the content of the agent’s authority, and if you are satisfied that it is the best marketing strategy for your home.

Advertising expenses

Auctions generally involve you, not the agent, paying for extensive campaign advertising. Advertising in a private treaty sale is usually much less expensive and costs can be borne by the agent. Ask for a detailed schedule of expenses, including the cost of flyers and signs.

Unless your authority provides otherwise, the agent is entitled to be reimbursed for advertising expenses actually incurred. Advertising services are generally sold at a discount by newspapers, signboard suppliers and printers to bulk buyers (such as agents). You are entitled to this discount unless you have specifically agreed to allow the agent to keep it. The standard forms of authority contain a clause that states that the agent can keep the discounts. You can delete this clause and ask that the discounts be paid to you.

Estate agents’ fees

Fees are stated in the agent’s authority. There is no limit on the amount the agent can charge. It is up to you to negotiate your price. The authority must show:

details of commission and outgoings; and

if the fee is calculated on a percentage basis, a statement of the fee expressed as a percentage and dollar amount that would be payable on the reserve price or other relevant amount.

The fee can be based on a service or series of services, such as holding open for inspections, negotiating the contract and collecting the deposit, or it can be a commission on the price.

Advice to sellers

Estate agents

Shop around before choosing an agent. You should consider costs and the competence of the agent before making your choice.

Conduct thorough negotiations before appointing an agent. Negotiations should cover the type of appointment, commission and advertising costs. Consider the proposed advertising campaign and who pays for its cost.

You need not nominate the price you are willing to accept for the property: you can put “to be advised” in the authority and add any other special conditions you want.

Do not:

allow the agent to prepare a vendor’s statement. These statements are technical legal documents and an error in the drafting can allow the buyer to avoid the sale entirely;

agree to sell the property by auction or private treaty to the agent, anyone employed by the agent, anyone related to these people or a company associated with them without first seeking advice about section 55 of the Estate Agents Act 1980 (Vic). These contracts may involve the buyer in a conflict of interest. You should remember to raise your price by the amount of commission or to get the agent to forego commission to ensure that the agent is not getting an artificial discount not available to any other buyers;

sign a contract of sale by which the property is sold for a price less than the value of the loans secured on the property (including overdrafts that are indirectly secured) unless you consult your lender and your solicitor or adviser first; or

sign a contract of sale that contains terms (including a price) that you are unhappy with. Ask the agent to renegotiate the agreement with the buyer.

Ultimately, the sale is your decision. You must determine whether an offer is acceptable. An agent must pass on all offers to you. If the offer is above the sale price specified in the agent’s appointment and you still refuse it, you may be liable to pay the agent’s fee.

Solicitors/conveyancers

You can obtain a quote for a solicitor’s conveyancing work by phoning the solicitor’s office.

If you are selling through a private treaty (not an auction), you should ask your solicitor whether they will rely on the contract prepared by the agent, or will prepare a contract of sale for the agent to use and, if so, why.

You should have the vendor’s statement prepared by a solicitor or a licensed conveyancer to ensure that it is accurate and to obtain the benefit of professional indemnity insurance cover.

Advice to buyers

Remember that the expenses of stamp duty, mortgage and registration fees, insurance and other charges will add about $23,000 to the cost of a $400,000 home.

Do not sign a sale or auction contract until:

your lender informs you in writing that finance is approved or that you qualify for a loan;

you have checked that the boundaries and fences of the land coordinate with the title measurements. Check the distance from the land to the street corner (or the “connecting point”) shown on the plan, to ensure that the land inspected is the same as the land in the title. Note that your ability to object to title based on measurements of the land may be restricted under the standard contract.

if the property has an unfenced swimming pool, you have checked whether you are required to install child-proof locks and barriers that comply with Australian standards; and

you have checked with the local council to ensure that the land can be used in the way you intend.

The documents you are required to sign immediately on the purchase are a vendor’s statement, contract of sale and a section 51 statement. You should not sign any other documents without independent advice.

Do not sign a section 27 statement releasing the deposit to the seller until your solicitor or licensed conveyancer agrees that you should do so.

Inspecting the building

The contract may contain warranties about the quality of the building. The rule is still caveat emptor, meaning “let the buyer beware”. You must take care that the property is sound and available for your intended use. However, deliberately misleading statements made by the seller or by the estate agent may give the buyer a right to compensation.

Check for rotten stumps, faulty wiring, structural cracking and dampness. You may wish to employ a valuer, builder or architect to do this. House inspection services are listed in the Yellow Pages under Building Inspection Services and Building Consultants. The charge for an average-size house is about $400–$600.

What are chattels?

Chattels are movable items that are not firmly connected to the land. They can include a garden shed, a garden statue, TV antenna, light fittings, swimming pool pump and filter and floor rugs. The seller is entitled to remove chattels. If you want to buy these movable items, you should include them in the chattels clause of the contract.

Inspecting the title

Land Victoria records the documents related to each parcel of land and issues a title to owners for a fee. The original documents and folios making up the title are kept at the Registry. The title shows the owner and other interests, such as easements, covenants, mortgages and discharges of mortgages.

Caveats (seeCaveats”) lodged after the title was issued from the Registry are shown only on the internal Registry records, and not on the issued title.

You should compare the land in the title with the land inspected. Many contracts contain a clause that defines the land sold as the land inspected. If there are discrepancies between title and fenced boundaries, the clause may prevent the buyer from claiming compensation.

Vendor’s statement

Before the property can be sold, the seller must provide the buyer with a vendor’s statement (also called a “section 32 statement”). The vendor’s statement is the most important document in the marketing process.

This statement contains information about the land. It does not contain information about the quality and condition of buildings or fittings, conformity of buildings with building regulations, any land wrongly included in the fences and any land in the title that is left outside the fences. The buyer may need to make separate enquiries to verify the information contained in the statement and to discover information not included.

An omission or error in the statement may allow the buyer to avoid the contract without any penalty at any time before settlement. The statement should be carefully prepared. If there is a dispute, the vendor may challenge the avoidance in a court and may win if the court is satisfied that the vendor acted honestly and reasonably and ought fairly to be excused for the wrong information, and that the buyer is in substantially as good a position as if all the information had been provided.

The vendor’s statement has information about:

warnings about planning controls and about the cost of providing services not already connected to the land;

easements, covenants and similar restrictions. Sometimes these are shown on title, but often they are not. An easement is a right to use land belonging to another person, such as a right of way, and drainage and sewerage rights. The statement must reveal the location and nature of known easements, including hidden easements and easements that can be discovered by a buyer when the land is inspected. Most, but not all, easements are on the title. A covenant is on the title and is an agreement between neighbours to restrict the way in which the land can be used. A common covenant restricts the use of land to residential purposes;

planning information;

prohibitions in the planning scheme against building a dwelling house, if the land is outside the metropolitan area;

a statement that there is no road access, if there is none;

rates, taxes and outgoings charged on the land, or a statement that the charges do not exceed a specified amount;

statutory charges on the land;

services connected to the property;

insurance details if the contract does not provide for the property to remain at the vendor’s risk until settlement;

building guarantees and permits obtained in the previous seven years;

any notice, order or approved proposal affecting the land that the vendor could be reasonably assumed to have known about;

owners corporation notices and liabilities;

contaminated land;

orders under the Land Acquisition and Compensation Act 1986 (Vic);

title and plan of subdivision information;

Growth Areas Infrastructure Contribution (GAIC). This is a statutory type of levy applied to the sale and purchase of selected development land, a certificate issued under the Planning and Environment Act 1987 (Vic). The GAIC can be released, deferred or exempted. Purchasers of land subject to the GAIC should be very clear about liability to pay the levy. The GAIC must be dealt with in order for the transfer to be registered.

Energy Efficiency Information. This is not a disclosure required by the Sale of Land Act 1962 (Vic), but a new requirement. It is appropriate to deal with it in the Vendor’s Statement. The relevant Statute is the Building Energy Efficiency Disclosure Act 2010 (Cth). Areas affected are a building or part of one used as office administration, clerical, professional or similar AND which has lettable area of at least 2000 square metres (excluding strata titles) It is the Vendor’s liability to make appropriate disclosure if the subject property fits the statutory descriptions.

If the land is sold on terms additional information is required, including details of interest and repayments. Details must be provided of any mortgages that will not be paid out at the settlement, and the seller’s defaults on the loans (if any).

A copy of the title must be attached to the statement. This should be a copy obtained by a recent title search at Land Victoria, not a copy of the duplicate title. If the land is on a subdivision, a copy of the plan of subdivision must be included.

You can attach certificates from the relevant rate and tax authorities to provide the detailed information. The certificates should be current.

A due diligence checklist for purchasers is issued by Consumer Affairs Victoria and must be given to the purchaser before signing receipt of the vendor’s statement. See www.consumer.vic.gov.au/duediligencechecklist.