Downsizing mistakes for older Australians to avoid
The decision to downsize your home is not just a rational move. It’s about making an impactful change to your life, finances and future. Selling your home can evoke a lot of emotions and memories.
You may choose to downsize for reasons like the kids leaving home, financial upkeep, property maintenance requirements, major life changes, or other. It can be an emotional decision so it is always worth doing some research to avoid real estate traps when downsizing your home.
Getting a professional value estimate on your property is a helpful way to set your expectations for selling. An experienced real estate agent with strong local knowledge should be able to make an accurate assessment including the most probable price within a 10 percent range.
Agents can provide valuable opinions with respect to the prices achieved for similar, recently sold properties in the area. They analyse the unique characteristics of your property and compare it with similar properties, enabling them to express their opinion on property value as a price range.
You can also try to estimate an approximate figure of your property using Homesuite’s free property report tool. Whilst an agent appraisal will be more accurate, a property report can provide an indication of price.
Downsizing finances can be a minefield and being unsure of what you can afford can be a horrible blunder. Seek early advice from a professional financial advisor, real estate agent or accountant to understand how much you can afford and manage your finances.Â
You might be tapping into built-up equity to end up debt-free, or refinancing your current loan to your downsized property. Work out the best option for your requirements and seek advice if you have any questions.
If thinking about a retirement living community, get professional legal advice from someone who specifically deals with understanding and translating retirement living contracts. While retirement living can be absolutely fantastic, it’s essential to understand what you are signing up for.
Your real estate agent should be well acquainted with strategies to sell a property. They will recommend a method of sale and explain the reasons for their choice.Â
The options available below should be well understood to assess what suits you, your home and the current market best...
This is by far the most common method of sale in Australia. A minimum price is established or an asking price is set and the sale price is negotiated with potential purchasers in private.
Accepted worldwide as the sales method of choice
No pressures of an auction on the seller
Buyers may assume more competition so they bid higher
The highest bid may be considerably higher than the next best bid unlike auctionsÂ
There may only be one genuine purchaser
No fixed time frame is set and it may take longer to sell
Buyer competition is not as transparent
An auction is another effective method of selling real estate. It is an intense, accelerated process that involves the public sale of any property through open and competitive bidding. It is considered ideal for unusual or desirable properties that are difficult to assess the value of.
Bona fide sell on a selected date
Competing purchasers at auction can result in a premium price
Purchasers don’t get a chance to cool off unlike private sale
Negotiations are concluded after the auction or within a week
If the property gets passed in at auction, it strengthens the position of the potential purchaser
Potential to accept a less than satisfactory price on the day
A substantial advertising budget can be spent without a result
The highest bid is only marginally higher than the next best bid
The most important thing is for you to be comfortable that the method of sale recommended is a good fit for your property.
Marketing is necessary in order to generate enquiries.Â
There are many options to market your property but it’s wise to choose and spend the right amount on the right options. The combination of most suitable marketing options varies significantly between property type, location and a multitude of other factors.
Pay attention to the channels used for marketing. Digital channels, including social media and property listing sites like realestate.com.au, are playing a more pivotal role than print media these days. Make sure your property is displayed in these places, and that you’re charged appropriately.
As a rule of thumb, the total advertising cost should be less than one percent of the estimated selling price of the property. The real estate agent must provide a fully costed advertising schedule and clearly indicate who is responsible to pay it and when. Your agent must also explain to you the reasons for their marketing costs and recommendations.
Commission charges generally vary according to how they are calculated throughout different locations in Australia. Commission charges are negotiable. A good real estate agent ensures that sellers/homeowners pay the going rate in their particular market.
Various options for commission charges are:
The maximum property selling price equates to the maximum commission. When you choose a fixed percentage, it’s an incentive for an agent to sell your property at the highest price because that gives them the maximum commission.Â
The disadvantage is that the commission does not vary significantly between a good and a bad result.
The percentage increases as the sale price does. This system can penalise the agent for a low result, whilst rewarding them for a high result.Â
The general market rate percentage is usually aligned with the expected price, whilst anything less attracts a lower percentage and anything above a greater percentage. This is probably not the best method if you’re unfamiliar with selling property.
A fixed amount is agreed to for the successful sale of the property irrespective of the selling price. The disadvantage is that it does not incentivise the agent for achieving a maximum price. The homeowner/seller is not obliged to pay a commission unless the agent achieves the reserve price noted on the sales authority or the seller is prepared to accept a lesser price.
There can be many variations to the above methods, but a fixed market percentage has long been used as the most common commission structure.
It is extremely important to understand what you are signing up for when engaging an agent to work on your behalf.Â
Different contractual obligations have their advantages and disadvantages:
By signing an exclusive authority with a real estate company they will be entitled to claim a pre-agreed sale fee if the real estate agent is successful in selling the property, within a pre-agreed time frame for an amount equal to or greater than the reserve (minimum) price, which is noted on the sale authority.
You are under no obligation to accept a price less than your minimum acceptable price, below which the agent is generally not entitled to any commission. If you do accept a lower price the agent is then entitled to claim a fee.
This authority, as it sounds, is for the purpose of auctioning a property and has the provision for your minimum or reserve (minimum) price, above which, the agent can claim a fee. Unlike the Exclusive Sale Authority, you are not always obliged to nominate a minimum price until auction day.Â
The other major difference is that the agent normally has a further 30-day minimum period after the auction to sell your home. If they sell the property at no less than your minimum price, or less if you agree, then the agent can claim their commission. The 30-day time period can be longer if agreed and documented when the authority is signed.Â
Homesuite does not recommend signing beyond 30 days unless there are genuinely specific circumstances that warrant this.
A General Sale Authority does not specify a time period and maintains the status of a binding legal agreement until notification in writing otherwise, or if it is superseded by an exclusive authority with the same, or alternative agent.Â
This type of authority entitles the agent to a fee if they successfully sell the property. A major difference from an exclusive agency is that you are able to list your property with more than one agent.Â
The major negative with this arrangement is that in response to the low level of commitment you have made to the agent or agents, they generally do not treat your property with priority. They will most likely have other exclusive listings, which will take precedence over your property. Not a good situation for something so important to you.Â
When you are personally entrusting the sale of your property to a real estate agent, the skill of the sales representative and the profile of a real estate company are important. After all, they will be managing the sales process on your behalf.
The agent representative's local knowledge, skills in marketing, and ability to manage enquiry and ultimately negotiate with prospective purchasers can have a significant impact on the sale price that you achieve.
Look for an experienced, knowledgeable, well presented, punctual real estate agent who communicates well and has an excellent recent sale record supported by references.Â
The agent must communicate the progress to you on a regular basis and in a manner that suits you. It’s usually a good practice to meet or have a phone conversation on Mondays after a weekend’s activity.Â
Make sure all the arrangements and agreements are made in writing between you and the agent at the outset.
