What are your priorities in the sale?
Before deciding on the best way of selling your home, there are several things to consider. Is the housing market rising or declining? What have similar homes in your area sold for? Is there a set time in which you need to complete the sale? At what price are you prepared to sell? How much will it cost you to move? Try and be clear on your answers to these questions as they should help eliminate some of the options and make some of the other decisions along the way a bit easier as well. Keep in mind too that the amount of work you expect your agent to do on your behalf is largely determined by the type of agency agreement you and the agent agree on. There are pros and cons for each type of agreement so bear in mind the factors that are important to you before deciding the best way forward.
Private Treaty
Private treaty is the term used for the sale of property by any method other than by auction. There are many methods of private treaty and many advantages. If you have chosen a good agent who can skillfully negotiate, there is a much better chance of receiving a higher price than if you were to sell at auction. You are more in control of the sale because if you do not get the price you know your house is worth (and you will if you have opted to get an independent valuation) you will not feel forced into selling (as you may in an auction because of the expense you may already owe in advertising and auctioneer fees).
Exclusive Agency Agreement: Having had a recommendation or good impression from the agent during the listing interviews and been impressed by the agency’s reputation you may decide give exclusive rights to one agent to sell your property. This type of agreement gives your agent the greatest incentive to work actively to sell your house as he or she will be entitled to a commission if the property is sold during the ‘exclusive’ term of the agreement.
Word of Advice: If you sign an exclusive agency agreement and the property does not sell during that term, the agent with whom you had the agreement may still be entitled to a commission if the eventual buyer was introduced by that agent during the term of the exclusive agency agreement.
Sole Listing: This is like an exclusive agency agreement however it also allows you to find a buyer privately. If you find a buyer who has not been introduced by your agent, then no commission is payable.
General Listing/Open Agency Agreement: This allows you to list your property with a number of agents and you only pay a commission to the agency who finds the buyer. If the property market in your area is experiencing a ‘seller’s market’ (where the number of buyers is greater than the number of properties for sale) perhaps this may be a good option, but be aware that the agents you list with are not going to be as enthusiastic about promoting and selling your property as they will about the ones which will give them a guaranteed income and they may even be tempted to ‘under sell’ it in order to make a quick sale and get the commission that way.
Multiple Listing: This is where a group of agents have agreed to combine their listings so that each agent in the group receives a copy of your listing. You still effectively enter into an exclusive or sole agency agreement for a period of time with the listing agent, however from their point of view, they will have to share some of the commission with the other agents in the group so may not put as much work into promoting the property as they would in an exclusive or sole agency agreement.
Auction
Selling by auction is another form of an exclusive agency agreement. Auction sales can be attractive because there is a definite period in which you know your house will be sold or at least put you in a position to negotiate the sale with the highest bidder if the reserve is not reached. If time is not on your side, there is the added benefit of the buyer signing a contract on the day of the sale which then frees you to plan your move and gives your stronger bargaining power to buy elsewhere because your funds are not still tied up in your property. A quick sale may avoid weeks or months of having to keep the house in ‘show time’ condition in case your agent wants to show it to a viewer. Finally, you have the possibility of receiving a price higher than your reserve while also enjoying the security of knowing you do not have to sell below the reserve you have set.
Auctions can be risky
There is also a down side to selling by auction which is not so readily promoted. Where in most market place negotiations you start at a high price and come down, an auction starts low and goes up. So chances are you are not going to get the highest possible price that the buyer would have been prepared to pay. Research has also shown that it is not the great majority of buyers’ preferred method of buying. In spite of heavy advertising campaigns, auctions do not necessarily attract more interest than sale by private treaty and their success is dependant on who turned up on a given day (that may not have suited a potential highest bidder). In addition, if the reserve price is not met, the property is passed in and you will still have to pay for marketing expenses and the costs of the auctioneer – and with these costs going into several thousands, you may feel pressured to lower your reserve and sell anyway. Furthermore, new laws in the ACT forbid the practice of dummy bidding, and allows the vendor one bid only which must be declared. This practice (though usually unethical) had previously been used to increase the competition among bidders and hence raise the price. Therefore, with strict new laws in place to prevent dummy bidding, sellers are more likely to receive a lower sale price.
Which method is best?
With so much to think about it is hard to know what method of sale is going to be most suitable for you. If you are thinking about selling by auction, check the local paper for clearance rates in your area to see the number of houses sold against the number of houses passed in. Go to a few auctions as well to get a feel for how it all works. It may also be worthwhile asking the agents you interview to provide a report on how they propose to market your house and their reasons for recommending a particular method of sale.
A word on agency agreements
The agency agreement you sign is binding and there is no automatic right to cancellation if you change your mind or are unhappy with the service provided by the agent. Therefore make sure you understand and are happy with the terms of the agreement. It is your right to negotiate the form and length of the agency agreement, as well as the fees – after all, you are the one who will be paying the agent for their services.
Word of Advice: Keep in mind that you want the best agent, not the cheapest. A good agent who charges a higher commission may get you a much better price on your house than a cheaper agent who may not have the same level of negotiation skills and possibly sell your house for less than the buyer’s highest price
