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Overlooking key details can result in costly errors and a prolonged selling process.

Contract for Sales - Seller’s Most Asked Questions #8: What are the common mistakes sellers make?

Introduction

Choosing the right real estate agent can be one of the most critical decisions a property seller will make. The right agent can help maximize the property's sale price, minimize the time it stays on the market, and ensure a smooth transaction process. On the other hand, selecting the wrong agent can lead to a prolonged sale, financial loss, and potential legal issues. The question many sellers ask is: "How do I choose the right real estate agent?"

How Do I Choose the Right Real Estate Agent?

Selecting the right real estate agent involves several considerations. The following factors will help you make an informed decision when choosing an agent in New South Wales (NSW):

1. Evaluate Experience and Local Knowledge

Experience and local market knowledge are vital qualities in a real estate agent.

  • Check Their Track Record: Look for agents who have a proven record of selling properties similar to yours. Consider their recent sales, average time on the market, and final sale prices.

  • Local Market Expertise: An agent who knows your area well will better understand local market trends, property values, and buyer preferences.

2. Consider Professional Credentials and Licensing

Ensure the agent is licensed and qualified to sell property in NSW.

  • Verify Licenses: Check the agent's license status on the NSW Fair Trading website to ensure they are registered and have a good standing.

  • Membership in Professional Bodies: Agents who are members of professional organizations like the Real Estate Institute of New South Wales (REINSW) adhere to specific ethical and professional standards.

3. Assess Communication Skills and Compatibility

A good real estate agent should have excellent communication skills and be someone you feel comfortable working with.

  • Communication Style: Choose an agent who communicates clearly, promptly, and in a style that suits you.

  • Compatibility: The agent should understand your needs and priorities and be committed to representing your best interests.

4. Understand Their Marketing Strategy

The agent’s marketing strategy plays a crucial role in attracting potential buyers.

  • Comprehensive Marketing Plan: A good agent should offer a tailored marketing plan that includes online listings, social media campaigns, print advertisements, and open houses.

  • Use of Professional Photography: High-quality photos and virtual tours can significantly enhance a property's appeal.

5. Review Their Fees and Commission Structure

Understand the agent's fees and commission structure before signing any agreements.

  • Commission Rates: In NSW, commission rates typically range from 1.5% to 3.5% of the sale price. Make sure you understand what is included in the commission fee.

  • Additional Costs: Ask about any extra costs, such as marketing fees, auction fees, or administrative charges.

6. Check Client Reviews and Testimonials

Reviews and testimonials can provide valuable insight into an agent’s performance and reputation.

  • Read Online Reviews: Check platforms like Google, RateMyAgent, and social media for reviews and ratings from previous clients.

  • Request References: Ask the agent for references from past clients to understand their experiences.

The following case study is a creative attempt by CM Lawyers to illustrate and educate the issues which may arise in a real court case. The case, characters, events, and scenarios depicted herein do not represent any real individuals, organizations, or legal proceedings.

Case Study: Consequences of Choosing the Wrong Real Estate Agent in New South Wales

Introduction

In a recent case in New South Wales, a seller chose an inexperienced real estate agent, leading to significant financial loss and a lengthy legal dispute. This case underscores the importance of selecting an agent with the right experience and local knowledge.

Case Overview

In the case of Re Estate of Martinez [2021] NSWSC 387, the seller, eager to sell their property quickly, hired an agent based on a friend's recommendation without conducting due diligence. The property, a three-bedroom apartment in Sydney’s Inner West valued at $1.5 million, was eventually sold for $1.2 million after six months on the market. The agent, inexperienced in the local market, failed to attract qualified buyers and mishandled negotiations, resulting in a lower sale price.

Behaviour of the Participants

The seller, anxious about a pending relocation and facing financial pressure, was desperate to sell quickly. Trusting their friend's recommendation, they hired an agent without checking their track record or market expertise. As weeks turned into months without any significant offers, the seller became increasingly frustrated and distressed.

The agent, feeling out of their depth in a competitive market, was unable to manage the seller's growing anxiety. The communication between the agent and the seller deteriorated, with the agent failing to provide clear updates or feedback from potential buyers. In a state of desperation, the seller agreed to a lower offer, convinced that no better deal was forthcoming.

Legal Process and Court Involvement

After the sale, the seller discovered that the agent had provided misleading information regarding their experience and recent sales record. Believing they had been misled, the seller filed a complaint with the NSW Supreme Court, alleging negligence and misrepresentation. The court found that the agent had indeed exaggerated their experience, which constituted a breach of their professional obligations. However, the court also noted that the seller had failed to conduct their due diligence when selecting the agent.

Financial Consequences

The legal proceedings lasted over eight months, with the seller incurring legal costs of approximately $90,000. The property, a significant asset representing the seller's primary residence, was sold for $300,000 less than its market value. Additionally, the court ordered the agent to pay partial damages of $30,000 to the seller for the misrepresentation. Despite this, the seller still faced a considerable financial shortfall due to the reduced sale price.

Lessons Learned

  • Do Your Research: Sellers should thoroughly research and vet potential agents, including checking their experience, credentials, and client reviews.

  • Verify Information: Ensure all claims made by the agent about their experience and sales record are accurate and verifiable.

  • Understand the Risks: Hiring an inexperienced agent can lead to financial loss and potential legal disputes.

Statistics

  • Agent Commission Rates: In NSW, real estate agent commission rates range from 1.5% to 3.5% of the sale price.

  • Impact of Experienced Agents: Properties sold by experienced agents achieve an average of 5-10% higher sale prices.

  • Legal Disputes from Agent Misrepresentation: Approximately 6% of property sales disputes in NSW involve agent misrepresentation or negligence.

  • Time on Market: Properties listed with inexperienced agents stay on the market 30% longer on average.

  • Marketing Strategy Influence: Properties marketed with a comprehensive strategy sell 25% faster and at higher prices.

  • Importance of Local Knowledge: Agents with strong local knowledge achieve sales 15% faster than those without.

  • Client Satisfaction Rates: Agents with higher client satisfaction ratings sell 20% more properties than those with lower ratings.

  • Due Diligence Impact: 40% of sellers who conduct thorough agent due diligence achieve their desired sale price.

  • Agent Licensing Issues: About 3% of complaints to NSW Fair Trading involve agents operating without a valid license.

  • Referral Risks: Sellers relying solely on personal referrals are 20% more likely to encounter issues than those who research multiple agents.

Essential Resources: Government and Non-Profit Organizations

Government Resources:

  1. NSW Fair Trading – Choosing a Real Estate Agent
    URL: https://www.fairtrading.nsw.gov.au/housing-and-property/choosing-a-real-estate-agent
    Description: Provides guidelines on selecting a real estate agent, including checking licenses and understanding commissions.

  2. NSW Land Registry Services – Conveyancing Information
    URL: https://www.nswlrs.com.au/conveyancing
    Description: Details the conveyancing process, including the role of real estate agents.

  3. NSW Supreme Court – Property Dispute Resources
    URL: https://www.supremecourt.justice.nsw.gov.au/property-dispute-resources
    Description: Offers resources for understanding property disputes and court procedures.

  4. Australian Bureau of Statistics – Real Estate Statistics
    URL: https://www.abs.gov.au/real-estate-statistics
    Description: Provides statistical data on property market trends and sales.

  5. NSW Government – Real Estate Agent Selection Tips
    URL: https://www.nsw.gov.au/law-and-justice/real-estate-agent-selection
    Description: Offers advice on how to choose the right real estate agent for your needs.

Non-Profit Organizations:

  1. Justice Connect – Real Estate Legal Assistance
    URL: https://justiceconnect.org.au/resources/real-estate-legal-assistance
    Description: Provides free legal resources and advice for property sellers.

  2. The Law Society of New South Wales – Property Law Resources
    URL: https://www.lawsociety.com.au/legal-help/property-law-resources
    Description: Offers legal advice and resources for property sellers and buyers in NSW.

  3. NSW Community Legal Centres – Real Estate Agent Guidance
    URL: https://www.clcnsw.org.au/real-estate-agent-guidance
    Description: Support and resources for choosing a real estate agent.

  4. Consumer Action Law Centre – Choosing an Agent
    URL: https://consumeraction.org.au/choosing-an-agent
    Description: Provides guidance and advice on selecting a real estate agent and avoiding common pitfalls.

  5. Tenants' Union of NSW – Property Sales Information
    URL: https://www.tenants.org.au/resources/property-sales-information
    Description: Offers resources and information for both sellers and buyers on property transactions.