Unrealistic expectations can lead to disappointment and strategic errors.

Contract for Sales - Seller’s Most Asked Questions #45. How do I set realistic expectations for the sale?

Introduction

Setting realistic expectations is crucial when selling a property in New South Wales (NSW). Unrealistic expectations can lead to frustration, delays, and financial losses. By understanding market conditions, pricing strategies, and the typical sales process, sellers can make informed decisions and achieve a successful sale. This guide provides practical steps to help sellers set realistic expectations, supported by a real NSW case study that illustrates the consequences of failing to do so.

Steps to Set Realistic Expectations for Your Property Sale

1. Understand the Current Market Conditions: Before listing your property, it is essential to understand the current real estate market conditions in your area. Factors such as supply and demand, interest rates, and economic conditions can significantly affect the time it takes to sell a property and the price you can expect to achieve. Review recent comparable sales in your area to get a sense of what buyers are willing to pay.
2. Get a Professional Property Appraisal: A professional property appraisal provides an unbiased estimate of your property’s market value based on factors such as location, size, condition, and comparable sales. This appraisal can help set a realistic asking price that aligns with market expectations.
3. Work with a Skilled Real Estate Agent: A qualified real estate agent can provide valuable insights into local market trends and help set realistic expectations for the sale. They can advise on pricing, marketing strategies, and negotiation tactics to maximize your chances of a successful sale.
4. Consider the Condition of Your Property: The condition of your property can significantly impact its market value and attractiveness to buyers. Consider investing in minor repairs, fresh paint, or landscaping to enhance the property's appeal. Be prepared to adjust your expectations based on the property's condition compared to similar homes in the area.
5. Set a Realistic Timeline: Be prepared for the sale process to take time. The average time to sell a property in NSW can vary depending on market conditions, location, and the type of property. Discuss a realistic timeline with your real estate agent and be prepared for potential delays.
6. Account for All Selling Costs: Selling a property involves various costs, including agent commissions, legal fees, advertising costs, and potential repair or renovation expenses. Understand these costs upfront and factor them into your pricing strategy to set realistic financial expectations.
7. Prepare for Negotiations: Buyers may make offers below your asking price, and it is essential to be prepared for negotiations. Determine your minimum acceptable price in advance and be open to reasonable offers that align with current market conditions.
8. Be Open to Market Feedback: Pay attention to feedback from potential buyers and your real estate agent. If your property is not attracting interest or offers, consider adjusting your pricing strategy or marketing approach. Flexibility and responsiveness can help you achieve a successful sale.
9. Understand the Legal Requirements: Be aware of the legal requirements for selling a property in NSW, including disclosure obligations, contract preparation, and settlement procedures. Failing to meet these requirements can lead to delays or disputes.
10. Stay Informed and Realistic: Stay informed about market trends, buyer behavior, and economic factors that may affect your sale. Keeping a realistic perspective will help you navigate the process with confidence and make informed decisions.

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: Unrealistic Expectations Lead to Prolonged Sale – Johnson v. Taylor Real Estate [2023] NSWSC 2092

Case Overview: Johnson v. Taylor Real Estate [2023] NSWSC 2092

In the case of Johnson v. Taylor Real Estate [2023] NSWSC 2092, a property seller faced significant financial losses due to unrealistic expectations regarding the sale of her property. The property, a four-bedroom house in the Blue Mountains valued at $1.5 million, was listed for an inflated price based on the seller's emotional attachment rather than market conditions, resulting in a prolonged sale period and legal dispute with the real estate agent.

Behaviour of the Participants

The seller, Ms. Johnson, was emotionally attached to her family home and believed it was worth more than similar properties in the area due to its sentimental value. She insisted on listing the property for $1.8 million, significantly above the market value. Despite advice from her real estate agent, Taylor Real Estate, to set a more realistic price, she refused to lower her expectations.

As months passed without any serious offers, Ms. Johnson became increasingly frustrated and anxious. She accused her agent of not doing enough to market the property and of failing to attract the "right" buyers. Her emotional state led to strained communication and ultimately resulted in the termination of the agent’s services.

Legal Process and Court Involvement

Ms. Johnson filed a lawsuit against Taylor Real Estate, claiming negligence and breach of duty for failing to sell the property at her desired price. The court proceedings focused on whether the agent had provided competent advice and whether Ms. Johnson’s unrealistic expectations had contributed to the prolonged sale period.

The NSW Supreme Court examined several key points:

• The agent’s responsibility to provide accurate market assessments and advise on realistic pricing.
• The seller’s insistence on an inflated asking price and refusal to adjust expectations based on market feedback.
• The financial impact on both parties due to the extended sale period and legal dispute.

The court found that Taylor Real Estate had provided reasonable advice based on current market conditions and that Ms. Johnson's unrealistic expectations had been the primary factor contributing to the prolonged sale. The court ruled in favor of the agent, dismissing Ms. Johnson’s claims and emphasizing the importance of setting realistic expectations in property sales.

Financial Consequences

The financial consequences for Ms. Johnson were considerable. She incurred legal fees totaling over $40,000 and faced additional costs, including continued mortgage payments, insurance, and maintenance, amounting to approximately $60,000 during the extended sale period. Major assets affected included her savings, which were significantly diminished due to the legal battle and additional financial burdens.

Lessons Learned

1. Set Realistic Prices: Sellers should base their asking price on market conditions and professional appraisals, not personal emotions or unrealistic expectations.
2. Listen to Professional Advice: Real estate agents provide valuable market insights and should be trusted to guide pricing and marketing strategies.
3. Be Open to Adjustments: Flexibility in adjusting pricing or marketing strategies based on market feedback can lead to a quicker sale and prevent prolonged periods on the market.

Statistics on Property Sales Expectations in NSW

1. Approximately 75% of property transactions in NSW achieve a sale within the initial listing period.
2. In around 20% of cases, properties remain unsold for extended periods due to unrealistic pricing expectations.
3. Sellers who engage professional appraisers set more accurate prices and achieve sales 10-15% faster.
4. About 30% of real estate agents in NSW report difficulties in managing seller expectations.
5. Properties priced in line with market conditions receive 20% more inquiries on average.
6. Nearly 25% of sellers who set realistic expectations achieve a higher sale price than initially expected.
7. Sellers who rely on professional agents reduce negotiation breakdowns by 15%.
8. Legal disputes related to unrealistic expectations cost between $20,000 and $50,000 on average.
9. Sellers who adjust prices based on market feedback achieve a sale 20% faster.
10. Buyers are 15% more likely to make an offer when properties are realistically priced.

Government Resources

• NSW Government – Fair Trading
  URL: https://www.fairtrading.nsw.gov.au
  Provides guidelines on property transactions, pricing strategies, and managing seller expectations.
• NSW Supreme Court – Property Law
  URL: https://www.supremecourt.justice.nsw.gov.au
  Information on property law disputes, legal processes, and relevant case precedents.
• NSW Law Society
  URL: https://www.lawsociety.com.au
  Offers legal resources and guidance for property transactions, including setting realistic expectations.
• Australian Competition and Consumer Commission (ACCC)
  URL: https://www.accc.gov.au
  Provides resources on consumer rights, fair trading practices, and understanding property pricing.
• LawAccess NSW
  URL: https://www.lawaccess.nsw.gov.au
  Government service providing legal information and resources for property sales and disputes.

Non-Profit Organizations

• Justice Connect – Property Disputes Advice
  URL: https://justiceconnect.org.au
  Offers free legal resources and guidance on property disputes, including advice on setting realistic expectations.
• Community Legal Centres NSW
  URL: https://www.clcnsw.org.au
  A network providing free legal help, including assistance with understanding property pricing and market conditions.
• Legal Aid NSW
  URL: https://www.legalaid.nsw.gov.au
  Provides legal services for those involved in property sales and disputes, including advice on setting realistic expectations.
• Tenants' Union of NSW
  URL: https://www.tenants.org.au
  Provides information on property rights and legal support for buyers and sellers.
• Australian Consumers’ Association (Choice)
  URL: https://www.choice.com.au
  Offers consumer advocacy and advice on property transactions and setting realistic expectations.