Selling House to Neighbour - Any Advice?

MoonlapseVertigo on 27/01/2019 - 18:29
Last edited 27/01/2019 - 18:45 by 1 other user

Hi all.

I’m currently preparing my property to sell and upgrade to a larger family home in Sydney. My neighbor has mentioned his interest if we ever choose to sell the place. I know he is serious as he owns the house on the other side of his house and purchased that from the previous owners with a successful sale before the sellers went to market.

As I’m not a sales guy and don’t really know how to best approach the negotiating, I’m after some advice from the ozbargain community.

I am about to organise 5 Real Estate Agents for an appraisal so I know where I stand in the market. I’m after sales tips and the best way to sit down with my neighbour and get close to what I’m after.

Appreciate your insights

Cheers

Home & Garden

Comments

  • wizzy on 27/01/2019 - 18:36
    +5

    Get yourself a conveyancer and do the negotiations through them. Approach it like any other sale.

  • 78zeros on 27/01/2019 - 18:42
    +3

    With regard to the pricing, if you sell it privately, you won’t have to pay agent’s commission, advertising etc - so you can negotiate a ‘lower’ price with your neighbour than you’d expect via an agent and still come out even, or maybe a little in front.

  • EightImmortals on 27/01/2019 - 18:43
    +1

    Come up with a price that you are happy with. Call your solicitor and tell them you need some conveyancing done as a vendor. If you actually sign a RE contract then you have to pay them commission so if you can negotiate a price with your neighbour and then get the conveyancer to do all the legal stuff you can save yourself a few grand.

    Your liability for the property remains until the contract goes unconditional so do not cancel any insurances until the money clears your bank account just to be sure.

  • holdenmg on 27/01/2019 - 18:44
    +7

    Don't sign anything.
    Don't fall for the RE agent telling you they have a buyer interested in your
    area, but they need you to sign etc.

    • bobbieb on 27/01/2019 - 19:37
      +3

      This.

      Don't sign any RE paperwork…

      Do your own market research or get a valuation done, decide on a price, then hand it over to your solicitor/conveyancer.

      • MoonlapseVertigo on 28/01/2019 - 06:55

        Agree here - I’ll be having the agents around to give their inflated valuation of the property only

  • Ocker on 27/01/2019 - 19:01
    +7

    Pay to get an independent valuation. That will cut through all of the BS that the land rats will tell you

    • jhmtaylor on 28/01/2019 - 13:07

      When Ocker is talking about "independent valuation" I think he means a licensed property valuer. Preferably find a valuer that is familiar with your area and mention that there is no bank involved and they will be slightly less conservative. Also remember the market price quoted will include selling costs of say 2.5% that you will not incur with a direct sale. I have sold 2 properties this way and it is by far the least stressful way of selling a property. After reaching a price engage a conveyancer to prepare the contract. A conveyancer working for a seller should charge you around $800 including dispersements.

      If you get bogged down haggling over price, tabling a valuation from a licensed valuer is a very persuasive tool in convincing the buyer to accept your price. Table a RE "appraisal" and the buyer will laugh

      Appraisals/opinions from RE agents will be just a range and including qualifiers such as up to, if you are lucky etc which is BS in a falling market. Remember the agent is trying to gain the listing and will do or say what it takes to achieve that.

    • brad1-8tsi on 29/01/2019 - 12:41

      I paid $1100 for a valuation when I got divorced. House was valued at $1.8m.

      Ex-wife paid $800 and it said the house was worth $1.7m.

      Analytical me studies both valutions (done using different methodologies).
      My guy has made a mistake and double counted some of the building area making the house worth $1.76m.
      Her guy has forgotten to account for some of the building area and also made some allowances for repairs that obviously included the use of gold and truffles. Re-work of that with correct floor area and realistic repair prices valued the house at $1.74m.

      Neither valuations were ideal but it did narrow down the negotiation range from my $1.9m and her $1.3m. She was buying me out so it was in her interest to have a low valuation (and me a high one).

  • JimmyF on 27/01/2019 - 19:39
    +1

    I am about to organise 5 Real Estate Agents for an appraisal so I know where I stand in the market

    Once you know the rough value of your house, talk to the neighbour and see what price you come up.

    Don't instantly knock back a 'lower' price, factor in no agent fees and the basically 'instant' sale you'll get. At the moment money is tough and houses are slowing down. SO if you want instant sales and funds, this could be an option.

    Then if you agree on a price, then engage your own solicitor rather than a conveyance agent to draw up the paperwork for the neighbour, get them to sign it and go from there.

  • Meho2026 on 27/01/2019 - 20:19
    +4

    Your neighbour isn’t going to care what the real estate agents value it at. REA are full of it, they will tell you the highest possible price in the hope of signing you up.
    Get the neighbour to pay for an independent valuation and that will be a fair price for both of you plus save you REA commission.
    If the neighbour can find out which local valuation company is used by his lender and get them to do the independent valuation, it may make things smoother for them when applying to borrow, in that the bank valuation will have to be the same or more as the independent valuation.

    • MoonlapseVertigo on 28/01/2019 - 06:57

      Interesting approach. Is the independent valuation seen as a spot on market value? It’s in my best interest to try sell above that, as the neighbour has vested interest

      • jhmtaylor on 29/01/2019 - 13:01

        The valuer will look at recent sales in the area and consider size, location and condition. The valuer will also look at what the market trend is. The valuation is often looked at as halfway between what the buyer would like to pay and what the seller would like to get.

        One thing that you should consider is that your neighbour may be willing to pay more than market value if he owns the two adjoining properties and if there is any hope of the land being rezoned for unit development. My brother bought a block of land zoned for duplex development last year. His neighbour recently offered him well above market value to buy it because instead of being able to build a duplex on each block, he could build 5 units by consolidating the two lots into one.

  • thatonethere on 27/01/2019 - 20:36
    +1

    You dont need an REA to sell your house. If you have a buyer and you know the price just get a conveyancer and tell him to do the same.

  • brettymaccc on 27/01/2019 - 21:41
    +7

    I'm a Sydney real estate agent. Get a few agents around to get a good understanding of price & what your property should be worth. Don't tell them you know someone who may be interested, and don't sign anything with them.

    Approach your neighbour and tell them you're considering selling, and wanted to do the right thing by them & offer it to them first as they'd previously mentioned. Being a neighbour, they are an out-of-line buyer & may pay a premium for your property if it allows them to do a development or helps improve the value of their own property.

    Whatever the agents suggest your home is worth (on average), say you'd be willing to sell it to your neighbour for a price - about 5% higher. The agents are probably a little optimistic in the hope of winning your business. Selling off market privately, as others have said, avoids agents fees and marketing costs so even at "market value" you are probably better off, and also avoid the stress of a marketing campaign and open homes etc.

    Your neighbour is unlikely to agree to the price straight up and will probably come in with something lower. Be reasonable and use lines like "look, let's meet in the middle", "if you're happy to pay x, I'll sell it to you", or, if you want to be more firm, "if you're not prepared to pay at x, that's fine but I'll take it to the open market".

    To physically sell your home - either with an agent or privately - you'll need a contract of sale drawn up by a solicitor or conveyancer. If you're certain about selling your home, get this drafted up ASAP so its ready to go either for your neighbour or for a sale campaign.

    • tryagain on 27/01/2019 - 22:47

      The agents are probably a little optimistic in the hope of winning your business.

      Understatement of the year, "go in high then beat them down" is how I heard one real estate agent mention it.

    • MoonlapseVertigo on 28/01/2019 - 06:58

      Thank you very much for your sound advice and experience. I never realised I need to get the contract of sale written up now as it can take a few weeks.

      I also appreciate the sales negotiation responses - that’s what I was after as it will be awkward trying to agree on a price.

      Can you recommend any solicitors in Sydney??

      • brettymaccc on 28/01/2019 - 13:55
        +1

        Depending on your local council, some contracts can be drawn up within 24 hours if all the searches and docs can be done online. There would be thousands of solicitors across Sydney - I'd probably recommend picking a conveyancer over a solicitor. They're usually cheaper, deal in property day to day and speak in lamens terms - especially useful seeing as you're doing this without an agent. Go with someone local, and don't pick a dirt cheap one working out the back of their home.

        With any negotiation/price sensitive conversations, if you're nervous about it, roleplay and practice first, and think how you would like the conversation to go. Ask the questions and don't feel pressured to provide answers on the spot - feel free to say "I'll get back to you on that", "I'll talk to my husband/wife about it and let you know" or something similar. Don't get your solicitor/conveyancer to negotiate for you. They're legal professionals. Don't let them muck up the deal for you.

        Also remember to confirm that it would be a 10% deposit (which you may need to access to purchase your next home?) and to confirm settlement period as well.

        Feel free to PM me if you have other questions. I'm happy to chat to you over the phone about it - don't want anything out of it.

  • MrHyde on 28/01/2019 - 07:30
    +2

    It helps if you know why the neighbour wants your house. We sold to our neighbour a few years ago. He wanted to open a medical practice in his house, but the council wouldn't approve it because of a lack of car parking space. So, he wanted our place to convert it to a car park. We sold him our place for a $100k premium over market value. We didn't have to sell, so calculated what would be a good return on investment irrespective of market value, came up with a number and pretty much stuck to it. We had the upper hand as he needed our property, but we didn't need to sell.

    • bobbified on 28/01/2019 - 12:33

      We had the upper hand as he needed our property, but we didn't need to sell.

      I understand that you didn't have to sell and he didn't have to buy… but, if the neighbour was your friend and that's how you found out that he wanted your place, that's pretty dirty.

      • MrHyde on 28/01/2019 - 12:42
        +1

        It was an investment property for us… We never lived there and had never met the neighbour previously….so a complete hands off transaction.

        If you are friends, then that does factor into the equation.

  • holdenmg on 28/01/2019 - 17:41
    +1

    Don't give the RE Agents a Mobile Phone number that you use…

    Buy a cheap SIM and chuck it in a spare old phone.

    Get their Business Card so you can contact them.

    Make some notes on what each of them say and be polite and interested
    when they talk about Private Treaty v Auction, marketing budget and fees
    in case your preferred buyer falls over.

  • Zachary on 29/01/2019 - 22:50

    cash in hand only, or no sale!

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