Selling property bought with an SMSF can be a strategic decision or a necessity. Taking care to understand the risks before entering a transaction will allow investors to avoid losing money.
What is the process for selling property in an SMSF?
The process for selling a property in an SMSF is largely the same process as it is to sell a regular property. The only changes that occur will be where the money ends up after the sale and how it will be dispensed back to the trust. Selling a property in Australia will go through the following process:
Find an agent
A good agent is a seller’s best chance to sell the property quickly and negotiate a good price while doing it. The agent will work with you to establish a fair market price and advise on any small fixes that could lead to a better price.
Prepare the contract
The conveyancer will help the seller complete all the details of the contract. This will include basic information such as the address, vendor’s name, real estate agent’s information, sale price, deposit amount, and terms of the deal.
A good property lawyer will also ensure there are special conditions in the sale contract that protect the seller. These may need to deal with any unusual characteristics the property has, or unforeseen circumstances that might pop-up.
Negotiate with buyers
After reviewing the price and disclosing any information required about the property, the buyer and seller can start a dialogue to discuss what they are hoping to get from the deal in terms of price, initial payments, and terms for the deal.
After signing the contract, the seller will arrange the discharge of its mortgage on the property before finalising the settlement. This will involve contacting the bank to fill out and forms and follow their procedure.
After all of the paperwork is signed and finalised, the exchange of the property takes place, and the full funds for the sale are released to the seller. The seller will hand over the title and receive the balance of the sale price minus the deposit, mortgage, and fees.
What are the conveyancing costs for selling property in an SMSF?
Buyers and sellers need to be sure that they pay all the fees needed to cover the legal side of a property purchase. These costs can generally be split into two categories: legal fees and disbursements.
The legal fees are what the conveyancer or solicitor charges for doing the work. Legal fees will be between $500 and $1500 depending on the circumstances of the transaction.
Disbursements are the costs associated with third parties that charge for services like special searches. There could be disbursements costs for things like:
- Title searches
- Rates and owners corporation certificates
- Transfer fees
- Bank fees
Disbursements are usually between $200 and $500 depending on whether the property has an owners corporation.