In family law matters the sale of the family home is often the most difficult and emotional part of the separation process. And everything is just that much harder in the current environment, with rising interest rates and inflation making the entire market uncertain.
For regional families things are even more opaque, because so much of what we see on social media or television relates to big city real estate markets. So it can be difficult to figure out the local dynamics.
To help our Coffs Coast listeners get a handle on the market and the issues related to selling a home after separation, Ben and Heather welcome two local experts.
Stacey Parks is a Certified Practising Valuer with property valuation specialists Herron Todd White. Craig Gardner is a partner and sales agent for Coffs Coast realtor Nolan Partners. Collectively this foursome provide some insights into the following commonly asked questions.
Herron Todd White – property valuation and advice
Nolan Partners – Coffs Coast real estate
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Benjamin Bryant: Welcome to episode 40 and our first show for 2023. I’m your host, Benjamin Bryant from Bryant McKinnon Lawyers and I’m joined by my partner in crime Heather McKinnon. Now Heather, we’re recording this show in November, but it’s not going to air until January, so I know it’s a bit early, but Happy New Year.
Heather McKinnon: Happy New Year Ben. I’m hoping that by the time this goes to air will be a bit more rested and looking forward to the new year.
Benjamin Bryant: Yes, rested. You’ll have to explain that to me. Because the dash to the end of the year can be brutal. But I’m excited about today’s show. For so many of our clients, it’s the sale of the family home that is the most difficult part of separation. And rising interest rates and inflation have made the real estate market very uncertain, which makes everything even harder. To make things worse, the information you see on socials or TV usually relates to the big city real estate markets. It’s quite different to get a perspective on what’s affecting markets right now, right here on the Coffs Coast. So, we are delighted to have two local experts on the show today to get down and dirty about what to do when the market turns. Stacey Parkes is a certified practising valuer with property valuation specialist Herron Todd White. Welcome to the show, Stacey.
Stacey Parkes: Thank you, Ben. It’s great to be here.
Benjamin Bryant: Excellent. Thank you. And we also have Craig Gardner, who is a partner and sales agent with local realtor Nolan Partners. Great to have you on the show, Craig.
Craig Gardner: Thanks, Ben. Great to be here also.
Benjamin Bryant: I’m eager to start grilling the two of you. But just before I do that, I need to remind our listeners to share this show with friends and family starting down the path of separation or divorce. We’ve got a huge library on a wide range of subjects with world class experts, so please share this resource with your friends and family who may benefit. And this particular episode might benefit just about everyone here on the Coffs Coast. So let’s get started.
Benjamin Bryant: So I think it’s best that we start talking about the real estate market in quite general terms. Craig, what are the factors that have been influencing the housing market here on the Coffs Coast for the last few months?
Craig Gardner: Good question, Ben. I think obviously one of the most important factors has been the rise in interest rates. That has had the effect of people’s borrowing capacity has been diminished and they are holding off a little bit in terms of making decisions about buying property. Particularly those people in the $700,000 up to sort of $900,000 bracket where the interest rate rises are affecting them the most. What that has actually then led on to is longer days on market, which we’re seeing across every category of sales at the moment. So during COVID, our days on market were down to a sort of 20 to 25. They’re transitioning back now to a normal market, where we’re going to take between 40 to 60 days to sell most homes. The market is very price pointed, but I do believe that Coffs Harbour itself is a little bit of a micro market. We’ve got a lot of infrastructure coming to town next year with obviously the bypass happening. So I think what you alluded to a minute ago, Ben, is don’t believe all the things you’re hearing on social media because a lot of it relates to Cap Cities. We’r sort of a little micro market that will continue to have some really good strong sales in the area.
Benjamin Bryant: And Craig, when people think about the real property market, they think the market’s either slow or it’s fast or, it’s good time to sell or a bad time to sell. But you’re right, the different price points, it’s different. And, if you didn’t already understand that, you just jump on realestate.com now and you can see the availability of the price points and just how hard it is to get into the markets in some particular areas.
Craig Gardner: I think what sellers need to understand is that we are going back to a normal market. We’ve had an abnormal market for the last two years where COVID has just sent prices crazy. The experts were saying when COVID first hit that the property market was going to fall by 30%, we went up by 40%. So they got it wrong. And I think too, when you listen to the social media reports don’t relate them back to your specific area. Go to an expert, get their opinion, get their appraisal, and then make your decision.
Benjamin Bryant: Great advice. And Stacey, do you agree? Do you have anything to add to Craig’s list?
Stacey Parkes: I agree with Craig. I think what we have is a reverse of the COVID market. We’ve got increasing inflation, increasing interest rates and no more lockdowns. People are back to work. We’ve got less out-of-towners coming to regional areas. I think that is affecting our market. Also, the rising building costs. We’ve got supply chain disruption and limited trades. We’ve had increasing building costs due to government construction incentive programs and lowest interest rates in history from 2020 to May ’22. All of those factors have affected a slowdown in the market. But I agree with Craig. We are a bit of a micro market. We have a lot of people about to come to Coffs for the construction of the highway. I think that is helping the market in many respects.
Benjamin Bryant: I love the idea of the micro market. I know when I talk to agents around town they say, well generally this is what the market’s doing. But for Coffs Harbour we are a little bit different. it’s not one size fits all, so it’s really great to have the expert advice from a couple of locals. So thank you.
Benjamin Bryant: And we’re now at a time when housing prices are uncertain, interest rates are rising, inflation is high, as we’ve heard. Craig, at a time like this, what should people consider when trying to figure out whether to sell now or wait?
Craig Gardner: I’ve always said to my vendors about selling, it’s up to them. It’s when the time is right for them. There’s no perfect time. I think you’ve got to consider, why are they selling? And that may be in this case, it might be a separation. It could be that they’re upsizing or downsizing. But once you work out why you’re selling, you’ve then got to get the appraisals, understand where the market is and what the market forces are. I think there’s a bit of confusion too where people have a perception that the market is in decline. But if that is reality and you do sell now, then you’re going to be better off in three or four months time because you’re buying power will be better. The effect of interest rates has obviously had an effect on that. And affordability again if the market goes down, your affordability will increase. So I really believe that selling depends on your circumstances and when it’s right for you. The other thing that I think is really important is when people are selling, a lot of people say to me, Oh, I want to buy something straight away. If you find the right home, then buy it. But most people have to sell first. So I would be just saying, depending on your circumstances, there’s no right or wrong time to sell.6:31
Benjamin Bryant: Great answer. And Stacy, with everything that’s so uncertain, how do you go about valuing real estate?
Stacey Parkes: What we need to do, Ben, is we need to properly investigate the market. We really need to talk to agents on every sale, analyse every sale, and find out all the intricate details in regard to that sale. We need to discuss the market conditions and we need to search for the most recent comparable sales. We need to not rely on anything that is dated. If we don’t have a recent comparable sale, then we need to make adjustments to the dated sales, appropriate adjustments for what’s happening in the market. We need to test our sales evidence, again that is speaking to the agent, making sure this sale was at arm’s length, it was marketed properly, we’ve got buyers acting prudently with all knowledge of all factors to do with the property and that there was no evidence of any compulsive behaviour in buying that property. We need to flag any risk with a property when we’re valuing it. It is a difficult time, but the most important thing is to analyse our sales really well.
Benjamin Bryant: From a family law point of view, when we have clients getting reports, they will almost always come back to us about the comparable sales. If you’re wanting to buy the other person out, then of course you want the valuation as low as possible. And if you’re not, then you want to go as high as possible. So people jump to the comparable sales. So I know it’s a lot of pressure.
Craig Gardner: I think one of the things that Stacy hit on there, which is really important, is if any of your clients have had an appraisal from an agent or a valuation and it’s six months old, it is really no longer relevant, because the market forces and conditions are changing that quickly. You need to get updated appraisals whenever you do decide to go to the market.
Benjamin Bryant: That’s great advice, Craig. And it’s interesting that a lot of people don’t know that or don’t agree with that. So great point. And Craig, I’m wondering whether the method of selling a home has shifted in recent years. Are we seeing more or less options or private sales? And would you think this might change with the changing market?
Craig Gardner: Our market is not a huge auction market. Never has been. We do do auctions, but they are for specific properties that tend to have a great location, an ocean view, development potential, that sort of thing. In terms of private sales, we did see an increase in private sales during COVID. And let’s face it, during COVID, a 12 year old sometimes could sell your home. It was just going gangbusters. However, as we transition now back to a normal market, interest rates are rising, inflation is on the rise and negotiation is the key to selling your home for the value that it should be sold at. That’s when your agent kicks in. In terms of having an agent that is a good negotiator, that can make sure that the buyers see the value in your home that we see in it and that you see in it, really importantly.
Benjamin Bryant: And now let’s talk more specifically in the family law context. Heather, if you’re separating at a time like this, when the market is really uncertain, timing is going to be a big concern. From a legal perspective, does it matter whether you sell the house before or after a divorce?
Heather McKinnon: It’s one of the big myths that we have to deal with when people first come to see us, isn’t it Ben? Divorce simply ends the marriage. It doesn’t have anything to do with the division of assets. The only important thing to note about divorce is that if you do divorce, you’ve then got 12 months to sort your property settlement out. What, in fact, happens is that most couples who separate start looking at their property settlement about three months after they separate, when the dust settles. We’re obviously working very closely with Stacey and her colleagues because people need to make assessments.
Heather McKinnon: Firstly, do I want to retain the home? So we send them off to their banks and brokers to see whether they have capacity to buy the other spouse out. And at the moment, depending on your occupation, your age, there’s a lot of restriction on lending. And you may rule out very early that neither of you are going to be able to borrow to buy the other one out. So that’s when you’ve got to get to Craig and his colleagues to start looking at sales.
Heather McKinnon: If you’re in a position where you the bank says, look, we think you’ve got capacity to buy your partner out, then the magic is, well, what’s the buy out price? And that’s the job that we’ve got at the moment. So initially we send people off to Craig and their colleagues, the agents, preferably senior people who are in the market for some decades at the moment. I think you need people who’ve been in this particular market for some time, who understand how it works, to get an idea of what they think it’s worth. If you then can’t negotiate an agreed price, that’s when we go to the heavy hitters: the degreed valuers, where Stacey’s team come in. They have to tell us what the buyout price is, because the parties can’t come up with their own figure. So in this market, we’ve got all sorts of logistics hitting us that we haven’t had before because we’ve got this dance between the person who’s in the property, who wants to get it cheap and the person who wants to get their money out at a higher price. So, the amount of evaluations we’re doing at the moment is way higher than in a normal market, because as Stacey and Craig have said, it’s really hard to pick it. And we need really up to date information. The market can change within a couple of weeks and you’ve really got to be on to it, help the clients understand that.
Benjamin Bryant: Craig’s told us before that a 12 year old could perhaps sell the house. Perhaps, a 12 year old could also draft orders in family law property settlements during COVID in the sense of the house is going to sell and it’s going to sell very quickly. Recently we’ve been discussing how we need to be more careful in extrapolating our orders at what if the house doesn’t sell at auction, What happens if they can’t agree on the reserve price? What happens if the auction falls through and then you do a private sale? What happens if it stays on the market for more than three or six months? So we have to be very careful now, like you mentioned before, with the logistics about how we do that, it’s making it very complicated. And also, Heather, I think that people need to understand and what we advise people all the time is that you don’t actually need to reach an agreement as to how to distribute the net sale proceeds of the home before agreeing to list it. It is entirely possible to list the property, sell it and put the money in a tin and then argue about who’s going to get what. Yeah, it’s entirely possible to do that. And perhaps in this market it’s wise to do so. But that’s when you defer to the experts.
Benjamin Bryant: And Heather, let’s say that you think it makes sense to sell quickly before the market drops even further. What if your partner refuses to sell? Is there anything you can do?
Heather McKinnon: That’s the dance going on at the moment. So, in these cases where one might have the capacity to buy the other one out, they’re stalling. Because they’re reading the Sydney market, reading social media and thinking cost is going to fall. So they’re just folding their arms and saying, come and get me. So if we’re acting for the person who wants to get their money out, we have to accelerate the mediation process. Because if you assess that that baulking at doing anything is happening, you need to get into court. Depending on which side we’re on, half the files we’re trying to slow down and the other half we’re trying to speed up. So you’ve got to be, as I said, with a team of lawyers, agents and valuers who have got the decades behind them, because this is a really unusual economy.
Benjamin Bryant: That’s right. And you may have one partner living in the house unencumbered and the other one out paying rent.
Benjamin Bryant: Craig, what if one partner on a joint property comes to you and tries to put that house on the market? Is there anything stopping them from doing that?
Craig Gardner: Yes, there is. Both partners need to agree. They both need to sign the agency agreement and they both need to provide identification. The rules around compliance now are very, very strict in terms of listing a property to go to market. So we have to make sure that both parties agree to sell the property.
Benjamin Bryant: And I’m sure you’ve had to handle some disagreement between exes. What happens if joint owners can’t agree on a listing price?
Craig Gardner: Look, that can be common in that occurrence. And as Heather just alluded to, with the perception that the market is falling, the person that’s going to keep the home might want to stall. The person that’s wanting to get their money out, may want to expediate that experience. Look, the last case scenario is obviously what Heather just said, which is going to court, which nobody wants. But I think common sense has to sort of apply here a lot as well. And I mean, that’s where your experience comes in as mediators. And then our experience comes in as salespeople and obviously valuers. The other options you’ve got are: to go and get three opinions from an agent or agents just to make sure that they’re all within the same ballpark. And they should be pretty much, if you’re going to experienced agents. Obviously, then if no one can agree a valuer comes into play. Because, again, they’re an independent body and, like us, look at the research, look at the numbers, look at what’s sold, do the comparable sales and come up with a realistic figure of sale. The other options you’ve got are, if they can’t agree on a list price, if they do decide to go to market, then you do an auction or expressions of interest. It takes the price off the table and the market then tells us what they’re prepared to pay for any property.
Benjamin Bryant: And Craig, what about the auction day? And the benefit and the detriment of auction is the high pressure, the high stakes. What happens if joint owners can’t agree on the day?
Craig Gardner: I don’t know that auctions are so much high pressure for the sellers. It might be for the buyers in terms of being in competition to buy a home. One of the things that obviously an auction does is that your sale price is protected by a reserve price. That’s why at Nolan Partners, we have a reserve setting meeting with both owners prior to the auction date where we all agree on what the reserve price is. Now that’s in writing, so nobody can change that. On auction day, if it doesn’t reach a reserve price, we have a figure that we can pause the auction that is in writing as well, that we can then go and talk to the owners about in terms of, okay, if we get this buy to this level, would you accept that offer? And again, both owners have to agree on that price. So auctions are a different beast in terms of you are definitely protected by your reserve price.
Benjamin Bryant: Interesting. And Stacey, speaking of disagreements, we quite often hear people disagreeing with their valuation report, as I alluded to earlier. We hear comments like they haven’t included this or the house down the road sold for more. What are the key factors you consider in valuing a property for family law purposes?
Stacey Parkes: It’s up to us as valuers and agents to really know the market we specialise in intimately and also the story behind every sale. Each property we’re looking at, we’re looking at location, quality, position, topography and then we’re comparing that to sales. We need to be an expert in what happened with that sale. We need to know if it’s an internal transfer or there could be an underlying transaction included in that registered sale price. If people are saying, Why didn’t you include the sale down the road, well, maybe there’s a reason for that. And that reason we need to be clear on and be able to provide that information to anyone questioning it.
Benjamin Bryant: And separation doesn’t always mean the sale of the family home. How do you go about valuing a property if one partner is going to buy the other one out? Is it any different if they went to Craig or another realtor?
Stacey Parkes: It’s no different. We’re valuing at the day we’re there, what that property would sell for on the open market? It’s exactly the same as what it would be if it was selling privately. It’s selling between owners. Our valuation is a legal document, and we are valuing it the day that we’re there.
Benjamin Bryant: Good to know. Heather, what if you can’t buy your ex out but you also don’t want to sell because the market is soft? Are there any options?
Heather McKinnon: Well, this is the negotiation that every couple go through. So a lot of factors come into the sale of a property in a breakdown of a family. Obviously, one of the factors that Stacey and Craig don’t count into their assessment is stability of children. So a lot of people reach agreement that they’ll stabilise the children through the separation process and won’t look to sell for a period of 6 to 12 months, because the kids are going through enough change. And that’s what you see with particularly people who’ve got toddlers or kids in that early infants primary. Because if you hit them with too much change, you can really do some damage and a lot of parents just reach agreement. Okay, we won’t put it on the market for a year, but in this time this is how we’ll handle the finances. For example, the person in the house might agree to pay most of the mortgage because the person who’s moved out is paying rent. So a lot of factors go into when it goes on the market other than just the pure economy of what’s happening. So we have to count in those personal perspectives.
Heather McKinnon: But really, this market is about how long do it give someone to adjust to the fact that it’s got to be sold. And as Craig and Stacey know, we’re the baddies, because sometimes we have to use the big stick, which is the court. And as Stacy knows, as a court expert, if people can’t get their head around what the valuer, who’s the court appointed expert says, then Stacey goes into the witness box and the judge talks to her about why she might have a particular view. So that it’s very clear to the parties that the judge is only listening to Stacey, not to their emotional needs or what a 20 year old real estate agent told them compared to a degreed valuer. So we’ve got all different scenarios that play out in every case, but at least we have a pretty well trodden path. So as Craig said, get a couple of appraisals each and see how close the agents are to the agreed price. If they’re all over the shop, that’s when we pay for Stacey and her colleagues to give us the number.
Benjamin Bryant: That’s right. And I think what we do Heather, as I say in most of our shows, is we try and manage people’s expectations and try and get them to be as commercially sensible and practical as possible. For example, a lot of people stall a sale because they just want to replace the deck or we’ve just got to repaint the lounge room. But the court doesn’t care. The court will just sell it as is. So just being very commercially sensible and just reaching out and getting information to make those informed decisions, I think is what people really need to do.
Heather McKinnon: And we talk a lot about in other programs with psychs and that about being in the right headspace to make commercial decisions. And the best way to do that is to pay the expert to think because you realise you’re in such an emotional state, you’re not thinking. And that’s the biggest advantage of having someone you trust to help you decide what to do.
Benjamin Bryant: That’s right. Because you make these decisions once.
Benjamin Bryant: Well, great show. Stacey and Craig, thank you so much for your time and expertise.
Stacey Parkes: Thanks, Ben. Great to be here.
Craig Gardner: Thanks, Ben. No problems.
Benjamin Bryant: Excellent. Heather, thank you, as always, for your family law insights. Do you think today’s show will affect how you advise clients over the next few months?
Heather McKinnon: All it’s done is scare the daylights out of me. And as we speak, Mr. Putin’s playing games. So we’ve got a whole lot of fun ahead of us.
Benjamin Bryant: Who knows by the time this airs in January. But this is a tough time to be selling the family home for sure. So it’s great to have this show as a resource.
Benjamin Bryant: Next month, we are going to talk to psychologist and mediator Anthony Smith about how to make mediation work. Successful mediation can save you a great deal of anguish and money when settling a family law dispute, So it’s worth knowing how to make the process successful and not just a box you tick on the way to the family law courts. Anthony has years of experience in family dispute resolution, and I know he’s going to have some really valuable advice for us. If you have specific questions about mediation, please send them to familymatters@bryantmckinnon.com.au or message us on Facebook and we’ll try to get the answers for you on the show. We’ll put links to any resources mentioned in today’s show and a full transcript in the show notes on our website. And don’t forget, please share the show with family and friends who may benefit. We hope to have you ears again next month.