Selling a property is usually the biggest financial transaction in the life of Mr and Mrs Schweizer. However, most people only sell a house or flat once, so they lack experience and don't know what pitfalls are lurking.
Please note: In Switzerland, most property purchases are financed with the help of a mortgage, which normally amounts to 80% of the purchase price. Of this, 15 per cent is normally amortised over the first few years. This means that around two thirds of the property remains financed by borrowing (from the bank). If you sell your property for less than its actual value, this will reduce your remaining capital even more, as you will have to use the proceeds to repay the mortgage first.
An example calculation:
Mr. Meier buys a house for CHF 1 million and holds it for 10 years (with a mortgage of CHF 800,000, which is still at CHF 700,000 after 10 years). Let's assume that the value has risen to CHF 1.15 million by the time the property is sold.
Mr. Meier trusts the first real estate agent who estimates the value at CHF 1.05 million. The estate agent is able to sell the house at this price within a few weeks. Mr. Meier repays the mortgage and is pleased with the additional income.
If we now compare this property sale with the best possible sale, the effects become apparent:
Sales price: CHF 1.05 million
Repayment of the mortgage: CHF 0.7 million
Payout to Mr. Meier: CHF 0.35 million
Ideal sale:
Sales price: CHF 1.15 million
Repayment of the mortgage: CHF 0.7 million
Payout to Mr. Meier: CHF 0.45 million
Conclusion:
The additional income of CHF 100,000 has a huge impact on his capital (+29%) and on his return on investment.
In this article, we show you what you should bear in mind when selling a property and what you should avoid at all costs. The right approach is extremely important, otherwise you will lose a lot of money.
You can also read about how Bestag can support you.
When selling a property, a sound valuation is essential to determine the optimum price and make the sales process successful. But valuations can often vary widely.
Different valuation methods, missing or incorrect data points and different market knowledge mean that individual valuations can differ significantly. We therefore recommend that you obtain several valuations so that you can identify major discrepancies and narrow down the actual value more precisely.
We are assuming a standard property sale (house or flat). In this case, the following two valuation methods are usually used: The hedonic valuation and the real value method.
Hedonic valuations
The hedonic valuation is a statistical comparison method that records characteristics such as location, size, condition and age of the property and compares them with properties that have already been sold. As it is based on past sales data and the calculations vary depending on the provider, it is advisable to obtain several hedonic valuations. Hedonic valuations are the most widely used method for upcoming property sales.
Disadvantage: The valuer records the data points and has a major influence on the valuation. In addition: The result is a value range of up to 20%, which can only be estimated more accurately by a person with local market knowledge.
Real value method
Here, the land value is added to the current value of the building. The land value takes into account factors such as the tax rate of the municipality, comparative prices of similar locations and the proximity to the city. The current value of the building is determined by calculating the costs of a hypothetical new building, including ancillary costs and expenditure on landscaping. A reduction in value due to age and condition is then deducted.
Disadvantage: With the exception of the land value, this method does not directly reflect the current market situation and is therefore only suitable for collectors' and luxury properties.
In order to obtain a reliable valuation, several qualified estate agents with local market knowledge should be consulted. Different perspectives and valuations help to determine a realistic price level.
It is also advisable to obtain hedonic valuations from a neutral provider. Hedonic valuations also play an important role for banks, as they are usually used as the basis for granting mortgages.
Would you like to find out more about property valuations? Then read our article about how to find the true value of your property.
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In step one, you learned that you should obtain several valuations from locally specialised estate agents. But what do you need to look out for when making your choice?
Once you have selected several estate agents, invite them to a viewing. Let the estate agents know that you are seeking several opinions. The competitive situation leads to better offers, but harbours the risk of overvaluations. To prevent this, you should announce a bonus-malus payment (more on this in step 3).
The viewing enables the estate agent to assess the condition and standard of the property more accurately. You also have the opportunity to get to know the estate agent personally and ask any questions you may have.
There are many different types of estate agent contracts, but they all have one thing in common: they mainly take into account the interests of the estate agent, which are contrary to your interests.
Here we look at three clauses that you should check carefully. If you don't want to take any risks at all, we recommend having the brokerage contract checked by an independent expert.
The contract specifies which services are covered by the agreed commission. Pay particular attention to additional costs that can be charged. Normally, the commission is between two and three per cent and covers all costs. You should also include a bonus-malus clause so that the estate agent is also financially motivated to get the best deal for you (more on this in the next chapter, mistake no. 4).
The minimum price clause states that the estate agent is entitled to his commission if he presents a buyer who is prepared to pay a minimum price fixed in writing. However, this minimum price can be significantly lower than the estimated value of the property previously stated by the estate agent. So read this carefully. Incidentally, a minimum price in the contract can also be fair, namely if the minimum price is identical to the estimated value.
Take your time when choosing an estate agent. However, as soon as you are sure, you should give this agent an exclusive contract. In marketing, the competitive situation would tend to lead to agents shying away from costs and effort for fear that someone else will close first (leaving them empty-handed). With an exclusive contract, the estate agent is given a fair, time-limited opportunity. He will do everything he can to finalise the sale.
Many things can go wrong when selling a property. A list of all possible mistakes would go far beyond the scope of this article. Nevertheless, we would like to point out a few mistakes and pitfalls.
Selling yourself only makes sense if you are selling a condominium in a residential complex in which several flats have recently been sold and you know the prices accordingly. You also need to be confident about the work involved in the sale. Otherwise, a qualified local estate agent will usually get more for you, even after deducting their commission.
As the name suggests, fixed-price agents work with a flat fee. If you want to compare fixed-price agents with traditional agents, you should not only look at the costs, but above all at the expected net proceeds (expected sales price minus commission). It is also advisable to check the scope of the services offered - with fixed-price estate agents, for example, you may have to organise viewings yourself.
Our conclusion on fixed-price estate agents is: stay away! This business model aims to sell properties quickly and cheaply without any real incentive to achieve the best price for you. If a higher sales price is realised, the fixed-price agent gains nothing from it. So why should he go the extra mile for you?
Selling a property is easier the lower the price is set. So if you only ask one estate agent for a valuation and then give them the order to sell, the risk of an undervaluation is very high.
The estate agent can speed up the sale and minimise his expenses with an undervaluation. You should therefore always ask several estate agents and inform them of the competitive situation.
Set a financial incentive for the agent by including a bonus-malus clause in the contract. This has two advantages:
If you have your property valued by several agents, there is a risk that they will value the property too highly in order to win the contract. If you link a bonus-malus clause to the valuation, the risk of overvaluation is reduced, as the estate agent otherwise risks a malus on his commission.
The bonus motivates the agent to get the absolute maximum for you. If he exceeds the valued price, he receives a share of the additional income. Accordingly, the agent is motivated to the max to get the maximum for you.
In order for your property to be valued seriously and as accurately as possible, you should provide the estate agent with all the necessary information and documents. There is one exception: Do not state a price - not the desired price, not the purchase price, not the valuation price of the other estate agents and also not the amount of the mortgage. This is because these details can unnecessarily influence the valuation. Let the estate agent make an unbiased valuation.
It is a misconception that the highest possible sales price is achieved in every bidding process. To make a bidding process successful, many things have to be done right: The right starting price, the right audience, a transparent process, etc.. Otherwise, a bidding process can also put off potential buyers.
In addition, a bidding process is only suitable for highly sought-after properties in very popular locations that are of interest to very wealthy individuals.
Our customer, Thierry Knecht, talks about working with Bestag (in german).
In the previous chapters, you have learnt why the undertaking of "selling property in Switzerland" can be complex. If mistakes are made in the valuation, the choice of estate agent or the brokerage contract, this usually has far-reaching financial consequences for the seller.
Bestag was founded to avoid precisely this. Bestag advises property sellers right through to notarisation. This service is unique in Switzerland and is based on three pillars:
To find the most suitable estate agents for your property sale, we draw on our unique database of all active estate agents in Switzerland.
In order to provide you with the most reliable and realistic assessment possible, we obtain a total of five valuations from two sources:
The result is a transparent overview for you, which our local customer advisors will discuss with you.
Have we aroused your curiosity? Click here to access our online property valuation, which will give you an initial indication.
As you could read in the previous chapter, brokerage contracts are normally orientated towards the interests of agents. We redesign them - in your interests:
Bestag has already accompanied over 500 property sales - you benefit from the experience we have gained.
And even after you have signed the brokerage contract, your Bestag customer advisor will accompany you - right through to the successful sale. You have a neutral expert at your side at all times.
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You can contact us at any time without obligation.