No one likes to talk about money, but EVERYONE seems to have an opinion about real estate agent commissions. For some reason, agents have acquired a similar reputation to solicitors and though many property owners don’t have a problem paying their agent's commission after a long, arduous campaign, some feel cheated when a property sells quickly. 

In our view, much of the criticism levelled at agents is unfair, which is one of the reasons the team at Listing Loop pairs its sellers with the right real estate agent as part of our free Seller Assist service. 

But more about that later...

The right agent will negotiate the best price for your property

There's no denying that a career as a real estate agent can be lucrative when the market is booming, but in an agent's defence, few people work the hours they work - many of which are after-hours - or have the level of patience required to meet the practical and emotional demands of their clientele.

Below are some of the many ways real estate agents can support you:

1. They set your property at the right price, based on their expert knowledge of the local property market
2. They take over the many contractual and administrative responsibilities and obligations required by law
3. They offer advice about changes to improve your property’s appeal and presentation – some of them even become amateur photographers to ensure you get the best shots of your home
4. They are a loyal middleman, someone who is in your corner and should reduce many stressful elements of the sales process

Selling property isn't rocket science, but...

It does require experience and a certain skill set. There is much more to it than a fancy suit or a flashy car.

“A key part of a real estate estate agent’s job is to manage negotiations and act as a go-between for any potential buyers and the owner of a property," say HomeOwners Alliance

Obviously, your research is crucial - and most experts recommend you meet at least three agents before you appoint one - but in a buyers’ market like the one we are currently experiencing, trust us, most agents will be forced to earn their fees. The majority are hungry for success. Many work on a commission-only basis and even when they are employed by an agency, they must give back a portion of their commission to cover their upfront costs. 

N.B., Agents earn nothing upfront and the only money they should take from the seller ahead of a campaign should be for advertising and marketing materials if required. Their earnings for what may be months of work come solely from their commission, hence, if the property doesn’t sell, they stand to earn nothing.

So how much do real estate agents actually earn?

“At the end of the day, the answer is that it depends on the market they’re operating in, the market’s current state, and how well they’ve negotiated the terms of sale with the vendor.” (Entry Education).

In simple terms, real estate agent commissions is an agreed percentage of the sale price of the property.

There is no standardised fee structure, although the average rate in Australia ranges between 1.4 and 4%, depending on the location of the property and the competition in the area. In Sydney, for example, agents may agree to a lower commission because there is more property on the market, property prices are higher, and they can earn enough, whereas, in Hobart, agents command the highest commission rates.

The simple rule of supply and demand dictates that postcodes with lots of local agents drive competition for your listing. To get your business they are forced to lower their rates. 

In Sydney, commission rates usually vary between 1.4 and 2.5%, in Melbourne, they range between 1.6 and 3% and in Queensland, the range is between 2.5 and 3.3%.

How is the commission worked out?

In Australia, we have two different fee structures:

1. FIXED commission - I.e., If a property sells for $1 million and their agreed commission rate when you signed your agreement was 3%, the agent will earn $30,000.
2. Or TIERED commission, sometimes called "negotiated commission", which is based on performance - I.e., If a seller anticipates a sale price of $830,000, he may agree on a lower rate should the property sell beneath this price and a higher rate on any price over that figure.

Inevitably, the seller must weigh up the pros and cons and decide on which fee structure suits their situation best, but it is easy to see why some sellers question real estate agent commissions when there are so many other costs to consider.

However, we warn against negotiating too hard unless the agent’s rate seems higher than your other quotes. Be mindful of the adage "You get what you pay for". If your budget is tight, maybe consider selling your property privately with us if you are confident in your negotiation skills or opt for a tiered commission structure.

As Brett Warren says on Market Update, “The cheapest estate agent is the one who gets you the best sale price – not the one who charges the lowest commission."

For more information about selling off-market and our SELLER ASSIST service, which saves you time and money, please click here. To find out about selling your property privately with us online so you are in full control of your sale, fill in this form and one of our amazing team members will call you back.