Real estate agent commission - what is it?
To get the best possible price for your home, you’ll want to list your property with a skilled real estate agent who knows your neighbourhood well and your target demographic even better. Most agents are paid by way of commission, which means they’ll receive an agreed percentage of your sale price once your property is sold.
For example, if your agent charges 2.5% plus GST and your home sells for $1.2 million, you’ll pay the agent $33,000 in commission.
In this article we take a look at the different commission structures and what you get for your money
How much commission will I pay?
There are three main commission structures real estate agents in NSW use:
Fixed percentage commission - probably the most common fee structure, this is where your contract with the agent will stipulate the agreed percentage commission to be paid on the sale of your property.
Tiered commission - you may decide to negotiate with your agent to pay a percentage commission for selling up to an agreed price and a higher commission for any amount over the agreed price. For example, you could pay 2.5% plus GST on a sale price up to $1.2 million and 3.5% plus GST for any amount over $1.2 million. If your home sells for $1.3 million you’ll pay the agent a total of $36,850 in commission. The idea here is to give your agent an extra incentive to get the highest possible return for your home by rewarding them for achieving a sale price above expectations
Fixed fee - some agencies operate on a fixed fee model where they charge you a flat rate regardless of how much your home sells for. For example, if your agency charges a flat fee of $10,000, that’s how much you’ll pay whether your home sells for $500,000 or $2 million. This is not such a common fee structure in Australia.
To find out more talk to your local DiJones real estate agent.
Why do commissions vary between agencies?
The main goal of engaging an agent is to sell your home for the best possible price, so it can be confusing when agent commissions differ. But there are some variables that might explain the differences.
The amount an agent charges might be influenced by:
Where you live - Fees vary across the states and territories and even between inner-city and suburban areas.
The number of agencies servicing your area - If agents have stiff competition to win business they might choose to lower their commission to attract listings.
The value of your home - because commission is a percentage of a property’s selling price, an agent will earn more by selling higher-priced homes. Some agents might agree to a lower commission for homes with a higher value.
The agent’s experience and expertise in your market - If an agent is a top performer in your neighbourhood and regularly sells above market expectations, they might charge at the higher end of the commission scale.
For information about what questions to ask when choosing a real estate agent click here
When you engage a top-performing agent, their fee is more like an investment in a successful, stress-free sale
What does a real estate agent commission cover?
For most of us, the aim of teaming up with an agent to sell our home is to achieve our desired sale price in as short a time frame as possible.
When you seek out a professional agency with a good reputation and high-performing agents, you can expect the following as part of the service:
Fine-tuned processes - there are a lot of steps involved when selling a house and it makes the world of difference if your agent knows exactly what to do and when to do it. This includes organising a sales contract, marketing materials, advertising and open homes. A good agent can probably help connect you with other professionals you might need to complete your journey such as brokers, solicitors/conveyancers, removalists and cleaners.
Excellent communication - it is really important for the agent to keep the lines of communication throughout the entire sales campaign. You’ll want to hear about inquiry levels, feedback on your home, offers to purchase and new listings in your local market. It can be a good idea to let your agent know your preferred method of communication (text message, a phone call, an email) so they know how best to get hold of you, particularly when offers start to roll in.
A buyer database - great agents have great databases and a well-managed list of high intent buyers they can match with your home. Many of these buyers will be “qualified” which means they have borrowed funds approved or cash in the bank ready to purchase a property. The more genuine buyers an agent can introduce to your property the more competition is created, and competition is what pushes prices up.
Top negotiation skills - an agent that can squeeze every last dollar from a keen buyer is definitely worth having on your team. The ability to negotiate a high price for your property while remaining respectful to buyers is a skill that shouldn’t be underestimated. While you could negotiate the sale of your own property and avoid paying commission there’s a strong chance you won’t achieve the best possible price.
The ability to perform in all market conditions - every market travels through booms and downturns, but a good agent who understands your property’s unique appeal will be able to secure a sale regardless of market conditions.
A final comment
You can think of an agent’s commission as a cost of selling your house, but when you engage a top-performing agent, their fee is more like an investment in a successful, stress-free sale.
To help, please find some useful links below:
To talk to your local real estate agent further about agent fees click here
To get a property appraisal click here
For more insights into selling your property, click here
For our Guide to selling your property in NSW click here
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