Real Estate Agent Fees & Commissions Explained

Hi. One of the hot topics amongst owners, when it's time to choose an agent to sell, are fees. There's always a curiosity concern about what that means. So in terms of fees, just to make it as simple as possible, the agent will charge a fee to measure with what they think they're worth and also in competition with other agents. There are different ways they can charge a fee, so there could be a flat fee. I.e. a lump sum of money for the service that doesn't fluctuate, depending on the result of the property in terms of the price.

There can be a commission based percentage, which is a percentage of whatever the sale price is. There can also be a performance type fee, so that could mean that up to a certain price, a certain percentage is charged. Above that price, a higher percentage is charged. An incentive for the agent to try and get that extra five, 10 percent of the price and get paid something as a bonus for that. So it's very, very much up to negotiation between the vendor and the agent and dependent upon the property and the conditions.

The Most Valuable Agent Is The One Who Gets You The Highest Price

The most important thing for vendors to take into consideration when they're picking an agent is commission is very important, but in my opinion, it should definitely not be the major reason you pick an agent. To make it very simple, the cheapest agent is the one that gets you the highest price, so what an owner should be looking for when it comes the time to pick an agent is value. So yes, if an agent's charging a very high commission and you see no value in it, don't pick them.

The Value Added Is More Important Than The Price Charged!

If an agent's charging you very low commission and you don't see value in that. I.e. they may not be able to get you a very high price, also don't pick them. Look at the agent's ability to get you the best price. Three different agents will most definitely end up with three different results. Sometimes it might be a small amount, but in many instances, it can be tens to hundreds of thousands of dollars due to skillset and other reasons, so always factor in the value of the agent's commission they're charging, rather than the individual amount.

Helping Vendors get a better price

So how does an agent justify a higher commission than their competitor? That's an interesting question and there's the cliché sort of answers that you can be given about integrity and results, experience, et cetera. For me personally, it's strategy. Agent fees are not based on market value. We don't go into the marketplace and value your property and then bring you back a price.

We're Marketers.

So marketing has a strategy and a good agent is gonna be a strategy to the table to help you get the property marketed perfectly which then leads to more people looking at it which then goes into high levels of interest. And if they're a good negotiator, which is the last factor, then a good price at the end. So that's where the extra value comes from an agent, they'll bring ideas and strategies to the table that will help you market the property better to get a better price.

What We Do Adds Up

An example of some of the things that we're trying to help our vendors get a better price, which justifies what we charge them. They're not even one-percenters, they're less than that. 15, 20 individual unit things that add up to four, five, six percent, which then, if you look at a price, can be a big difference for the owner at the end.

So social media, targeting ads towards people that might be interested in that property. The way that we present the property, styling. We take a lot of care with the times that we open the property. Always open at its best. Always take into consideration the moment that the buyer walks past the property for the first time. 50% of the sale is what they see before they walk in the front door. These things are sometimes not taken into consideration by some agents. They just feel ... sign at the front, show it on the internet and the rest will take care of itself. It's not really the case. You can get a sale that way and you might get lucky and get a good price, but it's all the little things added up together that gets you an extra three or four percent on the price.

Are Agent Fees Negotiable?

So a very common question, again, is are agents fees negotiable? Yes, of course, they are. Our fees are deregulated, so what that means is in our industry there is no base that we are allowed to charge or are allowed for the client to pay. I.e. We can change as little as we want or as high as we want. You are at our mercy, but vice versa, as well. We are at your mercy in terms of what you compete with other agents in terms of what you're quoted.

You Get What You Pay For

The only advice I'd give you is to think about it. If you can negotiate a really low fee out of your agent, I'm really sorry, but that is what is gonna happen with the buyer at that property when they're standing at the front of the house trying to protect your money. If they can't even justify their own fee and negotiate their own fee to some extent, when it gets tough on your property, they're going to be more inclined to favour the purchaser in the negotiation and look towards you negotiating your price down. So it's good to get a good fee from the agent, but it's also good to get a good agent for the fee that you get.

What Are The Other Costs Involved?

So what other costs are incurred through a real estate agent when you're selling a property? There's obviously the fee, the commission rate the agent charges. In most cases, in some areas of Sydney, it may not be, but in most cases, advertising is charged separately to the selling fee. So advertising takes the form of signs, internet advertisements, brochures, photos, et cetera. So when you sell the property, those two fees are exclusive of one another and the advertising in many instances, can be paid upon it being expended, so as the agent gets the property ready for market, the owner will then pay for those fees and then we go to market and then the agent's settlement commission rate is paid on the settlement of the sale.

Do I Pay An Agent If My Property Does Not Sell?

What many owners may not know is that the agent cannot be paid unless the property sells. So what settlement means is the full money that the buyer is paying for the property is transferred to the owner at the end of the sale So that doesn't mean the exchange, the exchange is when the offer is accepted and the contracts are signed and exchanged. The settlement is after that. Generally, a period of six weeks or longer where all the monies are paid by the buyer to the vendor through the relevant solicitors.
Only upon that moment can the agent be paid. They can never be paid at any stage prior to that point, which is important to know that they really don't get anything until you secure a result for your home.