Real estate agent fees
Real estate agent commissions generally cost around 2-4% of your selling price. Here's what you get for that investment.
Real estate agent fees are typically charged at 2-4% plus GST of a property's sale price. On a $600,000 property, that's a commission of $13,200 to $26,400.
In this article, we'll walk you through all the real estate agent commissions and fees you can expect to pay when you sell a house or apartment, including:
- How commissions are calculated.
- When the fees are payable.
- What other costs you may have to cover when selling your home.
- Tips to get the best possible deal.
Real estate fees and commissions do tend to vary depending on your suburb, state and the service on offer from your agent.
Usually, commission is calculated as a percentage of the home's sale price.
According to OpenAgent, the average is between 1.5% and 4%, plus GST, although 1.5% is very low – for most agents, the floor is 2% plus GST.
As a guide, you'll pay the following commission payments based on these sale prices:
|Property sale price||2.2% commission (inc. GST)||3.3% commission (inc. GST)||4.4% commission (inc. GST)|
Keep in mind that these amounts don't include marketing and advertising costs – more on that in a moment.
While most agents charge 2-4%, the market for agent fees and commissions is unregulated, which means agents can charge whatever they feel is fair. The Real Estate Institute of Tasmania (REIT) does offer its members a non-binding guide to fees, but agents are still free to use their own discretion.
That said, the market somewhat regulates fees, because there is a general "range" that most agents fall into. Charge too much higher than this, and the agent will struggle to get clients.
Do you pay GST on real estate agent commissions?
Yes, real estate commission is indeed a taxable service, so all fees are subject to GST.
If the property you're selling is an investment property, the full commission plus GST is tax deductible.
What are sellers actually paying for in commission?
These commissions can quickly mushroom into really significant dollar amounts. So let's dive into what you actually get for this investment.
"Most sellers want to make an informed decision when the time comes to accepting the best price in the market, and there are a number of elements involved when it comes to being able to make the most informed decision," explains Ray White's chief performance officer, Adam Downes.
He shares the 4 most important services and features you get in return for your commission:
- Clear communication. "This service from your agent is critical. You should get daily communication, weekly reports and weekly meetings on what is happening with your marketing campaign, including updates on buyer activities, feedback and enquiry levels, communication around offers, and updates on other market conditions – such as new listings that you may be competing with and recent sales."
- Managing offers. Your agent must be making every attempt to secure offers from buyers for you, Downes says. "Offers are the best form of feedback and can go a long way in helping you make an informed decision when the best offer is presented," he say.
- Negotiating. "Your agent's ability to negotiate will have a significant impact on your eventual sale price," he confirms. An experienced real estate agent with savvy and strategic negotiation techniques is more likely to help you achieve a higher sale price than you'd be able to negotiate on your own.
- Ability to create competition. "Arguably, if your agent has an ability to gather multiple buyers on your property, this will create an opportunity for a price that will far exceed a one on one negotiation," Downes says. This is another way in which an experienced agent can offer value.
Can you negotiate on agent commission?
Some real estate agents may be open to negotiation on the rates and fees they charge. To negotiate, discuss with the agent their strategy for selling your home, asking how they plan to market and advertise your home, what price they think you can expect and whether they plan to sell your home by auction or private treaty and why.
Once you understand your agent's strategy, you'll be in a better position to assess whether or not you feel their rate represents good value.
There are alternatives to commission, but they're less common.
Some agents and brands will agree to a flat fee, though it's much more common to pay a percentage-based commission. It's said that the drawback of a flat fee service might be that it doesn't motivate your agent to get the best possible price for your property, as an agent negotiating a flat fee could prioritise a quick sale over the highest price.
Other agents may also agree to a tiered commission structure, where you pay a percentage to a certain amount (say 3%+ GST until $750,000 and 5%+ GST on any price achieved above this point).
What other fees and costs may be payable?
In addition to commission, there will likely be marketing and advertising fees paid on top. This is because your agent will generally utilise a variety of channels to advertise your home.
"Marketing costs are generally paid by the seller and are separate to the commission, although this does often vary," Downes says.
"Some agents will pay for the marketing costs, some will defer the payment until settlement, or until the listing authority ends, and some will require it upfront. The most important aspect of this is to ensure you know what you are paying for or what the agent is paying for at the beginning."
A comprehensive marketing campaign will have a major impact on the selling price of your property. It can take into account things like:
|Marketing item||Potential cost||Notes|
|Online advertising such as Domain or realestate.com.au||$700 - $1,500||Price depends on size and scope of advertising. Premier (large) adds are pricier than small, standard ads.|
|Print advertising||$11,000||Newspapers and real estate magazines.|
|Pamphlets and flyers||$250 - $1,000||Depending on size, style, print quality, etc.|
|Letterbox drops||$200 - $500||To cover the cost of colour printing and distribution.|
|Window displays||Negotiable||Agents generally include this for free.|
|Professional copywriting||$140 - $250||Depends on copy length and requirements.|
|Professional photography||$300 - $800||Depends on number of images.|
|Professional videography||$220 - $500||Depends on length, style and market.|
"If sellers decide to auction their property, the auctioneer's fees are also payable, which is a one off-fee that generally falls between $500 and $700, depending on the experience of the auctioneer involved," Downes adds.
He also shares, "The reality is, agents don't know where your buyer (who will pay more than every other buyer) will see the property advertised. There can be a significant difference between your best buyer and the next best buyer. Often, [there's] tens of thousands of dollars [difference]. So it's important that you have a marketing campaign that will ensure you cast the net as wide as you can, to ensure every buyer in the market place can see your property for sale."
Can you avoid paying real estate agent commissions and fees?
You may decide to be your own real estate agent and sell your property online to avoid commissions and fees.
Selling it yourself can be complicated and time consuming, and you may not achieve the best price, if you don't have strong negotiation skills and the ability to reach a market of buyers. With a big client database, lots of industry connections and savvy negotiation techniques, experienced agents can generally help you get a better price.
However, if you're confident you have the time and skillset to save yourself money on commission and sell the property yourself, you can learn more in our guide to selling without a real estate agent.
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