Real estate commissions are often the largest outlay when it comes to selling property, so it’s important to understand exactly how they work before you commit.
Your house is often your biggest financial asset, and making the decision to sell is never easy. While the law says that Australian home owners are welcome to try and sell their property on their own, it’s generally not an advisable practice. As such, this is when many Aussies enlist the services of a real estate agent to sell their property.
Real estate agents are licensed professionals that have the tools to reach the right buyers, and to ultimately sell your home for the best possible price. Of course, this service doesn’t come for free. If you live in Melbourne, a typical real estate agency commission rate is between 1.6% and 2.5%. In regional areas, home owners can expect to pay between 2.5% and 3.5% commission to sell their property.
If you’re looking to sell a house or property in Victoria, the good news is that we have the lowest real estate commission percentage on average when compared to our neighbours in the other states and territories. According to Open Agent, the average commission charged by real estate agents in Victoria to sell a property is 2.05% – one of the lowest in the nation. While this may sound like a lot, it’s certainly a lot more favourable when compared to the nation’s highest in Tasmania, which averages 2.96%.
While real estate commissions are one of the more obvious costs when it comes to selling property, there’s a lot more to it than an agent simply sending you a bill – so how does it all work?
The Basics Of Navigating Real Estate Commissions
Whether you’re looking to sell a $500,000 home or a $5,000,000 mansion, the amount of real estate commissions you can expect to pay will undoubtedly vary. However, in the world of property, there are generally two structures available for an agent to get paid via commission.
Fixed Rate – If you agree to pay a real estate agent with a fixed rate commission structure, this means that sellers consent to paying a specific amount after the sale of the property in question. As the rate is fixed, the final selling price has no bearing on how much you will pay as the amount due does not change. While this route gives a sense of certainty on the final commission price due, the potential disadvantage of this method is the unspoken fear that the agent will sell the house quickly without motivation to secure the highest possible sale.
Tiered Percentage – Designed to work on a sliding scale, tiered percentage commission structures are arguably the best incentive for a real estate agent to secure the highest possible sale price – the higher the property sells for, the more commission the agent receives. An example of this at work is that while you may agree to pay 2% commission on a sale price of $480,000 or less, you may enter an agreement to pay 10% of the balance difference if it sells for more. The sale could then balloon to over $500,000, so both the seller and agent get a bonus.
While it can be tempting to settle on a real estate agent that offers the lowest fees and commissions, they may not be the best fit for your own individual circumstances or property. It’s also important to read the fine print as to what the agent’s included services are, along with researching their sales history and area knowledge. It’s also important to take note of the fact that you should only be offering the agent a higher commission rate once you have met your realistic selling price.
When in doubt, enlisting the help of a property advisor can go a long way when it comes to sorting the good agents from the bad – but where can you find one?
Take The Stress Out Of Selling Property
A completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.
