When you use a real estate agent to help you sell your property, one thing you can be sure of is that you will have to pay commission to the real estate agent in question. However, many real estate sellers don’t know that the commission paid to a real estate agent is negotiable, and even more sellers are hesitant to negotiate to start off with.
An agent’s commission is usually either fixed (a set percentage of the eventual selling price of your house is charged) or tiered (the percentage of the total price escalates on a sliding scale that serves as an incentive for agents to get the highest possible price). The commission percentage is agreed upon prior to the sale, regardless of whether it is fixed or tiered.
Most states in Australia have deregulated commission structures, which means that estate agents establish their own commission structures, although the average commission charged is between 2% and 3%.
Important things to remember
• If you decide to use a real estate to help you sell your home, the commission paid on the sale of the property is mandatory. You can only avoid paying commission if you decide to sell your property privately.
• Commission is only payable after your property has been sold. Real estate agencies might charge other fees upfront, like fees for advertising, but this will be stipulated as a charge separate from commission.
• Get all information about charges from the estate agent in writing.
• There is no cooling-off period after signing a sales authority, so do not sign anything, and especially not the sales authority, if you aren’t sure that you want to use the services of a specific real estate agent.
How to negotiate
Negotiating commission that you feel is fair could be difficult if you’re not used to it, but doing these things will help to make negotiating a little less daunting.
• Doing research is key. Acquaint yourself with the fees of a few agents who operate in your suburb, get a number of proposals and weigh up the services and commission and marketing fees against one another before deciding which agent to choose.
• Interview the agents you are considering to make sure you feel comfortable with the person handling this important sale.
• Create competition between agents by being open about asking agents for quotes.
• When negotiating about commission, trust your gut. Your house is probably the biggest asset you have and having the cheapest agent sell it won’t necessarily guarantee that you’ll get the best price. If negotiations with the real estate agent are too easy, that might mean that negotiations from potential buyers will also be easy.
• Remember that a few factors come into play when selling your property and, consequently, also when negotiating the commission:
– The average property price in your suburb.
– The selling experience of the real estate agent, and the knowledge the agent has of the property market in your area.
– What services the agent is offering for their fee.
– The desirability of your property.
All these factors will influence the ultimate price structure, and you are allowed to negotiate until you feel you are getting value for your money, and that the price that is being charged is honest and fair.
Even though the amount of money real estate agents seem to make from a single property sale might seem like a lot, agents often don’t get the full amount, as the principal of the agency can take between 50% and 70%. You often get what you pay for, and the cheapest agent is not necessarily the best. Doing thorough research and having an open conversation will help you to find an agent that will go the extra mile and will try to get the highest price for your property.
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