As a real estate agency owner, there’s a good chance you know a thing or two about real estate commission.
But you might be interested to know that the average consumer (i.e.: your client) has quite a few misconceptions about real estate commission. In fact, research shows that over a quarter of all consumers assume that agents all charge the same commission and fees as each other. Another quarter have no idea if all agents charge the same commission and fees for selling a property.
Since there is no regulation or standard for the real estate industry in Australia, the commission you pay your real estate agents is going to vary depending on a few things:
- The type of property being sold
- The state the property is in and whether it’s in the city or regional areas
- What’s included in the sales package you offer your clients
- The final sale price of the property
- How experienced your agent is and how good they are at negotiating with you!
What should you be paying your agents?
Commission fees vary greatly, and depend on whether they are a fixed or variable percentage of the sale price. The regulations (or lack of them) also vary for each state:
- In QLD – The QLD Government does not cap the amount of commission you can pay your agents. This can be negotiated between you, your agent and the vendor, and rates vary greatly.
- In NSW – official amounts are not set by law, so, like QLD, everything can be negotiated. However, commissions generally range from 2% – 2.5% in cities and metropolitan areas and 2.5% – 3.5% in regional areas. Some areas can even be more.
- In ACT – official amounts are not set by law and can be negotiated. Commissions generally range from 2.5% in the city and metropolitan areas and 2.5% – 4% for regional areas.
- In VIC – official amounts are not set by law and can be negotiated. Commissions are generally the lowest in the country, at 1.6% – 2.5% in the cities and metropolitan areas and 2.5% – 3% in regional areas.
- In TAS – the Real Estate Institute of Tasmania has recommended fees but members are not bound to them. These are:
- Does not exceed $10,000 – 11.04% with a minimum of $100
- From $10,001 – $50,000 – $1104 plus 6.02% of excess over $10,000
- From $50,001 – $100,000 – $3512 plus 4.22% of excess over $50,000
- From $100,001 upwards – $5523 plus 3.99% of excess over $100,000
- In SA – officially, all professional fees for services rendered by members of the Real Estate Institute of South Australia are a matter for negotiation and agreement. Commissions are generally 2% – 2.75% in the city and metropolitan areas and 2.75% – 3% for regional areas.
- In NT – official amounts charged are not set by law. Commissions are generally 2.5% – 4% with no major difference being found between the city and regional areas.
- In WA – The Real Estate Institute of Western Australia does not supply any guidelines, however commissions are generally a standard 3% – 3.25% throughout the state.
How to negotiate commission
The commission rate you pay your agents is going to vary considerably based on their experience, the type of properties they’ll be selling and the location you’re in. Ultimately it’s between you and your agents to come to a fair agreement that both parties are happy with.
Whilst you may have set commission rates you offer to vendors, some vendors will try and negotiate a lower commission with you. You can justify your rates by showing how many properties you’ve sold, ones that have sold for a very high price and some references and testimonials from previous clients.
Remember you don’t have to offer competitive rates if the vendor is asking you to sell their property for a price above market value. These will be a lot harder to sell and you’ll have to work hard.
When should you pay your agents their commission?
It seems to be standard practice amongst agencies to pay commissions to their agents once settlement of the property sale has gone through. This is usually around 6-8 weeks after contracts of sale have been approved. However, some agencies prefer to pay their agents quarterly or monthly.
It is more and more common these days for agencies to use a commission advance company so they are able to pay their agents the commission owed as soon as possible, usually within a day or two of the property being sold. This kind of perk also helps agencies attract the best real estate agents.
Commissions are a very grey area with rates being paid to agents varying a lot, and rates that clients pay varying just as much. If you’d like to offer your agents an advance on their commission as a perk of the job, please talk to us.