For most people, real estate agent commissions are a necessary part of selling their home. But what are real estate agent commissions, how are they calculated and how much should you be paying?
When it comes to selling your home, there are numerous costs involved. However, similar to other professional services you’ll require during the sale process, a real estate agent is a crucial partner in achieving the best outcome for the sale.
Wondering how much you’ll need to pay a real estate agent to sell your home? Here’s everything you need to know.
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Real estate agents will charge different commission rates in different areas. Picture: Getty
Read more about how to choose the right agent here.
How much commission do real estate agents charge in 2022?
On average, real estate agents in Australia charge a commission of around 2% – 2.5%. So if you’re selling your home for $1 million, for example, you’d pay $20-25,000 to the agent responsible for the sale.
However, this amount can vary depending on where you live. Different states have different averages, and even whether you live in a major city or regional area can affect how much you pay.
If you’re living in inner-city Sydney, you might pay less than someone living in Dubbo. This is because there’s more competition amongst agents in bigger cities, which drives down prices.
Below is a state by state breakdown of average real estate agent commissions in Australia.
|1.8% – 2.5%
|2.5% – 3.5%
|1.6% – 2.5%
|2.5% – 3.5%
|2% – 2.5%
|2.5 – 3.5%
|2% – 2.75%
|2.75% – 3%
|2% – 2.5%
|2.5% – 3.5%
Factors that affect commission fees
Commission fees obviously vary across the country (and even across individual states) but what else affects the amount of money you pay?
Aside from location, there are lots of different factors that can influence an agent’s commission fee. Here are some of the most common:
1. Your property and its value
The type of property you’re selling, as well as how much it’s valued at, can have a big impact on your agent’s commission fees.
If your home has broad appeal and is likely to attract a wide range of buyers, they may charge less because there won’t be as much work involved in selling it.
But if you have a particularly unique home that’ll only entice a few buyers, your agent might charge a higher amount because they’ll have to put more effort into getting your property sold.
In terms of your home’s value, your agent may be prepared to charge less if your property is worth a high amount. This is because the agent will still receive a decent commission even at a lower rate.
The amount of commission you pay could be determined by your property. Picture: realestate.com.au
2. The agent’s experience and competition
Agents with many years of experience selling homes often charge more, as you’re paying for their expertise. Newer agents, on the other hand, might charge less.
However, know that your home may sell for a higher price if you go with a more experienced agent – so even though you’re paying more, you could end up with more in your pocket after you sell.
Competition between agents in your local area can also affect fees. If there are lots of agents around you who are competing for your business, it will likely drive down prices.
But if there are very few agents working in your area, you can expect to pay a higher fee.
Wondering what to look for when picking an agent? Read our guide on what makes a good agent.
3. The agent’s commission structure
Different agents charge different fees depending on their commission structure. We’ll get into this shortly.
Commission structure: What’s included in real estate agent’s fees
Generally speaking, there are two types of commission structure: fixed and tiered.
Fixed is the most common and is calculated as a fixed percentage of the sale price. Let’s say you lock in a commission rate of 2.5% with your agent and sell your home for $1.5 million. You’d then pay $37,500 in agent fees.
Tiered is a performance-based fee structure that incentivises your agent to sell your home at a higher price. For example, you could agree to pay them 2.5% if your home sells for less than $1.5 million or 4% if it goes for more than $1.5 million.
Some agents also charge flat fees, where you agree on a fixed dollar value irrespective of the final sale price.
Regardless of the type of commission structure an agent uses, always find out exactly what’s included in their fees and compare between a few different agents to make sure you’re paying a fair price.
Some agents might charge more but their fees will include advertising and marketing your property, while others may charge less but won’t cover the cost of promoting your home.
Advertising and marketing can add up, so weigh up a higher agent fee versus the potential cost of paying for them separately before going with an agent.
Other costs that may or may not be included in an agent’s fee include the auctioneer (if you’re going to auction) and GST.
Can you negotiate real estate commission in Australia?
Yes indeed: agent commissions aren’t regulated in Australia so it’s very common practice to negotiate a lower fee.
Your best bet is to chat to a number of agents before committing to a particular one. Find out about their fees and what’s included, and see if you can haggle the price down.
Don’t be scared to let agents know you’re shopping around; this can work in your favour, as they may be prepared to lower their commission.
Once you’ve agreed on a rate, ensure you get it in writing – this’ll help protect you if any issues arise. And remember that you can only negotiate the commission before the sale, not after.