One of the first factors that people think of when selling a property are real…
Real Estate Agent Commission
How Much Commission Should You Pay?
Commission is the fee paid to a real estate agent for selling your property. Surprisingly, rates vary a lot from state to state. For example, the average Tasmanian pays $6,000 more in commission than the average South Australian resident on a $500,000 sale. You can find and research real estate commission rates in your state in detail by visiting the Real Estate Agent Fees and Commission section of our blog.
(If you want to compare fees and other information between real estate agents in your area, you can click here to use our agent comparison service. Agent fee information can’t be found anywhere else online.)
Australia’s highest commission rates are in Tasmania (3.26%) and the lowest are in South Australia (2.07%), with a national average sitting at 2.22%. As an independent body, LocalAgentFinder collates statistical data to determine an average for each state. This is the most comprehensive data available in the country, but keep in mind that what you end up paying will depend on your property, the local market and the agent you select. It’s also important to remember that commission rates change over time in line with cost of living, the movement of the market, and inflation.
Calculating the Dollar Amount
Commissions are calculated as a percentage of the property sale price. For example, on a $500,000 property at 2.11% commission, the commission would be $10,541 – calculated as follows: 500,000 x 2.11% = $10,541. Keeping in mind that the average commission in your suburb will vary from the state average, you can use the table below to gauge an idea of what you might be charged in the way of agent commission, based on your estimated property value.
|Sales Price||NSW 2.11%||SA 2.07%||WA 2.45%||QLD 2.47%||TAS 3.26%||VIC 2.13%||NT 2.68%||ACT 2.18%|
There is debate as to how effective commissions are as an incentive for agents to get the best price for your property. The idea is to encourage the agent to secure a higher price, which earns them a bigger commission. Some agents are willing to negotiate their fee structure, with the two most common options being fixed rate and tiered percentage.
Fixed rate means you agree to pay a specific dollar amount upon the sale of your property regardless of the final price. This approach gives you certainty over the fee but may mean the agent sells the house quickly, even if that results a lower price.
Tiered percentage operates on a sliding scale to encourage agents to secure a higher sale price. For example, you may agree to a 2% commission rate if the sale price is $480,000 or less, and an additional amount if the property is sold for more than that. So if the sale price is $500,000 you’ll pay 2% on first $480,000 (being $9,600) and, for example, 10% on the additional $20,000 (being $2,000). The total commission payable would be $11,600.
As of December 2014, all states are now deregulated, meaning that real estate agents can set their own fee, based on their perceived value, and are largely influenced by supply and demand in their area. Regardless of which state you live in, commissions are negotiable. A difference of just one percent can mean a huge saving, so do your research and don’t be afraid to negotiate with real estate agents prior to signing.
Frequently Asked Questions (FAQ)
How much commission should I pay?
Ultimately, the decision of how much to pay your agent is yours, but you should always feel that you get your money’s worth. Balance the average for your area, with how much your agent does for you and how much you feel comfortable paying. Remember that all commissions are negotiable and that agents will make concessions in order to get your business.
What is the ‘average’ commission?
Commission levels vary from state to state. The table above shows each state’s average but remember that rates change over time. This is the best currently available data in the country, but keep in mind that what you actually end up paying will depend on your property, local market and the agent you select.
Do commissions change over time?
At the time of writing, our data shows that the average real estate agent commission sought for the sale of a residential property nationwide has increased by about $550 on a $500,000 house over the first six months of this year in comparison to last year (0.11% increase in commission).
Are there other ways to negotiate commissions?
There is debate about whether commissions really work as an effective incentive for agents to get the best price for your property. The idea of paying a percentage is to spur the agent to obtain a higher sales price, which, of course, earns them a bigger payment. Some agents are willing to negotiate other ways of calculating their fees. The two most common alternatives are:
With this option, you agree to pay a specific dollar amount upon the sale of your property, no matter what the final sale price is. This approach gives you certainty over the fee, but also encourages the agent to sell the house quickly, even if that means a lower sales price for you.
Tiered percentages are an innovation intended to encourage agents to obtain a higher sale price than expected. For example, you could agree to pay a 2% commission rate as long as the sale price is $480,000 or less. In addition, you may also agree that if they sell the property for more than that, you will pay a rate of 10% on the extra amount.
Property sale price = $500,000
2% on first $480,000 = $9,600
10% on additional $20,000 = $2,000.00
Total commission payable = $11,600.00
You’ve paid your agent a little more, but they garnered you an extra $20,000.
Do I have to pay GST?
Yes, you have to pay the standard 10% GST on real estate agent commissions.
What do they charge in my area?
The easiest way to find out what agents charge in your suburb is to use our agent comparison service. You’ll learn agents’ fees (as well as their services and experience) so you can work out if they’re the right real estate agent for you. Start today to find out what agents charge in your area.
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