Let’s start with the idea of commission.

 Commission is defined as a sum of money paid to a salesperson for every sale that he or she makes. If a salesperson is paid on commission, the amount they receive depends on the amount they sell.

While the above notion of commission is straightforward, when selling something as valuable as your property, it’s important to ask more questions. Why is commission the appropriate payment method for your real estate agent? How much commission is normal for your property value? How will I know what is considered fair commission? These are all valid questions and it’s a good idea to consider them  before you begin the process of selling your property.

Commission is the standard based sales method used historically in real estate. Selling a property is not like any other sale you will ever make, both in monetary value and in the nature of the product – you are essentially selling someone brand new roots to lay the foundations of the next chapter in their life. It takes a strong skillet to negotiate the best possible price on your property and this skill set is developed through a real estate agent’s experience, sound knowledge of the market and passion for the industry.

An agent’s commission is usually anywhere between 1% and 5% of your overall property sale price and of course, while commission is an important factor when considering your choice of agent, it is certainly not the only factor.

Commission rates are merely a small piece of the bigger real estate puzzle. A few other important factors to consider when choosing an agent are things like the agent’s experience, success rate, negotiation skills and their strategic approach to marketing in the digital age. It’s a good idea to consider these factors on top of commission rates.

Commissions + Fees by State

In the Australian real estate market, we don’t have an overall “standard” commission rate.  Commissions and fees can vary a lot depending on which state you live in. This is logical when we consider things like the population per state, working wage and things like the physical location of a state which affect the volume of people buying and selling in this location. Consider factors like climate, economy and overall lifestyle of the state in question and it’s easier to understand that naturally, fluctuations of commissions and fees will occur when selling a property.

For example, the average Tasmanian pays $4,850 more in commission than the average South Australian resident on a $500,000 sale.

When it comes to the highest commission rates in Australia, Tasmania takes first place coming in a 2.96%. The lowest commission rates can be found in South Australia which sits at 1.99%. The national average rate is 2.10% in metro areas and 2.47% in regional areas. LocalAgentFinder compares thousands of agents in their network and collates statistical data to determine an average for each state.

This data is the most comprehensive data available in the country, but it’s vital to keep in mind that what you will end up paying in commission will also 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 the cost of living, the movement of the market and inflation.

The below data looks at each state in the country and the average commission to act as a guide but are not a concrete indication of the exact amount of amount of commission you should pay.

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Fees-paid-by-state (2)

View Fees & Commission by State

Commissions + Fees by City

It’s not just Australia’s states that dictate a difference of commission rates. We also see commissions and fee difference in different cities. You’ll also notice a difference in commissions in metropolitan areas compared with regional areas. In general, you’ll pay less commission in a metropolitan area, and there is one key reason for this reduced commission rate.  Metropolitan areas have more properties going up for sale on the market and so in order to compete in this market, the agents are forced to lower their rates. In the same way, a regional real estate agent is unlikely to have as much competition and so can afford to compete at a rate that they feel is fair and accurate. The competitive market in cities means that we see a natural difference in the highest average and lowest commission rates per city.

The capital city with the highest average real estate commission is Hobart at 2.94%, compared to the lowest in Sydney at 1.84%. To help put those figures into perspective, the population of Hobart is estimated at 220,000 where Sydney has a population of over 5 million people (source: population.net.au). So, it’s easy to understand that real estate competition in Sydney would play a large part in the reduced commission rate.

To help illustrate the difference found in commission and fees across the country, we’ve created the graph below. The graph uses accurate data to look at our main cities and give you an indication of how these fees difference. Much like the previous data, we recommend that you use this only as a guide for reference. We’ve done the hard work to look at various property values in relation to their location to help offer a broader look at commissions and fees by city. Below, you can see how much you’ll pay in each capital city, based on a $500,000 sale.

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Fees-paid-by-city

Fees & Commissions by City

Negotiating Fees + Commissions

A lot of people in today's property market will find themselves asking these common questions around the topic of commission; just how effective the commission-based model as an incentive for agents? Can a commission-based structure really ensuring an agent can secure the best possible price for your property? This is a common debate amongst people in the buying and selling real estate industry and in order to help empower you to negotiate fees and commissions – it’s vital that you fully understand the process.

The idea of a commission-based approach is to encourage the agent to secure a higher price, which earns the agent a bigger commission, so you could say it’s a win-win situation. However, your win would depend on what you deem to be a fair commission rate, and this will depend on many factors (including the size of your property, the location of your property, and the amenities in the area).

In general, agents are willing to negotiate their fee structure. The fee structure is usually one of the two most common; 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 can cause fear that may mean the agent sells the house quickly, even if that results in 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.

Estimating and Calculating Your Commissions

Commissions and fees can sometimes feel like a lot of smoke and mirrors, and we wouldn’t blame you for feeling confused with what it is exactly you’re committing to. When it comes down to calculating fees and commissions, you need to ensure full transparency is offered on both sides of the negotiation table. In order to do so, the first thing a seller needs to understand is terminology. In the world of real estate, the terms ‘commissions and fees’ are often assumed and never really questioned. In fact, commissions and fees are so often bundled together, we never really separate these terms but the meanings of these terms are different in real estate and this should be considered before making a deal with an agent.

Generally speaking, the terms fee will refer to the cost involved in hiring a real estate agent in order to cover the costs of marketing your property (online and offline). Where the term commission is a percentage calculated from the amount of the final sale agreed and awarded to the agent as payment for the sale.

The first thing you’ll want to do when talking commission is ensure the calculations are accurate and fair. In order to make sure whatever you’ve agreed with your agent is entirely transparent, you need to fully understand how you reached the commission agreement.

Real estate agent commission is calculated as a percentage of the property’s final sale price. For example, on a $500,000 property at 2.03% commission, the commission would be $10,150 – calculated as follows: 500,000 x 2.03% = $10,150.

If you agree to operate on a tiered commission-based practice, you need to understand exactly what you are committing and the possible eventualities of that commitment, before signing.

It’s vital to have a conversation about what is included in fees and commissions as this will vary from agent to agent. For example, is the cost of marketing the property included in this fee or will this be a separate fee?

Marketing Fees

In today’s competitive market, selling a house is no easy feat. It’s a challenging and competitive market that requires a thorough and targeted marketing approach. Some of the more traditional marketing strategies have stood the test of time. For example, print and signage are considered the norm in the world of real estate, while other realtors will also place a large focus on the world of online marketing and a drive to ensure visibility online.

The bottom line is, marketing fees are entirely dependent on the task at hand. For example,  the cost will depend on how many marketing channels the real estate agent intends to use to advertise your property.

Let’s take a look at how some of the commonly used channels work.

Online

The most common method of marketing a property is listing your home for sale on a property portal, such as domain.com.au or realestate.com.au. Listing your property on these sites comes at a cost. For example, a listing on domain.com.au costs $499 for a 28 day listing. It’s up to each individual agent to decide whether to bundle marketing costs into their commission, or add them on top.

Other common practices of online advertising in real estate land include:

PPC (pay per click) advertising – where you’ll only pay when a person physically clicks on the ad to view your property.

Lead capture forms – where a quick form asks for details from a potential buyer including contact details, so the realtor can follow up on interest with a call.

Social Media – Platforms like Facebook and Twitter advertising that are used to target potential buyers in your relevant location and demographic e.g. people who are actively seeking to purchase a property.

Because online advertising depends on how many people you reach, your location and the cost of reaching your target market, your budget isn’t easily defined. A good real estate agent will understand this and consider all options when it comes to making your budget work as hard as possible online.

Print Media

Traditional print media includes:

  • Property magazines
  • Local newspaper
  • Letters
  • Postcards
  • Promo material

When it comes to selling your property, your marketing strategy will be pivotal in helping you secure the sale. Some agents will include their marketing fee within their commission rate and others will not. It’s a good idea to clarify this before committing to a working relationship with your real estate agent.

Additional Advice + Considerations

Once you’ve used LocalAgentFinder to recommend expert potential agents meeting your requirements, the next steps are important. To help, we’ve created a little bit of a help list below.

1. Cheap doesn’t always mean cheerful in the property selling world

We can’t say it enough – commission isn’t everything. However, it’s entirely understandable that you would want to choose an agent who has a lower commission rate. It's normal to think value… but generally, with knowledge and experience comes higher commission rates. . We can’t reiterate the importance of the taking a look at the bigger picture. An agent who may be more expensive may indeed have the stronger skill set and experience needed to sell your property at a higher price, meaning more money in your pocket, even with the higher commission rate.

2. Open and honest conversation is better

Your agent will understand that he or she is competing with other sourced agents, so it’s a good idea to ask every agent how they operate their fees and commissions structures up front. This gives you the opportunity to negotiate if need be, meaning you might be able to encourage your preferred real estate agent to match a competitor's price range.

3. Ask for everything in writing – early!

Verbal communication is fantastic but it’s a good idea to ask for everything in writing from day one. This isn’t to imply that your agent is dishonest, it simply means that communication lines can get distorted and the only way to ensure that you’re both on the same page is to have everything in writing. Ask for a follow up email after telephone and face to face conversations so you can keep track of what you have and haven’t agreed.

We know this process can be a scary one, and that’s why we’re doing everything we can to help make the process as simple as possible for you. Good real estate agents are passionate about their job, experienced in their field and always transparent. You can rest easy knowing that any agent LocalAgentFinder sends your way is qualified for the job.